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Exhibit 10.6
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CREDIT AGREEMENT
Dated as of May 2, 1997
among
RINGER CORPORATION and
SAFER, INC.
as Borrowers,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
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TABLE OF CONTENTS
1. AMOUNT AND TERMS OF CREDIT..............................................1
1.1 Credit Facility...................................................1
1.2 Letters of Credit.................................................3
1.3 Prepayment........................................................3
1.4 Use of Proceeds...................................................5
1.5 Interest..........................................................5
1.6 Eligible Accounts.................................................6
1.7 Eligible Inventory................................................8
1.8 Cash Management Systems...........................................9
1.9 Fees..............................................................9
1.10 Receipt of Payments..............................................10
1.11 Application and Allocation of Payments...........................11
1.12 Loan Account and Accounting......................................11
1.13 Indemnity........................................................12
1.14 Access...........................................................12
1.15 Taxes............................................................13
1.16 Capital Adequacy; Increased Costs; Illegality....................14
1.17 Single Loan......................................................14
2. CONDITIONS PRECEDENT...................................................14
2.1 Conditions to the Initial Revolving Credit Advances on the
Closing Date.....................................................14
2.2 Further Conditions to Each Revolving Loan........................16
3. REPRESENTATIONS AND WARRANTIES.........................................17
3.1 Corporate Existence; Compliance with Law.........................17
3.2 Executive Offices; FEIN..........................................17
3.3 Corporate Power, Authorization, Enforceable Obligations..........17
3.4 Financial Statements and Projections.............................18
3.5 Material Adverse Effect..........................................18
3.6 Ownership of Property; Liens.....................................19
3.7 Labor Matters....................................................19
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness.....................................................20
3.9 Government Regulation............................................20
3.10 Margin Regulations...............................................20
3.11 Taxes............................................................21
3.12 ERISA............................................................21
3.13 No Litigation....................................................22
3.14 Brokers..........................................................22
3.15 Intellectual Property............................................22
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3.16 Full Disclosure..................................................22
3.17 Environmental Matters............................................23
3.18 Insurance........................................................23
3.19 Deposit and Disbursement Accounts................................24
3.20 Government Contracts.............................................24
3.21 Customer and Trade Relations.....................................24
3.22 Agreements and Other Documents...................................24
3.23 Solvency.........................................................24
3.24 Dexol Acquisition Agreement......................................24
3.25 Subordinated Debt................................................25
4. FINANCIAL STATEMENTS AND INFORMATION...................................25
4.1 Reports and Notices..............................................25
4.2 Communication with Accountants...................................26
5. AFFIRMATIVE COVENANTS..................................................26
5.1 Maintenance of Existence and Conduct of Business.................26
5.2 Payment of Obligations...........................................26
5.3 Books and Records................................................27
5.4 Insurance; Damage to or Destruction of Collateral................27
5.5 Compliance with Laws.............................................28
5.6 Supplemental Disclosure..........................................28
5.7 Intellectual Property............................................29
5.8 Environmental Matters............................................29
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters...30
5.10 Further Assurances...............................................30
6. NEGATIVE COVENANTS.....................................................30
6.1 Mergers, Subsidiaries, Etc.......................................30
6.2 Investments......................................................33
6.3 Indebtedness.....................................................34
6.4 Employee Loans and Affiliate Transactions........................35
6.5 Capital Structure and Business...................................35
6.6 Guaranteed Indebtedness..........................................36
6.7 Liens............................................................36
6.8 Sale of Stock and Assets.........................................36
6.9 ERISA............................................................37
6.10 Financial Covenants..............................................37
6.11 Hazardous Materials..............................................37
6.12 Sale-Leasebacks..................................................37
6.13 Cancellation of Indebtedness.....................................37
6.14 Restricted Payments..............................................37
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6.15 Change of Corporate Name or Location; Change of Fiscal Year.......38
6.16 No Impairment of Intercompany Transfers...........................38
6.17 No Speculative Transactions.......................................38
6.18 Leases............................................................39
6.19 Changes Relating to Subordinated Debt.............................39
7. TERM....................................................................39
7.1 Termination.......................................................39
7.2 Survival of Obligations Upon Termination of Financing
Arrangements......................................................39
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES..................................39
8.1 Events of Default.................................................39
8.2 Remedies..........................................................42
8.3 Waivers by Credit Parties.........................................42
9. PARTICIPATIONS..........................................................42
9.1 Participations....................................................42
10. SUCCESSORS AND ASSIGNS..................................................43
10.1 Successors and Assigns............................................43
11. MISCELLANEOUS...........................................................44
11.1 Complete Agreement; Modification of Agreement.....................44
11.2 Amendments and Waivers............................................44
11.3 Fees and Expenses.................................................44
11.4 No Waiver.........................................................45
11.5 Remedies..........................................................46
11.6 Severability......................................................46
11.7 Conflict of Terms.................................................46
11.8 Confidentiality...................................................46
11.9 GOVERNING LAW.....................................................46
11.10 Notices...........................................................47
11.11 Section Titles....................................................48
11.12 Counterparts......................................................48
11.13 WAIVER OF JURY TRIAL..............................................48
11.14 Press Releases....................................................48
11.15 Reinstatement.....................................................49
11.16 Advice of Counsel.................................................49
11.17 No Strict Construction............................................49
12. CROSS-GUARANTY..........................................................49
12.1 Cross-Guaranty....................................................49
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12.2 Waivers by Borrowers.............................................50
12.3 Benefit of Guaranty..............................................50
12.4 Subordination of Subrogation, Etc................................50
12.5 Election of Remedies.............................................50
12.6 Limitation.......................................................51
12.7 Contribution with Respect to Guaranty Obligations................51
12.8 Liability Cumulative.............................................52
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INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding
Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Environmental Matters
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.22 - Material Agreements
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.4 - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Schedule of Additional Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 11.10) - Notice Addresses
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CREDIT AGREEMENT, dated as of May 2, 1997 among RINGER CORPORATION, a
Minnesota corporation ("Ringer") and SAFER, INC., a Delaware corporation
("Safer") (Ringer and Safer are sometimes referred to herein individually as a
"Borrower" and collectively with any other Credit Parties which hereafter
become Borrowers hereunder in accordance with the terms hereof, the
"Borrowers"); and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
(in its individual capacity, "GE Capital"), as Lender.
RECITALS
WHEREAS, Borrowers desire that Lender extend a revolving credit facility
to Borrowers of up to Twenty Five Million Dollars ($25,000,000) in the
aggregate for the purpose of refinancing certain indebtedness of Borrowers and
to provide (a) working capital financing for Borrowers, (b) funds for the
purpose of financing future Permitted Acquisitions by Ringer and (c) funds for
other general corporate purposes of Borrowers; and for these purposes, Lender
is willing to make certain loans and other extensions of credit to Borrowers of
up to such amount upon the terms and conditions set forth herein; and
WHEREAS, Borrowers desire to secure all of their obligations under the
Loan Documents by granting to Lender a security interest in and lien upon all
of their existing and after-acquired personal property; and
WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A. All Annexes, Disclosure Schedules, Exhibits and
other attachments (collectively, "Appendices") hereto, or expressly identified
to this Agreement, are incorporated herein by reference, and taken together,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facility.
(a) Revolving Credit Facility. Subject to the terms and conditions
hereof, Lender agrees to make available from time to time until the Commitment
Termination Date advances (each, a "Revolving Credit Advance"). The aggregate
amount of Revolving Credit Advances outstanding shall not exceed at any time
the lesser of (A) the Effective Revolving Loan Commitment and (B) the Aggregate
Borrowing Base, in each case less the Letter of Credit Obligations outstanding
at such time ("Borrowing Availability"). Moreover, the Revolving Loan
outstanding to any Borrower shall not exceed at any time that Borrower's
separate Borrowing
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Base. Until the Commitment Termination Date, Borrowers may from time to time
borrow, repay and reborrow under this Section 1.1(a). Each Revolving Credit
Advance shall be made on notice by Borrower Representative on behalf of the
applicable Borrower to the representative of Lender identified on Schedule 1.1
at the address specified thereon. Those notices must be given no later than
(1) 12:00 noon (Chicago time) on the Business Day of the proposed Revolving
Credit Advance. Each such notice (a "Notice of Revolving Credit Advance") must
be given in writing (by telecopy or overnight courier) substantially in the
form of Exhibit 1.1(a)(i), and shall include the information required in such
Exhibit and such other information as may be required by Lender.
(ii) Each Borrower shall execute and deliver to Lender a note to
evidence the Revolving Loan Commitment. Each note shall be dated the Closing
Date and substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving
Note" and, collectively, the "Revolving Notes"). Each Revolving Note shall
represent the obligation of each Borrower to pay the amount of the Revolving
Loan Commitment or, if less, the aggregate unpaid principal amount of all
Revolving Credit Advances to such Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the aggregate
Revolving Loan and all other non-contingent Obligations shall be immediately
due and payable in full in immediately available funds on the Commitment
Termination Date.
(b) Optional Increase in Effective Revolving Loan Commitment. (i)
Subject to the terms and conditions hereof, prior to the Commitment Termination
Date, Borrower Representative may from time to time notify Lender in writing
that Borrowers desire to increase the Effective Revolving Credit Commitment (an
"Effective Commitment Increase"). Each Effective Commitment Increase shall be
in the minimum amount of $5,000,000 and in integral multiples of $5,000,000 if
in excess thereof; provided that the aggregate amount of all Effective
Commitment Increases shall not increase the Effective Revolving Loan Commitment
above the Revolving Loan Commitment. Each Revolving Credit Advance made in
connection with the financing of a Permitted Acquisition shall be made to
Ringer or, at the election of Lender if the Target of such Permitted
Acquisition and/or a Subsidiary of such Target is to become a Borrower under
this Agreement, to such Target and/or such Subsidiary.
(ii) In the event that an Effective Commitment Increase is
requested in connection with a proposed Permitted Acquisition, each of the
conditions set forth in Section 6.1 with respect to Permitted Acquisitions
shall be satisfied prior to the effectiveness of any Effective Commitment
Increase.
(c) Reliance on Notices; Appointment of Borrower Representative. Lender
shall be entitled to rely upon, and shall be fully protected in relying upon,
any Notice of Revolving Credit Advance or similar notice believed by Lender to
be genuine. Lender may assume that each Person executing and delivering such a
notice was duly authorized, unless the responsible individual acting thereon
for Lender has actual knowledge to the contrary. Each
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Borrower hereby designates Ringer as its representative and agent on its behalf
for the purposes of issuing Notices of Revolving Credit Advances, giving
instructions with respect to the disbursement of the proceeds of the Revolving
Loan, requesting Letters of Credit, giving and receiving all other notices and
consents hereunder or under any of the other Loan Documents and taking all
other actions (including in respect of compliance with covenants) on behalf of
any Borrower or Borrowers under the Loan Documents. Borrower Representative
hereby accepts such appointment. Lender may regard any notice or other
communication pursuant to any Loan Document from Borrower Representative as a
notice or communication from all Borrowers, and may give any notice or
communication required or permitted to be given to any Borrower or Borrowers
hereunder to Borrower Representative on behalf of such Borrower or Borrowers.
Each Borrower agrees that each notice, election, representation and warranty,
covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.
1.2 Letters of Credit. Subject to and in accordance with the terms
and conditions contained herein and in Annex B, Borrower Representative, on
behalf of the applicable Borrower, shall have the right to request, and Lender
agrees to incur, Letter of Credit Obligations in respect of each Borrower.
1.3 Prepayment.
(a) Voluntary Prepayment. Borrowers may at any time on at least ten
(10) days' prior written notice by Borrower Representative to Lender terminate
the Revolving Loan Commitment; provided that upon such termination, the
Revolving Loan and all other Obligations shall be immediately due and payable
in full. Any such termination of the Revolving Loan Commitment must be
accompanied by the payment of the fee required by Section 1.9(d), if any. Upon
any such termination of the Revolving Loan Commitment, each Borrower's right to
request Revolving Credit Advances, or request that Letter of Credit Obligations
be incurred on its behalf, shall simultaneously be permanently terminated.
(b) Mandatory Prepayments. (i) If at any time the outstanding
balance of the aggregate Revolving Loan exceeds the lesser of (A) the Effective
Revolving Loan Commitment and (B) the Aggregate Borrowing Base, Borrowers shall
immediately repay the aggregate outstanding Revolving Credit Advances to the
extent required to eliminate such excess. If any such excess remains after
repayment in full of the aggregate outstanding Revolving Credit Advances,
Borrowers shall provide cash collateral for the Letter of Credit Obligations in
the manner set forth in Annex B to the extent required to eliminate such
excess. Furthermore, if the outstanding balance of the Revolving Loan of any
Borrower exceeds that Borrower's separate Borrowing Base at any time, the
applicable Borrower shall immediately repay its Revolving Credit Advances in
the amount of such excess (and, if necessary, shall provide cash collateral for
its Letter of Credit Obligations as described above).
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(ii) Immediately upon receipt by any Credit Party of proceeds of any
asset disposition (including condemnation proceeds, but excluding proceeds of
asset dispositions permitted by Section 6.8(a)) or any sale of Stock of any
Subsidiary of any Credit Party, Borrowers shall prepay the Revolving Loan in an
amount equal to all such proceeds, net of (A) commissions and other reasonable
and customary transaction costs, fees and expenses properly attributable to
such transaction and payable by Borrowers in connection therewith (in each
case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to
holders of senior Liens (to the extent such Liens constitute Permitted
Encumbrances hereunder), if any, and (D) an appropriate reserve for income
taxes in accordance with GAAP in connection therewith. Any such prepayment
shall be applied in accordance with clause (c) below.
(iii) If any Borrower issues Stock other than as a result of an equity
contribution in connection with a Permitted Acquisition, no later than the
Business Day following the date of receipt of the cash proceeds thereof, the
issuing Borrower shall prepay the Revolving Loan in an amount equal to all such
proceeds, net of underwriting discounts and commissions and other reasonable
costs paid to non-Affiliates in connection therewith. Any such prepayment
shall be applied in accordance with clause (c) below.
(c) Application of Certain Mandatory Prepayments. Any prepayments
made by any Borrower pursuant to clauses (b)(ii) or (b)(iii) above shall be
applied as follows: first, to Fees and reimbursable expenses of Lender then due
and payable pursuant to any of the Loan Documents; second, to interest then due
and payable on Revolving Credit Advances made to such Borrower; third, to the
principal balance of Revolving Credit Advances outstanding to such Borrower
until the same shall have been paid in full; fourth, to any Letter of Credit
Obligations of such Borrower to provide cash collateral therefor in the manner
set forth in Annex B, until all such Letter of Credit Obligations have been
fully cash collateralized in the manner set forth in Annex B; fifth, to
interest then due and payable on the Revolving Credit Advances outstanding to
each other Borrower, pro rata; sixth, to the principal balance of the Revolving
Credit Advances made to each other Borrower, pro rata, until the same shall
have been paid in full, and seventh to any Letter of Credit Obligations of each
other Borrower, pro rata, to provide cash collateral therefor in the manner set
forth in Annex B, until all such Letter of Credit Obligations have been fully
cash collateralized. The Revolving Loan Commitment shall not be permanently
reduced by the amount of any such prepayments.
(d) Application of Prepayments from Insurance Proceeds. Prepayments
from insurance proceeds in accordance with Section 5.4(c) shall be applied to
the Revolving Credit Advances of the Borrower that incurred such casualties or
losses. The Revolving Loan Commitment shall not be permanently reduced by the
amount of any such prepayments. If the insurance proceeds received as to a
particular Borrower exceed the outstanding principal balance of the Revolving
Loan to that Borrower, the application of those proceeds shall be determined by
Lender.
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(e) Nothing in this Section 1.3 shall be construed to constitute
Lender's consent to any transaction referred to in clauses (b)(ii) and (b)(iii)
above which is not permitted by other provisions of this Agreement or the
other Loan Documents.
1.4 Use of Proceeds. Borrowers shall utilize the proceeds of the
Revolving Loan received on the Closing Date solely for the Refinancing (and to
pay any related transaction expenses), and for the financing of Borrowers'
ordinary working capital and general corporate needs (but excluding in any
event the making of any Restricted Payment not specifically permitted by
Section 6.14). Borrowers shall utilize the proceeds of the Revolving Loan
received after the Closing Date for the financing of Borrowers' ordinary
working capital and general corporate needs (but excluding in any event the
making of any Restricted Payment not specifically permitted by Section 6.14)
and, to the extent permitted pursuant to Section 6.1, for the financing of
Permitted Acquisitions. Disclosure Schedule (1.4) contains a description of
Borrowers' sources and uses of funds as of the Closing Date, including
Revolving Loan and Letter of Credit Obligations to be made or incurred on that
date, and a funds flow memorandum detailing how funds from each source are to
be transferred to particular uses.
1.5 Interest. (a) Borrowers shall pay interest to Lender, in arrears
on each Interest Payment Date, at a rate of interest equal to the Index Rate
plus three and one-quarter percent (3.25%) per annum.
(b) If any payment on the Revolving Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Lender on the basis of a three hundred and sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such interest and Fees are payable. The Index Rate shall be
determined by Lender (i) on the first Business Day immediately prior to the
Closing Date and (ii) thereafter, as of the last Business Day of each calendar
month for calculation of interest for the following calendar month. Each
determination by Lender of an interest rate hereunder shall be conclusive,
absent manifest error.
(d) So long as any Default or Event of Default shall have occurred
and be continuing, and at the election of Lender confirmed by written notice
from Lender to Borrower Representative, the interest rate applicable to the
Revolving Loan and the Letter of Credit Fees shall be increased by two percent
(2%) per annum above the rate of interest or the rate of such Fees otherwise
applicable hereunder ("Default Rate"), and, if such election is made, all
outstanding Obligations shall bear interest at the Default Rate applicable to
such Obligations. Interest and Letter of Credit Fees at the Default Rate shall
accrue from the initial date of such
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Default or Event of Default until that Default or Event of Default is cured or
waived and shall be payable upon demand.
(e) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of
interest permissible under law (the "Maximum Lawful Rate"), then so long as the
Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if
at any time thereafter the rate of interest payable hereunder is less than the
Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the
Maximum Lawful Rate until such time as the total interest received by Lender is
equal to the total interest which would have been received had the interest
rate payable hereunder been (but for the operation of this Section 1.5(e)) the
interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of
interest and in the manner provided in Sections 1.5(a) through (d) above,
unless and until the rate of interest again exceeds the Maximum Lawful Rate,
and at that time this Section 1.5(e) shall again apply. In no event shall the
total interest received by Lender pursuant to the terms hereof exceed the
amount which Lender could lawfully have received had the interest due hereunder
been calculated for the full term hereof at the Maximum Lawful Rate. If the
Maximum Lawful Rate is calculated pursuant to this Section 1.5(e), such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made.
If, notwithstanding the provisions of this Section 1.5(e), a court of competent
jurisdiction shall finally determine that Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Lender shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.11 and thereafter shall refund any excess to Borrowers or as a
court of competent jurisdiction may otherwise order.
1.6 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by each Borrower to Lender and on other information
available to Lender, Lender shall in its reasonable credit judgment determine
which Accounts of each Borrower shall be "Eligible Accounts" for purposes of
this Agreement. In determining whether a particular Account of any Borrower
constitutes an Eligible Account, Lender shall not include any such Account to
which any of the exclusionary criteria set forth below applies. Lender
reserves the right, at any time and from time to time after the Closing Date,
to adjust any such criteria, to establish new criteria and to adjust advance
rates with respect to Eligible Accounts, in its reasonable credit judgment.
Eligible Accounts shall not include any Account of any Borrower:
(a) which does not arise from the sale of goods or the performance of
services by such Borrower in the ordinary course of its business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) such Borrower is not able
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to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process;
(c) to the extent any defense, counterclaim, setoff or dispute is
asserted as to such Account or if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant
to a contract under which the Account Debtor's obligation to pay that invoice
is subject to such Borrower's completion of further performance under such
contract;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice, acceptable to Lender in form
and substance, has not been sent to the applicable Account Debtor;
(f) that (i) is not owned by such Borrower or (ii) is subject to any
right, claim, security interest or other interest of any other Person, other
than Liens in favor of Lender;
(g) that arises from a sale to any director, officer, other employee
or Affiliate of any Credit Party, or to any entity which has any common officer
or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state or
municipality or department, agency or instrumentality thereof unless Lender, in
its sole discretion, has agreed to the contrary in writing and such Borrower,
if necessary or desirable, has complied with the Federal Assignment of Claims
Act of 1940, and any amendments thereto, or any applicable state statute or
municipal ordinance of similar purpose and effect, with respect to such
obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the provinces of Quebec, Newfoundland,
Nova Scotia and Xxxxxx Xxxxxx Island and the Northwest Territories) unless such
Account is payable in Dollars and (A) payment thereof is assured by a letter of
credit, satisfactory to Lender as to form, amount and issuer or (B) is
otherwise approved in writing by Lender in its sole discretion;
(j) to the extent such Borrower or any Subsidiary thereof is liable
for goods sold or services rendered by the applicable Account Debtor to such
Borrower or any Subsidiary thereof but only to the extent of the potential
offset;
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(k) that arises with respect to goods which are delivered on a
xxxx-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may
be conditional;
(l) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(A) it is not paid within sixty (60) days following its due date;
(B) it is not invoiced in accordance with such Borrower's customary
business practices in effect on the Closing Date;
(C) if any Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or fails
to pay its debts generally as they come due; or
(D) if any petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal,
state or foreign (including any provincial) receivership, insolvency
relief or other law or laws for the relief of debtors;
(m) which is the obligation of an Account Debtor if fifty percent
(50%) or more of the dollar amount of all Accounts owing by that Account Debtor
are ineligible under the other criteria set forth in this Section 1.6;
(n) as to which Lender's Lien is not a first priority perfected
security interest;
(o) as to which any of the representations or warranties pertaining
to Accounts set forth in this Agreement or the Security Agreement is untrue;
(p) to the extent such Account is evidenced by a judgment, Instrument
or Chattel Paper;
(q) to the extent such Account exceeds any credit limit established
by Lender, in its reasonable discretion;
(r) which is payable in any currency other than Dollars (or, in the
case of Accounts owing from a Canadian Account Debtor, Canadian dollars); or
(s) which is unacceptable to Lender in its reasonable credit
judgment.
1.7 Eligible Inventory. Based on the most recent Borrowing Base
Certificate delivered by each Borrower to Lender and on other information
available to Lender, Lender shall
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in its reasonable credit judgment determine which Inventory of each Borrower
shall be "Eligible Inventory" for purposes of this Agreement. In determining
whether any particular Inventory of any Borrower constitutes Eligible
Inventory, Lender shall not include any such Inventory to which any of the
exclusionary criteria set forth below applies. Lender reserves the right, at
any time and from time to time after the Closing Date, to adjust any such
criteria, to establish new criteria and to adjust advance rates with respect to
Eligible Inventory, in its reasonable credit judgment. Eligible Inventory
shall not include any Inventory of any Borrower:
(a) that is not owned by such Borrower free and clear of all Liens
and rights of any other Person (including the rights of a purchaser that has
made progress payments and the rights of a surety that has issued a bond to
assure such Borrower's performance with respect to that Inventory), except the
Liens in favor of Lender;
(b) that is (i) not located on premises owned, leased or operated by
such Borrower or (ii) is stored with a bailee, warehouseman or similar Person,
unless Lender has given its prior consent thereto and unless (x) a satisfactory
bailee letter or landlord waiver has been delivered to Lender, or (y) Reserves
satisfactory to Lender have been established with respect thereto, or (iii)
located at any site if the aggregate book value of Inventory at any such
location is less than $50,000 at all times during the year;
(c) that is placed on consignment, is in transit or is otherwise not
located on premises owned or leased by such Borrower;
(d) that is covered by a negotiable document of title, unless such
document has been delivered to Lender;
(e) that in Lender's reasonable determination, is excess, obsolete,
unsalable, shopworn, seconds, damaged or unfit for sale;
(f) that consists of display items or packing or shipping materials
(other than commodity packaging acceptable to Lender in its discretion in an
amount not to exceed $500,000 in the aggregate) manufacturing supplies,
work-in-process Inventory or replacement parts;
(g) that consists of goods which have been returned by the buyer;
(h) that is not of a type held for sale in the ordinary course of
such Borrower's business;
(i) as to which Lender's Lien therein is not a first priority
perfected Lien;
(j) as to which any of the representations or warranties pertaining
to Inventory set forth in this Agreement or the Security Agreement is untrue;
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(k) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(l) is not covered by casualty insurance acceptable to Lender; or
(m) is otherwise unacceptable to Lender in its reasonable credit
judgment.
1.8 Cash Management Systems. On or prior to the Closing Date,
Borrowers will establish and will maintain until the Termination Date, the cash
management systems described on Annex C (the "Cash Management Systems").
1.9 Fees. (a) Borrowers shall pay to Lender a closing fee on the
Closing Date in the amount of $50,000 less the remaining portion, if any, of
the underwriting deposit previously paid by Ringer to Lender.
(b) Borrowers shall pay to Lender a commitment increase fee on the
date of each Effective Commitment Increase in an amount to be agreed upon among
Borrowers and Lender at such time.
(c) As additional compensation for Lender's Revolving Loan
Commitment, Borrowers agree to pay to Lender, in arrears, on the first Business
Day of each month prior to the Commitment Termination Date and on the
Commitment Termination Date, a fee for Borrowers' non-use of available funds an
amount equal to (i) three-eighths of one percent (.375%) per annum so long as
the Effective Revolving Loan Commitment does not exceed $10 million, and (ii)
one-half of one percent (0.50%) per annum at all times after the initial
Effective Commitment Increase (calculated in each case on the basis of a 360
day-year for actual days elapsed) of the difference between (x) the Effective
Revolving Loan Commitment and (y) the average for the period of the daily
closing balance of the aggregate Revolving Loan outstanding during the period
for which such fee is due.
(d) If Borrowers terminate the Revolving Loan Commitment, whether
voluntarily or involuntarily and whether before or after acceleration of the
Obligations, Borrowers shall pay to Lender as liquidated damages and
compensation for the costs of being prepared to make funds available hereunder
prepayment fee in an amount determined by multiplying the Applicable Percentage
(as defined below) by the amount of the Effective Revolving Loan Commitment.
As used herein, the term "Applicable Percentage" shall mean (x) two percent
(2.0%), in the case of a prepayment on or prior to the first anniversary of
the Closing Date and (y) one percent (1.0%), in the case of a prepayment after
the first anniversary of the Closing Date but on or prior to the second
anniversary of the Closing Date; provided, however, that if at any time prior
to the second anniversary of the Closing Date Ringer requests an Effective
Commitment Increase and (i) Lender shall notify Borrower Representative in
writing that the proposed Acquisition associated with such Effective Commitment
Increase is not acceptable to Lender and
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(ii) such proposed Acquisition shall be funded by another commercial lender
within 90 days after Lender's written notice to Borrower Representative, the
prepayment fee shall be $25,000, which prepayment fee shall be in lieu of any
prepayment fee under clause (x) or clause (y) of this Section 1.9(d).
Notwithstanding the foregoing, no prepayment fee shall be payable by Borrowers
upon a mandatory prepayment made pursuant to Section 1.3(b); provided that
Borrowers do not terminate the Revolving Loan Commitment upon any such
prepayment and, in the case of prepayments made pursuant to Section 1.3(b)(ii)
or (b)(iii), the transaction giving rise to the applicable prepayment is
expressly permitted under Section 6.
(e) Borrowers shall pay to Lender an annual collateral monitoring fee
of $10,000, payable in arrears on each anniversary of the Closing Date.
1.10 Receipt of Payments. Borrowers shall make each payment under
this Agreement not later than 2:00 p.m. (Chicago time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received on
the day of receipt of immediately available funds therefor in the Collection
Account prior to 2:00 p.m. Chicago time. Payments received after 2:00 p.m.
Chicago time on any Business Day shall be deemed to have been received on the
following Business Day.
1.11 Application and Allocation of Payments. (a) So long as no
Default or Event of Default shall have occurred and be continuing, (i) payments
consisting of proceeds of Accounts received in the ordinary course of business
shall be applied to the Revolving Loan, (ii) voluntary prepayments shall be
applied as determined by Borrower Representative, subject to the provisions of
Section 1.3(a); and (iii) mandatory prepayments shall be applied as set forth
in Section 1.3. As to each other payment, and as to all payments made when a
Default or Event of Default shall have occurred and be continuing or following
the Commitment Termination Date, each Borrower hereby irrevocably waives the
right to direct the application of any and all payments received from or on
behalf of such Borrower, and each Borrower hereby irrevocably agrees that
Lender shall have the continuing exclusive right to apply any and all such
payments against the Obligations of Borrowers as Lender may deem advisable
notwithstanding any previous entry by Lender in the Loan Account or any other
books and records. In the absence of a specific determination by Lender with
respect thereto, payments shall be applied to amounts then due and payable in
the following order: (1) to Fees and Lender's expenses reimbursable hereunder;
(2) to interest on the Revolving Loan; (3) to principal payments on the
Revolving Loan and to provide cash collateral for Letter of Credit Obligations
in the manner described in Annex B; and (4) to all other Obligations to the
extent reimbursable under Section 11.3.
(b) If and to the extent Borrowers fail to pay promptly any Fees,
expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest owing by Borrowers under this Agreement or any of
the other Loan Documents as and when due (after giving effect to any notice or
grace period provided in the Loan Documents), Lender is
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authorized to, and at its sole election upon notice to Borrower Representative
may, charge to the Revolving Loan balance on behalf of each Borrower and cause
to be paid all such amounts, even if such charges would cause the balance of
the aggregate Revolving Loan to exceed Borrowing Availability or would cause
the balance of the Revolving Loan of any Borrower to exceed such Borrower's
separate Borrowing Base. At Lender's option and to the extent permitted by
law, any charges so made shall constitute part of the Revolving Loan hereunder.
1.12 Loan Account and Accounting. Lender shall maintain a loan
account (the "Loan Account") on its books to record: all Revolving Credit
Advances, all payments made by Borrowers, and all other debits and credits as
provided in this Agreement with respect to the Revolving Loan or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Lender's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Lender's most recent printout or
other written statement, shall be presumptive evidence of the amounts due and
owing to Lender by each Borrower; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect any Borrower's duty
to pay the Obligations. Lender shall render to Borrower Representative a
monthly accounting of transactions with respect to the Revolving Loan setting
forth the balance of the Loan Account as to each Borrower. Unless Borrower
Representative notifies Lender in writing of any objection to any such
accounting (specifically describing the basis for such objection), within
forty-five (45) days after the date thereof, each and every such accounting
shall (absent manifest error) be deemed final, binding and conclusive upon
Borrowers in all respects as to all matters reflected therein. Only those items
expressly objected to in such notice shall be deemed to be disputed by
Borrowers.
1.13 Indemnity. Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of Lender and its
Affiliates, and each such Person's respective officers, directors, employees,
attorneys, agents and representatives (each, an "Indemnified Person"), from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including attorneys' fees and disbursements and other
costs of investigation or defense, including those incurred upon any appeal)
which may be instituted or asserted against or incurred by any such Indemnified
Person as the result of credit having been extended, suspended or terminated
under this Agreement and the other Loan Documents and the administration of
such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and legal
costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively,
"Indemnified Liabilities"); provided, that no Credit Party shall be liable for
any indemnification to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results solely
from that Indemnified Person's gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction. NO INDEMNIFIED PERSON
SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY
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BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.
1.14 Access. (a) Each Credit Party which is a party hereto shall,
during normal business hours, from time to time upon one (1) Business Day's
prior notice as frequently as Lender reasonably determines to be appropriate:
(a) provide Lender and any of its officers, employees and agents access to its
properties, facilities, advisors and employees (including officers) of each
Credit Party and to the Collateral, (b) permit Lender, and any of its officers,
employees and agents, to inspect, audit and make extracts from such Credit
Party's books and records, (c) permit Lender, and its officers, employees and
agents, to inspect, review, evaluate and make test verifications and counts of
the Accounts, Inventory and other Collateral of any Credit Party, and (d)
provide Lender and any of its officers, employees and agents access to all
relevant books and records and other information (financial or otherwise)
necessary to enable Lender to complete its business and legal due diligence
with respect to any proposed Permitted Acquisition and with respect to the
inclusion of receivables and inventory in the applicable Borrowing Base
resulting from any Permitted Acquisition. If a Default or Event of Default
shall have occurred and be continuing, each such Credit Party shall provide
such access at all times and without advance notice. Furthermore, so long as
any Event of Default shall have occurred and be continuing, Borrowers shall
provide Lender with access to their suppliers and customers. Each Credit Party
shall make available to Lender and its counsel, as quickly as is possible under
the circumstances, originals or copies of all books and records which Lender
may request. Each Credit Party shall deliver any document or instrument
necessary for Lender, as it may from time to time request, to obtain records
from any service bureau or other Person which maintains records for such Credit
Party, and shall maintain duplicate records or supporting documentation on
media, including computer tapes and discs owned by such Credit Party.
(b) Borrowers shall pay Lender a Fee of $650 per day per individual
(plus all reasonable out-of-pocket costs and expenses) in connection with
Lender's field examinations permitted under Section 1.14(a) and Section 4(c) of
the Security Agreement. Subject to Section 1.11(b), such Fees and expenses
shall be charged against the Revolving Loan in connection with each field audit
conducted after the Closing Date; provided, however, that so long as no Default
or Event of Default shall have occurred and be continuing, Lender shall not be
entitled to be reimbursed for more than two (2) such field examinations (other
than in connection with any proposed Permitted Acquisition) in any calendar
year; provided further, however, that so long as no Default or Event of Default
shall have occurred and be continuing, Fees in the aggregate in any calendar
year for such field examinations shall not exceed (i) $20,000 plus (ii) after
the initial Permitted Acquisition either (x) an additional $20,000 for each
Target acquired pursuant to a Permitted Acquisition whose accounting operations
have not been consolidated with Ringer's
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accounting operations at one location within six (6) months after the closing
of such Permitted Acquisition or (y) an additional $10,000 for each Target
acquired pursuant to a Permitted Acquisition if (A) such field examination is
conducted within six (6) months after the closing of such Permitted Acquisition
or (B) at all times after such six month period the accounting operations of
such Target have been consolidated with Ringer's accounting operations at one
location.
1.15 Taxes. (a) Any and all payments by each Borrower hereunder
(including any payments made pursuant to Section 12) or under the Revolving
Notes shall be made, in accordance with this Section 1.15, free and clear of
and without deduction for any and all present or future Taxes. If any Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder (including any sum payable pursuant to Section 12) or under
the Revolving Notes, (i) the sum payable shall be increased as much as shall be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 1.15) Lender receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Borrower shall make such deductions, and (iii) such Borrower
shall pay the full amount deducted to the relevant taxing or other authority in
accordance with applicable law. Within thirty (30) days after the date of any
payment of Taxes, Borrower Representative shall furnish to Lender the original
or a certified copy of a receipt evidencing payment thereof.
(b) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and, within ten (10) days of demand therefor, pay Lender
for the full amount of Taxes (including any Taxes imposed by any jurisdiction
on amounts payable under this Section 1.15) paid by Lender, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.
1.16 Capital Adequacy; Increased Costs; Illegality. (a) If Lender
shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law) from any central bank or other Governmental Authority
increases or would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by Lender and thereby
reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder, then Borrowers shall from time to time upon demand by
Lender pay to Lender additional amounts sufficient to compensate Lender for
such reduction. A certificate as to the amount of that reduction and showing
the basis of the computation thereof submitted by Lender to Borrower
Representative shall, absent manifest error, be final, conclusive and binding
for all purposes.
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(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to Lender of agreeing to make or making, funding or
maintaining the Revolving Loan, then Borrowers shall from time to time, upon
demand by Lender pay to Lender additional amounts sufficient to compensate
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to Borrower Representative by Lender, shall be
conclusive and binding on Borrowers for all purposes, absent manifest error.
Lender agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
Lender shall, to the extent not inconsistent with Lender's internal policies of
general application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrowers pursuant to this Section
1.16(b).
1.17 Single Loan. All Revolving Credit Advances to each Borrower and
all of the other Obligations of each Borrower arising under this Agreement and
the other Loan Documents shall constitute one general obligation of that
Borrower and, subject to Section 11.2, shall be secured, until the Termination
Date, by all of its Collateral.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Revolving Credit Advances on the
Closing Date.
Lender shall not be obligated to make any Revolving Credit Advances or
incur any Letter of Credit Obligations on the Closing Date, or to take,
fulfill, or perform any other action hereunder, until the following conditions
have been satisfied, in Lender's sole discretion, or waived in writing by
Lender:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrowers and
Lender; and Lender shall have received such documents, instruments, agreements
and legal opinions as Lender shall request in connection with the transactions
contemplated by this Agreement and the other Loan Documents, including all
those listed in the Closing Checklist attached hereto as Annex D, each in form
and substance satisfactory to Lender.
(b) Repayment of Prior Lender Obligations; Satisfaction of
Outstanding L/Cs. (i) Lender shall have received a fully executed original of
a pay-off letter satisfactory to Lender confirming that all of the Prior Lender
Obligations will be repaid in full from the proceeds of the initial Revolving
Credit Advance and all Liens upon any of the property of Borrowers or any of
their Subsidiaries in favor of Prior Lender shall be terminated by Prior Lender
immediately upon such payment; and (ii) all letters of credit issued or
guaranteed by Prior Lender shall have been
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cash collateralized or supported by a Letter of Credit issued pursuant to
Annex B, as mutually agreed upon by Lender, Borrowers and Prior Lender.
(c) Approvals. Lender shall have received (i) satisfactory evidence
that the Credit Parties have obtained all required consents, waivers,
acknowledgments, orders, authorizations and approvals of all Persons including
all requisite Governmental Authorities, to the execution, delivery and
performance of this Agreement and the other Loan Documents and the consummation
of the Related Transactions or (ii) an officer's certificate in form and
substance satisfactory to Lender affirming that no such consents or approvals
are required.
(d) Opening Availability. The Eligible Accounts and Eligible
Inventory of each Borrower supporting the initial Revolving Credit Advance and
the initial Letter of Credit Obligations incurred and the amount of the
Reserves to be established on the Closing Date shall be sufficient in value, as
determined by Lender, to provide Borrowers, collectively, with Net Borrowing
Availability, after giving effect to the initial Revolving Credit Advance made
to each Borrower under the Revolving Loan, the incurrence of any initial Letter
of Credit Obligations and the consummation of the Related Transactions (on a
pro forma basis, with expenses and liabilities being paid in the ordinary
course of business and without acceleration of sales or any deterioration of
trade payables) of at least $1,300,000.
(e) Payment of Fees. Borrowers shall have paid the Fees required to
be paid on the Closing Date in the respective amounts specified in Section 1.9
and shall have reimbursed Lender for all fees, costs and expenses of closing
presented as of the Closing Date.
(f) Capital Structure: Other Indebtedness. The capital structure of
each Credit Party and the terms and conditions of all Indebtedness of each
Credit Party shall be acceptable to Lender in its sole discretion.
(g) Consummation of Related Transactions. Lender shall have received
fully executed copies of the Dexol Acquisition Agreement and each of the other
Related Transactions Documents in effect on the Closing Date, each of which
shall be in form and substance satisfactory to Lender and its counsel. The
Dexol Transaction and the other Related Transactions shall have been
consummated in accordance with the terms of the Dexol Acquisition Agreement and
the other Related Transactions Documents.
(h) Aggregate Expenses. Aggregate fees and expenses paid or payable
with respect to the Related Transactions (including fees and expenses payable
to Lender) shall not exceed $550,000.
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2.2 Further Conditions to Each Revolving Loan. Lender shall not be
obligated to fund any Revolving Credit Advance or incur any Letter of Credit
Obligation, if, as of the date thereof:
(a) Any representation or warranty by any Credit Party contained
herein or in any of the other Loan Documents shall be untrue or incorrect as of
such date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted
or expressly contemplated by this Agreement; or
(b) Any event or circumstance having a Material Adverse Effect shall
have occurred since the date hereof; or
(c) Any Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any Revolving Credit Advance
or the incurrence of any Letter of Credit Obligations; or
(d) After giving effect to any Revolving Credit Advance or the
incurrence of any Letter of Credit Obligations, (i) the outstanding principal
amount of the aggregate Revolving Loan would exceed the lesser of the Aggregate
Borrowing Base and the Effective Revolving Loan Commitment, or (ii) the
outstanding principal amount of the Revolving Loan of the applicable Borrower
would exceed such Borrower's separate Borrowing Base.
The request and acceptance by any Borrower of the proceeds of any Revolving
Credit Advance or the incurrence of any Letter of Credit Obligations shall be
deemed to constitute, as of the date of such request or acceptance, (i) a
representation and warranty by Borrowers that the conditions in this Section
2.2 have been satisfied and (ii) a reaffirmation by Borrowers of the
cross-guaranty provisions set forth in Section 12 and of the granting and
continuance of Lender's Liens pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Revolving Loan and to incur Letter of
Credit Obligations, the Credit Parties executing this Agreement, jointly and
severally, make the following representations and warranties to Lender with
respect to all Credit Parties, each and all of which shall survive the
execution and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each Credit Party (a)
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation; (b) is duly qualified to conduct
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such
qualification; (c) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it
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operates under lease and to conduct its business as now, heretofore and
proposed to be conducted; (d) has all licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter and
by-laws; and (f) subject to specific representations set forth herein regarding
ERISA, Environmental Laws, tax and other laws, is in compliance with all
applicable provisions of law, except where the failure to comply, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. No inventory is subject to any licensing, patent, royalty,
trademark, tradename or copyright agreements with any third parties which
materially restricts the ability of either Borrower or, in the case of the
exercise of its remedies, the Lender to sell such Inventory.
3.2 Executive Offices; FEIN. As of the Closing Date, the current
location of each Credit Party's chief executive office and principal place of
business is set forth in Disclosure Schedule (3.2) and none of such locations
have changed within the twelve (12) months preceding the Closing Date. In
addition, Disclosure Schedule (3.2) lists the federal employer identification
number of each Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's corporate power; (b) have been duly authorized by all
necessary or proper corporate and shareholder action; (c) do not contravene any
provision of such Person's charter or bylaws; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of
its property is bound; (f) do not result in the creation or imposition of any
Lien upon any of the property of such Person other than those in favor of
Lender pursuant to the Loan Documents; and (g) do not require the consent,
waiver, acknowledgment, order, authorization or approval of any Governmental
Authority or any other Person, except those referred to in Section 2.1(c), all
of which will have been duly obtained, made or complied with prior to the
Closing Date. On or prior to the Closing Date, each of the Loan Documents
shall have been duly executed and delivered by each Credit Party thereto and
each such Loan Document shall then constitute a legal, valid and binding
obligation of such Credit Party enforceable against it in accordance with its
terms.
3.4 Financial Statements and Projections. Except for the
Projections, all Financial Statements concerning Borrowers and their respective
Subsidiaries which are referenced below have been prepared in accordance with
GAAP consistently applied throughout the periods covered (except as disclosed
therein and except, with respect to unaudited Financial Statements, for the
absence of footnotes and normal year-end audit adjustments) and present fairly
in all
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material respects the financial position of the Persons covered thereby as at
the dates thereof and the results of their operations and cash flows for the
periods then ended.
(a) The following Financial Statements attached hereto as Disclosure
Schedule (3.4(A)) have been delivered on the Closing Date:
(i) The audited consolidated balance sheets at September 30, 1995 and
1996 and the related statements of income and cash flows of Borrowers and
their Subsidiaries for the Fiscal Years then ended, certified by Deloitte
& Touche LLP.
(ii) The unaudited consolidating balance sheets at September 30, 1995
and 1996 and the related statements of income and cash flows of Borrowers
and their Subsidiaries for the Fiscal Years then ended.
(iii) The unaudited consolidated and consolidating balance sheet(s) at
February 28, 1997 and the related statement(s) of income and cash flows of
Borrowers and their Subsidiaries for the Fiscal Month then ended.
(b) Pro Forma. The Pro Forma delivered on the Closing Date and
attached hereto as Disclosure Schedule (3.4(B)) was prepared by Borrowers
giving pro forma effect to the Related Transactions, was based on the unaudited
consolidated and consolidating balance sheets of Borrowers and their
Subsidiaries dated January 31, 1997, and was prepared in accordance with GAAP,
with only such adjustments thereto as would be required in accordance with
GAAP.
(c) Projections. The Projections delivered on the Closing Date and
attached hereto as Disclosure Schedule (3.4(C)) have been prepared by Borrowers
in light of the past operations of their businesses, and reflect projections
for Fiscal Year 1997 on a month by month basis. The Projections are based upon
estimates and assumptions stated therein, all of which Borrowers believe to be
reasonable and fair in light of current conditions and current facts known to
Borrowers and, as of the Closing Date, reflect Borrowers' good faith and
reasonable estimates of the future financial performance of Borrowers and of
the other information projected therein for the period set forth therein.
3.5 Material Adverse Effect. Between September 30, 1996 and the
Closing Date, (a) no Credit Party has incurred any obligations, contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the Pro
Forma and which, alone or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Credit Party or has become binding upon
any Credit Party's assets and no law or regulation applicable to any Credit
Party has been adopted which has had or could reasonably be expected to have a
Material Adverse Effect, and (c) no Credit Party is in default and to the best
of Borrowers' knowledge no third party is in default under any material
contract,
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lease or other agreement or instrument, which alone or in the aggregate could
reasonably be expected to have a Material Adverse Effect. Between September
30, 1996 and the Closing Date no event has occurred, which alone or together
with other events, could reasonably be expected to have a Material Adverse
Effect.
3.6 Ownership of Property; Liens. (a) As of the Closing Date, the
real estate ("Real Estate") listed on Disclosure Schedule (3.6) constitutes all
of the real property owned, leased, subleased, or used by any Credit Party.
Each Credit Party owns good and marketable fee simple title to all of its owned
Real Estate, and valid and marketable leasehold interests in all of its leased
Real Estate, all as described on Disclosure Schedule (3.6), and copies of all
such leases or a summary of terms thereof satisfactory to Lender have been
delivered to Lender. Disclosure Schedule (3.6) further describes any Real
Estate with respect to which any Credit Party is a lessor, sublessor or
assignor as of the Closing Date. Each Credit Party also has good and
marketable title to, or valid leasehold interests in, all of its personal
properties and assets. As of the Closing Date, none of the properties and
assets of any Credit Party are subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions known to any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances. Each Credit Party has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and has
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect such Credit Party's right, title and interest in and to all
such Real Estate and other properties and assets. Disclosure Schedule (3.6)
also describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate. As of the Closing Date, no
portion of any Credit Party's Real Estate has suffered any material damage by
fire or other casualty loss which has not heretofore been repaired and restored
in all material respects to its original condition or otherwise remedied. As
of the Closing Date, all material permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and used for all
of the purposes for which they are currently occupied and used have been
lawfully issued and are in full force and effect.
3.7 Labor Matters. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to
employees of each Credit Party comply with the Fair Labor Standards Act and
each other federal, state, local or foreign law applicable to such matter; (c)
all payments due from any Credit Party for employee health and welfare
insurance have been paid or accrued as a liability on the books of such Credit
Party; (d) except as set forth in Disclosure Schedule (3.7), no Credit Party is
a party to or bound by any collective bargaining agreement, management
agreement, consulting agreement or any employment agreement (and true and
complete copies of any agreements described on Disclosure Schedule (3.7) have
been delivered to Lender); (e) there is no organizing activity involving any
Credit Party pending or, to any Credit Party's knowledge, threatened by any
labor union or group of employees; (f) there are no representation proceedings
pending or, to any Credit Party's knowledge, threatened with
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the National Labor Relations Board, and no labor organization or group of
employees of any Credit Party has made a pending demand for recognition; and
(g) except as set forth in Disclosure Schedule (3.7), there are no complaints
or charges against any Credit Party pending or, to the knowledge of any Credit
Party, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by any Credit Party of any individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit
Party has any Subsidiaries, is engaged in any joint venture or partnership with
any other Person, or is an Affiliate of any other Person. All of the issued
and outstanding Stock of each Credit Party is owned by each of the stockholders
and in the amounts set forth on Disclosure Schedule (3.8). Except as set forth
in Disclosure Schedule (3.8), there are no outstanding rights to purchase,
options, warrants or similar rights or agreements pursuant to which any Credit
Party may be required to issue, sell, repurchase or redeem any of its Stock or
other equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Indebtedness of each Credit Party as of the
Closing Date is described in Section 6.3 (including Disclosure Schedule (6.3)).
3.9 Government Regulation. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940 as amended. No Credit Party is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, or any
other federal or state statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The making of the
Revolving Loan by Lender to Borrowers, the incurrence of the Letter of Credit
Obligations on behalf of Borrowers, the application of the proceeds thereof and
repayment thereof and the consummation of the Related Transactions will not
violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission.
3.10 Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
security" as such terms are defined in Regulation U or G of the Federal Reserve
Board as now and from time to time hereafter in effect (such securities being
referred to herein as "Margin Stock"). No Credit Party owns any Margin Stock,
and none of the proceeds of the Revolving Loan or other extensions of credit
under this Agreement will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the
Revolving Loan or other extensions of credit under this Agreement to be
considered a "purpose credit" within the meaning of Regulation G, T, U or X of
the Federal Reserve Board. No Credit Party will take or permit to be taken any
action which might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
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3.11 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority by
their due date (subject to any extensions agreed to by such Governmental
Authority) and all Charges have been paid prior to the date on which any fine,
penalty, interest or late charge may be added thereto for nonpayment thereof
(or any such fine, penalty, interest, late charge or loss has been paid),
excluding Charges or other amounts being contested in accordance with Section
5.2(b). Proper and accurate amounts have been withheld by each Credit Party
from its respective employees for all periods in full and complete compliance
with all applicable federal, state, local and foreign law and such withholdings
have been timely paid to the respective Governmental Authorities. Disclosure
Schedule (3.11) sets forth as of the Closing Date those taxable years for which
any Credit Party's tax returns are currently being audited by the IRS or any
other applicable Governmental Authority and any assessments or threatened
assessments in connection with such audit, or otherwise currently outstanding.
Except as described on Disclosure Schedule (3.11), no Credit Party has executed
or filed with the IRS or any other Governmental Authority any agreement or
other document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Credit Parties and their
respective predecessors are liable for any Charges: (a) under any agreement
(including any tax sharing agreements) or (b) to each Credit Party's knowledge,
as a transferee. As of the Closing Date, no Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by reason of a
change in accounting method or otherwise, which would have a Material Adverse
Effect.
3.12 ERISA. (a) Disclosure Schedule (3.12) lists and separately
identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare
Plans. Copies of all such listed Plans, together with a copy of the latest
form 5500 for each such Plan, have been delivered to Lender. Each Qualified
Plan has been determined by the IRS to qualify under Section 401 of the IRC,
and the trusts created thereunder have been determined to be exempt from tax
under the provisions of Section 501 of the IRC, and nothing has occurred which
would cause the loss of such qualification or tax-exempt status. Each Plan is
in compliance with the applicable provisions of ERISA and the IRC, including
the filing of reports required under the IRC or ERISA. No Credit Party or ERISA
Affiliate has failed to make any contribution or pay any amount due as required
by either Section 412 of the IRC or Section 302 of ERISA or the terms of any
such Plan. No Credit Party or ERISA Affiliate has engaged in a prohibited
transaction, as defined in Section 4975 of the IRC, in connection with any
Plan, which would subject any Credit Party to a material tax on prohibited
transactions imposed by Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title
IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA
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Affiliate has incurred or reasonably expects to incur any liability as a
result of a complete or partial withdrawal from a Multiemployer Plan; (v)
within the last five years no Title IV Plan with Unfunded Pension Liabilities
has been transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; and (vi)
no liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or the equivalent by another nationally recognized rating
agency.
3.13 No Litigation. No action, claim, lawsuit, demand, investigation
or proceeding is now pending or, to the knowledge of any Credit Party,
threatened against any Credit Party, before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a)
which challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) which has a reasonable risk of being determined adversely to any Credit
Party and which, if so determined, could have a Material Adverse Effect.
Except as set forth on Disclosure Schedule (3.13), as of the Closing Date there
is no Litigation pending or threatened which seeks damages in excess of
$100,000 or injunctive relief or alleges criminal misconduct of any Credit
Party.
3.14 Brokers. No broker or finder acting on behalf of any Credit
Party brought about the obtaining, making or closing of the Revolving Loan or
the Related Transactions, and no Credit Party has any obligation to any Person
in respect of any finder's or brokerage fees in connection therewith.
3.15 Intellectual Property. As of the Closing Date, each Credit Party
owns or has rights to use all Intellectual Property necessary to continue to
conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and each Patent, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule (3.15) hereto. Each Credit Party conducts its business and affairs
without infringement of or interference with any Intellectual Property of any
other Person.
3.16 Full Disclosure. No information contained in this Agreement, any
of the other Loan Documents, any Projections, Financial Statements or
Collateral Reports or other reports from time to time delivered hereunder or
any written statement furnished by or on behalf of any Credit Party to Lender
pursuant to the terms of this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. The Liens granted to
Lender pursuant to the Collateral Documents will at all times be fully
perfected first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances with respect to the
Collateral other than Accounts.
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3.17 Environmental Matters. (a) To the knowledge of the Borrowers,
except as set forth in Disclosure Schedule (3.17), as of the Closing Date: (i)
the Real Estate is free of contamination from any Hazardous Material except for
such contamination that would not adversely impact the value or marketability
of such Real Estate and which would not result in Environmental Liabilities
which could reasonably be expected to exceed $35,000; (ii) no Credit Party has
caused or suffered to occur any Release of Hazardous Materials on, at, in,
under, above, to, from or about any of its Real Estate; (iii) the Credit
Parties are and have been in compliance with all Environmental Laws, except for
such noncompliance which would not result in Environmental Liabilities which
could reasonably be expected to exceed $35,000; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities which could reasonably be expected to exceed $35,000,
and all such Environmental Permits are valid, uncontested and in good standing;
(v) no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous Materials,
that are likely to result in any Environmental Liabilities of such Credit Party
which could reasonably be expected to exceed $35,000, and no Credit Party has
permitted any current or former tenant or occupant of the Real Estate to engage
in any such operations; (vi) the Credit Parties' estimated costs of compliance
with Environmental Laws and Environmental Permits (excluding the filing fees
and costs for all regularly scheduled periodic reports and license renewals)
for each of the two Fiscal Years following the Closing Date are not in excess
of $35,000 in either Fiscal Year; (vii) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
which seeks damages, penalties, fines, costs or expenses in excess of $25,000
or injunctive relief, or which alleges criminal misconduct by any Credit Party;
(viii) no notice has been received by any Credit Party identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Credit Parties, there are
no facts, circumstances or conditions that may result in any Credit Party being
identified as a "potentially responsible party" under CERCLA or analogous state
statutes; and (ix) the Credit Parties have provided to Lender copies of all
existing environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that Lender (i)
is not now, and has not ever been, in control of any of the Real Estate or any
Credit Party's affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party's
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
3.18 Insurance. Disclosure Schedule (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each
such policy.
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3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposits and/or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number.
3.20 Government Contracts. Except as set forth in Disclosure Schedule
(3.20), as of the Closing Date, no Credit Party is a party to any contract or
agreement with any Governmental Authority and no Credit Party's Accounts are
subject to the Federal Assignment of Claims Act, as amended (31 U.S.C. Section
3727) or any similar state or local laws.
3.21 Customer and Trade Relations. As of the Closing Date, there
exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Credit Party with any customer or group
of customers whose purchases during the preceding twelve (12) months caused
them to be ranked among the ten largest customers of such Credit Party; or the
business relationship of any Credit Party with any supplier material to its
operations.
3.22 Agreements and Other Documents. As of the Closing Date, each
Credit Party has provided to Lender or its counsel accurate and complete copies
(or summaries) of all of the following agreements or documents to which it is
subject and each of which are listed on Disclosure Schedule (3.22): supply
agreements and purchase agreements not terminable by such Credit Party within
sixty (60) days following written notice issued by such Credit Party and
involving transactions in excess of $250,000 per annum; any lease of Equipment
having a remaining term of one year or longer and requiring aggregate rental
and other payments in excess of $100,000 per annum; licenses and permits held
by the Credit Parties, the absence of which could be reasonably likely to have
a Material Adverse Effect; instruments or documents evidencing Indebtedness of
such Credit Party and any security interest granted by such Credit Party with
respect thereto; and instruments and agreements evidencing the issuance of any
equity securities, warrants, rights or options to purchase equity securities of
such Credit Party.
3.23 Solvency. Both before and after giving effect to (a) the
Revolving Credit Advances and Letter of Credit Obligations to be made or
extended on the Closing Date or such other date as Revolving Credit Advances
and Letter of Credit Obligations requested hereunder are made or extended, (b)
the disbursement of the proceeds of the Revolving Loan pursuant to the
instructions of Borrower Representative, (c) the Dexol Transaction, the
Refinancing and the consummation of the other Related Transactions and (d) the
payment and accrual of all transaction costs in connection with the foregoing,
each Credit Party is Solvent.
3.24 Dexol Acquisition Agreement. As of the Closing Date, Ringer has
delivered to Lender a complete and correct copy of the Dexol Acquisition
Agreement (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other
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documents delivered pursuant thereto or in connection therewith). No Credit
Party and no other Person party thereto is in default in the performance or
compliance with any provisions thereof. The Dexol Acquisition Agreement
complies with, and the Dexol Transaction has been consummated in accordance
with, all applicable laws. The Dexol Acquisition Agreement is in full force
and effect as of the Closing Date, has not been terminated, rescinded or
withdrawn. All requisite approvals by Governmental Authorities having
jurisdiction over Dexol, any Credit Party and other Persons referenced therein,
with respect to the transactions contemplated by the Dexol Acquisition
Agreement, have been obtained, and no such approvals impose any conditions to
the consummation of the transactions contemplated by the Dexol Acquisition
Agreement or to the conduct by any Credit Party of its business thereafter. To
the best of each Credit Party's knowledge, none of Dexol's representations or
warranties in the Dexol Acquisition Agreement contain any untrue statement of a
material fact or omit any fact necessary to make the statements therein not
misleading. Each of the representations and warranties given by each
applicable Credit Party in the Dexol Acquisition Agreement is true and correct
in all material respects. Notwithstanding anything contained in the Dexol
Acquisition Agreement to the contrary, such representations and warranties of
the Credit Parties are incorporated into this Agreement by this Section 3.24
and shall, solely for purposes of this Agreement and the benefit of Lender,
survive the consummation of the Dexol Transaction.
3.25 Subordinated Debt. As of the Closing Date, Borrowers have
delivered to Lender a complete and correct copy of the Subordinated Note
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). Ringer has the corporate power and authority to incur the
Indebtedness evidenced by the Subordinated Note. The subordination provisions
of the Subordinated Note are enforceable against the holders of the
Subordinated Note by Lender. All Obligations, including the Obligations to pay
principal of and interest on the Revolving Loan and the Letter of Credit
Obligations, constitute senior Indebtedness entitled to the benefits of the
subordination provisions contained in the Subordinated Note. The principal of
and interest on the Revolving Notes, all Letter of Credit Obligations and all
other Obligations will constitute "senior debt" as that or any similar term is
or may be used in any other instrument evidencing or applicable to any other
Subordinated Debt. Borrowers acknowledge that Lender is entering into this
Agreement and is extending the Revolving Loan Commitment in reliance upon the
subordination provisions of the Subordinated Note and this Section 3.25.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. (a) Each Credit Party executing this
Agreement hereby agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Lender the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the
manner set forth in Annex E.
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(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall
deliver to Lender the Collateral Reports (including Borrowing Base Certificates
in the form of Exhibit 4.1(b)) at the times, to the Persons and in the manner
set forth in Annex F.
4.2 Communication with Accountants. Each Credit Party executing this
Agreement authorizes Lender to communicate directly with its independent
certified public accountants, and authorizes and shall instruct those
accountants and advisors to disclose and make available to Lender any and all
Financial Statements and other supporting financial documents, schedules and
information relating to any Credit Party (including copies of any issued
management letters) with respect to the business, financial condition and other
affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees
as to all Credit Parties that from and after the Closing Date and until the
Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and its rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; except as otherwise provided herein, at all times
maintain, preserve and protect all of its assets and properties used or useful
in the conduct of its business, and keep the same in good repair, working order
and condition in all material respects (taking into consideration ordinary wear
and tear) and from time to time make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices; and transact business only in such corporate and trade
names as are set forth in Disclosure Schedule (5.1).
5.2 Payment of Obligations. (a) Subject to Section 5.2(b), each
Credit Party shall pay and discharge or cause to be paid and discharged
promptly all Charges payable by it, including (A) Charges imposed upon it, its
income and profits, or any of its property (real, personal or mixed) and all
Charges with respect to tax, social security and unemployment withholding with
respect to its employees, and (B) lawful claims for labor, materials, supplies
and services or otherwise, before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) at the time of commencement of any such
contest no Default or Event of Default shall have occurred and be continuing,
(ii) adequate reserves with respect to such contest are maintained on the books
of such Credit Party, in accordance with GAAP, (iii) such contest is maintained
and prosecuted continuously and with diligence and operates to suspend
collection or enforcement of such Charges or claims or any Lien in respect
thereof, (iv) none of the Collateral becomes subject
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to forfeiture or loss as a result of such contest, (v) no Lien shall be imposed
to secure payment of such Charges or claims other than Permitted Encumbrances,
(vi) such Credit Party shall promptly pay or discharge such contested Charges
or claims and all additional charges, interest, penalties and expenses, if any,
and shall deliver to Lender evidence acceptable to Lender of such compliance,
payment or discharge, if such contest is terminated or discontinued adversely
to such Credit Party or the conditions set forth in this Section 5.2(b) are no
longer met, and (vii) Lender has not advised Borrowers in writing that Lender
reasonably believes that nonpayment or nondischarge thereof could have or
result in a Material Adverse Effect.
5.3 Books and Records. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on
a basis consistent with the Financial Statements attached as Disclosure
Schedule (3.4(A)).
5.4 Insurance; Damage to or Destruction of Collateral. (a) The
Credit Parties shall, at their sole cost and expense, maintain the policies of
insurance described on Disclosure Schedule (3.18) in form and with insurers
acceptable to Lender. If any Credit Party at any time or times hereafter shall
fail to obtain or maintain any of the policies of insurance required above or
to pay all premiums relating thereto, Lender may at any time or times
thereafter obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which Lender deems advisable.
Lender shall have no obligation to obtain insurance for any Credit Party or pay
any premiums therefor. By doing so, Lender shall not be deemed to have waived
any Default or Event of Default arising from any Credit Party's failure to
maintain such insurance or pay any premiums therefor. All sums so disbursed,
including attorneys' fees, court costs and other charges related thereto, shall
be payable on demand by Borrowers to Lender and shall be additional Obligations
hereunder secured by the Collateral.
(b) Lender reserves the right at any time upon any change in any
Credit Party's risk profile (including any change in the product mix maintained
by any Credit Party or any laws affecting the potential liability of such
Credit Party) to require additional forms and limits of insurance to, in
Lender's opinion, adequately protect Lender's interests in all or any portion
of the Collateral and to ensure that each Credit Party is protected by
insurance in amounts and with coverage customary for its industry. If
requested by Lender, each Credit Party shall deliver to Lender from time to
time a report of a reputable insurance broker, satisfactory to Lender, with
respect to its insurance policies.
(c) Each Borrower shall deliver to Lender, in form and substance
satisfactory to Lender, endorsements to (i) all "All Risk" and business
interruption insurance naming Lender as loss payee, and (ii) all general
liability and other liability policies naming Lender as additional insured,
which endorsements shall provide for at least 30 days' written notice to Lender
prior to any renewal, cancellation or material amendment of any referenced
policies. Each Borrower irrevocably makes, constitutes and appoints Lender
(and all officers, employees or agents
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designated by Lender), so long as any Default or Event of Default shall have
occurred and be continuing or the anticipated insurance proceeds exceed
$250,000, as such Borrower's true and lawful agent and attorney-in-fact for the
purpose of making, settling and adjusting claims under such "All Risk" policies
of insurance, endorsing the name of such Borrower on any check or other item of
payment for the proceeds of such "All Risk" policies of insurance and for
making all determinations and decisions with respect to such "All Risk"
policies of insurance. Lender shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-attorney. Borrower
Representative shall promptly (and in any event within five (5) Business Days)
notify Lender of any loss, damage, or destruction to the Collateral in the
amount of $100,000 or more, whether or not covered by insurance. After
deducting from such proceeds the expenses, if any, incurred by Lender in the
collection or handling thereof, Lender may, at its option, apply such proceeds
to the reduction of the Obligations in accordance with Section 1.3(d), or
permit or require the applicable Borrower to use such money, or any part
thereof, to replace, repair, restore or rebuild the Collateral in a diligent
and expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction. Notwithstanding the
foregoing, if the casualty giving rise to such insurance proceeds would not
reasonably be expected to have a Material Adverse Effect and such insurance
proceeds do not exceed $250,000 in the aggregate during any Fiscal Year, Lender
shall permit the applicable Borrower to replace, restore, repair or rebuild the
property; provided that if such Borrower shall not have completed or entered
into binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Lender may apply such insurance
proceeds to the Obligations in accordance with Section 1.3(d). All insurance
proceeds which are to be made available to any Borrower to replace, repair,
restore or rebuild the Collateral shall be applied by Lender to reduce the
outstanding principal balance of the Revolving Loan of such Borrower (which
application shall not result in a permanent reduction of the Revolving Loan
Commitment) and upon such application, Lender shall establish a Reserve against
the separate Borrowing Base of the affected Borrower in an amount equal to the
amount of such proceeds so applied. Thereafter, such funds shall be made
available to that Borrower to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower Representative shall request a
Revolving Credit Advance be made to such Borrower in the amount requested to be
released; (ii) so long as the conditions set forth in Section 2.2 have been
met, Lender shall make such Revolving Credit Advance; and (iii) the Reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Revolving Credit Advance. To the extent not used to replace,
repair, restore or rebuild the Collateral, such insurance proceeds shall be
applied in accordance with Section 1.3(d).
5.5 Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to licensing, ERISA and labor matters and
Environmental Laws and Environmental Permits except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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5.6 Supplemental Disclosure. From time to time as may be requested
by Lender (which request will not be made more frequently than once each year
absent the occurrence and continuance of a Default or an Event of Default), the
Credit Parties shall supplement each Disclosure Schedule hereto, or any
representation herein or in any other Loan Document, with respect to any matter
hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall be or
be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Lender in writing; and (b)
no supplement shall be required as to representations and warranties that
relate solely to the Closing Date.
5.7 Intellectual Property. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person.
5.8 Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance which could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions which are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining
to the presence, generation, treatment, storage, use, disposal, transportation
or Release of any Hazardous Material on, at, in, under, above, to, from or
about any of its Real Estate; (c) notify Lender promptly after such Credit
Party becomes aware of any violation of Environmental Laws or Environmental
Permits or any Release on, at, in, under, above, to, from or about any Real
Estate which is reasonably likely to result in Environmental Liabilities in
excess of $35,000; and (d) promptly forward to Lender a copy of any order,
notice, request for information or any communication or report received by such
Credit Party in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess of
$35,000, in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or threatened any action in connection with
any such violation, Release or other matter. If Lender at any time has a
reasonable basis to believe that there may be a violation of any Environmental
Laws or Environmental Permits by any Credit Party or any Environmental
Liability arising thereunder, or a Release of Hazardous Materials on, at, in,
under, above, to, from or about any of its Real Estate, which, in each case,
could reasonably be expected to have a Material Adverse Effect, then each
Credit Party shall, upon Lender's written request (i) cause the performance of
such environmental audits including subsurface sampling of soil and
groundwater, and preparation of
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such environmental reports, at Borrowers' expense, as Lender may from time
to time request, which shall be conducted by reputable environmental consulting
firms acceptable to Lender and shall be in form and substance acceptable to
Lender, and (ii) permit Lender or its representatives to have access to all
Real Estate for the purpose of conducting such environmental audits and testing
as Lender deems appropriate, including subsurface sampling of soil and
groundwater. Borrowers shall reimburse Lender for the costs of such audits and
tests and the same will constitute a part of the Obligations secured
hereunder.
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters.
Each Credit Party shall use its best efforts to obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property or mortgagee of owned property or with respect to any
warehouse, processor or converter facility or other location where Collateral
is located, which letter or agreement shall contain a waiver or subordination
of all Liens or claims that the landlord, mortgagee or bailee may assert
against the Inventory or Collateral at that location and shall otherwise be
satisfactory in form and substance to Lender. With respect to such locations
or warehouse space leased or owned as of the Closing Date, if Lender has not
received a satisfactory landlord or mortgagee agreement or bailee letter as of
the Closing Date, any Borrower's Eligible Inventory at that location shall, in
Lender's discretion, be excluded from the Borrowing Base or be subject to such
Reserves as may be established by Lender in its reasonable credit judgment.
After the Closing Date, no real property or warehouse space shall be leased or
acquired by any Credit Party and no Inventory shall be shipped to a processor
or converter under arrangements established after the Closing Date, unless and
until a satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location;
provided that Borrowers may hold Inventory with a book value not to exceed
$300,000 in the aggregate at newly established locations with Lender's prior
approval and subject to a Reserve established at Lender's discretion. Each
Credit Party shall timely and fully pay and perform its obligations under all
leases and other agreements with respect to each leased location or public
warehouse where any Collateral is or may be located.
5.10 Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Lender, duly execute and deliver, or cause
to be duly executed and delivered, to Lender such further instruments and do
and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Lender to carry out more effectually the provisions and
purposes of this Agreement or any other Loan Document.
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6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees
as to all Credit Parties that, without the prior written consent of Lender,
from and after the date hereof until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. On and after the Closing Date no
Credit Party shall directly or indirectly, by operation of law or otherwise,
(a) form or acquire any Subsidiary, or (b) merge with, consolidate with,
acquire all or substantially all of the assets or capital stock of, or
otherwise combine with or acquire, any Person, except (i) that any Borrower may
merge with another Borrower, provided that Ringer shall be the survivor of any
such merger to which it is a party.
Notwithstanding the foregoing, Ringer may acquire all or substantially
all of the assets or capital Stock of any Person (the "Target") (in each case,
a "Permitted Acquisition") subject to the satisfaction of each of the following
conditions:
(i) Lender shall receive at least thirty (30) Business Days' prior
written notice of such proposed Permitted Acquisition, which notice shall
include a reasonably detailed description of such proposed Permitted
Acquisition;
(ii) such Permitted Acquisition shall only involve assets comprising a
business, or those assets of a business, of the type engaged in by Borrowers as
of the Closing Date or a similar related business, and which business would not
subject Lender to regulatory or third party approvals in connection with the
exercise of its rights and remedies under this Agreement or any other Loan
Documents other than approvals applicable to the exercise of such rights and
remedies with respect to Borrowers prior to such Permitted Acquisition;
(iii) such Permitted Acquisition shall be consensual and shall have
been approved by the Target's board of directors;
(iv) no additional Indebtedness, Guaranteed Indebtedness, contingent
obligations or other liabilities shall be incurred, assumed or otherwise be
reflected on a consolidated balance sheet of Borrowers and Target after giving
effect to such Permitted Acquisition, except (A) the Revolving Credit Advance
made hereunder to fund such Permitted Acquisition, (B) ordinary course trade
payables and accrued expenses of the Target to the extent no Default or Event
of Default shall have occurred and be continuing or would result after giving
effect to such Permitted Acquisition and (C) other Indebtedness, Guaranteed
Indebtedness obligations and liabilities permitted by Lender in its sole
discretion;
(v) such Permitted Acquisition shall be structured as an asset
acquisition by Ringer or as an acquisition of one hundred percent (100%) (or,
in the discretion of Lender, such
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lower percentage) of the capital stock of the Target directly by Ringer;
provided that if any material portion of the Target's business or assets shall
be held through any Subsidiary of the Target, at the discretion of Lender, such
Subsidiary shall become a Borrower under this Agreement;
(vi) the business and assets acquired in such Permitted Acquisition
shall be free and clear of all Liens (other than Permitted Encumbrances);
(vii) at or prior to the closing of any Permitted Acquisition, Lender
will be granted a first priority perfected Lien (subject to Permitted
Encumbrances) (x) in the case of an asset acquisition, all assets of the Target
(and its Subsidiaries, if any) acquired pursuant thereto, or (y) in the case of
an acquisition of the capital stock of the Target, the assets of the Target
(and its Subsidiaries, if any) and one hundred percent (100%) (or, in the
discretion of Lender, such lower percentage with respect to foreign entities)
of the capital stock of the Target (and its Subsidiaries, if any) acquired by
Ringer and Borrowers, the Target and the Target's Subsidiaries (if any) shall
have executed such documents and taken such other actions as may be required by
Lender in connection therewith including, in the case of a Permitted
Acquisition in which the Target (and/or a Subsidiary of the Target) becomes a
Subsidiary of Ringer, such documents and actions as may be required by Lender
to make the Target (and/or such Subsidiary) a Credit Party under this Agreement
(as a Borrower or Guarantor, as applicable);
(viii) Lender shall have completed all business and legal due diligence
with respect to the Target and the proposed acquisition with results
satisfactory to Lender including the capital structure, corporate structure,
governing documents and material agreements of Borrowers and the Target and
their respective Subsidiaries after giving effect to the proposed acquisition,
and the legal and tax effects resulting from such proposed acquisition;
(ix) Lender shall have received satisfactory evidence that the Credit
Parties have obtained all required consents, waivers, acknowledgments, orders,
authorizations and approvals of all Persons including all requisite
Governmental Authorities, to the consummation of the proposed acquisition;
(x) as soon as possible after delivery of the notice referred to in
clause (i) above but in no event later than ten (10) Business Days after
delivery of such notice, Borrowers shall have delivered to Lender, in form and
substance satisfactory to Lender:
(A) a pro forma consolidated balance sheet of Ringer and its
Subsidiaries (the "Acquisition Pro Forma"), based on recent
financial data, which shall be complete and shall accurately and
fairly represent the assets, liabilities, financial condition and
results of operations of Ringer and its Subsidiaries in accordance
with GAAP consistently applied, but taking into account such
Permitted Acquisition and the funding of the Revolving Credit
Advance, and the assumption
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of liabilities permitted to be assumed pursuant to Section 6.1(iv)(B),
in connection therewith, and such Acquisition Pro Forma shall reflect
that on a pro forma basis, no Event of Default shall have occurred and
be continuing or would result after giving effect to such Permitted
Acquisition;
(B) updated versions of the most recently delivered Projections
covering the one (1) year period commencing on the date of such
Permitted Acquisition and otherwise prepared in accordance with the
Projections (the "Acquisition Projections") and based upon historical
financial data of a recent date satisfactory to Lender, taking into
account such Permitted Acquisition;
(C) a Fair Salable Balance Sheet, prepared on the same basis
as the Acquisition Pro Forma, setting forth therein Borrowers' assets
at their fair salable value on a going-concern basis with the
liabilities set forth therein including all contingent liabilities of
Borrowers stated at the reasonably estimated present values thereof;
and
(D) a certificate of the Chief Financial Officer of each
Borrower to the effect that: (w) each Borrower (after taking into
consideration all rights of contribution and indemnity such Borrower
has against each other Subsidiary of Ringer) will be Solvent upon the
consummation of the Permitted Acquisition; (x) the Acquisition Pro
Forma fairly presents the financial condition of Borrowers (on a
consolidated basis) as of the date thereof after giving effect to the
Permitted Acquisition; (y) the Acquisition Projections are reasonable
estimates of the future financial performance of Borrowers subsequent
to the date thereof based upon the historical performance of Borrowers
and the Target; and (z) Borrowers have substantially completed their
due diligence investigation with respect to the Target and such
Permitted Acquisition, which investigation was conducted in a manner
similar to that which would have been conducted by a prudent purchaser
of a comparable business and the results of which investigation were
delivered to Lender;
(xi) on or prior to the date of such Permitted Acquisition, Lender
shall have received, in form and substance satisfactory to Lender, all
acquisition documents related thereto, legal opinions, evidence of solvency,
certificates, lien search results, amendments to the Loan Documents including
Annex G and execution of additional Loan Documents and other documentation as
may be requested by Lender to reflect the Permitted Acquisition, the additional
Credit Parties, the availability of the increase in the Effective Revolving
Loan Commitment and other matters related to the Permitted Acquisition, which
collectively shall confirm to Lender's satisfaction that the conditions set
forth herein have been satisfied; and
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(xii) at the time of such Permitted Acquisition and after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing.
Notwithstanding the foregoing, the Accounts and Inventory of the Target
(or of any Subsidiary of the Target) shall not be included in Eligible Accounts
and Eligible Inventory without the prior written consent of Lender and shall
not be included in the Borrowing Base in any event until completion by Lender
of its audit examination of the Target. If the Accounts and Inventory of the
Target (or any Subsidiary of the Target) which is to become a Subsidiary of
Ringer are included in Eligible Accounts and Eligible Inventory pursuant to the
preceding sentence, then such Person shall become a Borrower under this
Agreement.
6.2 Investments. Except as otherwise expressly permitted by this
Section 6, no Credit Party shall make or permit to exist any investment in, or
make, accrue or permit to exist loans or advances of money to, any Person,
through the direct or indirect lending of money, holding of securities or
otherwise, except that:
(a) Borrowers may hold investments comprised of notes payable, or
stock or other securities issued by Account Debtors to any Borrower pursuant to
negotiated agreements with respect to settlement of such Account Debtor's
Accounts in the ordinary course of business, so long as the aggregate amount of
such Accounts so settled by Borrowers does not exceed $300,000;
(b) each Credit Party may maintain its existing investments in its
Subsidiaries as of the Closing Date;
(c) Permitted Acquisitions by Ringer;
(d) Borrowers may make intercompany loans permitted under Section
6.3(a)(viii); and
(e) so long as (A) no Revolving Loan Obligations or Letter of Credit
Obligations are outstanding and (B) no Default or Event of Default shall have
occurred and be continuing, Borrowers may make investments up to $5,000,000 in
the aggregate, subject to Control Letters in favor of Lender or otherwise
subject to a perfected security interest in favor of Lender, in Cash
Equivalents Investments; provided that Borrowers may maintain cash in Cash
Equivalents Investments consisting of money market funds in amounts necessary
to meet minimum balance requirements.
6.3 Indebtedness. (a) No Credit Party shall create, incur, assume or
permit to exist any Indebtedness, except (without duplication):
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(i) Indebtedness secured by purchase money security interests
permitted in clause (c) of Section 6.7;
(ii) the Revolving Loan and the other Obligations;
(iii) deferred taxes;
(iv) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain
unfunded under applicable law;
(v) the Subordinated Note;
(vi) existing Indebtedness described in Disclosure Schedule (6.3)
and refinancings thereof or amendments or modifications thereof which do
not have the effect of increasing the principal amount thereof or changing
the amortization thereof (other than to extend the same) and which are
otherwise on terms and conditions no less favorable to any Credit Party or
Lender, as determined by Lender, than the terms of the Indebtedness being
refinanced, amended or modified;
(vii) Indebtedness specifically permitted under Section 6.1,; and
(viii) Indebtedness consisting of intercompany loans and advances
made by any Borrower to any other Borrower, provided that (A) each
Borrower shall have executed and delivered to each other Borrower, on the
Closing Date, a demand note (collectively, the "Intercompany Notes") to
evidence any such intercompany Indebtedness owing at any time by such
Borrower to such other Borrowers, which Intercompany Notes shall be in
form and substance satisfactory to Lender and shall be pledged and
delivered to Lender pursuant to the applicable Pledge Agreement or
Security Agreement as additional collateral security for the Obligations;
(B) each Borrower shall record all intercompany transactions on its books
and records in a manner satisfactory to Lender; (C) the obligations of
each Borrower under any such Intercompany Notes shall be subordinated to
the Obligations of such Borrower hereunder in a manner satisfactory to
Lender; (D) at the time any such intercompany loan or advance is made by
any Borrower to any other Borrower and after giving effect thereto, each
such Borrower shall be Solvent; and (E) no Default or Event of Default
would occur and be continuing after giving effect to any such proposed
intercompany loan.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations and (ii) Indebtedness secured by a Permitted Encumbrance if the
asset securing such Indebtedness has been sold or otherwise disposed of in
accordance with Sections 6.8(b) or (c).
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6.4 Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6 with
respect to Affiliates, no Credit Party shall enter into or be a party to any
transaction with any other Credit Party or any Affiliate thereof except in the
ordinary course of and pursuant to the reasonable requirements of such Credit
Party's business and upon fair and reasonable terms that are no less favorable
to such Credit Party than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate of such Credit Party. In addition,
if any such transaction or series of related transactions involves payments in
excess of $50,000 in the aggregate, the terms of these transactions must be
disclosed in advance to Lender. All such transactions existing or pending as
of the Closing Date are described on Disclosure Schedule (6.4).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to their
respective employees on an arm's-length basis in the ordinary course of
business consistent with past practices for travel expenses, relocation costs
and similar purposes up to a maximum of $100,000 to any employee and up to a
maximum of $300,000 in the aggregate at any one time outstanding.
6.5 Capital Structure and Business. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations which
could in any way adversely affect the repayment of the Revolving Loan or any of
the other Obligations or could have or result in a Material Adverse Effect, (b)
make any change in its capital structure as described on Disclosure Schedule
(3.8) including (other than with respect to Ringer) the issuance of any shares
of Stock, warrants or other securities convertible into Stock or any revision
of the terms of its outstanding Stock or (c) amend its charter or bylaws in a
manner which would adversely affect Lender or such Credit Party's duty or
ability to repay the Obligations. No Credit Party shall engage in any business
other than the businesses currently engaged in by it or businesses reasonably
related thereto.
6.6 Guaranteed Indebtedness. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement other than Indebtedness, if any, of a Target existing at the time
such Target is acquired.
6.7 Liens. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other
properties or assets (whether now owned or hereafter acquired) except for:
(a) Permitted Encumbrances;
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(b) Liens in existence on the date hereof and summarized on
Disclosure Schedule (6.7); and
(c) Liens created after the date hereof by conditional sale or other
title retention agreements (including Capital Leases) or in connection with
purchase money Indebtedness with respect to Equipment and Fixtures acquired by
any Credit Party in the ordinary course of business, involving the incurrence
of an aggregate amount of purchase money Indebtedness and Capital Lease
Obligations of not more than $1,000,000 outstanding at any one time for all
such Liens (provided that such Liens attach only to the assets subject to such
purchase money debt and such Indebtedness is incurred within twenty (20) days
following such purchase and does not exceed 100% of the purchase price of the
subject assets).
In addition, no Credit Party shall become a party to any agreement,
note, indenture or instrument, or take any other action, which would prohibit
the creation of a Lien on any of its properties or other assets in favor of
Lender as additional collateral for the Obligations, except operating leases,
Capital Leases or Licenses which prohibit Liens upon the assets that are
subject thereto.
6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including its capital Stock or the capital Stock of any of its Subsidiaries
(whether in a public or a private offering or otherwise or any of their
Accounts, other than:
(a) the sale of Inventory in the ordinary course of business, and
(b) the sale, transfer, conveyance or other disposition by a Credit
Party of Equipment, Fixtures, Real Estate or Inventory that are obsolete or no
longer used or useful in such Credit Party's business and having a value not
exceeding $250,000 in any single transaction or $450,000 in the aggregate in
any Fiscal Year;
(c) other Equipment and Fixtures having a value not exceeding
$100,000 in any single transaction or $250,000 in the aggregate in any Fiscal
Year; and
(d) transfers or assignments of properties and assets of Ringer to a
Subsidiary in connection with a Permitted Acquisition subject to the
satisfaction of the conditions set forth in Section 6.1.
With respect to any disposition of assets or other properties permitted
pursuant to clause (b) and clause (c) above, Lender agrees on reasonable prior
written notice to release its Lien on such assets or other properties in order
to permit the applicable Credit Party to effect such disposition and shall
execute and deliver to Borrowers, at Borrowers' expense, appropriate UCC-3
termination statements and other releases as reasonably requested by Borrowers.
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6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event which could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA.
6.10 Financial Covenants. Borrowers shall not breach or fail to
comply with any of the Financial Covenants (the "Financial Covenants") set
forth in Annex G.
6.11 Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or impacts which could not reasonably be expected to have a
Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13 Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
6.14 Restricted Payments. No Credit Party shall make any Restricted
Payment, except:
(a) intercompany loans and advances between Borrowers to the extent
permitted by Section 6.3 above;
(b) dividends and distributions by Subsidiaries of any Borrower paid
to such Borrower;
(c) employee loans permitted under Section 6.4(b) above; and
(d) scheduled payments of interest with respect to the Subordinated
Debt;
provided that (i) no Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any payment pursuant to
clause (d) above and (ii) the timing of the payments referred to in clause (d)
above shall be set at dates which permit the delivery of Financial Statements
necessary to determine current financial covenant compliance prior to each
payment.
6.15 Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its corporate name, or (b) change its chief
executive office, principal place
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of business, corporate offices or warehouses or locations at which Collateral
is held or stored, or the location of its records concerning the Collateral, in
any case without at least thirty (30) days prior written notice to Lender and
after Lender's written acknowledgment that any reasonable action requested by
Lender in connection therewith, including to continue the perfection of any
Liens in favor of Lender in any Collateral, has been completed or taken, and
provided that any such new location shall be in the continental United States.
Without limiting the foregoing, no Credit Party shall change its name, identity
or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the Code or any other then applicable
provision of the Code except upon prior written notice to Lender and after
Lender's written acknowledgment that any reasonable action requested by Lender
in connection therewith, including to continue the perfection of any Liens in
favor of Lender in any Collateral, has been completed or taken. No Credit
Party shall change its Fiscal Year.
6.16 No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) which could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of any
Borrower to any Borrower or between Borrowers.
6.17 No Speculative Transactions. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18 Leases. No Credit Party shall enter into any operating lease for
Equipment or Real Estate, if the aggregate of all such operating lease payments
payable in any year for Borrowers and their Subsidiaries on a consolidated
basis would exceed $1,000,000.
6.19 Changes Relating to Subordinated Debt. No Credit Party shall
change or amend the terms of any Subordinated Debt (or any indenture or
agreement in connection therewith) if the effect of such amendment is to: (a)
increase the interest rate on such Subordinated Debt; (b) change the dates upon
which payments of principal or interest are due on such Subordinated Debt other
than to extend such dates; (c) change any default or event of default other
than to delete or make less restrictive any default provision therein, or add
any covenant with respect to such Subordinated Debt; (d) change the redemption
or prepayment provisions of such Subordinated Debt other than to extend the
dates therefor or to reduce the premiums payable in connection therewith; (e)
grant any security or collateral to secure payment of such Subordinated Debt;
or (f) change or amend any other term if such change or amendment would
materially increase the obligations of the obligor or confer additional
material rights to the holder of such Subordinated Debt in a manner adverse to
any Credit Party or Lender.
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7. TERM
7.1 Termination. The financing arrangements contemplated hereby
shall be in effect until the Commitment Termination Date, and the Revolving
Loan and all other Obligations shall be automatically due and payable in full
on such date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or procedure) of
any financing arrangement under this Agreement shall in any way affect or
impair the obligations, duties and liabilities of the Credit Parties or the
rights of Lender relating to any unpaid portion of the Revolving Loan or any
other Obligations, due or not due, liquidated, contingent or unliquidated or
any transaction or event occurring prior to such termination, or any
transaction or event, the performance of which is required after the Commitment
Termination Date. Except as otherwise expressly provided herein or in any
other Loan Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of
Lender, all as contained in the Loan Documents, shall not terminate or expire,
but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided however,
that in all events the provisions of Section 11, the payment obligations under
Sections 1.15 and 1.16, and the indemnities contained in the Loan Documents
shall survive the Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Any Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Revolving Loan or any of the
other Obligations when due and payable, or (ii) fails to pay or reimburse
Lender for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following Lender's demand for such reimbursement or
payment of expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or
observe any of the provisions of Sections 1.4, 1.8, 5.4 or 6, or any of the
provisions set forth in Annexes C or G, respectively.
(c) Any Borrower shall fail or neglect to perform, keep or observe
any of the provisions of Section 4 or any provisions set forth in Annexes E or
F, respectively, and the same shall remain unremedied for five (5) days or
more.
(d) Any Credit Party shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision
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embodied in or covered by any other clause of this Section 8.1) and the same
shall remain unremedied for thirty (30) days or more after the earlier of (i)
Borrower Representative's receipt of written notice from Lender or (ii) actual
knowledge of such breach by any Borrower.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party which is not cured
within any applicable grace period, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other than
the Obligations) of any Credit Party in excess of $250,000 in the aggregate, or
(ii) causes, or permits any holder of such Indebtedness or a trustee to cause,
Indebtedness or a portion thereof in excess of $250,000 in the aggregate to
become due prior to its stated maturity or prior to its regularly scheduled
dates of payment, regardless of whether such default is waived, or such right
is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect, or any representation or warranty herein or
in any Loan Document or in any written statement, report, financial statement
or certificate (other than a Borrowing Base Certificate) made or delivered to
Lender by any Credit Party is untrue or incorrect in any material respect as of
the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value of $100,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced against any Credit
Party seeking a decree or order in respect of any Credit Party (i) under Title
11 of the United States Code, as now constituted or hereafter amended or any
other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any Credit Party or of any substantial
part of any such Person's assets, or (iii) ordering the winding-up or
liquidation of the affairs of any Credit Party, and such case or proceeding
shall remain undismissed or unstayed for sixty (60) days or more or such court
shall enter a decree or order granting the relief sought in such case or
proceeding.
(i) Any Credit Party (i) shall file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) shall fail to contest in a timely and appropriate manner or shall consent
to the institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of any Credit Party or of any substantial part of any such Person's assets,
(iii) shall make an assignment for the benefit of creditors, (iv) shall take
any corporate action in furtherance of any of the foregoing; or (v) shall admit
in writing its inability to, or shall be generally unable to, pay its debts as
such debts become due.
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(j) A final judgment or judgments for the payment of money in excess
of (i) $300,000 in the aggregate at any time outstanding with respect to
outstanding obligations or liabilities acquired in the Dexol Transaction or
(ii) $100,000 in the aggregate at any time outstanding in all other cases shall
be rendered against any Credit Party and the same shall not, within thirty (30)
days after the entry thereof, have been discharged or execution thereof stayed
or bonded pending appeal, or shall not have been discharged prior to the
expiration of any such stay.
(k) Any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any security interest created under any Loan Document shall cease to be a
valid and perfected first priority security interest or Lien (except as
otherwise permitted herein or therein) in any of the Collateral purported to be
covered thereby.
(l) Any "Change of Control" shall occur.
(m) Any event shall occur, whether or not insured or insurable, as a
result of which revenue-producing activities cease or are substantially
curtailed at any facility of Borrowers generating more than twenty-five percent
(25%) of Borrowers' consolidated revenues for the Fiscal Year preceding such
event and such cessation or curtailment continues for more than thirty (30)
days.
(n) The failure of Borrowers to deliver to Lender on or prior to May
9, 1997, the Subordination Agreement executed by Dexol and Ringer, in form and
substance satisfactory to Lender.
8.2 Remedies. (a) If any Default or Event of Default shall have
occurred and be continuing, Lender may, without notice, (i) suspend this
facility with respect to further Revolving Credit Advances and/or the
incurrence of further Letter of Credit Obligations whereupon any further
Revolving Credit Advances and Letter of Credit Obligations shall be made or
extended in Lender's sole discretion so long as such Default or Event of
Default is continuing, and (ii) increase the rate of interest applicable to the
Revolving Loan and the Letter of Credit Fees to the Default Rate.
(b) If any Event of Default shall have occurred and be continuing,
Lender may, without notice, (i) terminate this facility with respect to further
Revolving Credit Advances or the incurrence of further Letter of Credit
Obligations; (ii) declare all or any portion of the Obligations, including the
Revolving Loan to be forthwith due and payable, and require that the
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Letter of Credit Obligations be cash collateralized as provided in Annex B,
all without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrowers and each other Credit Party; and (iii)
exercise any rights and remedies provided to Lender under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
provided, however, that upon the occurrence of an Event of Default specified in
Sections 8.1(g), (h) or (i), all of the Obligations, including the aggregate
Revolving Loan, shall become immediately due and payable without declaration,
notice or demand by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives (including for
purposes of Section 12): (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Lender
on which any Credit Party may in any way be liable, and hereby ratifies and
confirms whatever Lender may do in this regard, (b) all rights to notice and a
hearing prior to Lender's taking possession or control of, or to Lender's
replevy, attachment or levy upon, the Collateral or any bond or security which
might be required by any court prior to allowing Lender to exercise any of its
remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.
9. PARTICIPATIONS.
9.1 Participations. (a) The Credit Parties signatory hereto consent
to Lender's sale of participations in, at any time or times, the Revolving Loan
Commitment or any portion thereof or interest therein. Any participation by
Lender of all or any part of its Revolving Loan Commitment shall be in an
amount at least equal to $5,000,000, and shall be sold with the understanding
that all amounts payable by Borrowers hereunder shall be determined as if
Lender had not sold such participation, and that the holder of any such
participation shall not be entitled to require Lender to take or omit to take
any action hereunder except actions directly affecting (i) any reduction in the
principal amount of, or interest rate or Fees payable with respect to, the
Revolving Loan in which such holder participates, (ii) any extension of the
scheduled amortization of the principal amount of the Revolving Loan in which
such holder participates or the final maturity date thereof, and (iii) any
release of all or substantially all of the Collateral (other than in accordance
with the terms of this Agreement, the Collateral Documents or the other Loan
Documents). Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, each
Borrower acknowledges and agrees that a participation shall give rise to a
direct obligation of Borrowers to the participant and the participant shall be
considered to be a "Lender". Except as set forth in the preceding sentence no
Borrower or Credit Party shall have any obligation or duty to any participant.
(b) Each Credit Party executing this Agreement shall assist Lender as
reasonably required to enable Lender to effect any such participation,
including, if requested by Lender,
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participation of Borrowers' management in meetings with potential participants.
Each Credit Party executing this Agreement shall certify the correctness,
completeness and accuracy of all descriptions of the Credit Parties and their
affairs contained in any selling materials provided by them and all other
information provided by them and included in such materials, except that any
Projections delivered by Borrowers shall only be certified by Borrowers as
having been prepared by Borrowers in compliance with the representations
contained in Section 3.4(c).
(c) Lender may furnish any information concerning Borrowers in the
possession of Lender from time to time to participants (including prospective
participants). Lender shall obtain from assignees or participants
confidentiality covenants substantially equivalent to those contained in
Section 11.8 hereof.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Lender and their respective successors and assigns (including, in the
case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents
without the prior express written consent of Lender. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Lender shall be void. Lender may
assign all or any part of its rights and obligations under the Loan Documents
to any Person; provided that so long as no Default or Event of Default shall
have occurred and be continuing the Borrower Representative shall consent to
such assignment, which consent shall not be unreasonably withheld. The terms
and provisions of this Agreement are for the purpose of defining the relative
rights and obligations of each Credit Party and Lender with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except
as set forth in Section 11.2 below. Any letter of interest, commitment letter,
fee letter and/or confidentiality agreement between any Credit Party and Lender
or any of their respective affiliates, predating this Agreement and relating to
a financing of substantially similar form, purpose or effect shall be
superseded by this Agreement.
11.2 Amendments and Waivers. No amendment, modification, termination
or waiver of any provision of this Agreement or any of the Revolving Notes, or
any consent to any
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departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Lender and Borrowers.
Until (i) payment in full in cash and performance of all of the
Obligations except unmatured contingent Obligations (other than those
Obligations described in clauses (ii) and (iii) below) for which no claim has
been asserted, termination of the Revolving Loan Commitment and a release by
Borrowers of all claims against Lender, (ii) the Letter of Credit Obligations
shall have been terminated or payment thereof shall have been secured in
accordance with Annex B and (iii) Borrowers shall have provided to Lender
security on terms satisfactory to Lender with respect to any pending or
threatened action, suit, proceeding or claim against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Borrowers shall remain bound by the terms of this Agreement and Lender shall be
entitled to retain its Liens on the Collateral. Upon compliance with the
preceding sentence, Lender shall deliver to Borrowers termination statements,
mortgage releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.
11.3 Fees and Expenses. Borrowers shall reimburse Lender for all
reasonable out-of-pocket expenses reasonably incurred in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses
of all of its loan counsel (including Canadian local counsel) and auditors
retained in connection with the Loan Documents and the Related Transactions and
advice in connection therewith). Borrowers shall reimburse Lender for all
fees, costs and expenses, including the fees, costs and expenses of counsel or
other advisors (including environmental and management consultants and
appraisers) for advice, assistance, or other representation in connection with:
(a) the forwarding to Borrowers or any other Person on behalf of
Borrowers by Lender of the proceeds of the Revolving Loan;
(b) any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or Related Transactions Documents or
advice in connection with the administration of the Revolving Loan made
pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, any Borrower or any other Person) in any way
relating to the Collateral, any of the Loan Documents or any other agreement to
be executed or delivered in connection therewith or herewith, whether as party,
witness, or otherwise, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in connection with a
case commenced by or against any or all of the Borrowers or any other Person
that may be obligated to Lender by virtue of the Loan Documents; including any
such litigation, contest, dispute, suit, proceeding or action arising in
connection with any work-out or restructuring of the Revolving Loan during the
pendency of one or more Events of Default;
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(d) any attempt to enforce any remedies of Lender against any
or all of the Credit Parties or any other Person that may be obligated to
Lender by virtue of any of the Loan Documents; including any such attempt to
enforce any such remedies in the course of any work-out or restructuring of the
Revolving Loan during the pendency of one or more Events of Default;
(e) any work-out or restructuring of the Revolving Loan during
the pendency of one or more Events of Default;
(f) subject to Section 1.14(b), efforts to (i) monitor the
Revolving Loan or any of the other Obligations, (ii) evaluate, observe or
assess any of the Credit Parties or their respective affairs, and (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of any of the Collateral;
including, without limitation, all reasonable attorneys' and other professional
and service providers' fees arising from such services, including those in
connection with any appellate proceedings; and all reasonable expenses, costs,
charges and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section 11.3 shall be payable, on demand, by Borrowers to
Lender. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and other
consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.
11.4 No Waiver. Lender's failure, at any time or times, to require
strict performance by the Credit Parties of any provision of this Agreement and
any of the other Loan Documents shall not waive, affect or diminish any right
of Lender thereafter to demand strict compliance and performance therewith.
Any suspension or waiver of an Event of Default shall not suspend, waive or
affect any other Event of Default whether the same is prior or subsequent
thereto and whether the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default
or Event of Default by any Credit Party shall be deemed to have been suspended
or waived by Lender, unless such waiver or suspension is by an instrument in
writing signed by an officer of or other authorized employee of Lender and
directed to Borrowers specifying such suspension or waiver.
11.5 Remedies. Lender's rights and remedies under this Agreement
shall be cumulative and nonexclusive of any other rights and remedies which
Lender may have under any
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other agreement, including the other Loan Documents, by operation of law or
otherwise. Recourse to the Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
11.7 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.
11.8 Confidentiality. Lender agrees to use commercially reasonable
efforts (equivalent to the efforts Lender applies to maintaining the
confidentiality of its own confidential information) to maintain as
confidential all confidential information provided to it by the Credit Parties
and designated as confidential for a period of two (2) years following receipt
thereof, except that Lender may disclose such information (a) to Persons
employed or engaged by Lender in evaluating, approving, structuring or
administering the Revolving Loan and the Revolving Loan Commitment; (b) to any
bona fide assignee or participant or potential assignee or participant that has
agreed to comply with the covenant contained in this Section 11.8 (and any such
bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described
in clause (a) above); (c) as required or requested by any Governmental
Authority or reasonably believed by Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (d) as, in the opinion of
Lender's counsel, required by law; (e) in connection with the exercise of any
right or remedy under the Loan Documents or in connection with any Litigation
to which Lender is a party; or (f) which ceases to be confidential through no
fault of Lender.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN XXXX COUNTY,
CITY OF CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE
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ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES AND LENDER PERTAINING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED,
THAT LENDER AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF XXXX COUNTY, CITY OF
CHICAGO, ILLINOIS AND, PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF LENDER. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
CREDIT PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS
SET FORTH IN ANNEX H OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been
validly served, given or delivered (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the United States Mail, registered or
certified mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10), (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated on Annex H or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided. The giving of any notice
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required hereunder may be waived in writing by the party entitled to receive
such notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to any Person
(other than Borrower Representative or Lender) designated on Annex H to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER AND ANY CREDIT PARTY
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases. Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any press
releases or other public disclosure using the name of GE Capital or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will
consult with GE Capital before issuing such press release or other public
disclosure. Each Credit Party consents to the publication by Lender of a
tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement.
11.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Borrower for liquidation or
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reorganization, should any Borrower become insolvent or make an assignment for
the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of any Borrower's assets, and shall
continue to be effective or to be reinstated, as the case may be, if at any
time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise
be restored or returned by any obligee of the Obligations, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment,
or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. Each of the Credit Parties acknowledges
that it and its counsel have participated in the negotiation of the Loan
Documents and that the Credit Parties have approved the Loan Documents. In the
event an ambiguity or question of intent or interpretation arises, the usual
rule of construction of resolving ambiguities or inconsistencies in the Loan
Documents against the drafting Person shall not be applicable and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of the Loan Documents.
12. CROSS-GUARANTY
12.1 Cross-Guaranty. Each Borrower hereby agrees that such Borrower
is jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns, the full and prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Obligations owed or hereafter owing to Lender by each other
Borrower. Each Borrower agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, and that
its obligations under this Section 12 shall be absolute and unconditional,
irrespective of, and unaffected by,
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document
or any other agreement, document or instrument to which any Borrower is or
may become a party;
(b) the absence of any action to enforce this Agreement
(including this Section 12) or any other Loan Document or the waiver or
consent by Lender with respect to any of the provisions thereof;
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(c) the existence, value or condition of, or failure to perfect
its Lien against, any security for the Obligations or any action, or the
absence of any action, by Lender in respect thereof (including the release
of any such security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor,
it being agreed by each Borrower that its obligations under this Section 12
shall not be discharged until the payment and performance, in full, of the
Obligations has occurred. Each Borrower shall be regarded, and shall be in the
same position, as principal debtor with respect to the Obligations guaranteed
hereunder.
12.2 Waivers by Borrowers. Each Borrower expressly waives all rights
it may have now or in the future under any statute, or at common law, or at law
or in equity, or otherwise, to compel Lender to xxxxxxxx assets or to proceed
in respect of the Obligations guaranteed hereunder against any other Credit
Party, any other party or against any security for the payment and performance
of the Obligations before proceeding against, or as a condition to proceeding
against, such Borrower. It is agreed among each Borrower and Lender that the
foregoing waivers are of the essence of the transaction contemplated by this
Agreement and the other Loan Documents and that, but for the provisions of this
Section 12 and such waivers, Lender would decline to enter into this Agreement.
12.3 Benefit of Guaranty. Each Borrower agrees that the provisions of
this Section 12 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
any other Borrower and Lender, the obligations of such other Borrower under the
Loan Documents.
12.4 subordination of Subrogation, Etc. Notwithstanding anything to
the contrary in this Agreement or in any other Loan Document, and except as set
forth in Section 12.7, each Borrower hereby expressly and irrevocably
subordinates to payment of the Obligations any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Obligations are indefeasibly
paid in full in cash. Each Borrower acknowledges and agrees that this
subordination is intended to benefit Lender and shall not limit or otherwise
affect such Borrower's liability hereunder or the enforceability of this
Section 12, and that Lender and its successors and assigns are intended third
party beneficiaries of the waivers and agreements set forth in this Section
12.4.
12.5 Election of Remedies. If Lender may, under applicable law,
proceed to realize its benefits under any of the Loan Documents giving Lender a
Lien upon any Collateral,
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whether owned by any Borrower or by any other Person, either by judicial
foreclosure or by non-judicial sale or enforcement, Lender may, at its sole
option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 12. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Borrower or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if
such action by Lender shall result in a full or partial loss of any rights of
subrogation which each Borrower might otherwise have had but for such action by
Lender. Any election of remedies which results in the denial or impairment of
the right of Lender to seek a deficiency judgment against any Borrower shall
not impair any other Borrower's obligation to pay the full amount of the
Obligations. In the event Lender shall bid at any foreclosure or trustee's
sale or at any private sale permitted by law or the Loan Documents, Lender may
bid all or less than the amount of the Obligations and the amount of such bid
need not be paid by Lender but shall be credited against the Obligations. The
amount of the successful bid at any such sale, whether Lender or any other
party is the successful bidder, shall be conclusively deemed to be the fair
market value of the Collateral and the difference between such bid amount and
the remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations guaranteed under this Section 12, notwithstanding
that any present or future law or court decision or ruling may have the effect
of reducing the amount of any deficiency claim to which Lender might otherwise
be entitled but for such bidding at any such sale.
12.6 Limitation. Notwithstanding any provision herein contained to
the contrary, each Borrower's liability under this Section 12 (which liability
is in any event in addition to amounts for which such Borrower is primarily
liable under Section 1) shall be limited to an amount not to exceed as of any
date of determination the greater of:
(a) the net amount of the Revolving Loan advanced to any other
Borrower under this Agreement and then re-loaned or otherwise transferred to,
or for the benefit of, such Borrower; and
(b) the amount which could be claimed by Lender from such Borrower
under this Section 12 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law after taking into account, among other things, such
Borrower's right of contribution and indemnification from each other Borrower
under Section 12.7.
12.7 Contribution with Respect to Guaranty Obligations.
(a) To the extent that any Borrower shall make a payment under this
Section 12 of all or any of the Obligations (other than Revolving Credit
Advances made to that Borrower
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for which it is primarily liable) (a "Guarantor Payment") which, taking into
account all other Guarantor Payments then previously or concurrently made by
any other Borrower, exceeds the amount which such Borrower would otherwise have
paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower's "Allocable
Amount" (as defined below) (as determined immediately prior to such Guarantor
Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as
determined immediately prior to the making of such Guarantor Payment, then,
following indefeasible payment in full in cash of the Obligations and
termination of the Revolving Loan Commitment, such Borrower shall be entitled
to receive contribution and indemnification payments from, and be reimbursed
by, each other Borrower for the amount of such excess, pro rata based upon
their respective Allocable Amounts in effect immediately prior to such
Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount of the claim which could then be
recovered from such Borrower under this Section 12 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(c) This Section 12.7 is intended only to define the relative rights
of Borrowers and nothing set forth in this Section 12.7 is intended to or shall
impair the obligations of Borrowers, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including Section 12.1. Nothing contained in this Section
12.7 shall limit the liability of any Borrower to pay the Revolving Loan made
directly or indirectly to that Borrower and accrued interest, Fees and expenses
with respect thereto for which such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of the Borrower to which
such contribution and indemnification is owing.
(e) The rights of the indemnifying Borrowers against other Credit
Parties under this Section 12.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Revolving
Loan Commitment.
12.8 Liability Cumulative. The liability of Borrowers under this
Section 12 is in addition to and shall be cumulative with all liabilities of
each Borrower to Lender under this Agreement and the other Loan Documents to
which such Borrower is a party or in respect of any Obligations or obligation
of the other Borrower, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
RINGER CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxxx
-------------------------------------
Title: Executive Vice President and CFO
SAFER, INC.
By: /s/ Xxxx X. Xxxxxxxxxxx
-------------------------------------
Title: Executive Vice President and CFO
GENERAL ELECTRIC CAPITAL
CORPORATION,
Revolving Loan as Lender
Commitment:
$25,000,000 By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Title: Duly Authorized Signatory
----------------------------------
The following Person is a signatory to this Agreement in its capacity as a
Credit Party and not as a Borrower.
SAFER LTD.
By: /s/ Xxxx X. Xxxxxxxxxxx
-------------------------------------
Title: Executive Vice President and CFO
----------------------------------
