Exhibit 10.1
$32,500,000 REVOLVING LOAN FACILITY
$12,500,000 TERM LOAN FACILITY
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
AMONG
ACORN PRODUCTS, INC.
AND
UNIONTOOLS, INC.
AS BORROWER,
CAPITALSOURCE FINANCE LLC,
AS AGENT AND LENDER
AND
THE OTHER LENDERS THERETO
DATED AS OF
JUNE 28, 2002
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
PAGE
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I. DEFINITIONS..............................................................................................1
1.1 General Terms................................................................................1
II. LOANS, PAYMENT AND INTEREST..............................................................................1
2.1 The Revolving Facility.......................................................................1
2.2 The Revolving Notes; Maturity................................................................2
2.3 Interest.....................................................................................3
2.4 Facility Disbursements; Requirement to Deliver Borrowing Certificate.........................3
2.5 Collections; Repayment; Borrowing Availability and Lockbox...................................3
2.6 Standby Letters of Credit....................................................................4
2.7 Term Loan....................................................................................6
2.8 Interest on the Term Notes...................................................................6
2.9 Repayment of Term Loan; Maturity.............................................................7
2.10 Manner of Payment............................................................................7
2.11 Repayment of Excess Advances.................................................................7
2.12 Other Mandatory Prepayments..................................................................8
2.13 Payments by Agent............................................................................9
2.14 Grant of Security Interest; Collateral.......................................................9
2.15 Collateral Administration...................................................................10
2.16 Power of Attorney...........................................................................11
2.17 Notes.......................................................................................12
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE....................................................12
3.1 Commitment Fee..............................................................................12
3.2 Unused Line Fee.............................................................................12
3.3 Collateral Management Fee...................................................................12
3.4 Early Termination Fee.......................................................................12
3.5 Standby Letter of Credit Fees...............................................................13
3.6 Computation of Fees; Lawful Limits..........................................................13
3.7 Default Rate of Interest....................................................................13
3.8 Joint and Several Liability/Cross-Guarantee.................................................13
3.9 Issued Shares...............................................................................15
3.10 Allocation of Purchase Price................................................................15
3.11 Borrower Representation.....................................................................15
IV. CONDITIONS PRECEDENT....................................................................................16
4.1 Conditions to Initial Advance and Closing...................................................16
4.2 Conditions to Each Advance and Funding of Term Loan.........................................18
4.3 No Overadvances.............................................................................19
V. REPRESENTATIONS AND WARRANTIES..........................................................................19
5.1 Organization and Authority..................................................................19
5.2 Loan Documents..............................................................................20
5.3 Subsidiaries, Capitalization and Ownership Interests........................................20
5.4 Properties..................................................................................20
5.5 Other Agreements............................................................................21
5.6 Litigation..................................................................................21
5.7 Hazardous Materials.........................................................................21
5.8 Tax Returns; Governmental Reports...........................................................22
5.9 Financial Statements and Reports............................................................22
5.10 Compliance with Law.........................................................................22
5.11 Intellectual Property.......................................................................23
5.12 Licenses and Permits; Labor.................................................................23
5.13 No Default; Solvency........................................................................23
5.14 Disclosure..................................................................................23
5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts........................24
5.16 Inventory Records...........................................................................24
5.17 Insurance...................................................................................24
5.18 Names; Location of Offices, Records and Collateral..........................................24
5.19 Non-Subordination...........................................................................24
5.20 Accounts....................................................................................25
5.21 Survival....................................................................................25
VI. AFFIRMATIVE COVENANTS...................................................................................25
6.1 Financial Statements, Reports and Other Information.........................................25
6.2 Payment of Obligations......................................................................28
6.3 Conduct of Business and Maintenance of Existence and Assets.................................28
6.4 Compliance with Legal and Other Obligations.................................................28
6.5 Insurance...................................................................................29
6.6 True Books..................................................................................29
6.7 Inspection; Periodic Audits.................................................................29
6.8 Further Assurances; Post Closing............................................................29
6.9 Payment of Indebtedness.....................................................................30
6.10 Lien Searches...............................................................................30
6.11 Use of Proceeds.............................................................................30
6.12 Collateral Documents; Security Interest in Collateral.......................................30
6.13 Taxes and Other Charges.....................................................................31
VII. NEGATIVE COVENANTS......................................................................................32
7.1 Financial Covenants.........................................................................32
7.2 Indebtedness................................................................................32
7.3 Liens.......................................................................................32
7.4 Investments; Investment Property; New Facilities or Collateral; Subsidiaries................33
7.5 Dividends; Redemptions; Equity..............................................................33
7.6 Transactions with Affiliates................................................................34
7.7 Charter Documents; Fiscal Year; Dissolution; Use of Proceeds; Life Insurance;
Disposition of Collateral; Taxes; Trade Names...............................................34
7.8 Transfer of Assets..........................................................................35
7.9 Contingent Obligations and Risks............................................................35
7.10 Truth of Statements.........................................................................36
7.11 Payment on Subordinated Debt................................................................36
7.12 Non-Hypothecation on Real Property..........................................................36
VIII. EVENTS OF DEFAULT.......................................................................................36
IX. RIGHTS AND REMEDIES AFTER DEFAULT.......................................................................39
9.1 Rights and Remedies.........................................................................39
9.2 Application of Proceeds.....................................................................39
9.3 Rights to Appoint Receiver..................................................................40
9.4 Attorney In Fact............................................................................40
9.5 Blocked Accounts............................................................................40
9.6 Rights and Remedies not Exclusive...........................................................41
X. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................41
10.1 Waivers.....................................................................................41
10.2 Delay; No Waiver of Defaults................................................................41
10.3 Jury Waiver.................................................................................41
10.4 [Reserved.].................................................................................42
10.5 Amendment and Waivers.......................................................................42
XI. EFFECTIVE DATE AND TERMINATION..........................................................................42
11.1 Effectiveness and Termination...............................................................42
11.2 Survival....................................................................................43
XI-A. AGENCY PROVISIONS.......................................................................................43
11-A.1 Agent.......................................................................................43
11-A.2 Consents....................................................................................47
11-A.3 Set Off and Sharing of Payments.............................................................47
11-A.4 Disbursement of Funds.......................................................................48
11-A.5 Settlements; Payments and Information.......................................................49
11-A.6 Dissemination of Information................................................................50
XII. MISCELLANEOUS...........................................................................................50
12.1 Governing Law; Jurisdiction; Service of Process; Venue......................................50
12.2 Successors and Assigns; Assignments and Participations......................................51
12.3 Application of Payments.....................................................................53
12.4 Indemnity...................................................................................53
12.5 Notice......................................................................................54
12.6 Severability; Captions; Counterparts; Facsimile Signatures..................................54
12.7 Expenses....................................................................................54
12.8 Entire Agreement............................................................................55
12.9 Approvals and Duties........................................................................55
12.10 Confidentiality and Publicity...............................................................56
12.11 Release of Collateral.......................................................................56
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (the
"AGREEMENT") dated as of June 28, 2002, is entered into by and among ACORN
PRODUCTS, INC., a Delaware corporation (the "PARENT"), UNIONTOOLS, INC., a
Delaware corporation ("UNION"), CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company ("CAPITALSOURCE"), as administrative agent and collateral
agent for Lenders (in such capacities, the "AGENT"), and the Lenders. The Parent
and Union are collectively referred to herein as the "BORROWER".
WHEREAS, Borrower has requested that Lenders make available to Borrower
(i) a revolving credit facility (the "REVOLVING FACILITY") in a maximum
principal amount at any time outstanding not to exceed Thirty-Two Million Five
Hundred Thousand Dollars ($32,500,000.00) (the "FACILITY CAP"), and (ii) a term
loan facility (the "TERM LOAN") in an aggregate maximum principal amount of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) (the "MAXIMUM LOAN
AMOUNT"), the proceeds of which shall be used by Borrower for refinancing
Borrower's existing obligations and indebtedness and working capital needs in
connection with its lawn and garden products business as of the date hereof and
as contemplated by the terms of this Agreement (the "BUSINESS"); and
WHEREAS, Lenders are willing to make the Revolving Facility and Term
Loan available to Borrower upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Borrower, Agent and Lenders hereby agree as follows:
I. DEFINITIONS
1.1 GENERAL TERMS
For purposes of the Loan Documents and all Annexes thereto, in addition
to the definitions above and elsewhere in this Agreement or the other Loan
Documents, the terms listed in Appendix A hereto shall have the meanings given
such terms in Appendix A, which is incorporated herein and made a part hereof.
All capitalized terms used which are not specifically defined shall have
meanings provided in Article 9 of the UCC in effect on the date hereof to the
extent the same are used or defined therein. Unless otherwise specified herein
or in Appendix A, this Agreement and any agreement or contract referred to
herein or in Appendix A shall mean such agreement as modified, amended or
supplemented from time to time. Unless otherwise specified, as used in the Loan
Documents or in any certificate, report, instrument or other document made or
delivered pursuant to any of the Loan Documents, all accounting terms not
defined in Appendix A or elsewhere in this Agreement shall have the meanings
given to such terms in and shall be interpreted in accordance with GAAP.
II. LOANS, PAYMENT AND INTEREST
2.1 THE REVOLVING FACILITY
(a) Subject to the provisions of this Agreement, each Revolving
Lender agrees to make available its Pro Rata Share of Advances to Borrower under
the Revolving Facility from time to time during the Term; provided, that (i) the
Pro Rata Share of the Advances of any Revolving Lender shall not at any time
exceed its separate Commitment, and (ii) the aggregate amount of all Advances at
any time
outstanding under the Revolving Facility shall not exceed the lesser of (A) the
Facility Cap and (B) the Availability (as defined below) minus the outstanding
Letter of Credit Obligations. The obligations of Revolving Lenders hereunder
shall be several and not joint up to the amount of the Commitments. The
Revolving Facility is a revolving credit facility, which may be drawn, repaid
and redrawn, from time to time as permitted under this Agreement. Any
determination as to whether there is availability within the Borrowing Base for
Advances shall be made by Agent in its Permitted Discretion and is final and
binding upon Borrower. Unless otherwise permitted by Agent, each Advance shall
be in an amount of at least $100,000. Subject to the provisions of this
Agreement, Borrower may request Advances under the Revolving Facility up to and
including the value, in U.S. dollars, of (i) eighty percent (80%) of Eligible
Receivables in the Borrowing Base, and (ii) (A) from November 1 of each year
until January 31 of the following year, sixty percent (60%) or (B) from February
1 until October 31 of each year, fifty-five percent (55%), of Eligible Inventory
Costs in the Borrowing Base minus, if applicable, amounts reserved pursuant to
this Agreement (such calculated amount being referred to herein as the
"AVAILABILITY"). Advances under the Revolving Facility automatically shall be
made for the payment of interest on the Notes and other Obligations on the date
when due to the extent available and as provided for herein.
(b) Agent has established the above-referenced advance rates for
Availability and, in its Permitted Discretion, may further adjust the
Availability and such advance rates by applying percentages (known as "LIQUIDITY
FACTORS") to Eligible Receivables based upon Borrower's actual recent collection
history in a manner consistent with Agent's underwriting practices and
procedures, including, without limitation, Agent's review and analysis of, among
other things, Borrower's historical returns, rebates, discounts, credits and
allowances (collectively, the "DILUTION ITEMS"). Such liquidity factors and the
advance rates for Availability may be adjusted by Agent throughout the Term as
warranted by Agent's underwriting practices and procedures in its Permitted
Discretion. Also, Agent shall have the right to establish and readjust from time
to time, in its Permitted Discretion, reserves against the Borrowing Base, which
reserves shall have the effect of reducing the amounts otherwise eligible to be
disbursed to Borrower under the Revolving Facility pursuant to this Agreement.
2.2 THE REVOLVING NOTES; MATURITY
(a) All Advances under the Revolving Facility shall be evidenced
by the Revolving Notes, payable to the order of each Revolving Lender in the
principal amount of the Commitment of such Revolving Lender, duly executed and
delivered by Borrower. The Revolving Notes shall evidence the aggregate
Indebtedness of Borrower to Revolving Lenders resulting from Advances under the
Revolving Facility from time to time. Each Revolving Lender hereby is
authorized, but is not obligated, to enter the amount of such Revolving Lender's
Pro Rata Share of each Advance under the Revolving Facility, and the amount of
each payment or prepayment of principal or interest thereon in the appropriate
spaces on the reverse of or on an attachment to such Revolving Lender's
Revolving Note(s). Agent will account to Borrower monthly with a statement of
Advances under the Revolving Facility, and charges and payments made pursuant to
this Agreement, and in the absence of manifest error, such accounting rendered
by Agent shall be deemed final, binding and conclusive unless Agent is notified
by Borrower in writing to the contrary within 30 calendar days of Receipt of
each accounting, which notice shall be deemed an objection only to items
specifically objected to therein.
(b) All amounts outstanding under the Revolving Notes and other
Obligations under the Revolving Facility shall be due and payable in full, if
not earlier in accordance with this Agreement, on the Maturity Date.
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2.3 INTEREST
Interest on outstanding Advances under the Revolving Notes shall be
payable monthly in arrears on the first day of each calendar month at an annual
rate of Prime Rate plus 3.00%, provided, however, that, notwithstanding any
provision of any Loan Document, the interest on outstanding Advances under the
Revolving Notes shall be not less than 8.00%, in each case calculated on the
basis of a 360-day year and for the actual number of days elapsed in each
interest calculation period. Interest accrued on each Advance under the
Revolving Notes shall be due and payable on the first day of each calendar
month, in accordance with the procedures provided for in Section 2.5 and Section
2.10, commencing August 1, 2002 and continuing until the later of the expiration
of the Term and the full performance and irrevocable payment in full in cash of
the Obligations and termination of this Agreement.
2.4 FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER BORROWING CERTIFICATE
So long as no Default or Event of Default shall have occurred and be
continuing, Borrower may give Agent irrevocable written notice requesting an
Advance under the Revolving Facility by delivering to Agent not later than 11:00
a.m. (New York City time) at least one (1) but not more than four (4) Business
Days before the proposed borrowing date of such requested Advance (the
"BORROWING DATE"), a completed Borrowing Certificate requesting such Advance
accompanied by relevant supporting documentation satisfactory to Agent, which
shall (a) specify the proposed Borrowing Date of such Advance which shall be a
Business Day, (b) specify the principal amount of such requested Advance, (c)
certify the matters contained in Section 4.2, and (d) specify the amount of any
recoupments of any third-party payor being sought, requested or claimed, or, to
Borrower's knowledge, threatened against Borrower or Borrower's affiliates. On
Wednesday of each week during the Term (and more frequently if Agent shall so
request in its Permitted Discretion) until the Obligations (other than
contingent obligations and indemnities that survive repayment of the Loans and
termination of the Commitments) are indefeasibly paid in cash in full and this
Agreement is terminated, Borrower shall deliver to Agent a Borrowing Certificate
accompanied by a separate detailed aging and categorizing of Borrower's accounts
receivable and such other supporting documentation with respect to the figures
and information in the Borrowing Certificate as Agent shall request in its
Permitted Discretion; provided, however, ineligible amounts in the Borrowing
Base are only required to be computed on a monthly basis. On each Borrowing
Date, Borrower irrevocably authorizes Agent to disburse the proceeds of the
requested Advance to the applicable account(s) of Borrower specified in the
applicable Borrowing Certificate, each of which accounts shall constitute one or
more of the accounts set forth on Schedule 2.4, in all cases for credit to the
applicable Borrower (or to such other account as to which the Borrower shall
instruct Agent in writing) via Federal funds wire transfer no later than 4:00
p.m. New York City time.
2.5 COLLECTIONS; REPAYMENT; BORROWING AVAILABILITY AND LOCKBOX
Borrower shall maintain a lockbox together with a blocked account
(individually and collectively, the "BLOCKED ACCOUNT") with one or more banks
reasonably acceptable to Agent (each, a "LOCKBOX BANK"), and shall execute with
each Lockbox Bank one or more agreements reasonably acceptable to Agent
(individually and collectively, the "LOCKBOX AGREEMENT"), and such other
agreements related thereto as Agent may reasonably require. Borrower shall
ensure that all collections of their respective Accounts and all other cash
payments received by Borrower (other than direct proceeds of sales of equity
securities and Subordinated Debt) are paid and delivered directly from Account
Debtors and other Persons into the Blocked Account. The Lockbox Agreements shall
provide that the Lockbox Banks immediately will transfer all funds paid into the
Blocked Accounts into a depository account or accounts maintained by Agent or an
affiliate of Agent at such bank as Agent may communicate to Borrower from time
to time (the "CONCENTRATION ACCOUNT"). Notwithstanding and without limiting any
other provision of any Loan Document, Agent shall apply, on a daily basis, all
funds (a) transferred into the
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Concentration Account pursuant to the Lockbox Agreement and this Section 2.5 and
(b) received in connection with the disposition of assets, to the Obligations to
be applied in the following order of priority: (i) first, to the payment of all
outstanding Advances, (ii) second, to the payment of all interest, fees and
expenses then due to Agent and the Lenders, (iii) third, to the payment of all
amounts then due and payable on the outstanding Term Loans, and (iv) fourth, to
all other Obligations, including the cash collateralization of the Letters of
Credit. To the extent that any Accounts collections of Borrower or any other
cash payments received by Borrower are not sent directly to the Blocked Account
but are received by Borrower or any of their affiliates, such collections and
proceeds shall be held in trust for the benefit of Agent and Lenders and
immediately remitted (and in any event within two (2) Business Days), in the
form received, to the Blocked Account for immediate transfer to the
Concentration Account. All funds transferred to the Concentration Account for
application to the Obligations under the Revolving Facility shall be applied to
reduce the Obligations under the Revolving Facility, but, for purposes of
calculating interest hereunder, shall be subject to a five (5) Business Day
clearance period. If as the result of collections of Accounts and/or any other
cash payments received by Borrower pursuant to this Section 2.5 a credit balance
exists with respect to the Concentration Account, such credit balance shall not
accrue interest in favor of Borrower, but shall be available to Borrower upon
written request in accordance with the terms of this Agreement. If applicable,
at any time prior to the execution of all or any of the Lockbox Agreements and
operation of the Blocked Account, Borrower and its affiliates shall direct all
collections or proceeds it receives on Accounts or from other Collateral to the
accounts(s) and in the manner specified by Agent in its sole discretion.
2.6 STANDBY LETTERS OF CREDIT
(a) Subject to the terms and conditions hereof, Agent shall (a)
from time to time during the Term issue or cause the L/C Issuer to issue Standby
Letters of Credit for the account of Borrower; provided, however, that Agent
will not be required to issue or to cause to be issued any Standby Letters of
Credit to the extent that the issuance of such Standby Letters of Credit would
then cause the sum of the outstanding Advances to exceed the lesser of (i)
Availability minus the outstanding Letter of Credit Obligations (with the
requested Standby Letter of Credit being deemed to be outstanding for the
purposes of this calculation) or (ii) the Facility Cap. The maximum amount of
outstanding Standby Letters of Credit shall not exceed Five Million Dollars
($5,000,000) in the aggregate at any time. Each disbursement or payment by the
L/C Issuer or Agent of an amount drawn under Standby Letters of Credit shall be
deemed to be an Advance and shall bear interest at the Applicable Rate for
Revolving Notes. Standby Letters of Credit that have not been drawn upon shall
not bear interest.
(b) Borrower may from time to time upon notice not later than
11:00 a.m., New York City time, at least three (3) Business Days in advance,
request Agent to assist Borrower in establishing or opening a Standby Letter of
Credit by delivering to Agent at the Payment Office, the L/C Issuer's standard
form of standby letter of credit application (the "STANDBY LETTER OF CREDIT
APPLICATION") completed to the satisfaction of the L/C Issuer, and such other
certificates, documents and other papers and information as Agent or L/C Issuer
may reasonably request.
(c) Each Standby Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than twelve (12) months
after such Standby Letter of Credit's date of issuance and in no event later
than the last day of the Term. Each Standby Letter of Credit Application and
each Standby Letter of Credit shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revision thereof.
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(d) In connection with the issuance of any Standby Letter of
Credit, Borrower shall indemnify, save and hold Agent, each Lender and each L/C
Issuer harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any L/C Issuer, and reasonable
expenses and reasonable attorneys' fees incurred by Agent, any Lender or any L/C
Issuer arising out of, or in connection with, any Standby Letter of Credit to be
issued for the account of Borrower, except as such loss, cost, expense or
liability results from such Person's gross negligence, bad faith or willful
misconduct. Borrower shall be bound by the L/C Issuer's regulations and good
faith interpretations of any Standby Letter of Credit issued or created for
Borrower's account, although this interpretation may be different from
Borrower's own; and, neither Agent nor any Lender, any L/C Issuer, nor any of
its correspondents shall be liable for any error, negligence, or mistakes,
whether of omission or commission, in following Borrower's instructions or those
contained in any Standby Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Standby Letter of Credit, except
for Agent's, any Lender's, such L/C Issuer's or such correspondents' gross
negligence or willful misconduct.
(e) Borrower shall authorize and direct the L/C Issuer to name
Borrower as the "Account Party" therein and to deliver to Agent all instruments,
documents, and other writings and property received by the L/C Issuer pursuant
to the Standby Letters of Credit and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising in connection
with the Standby Letters of Credit and the applications therefor.
(f) Each Revolving Lender shall to the extent of its Pro Rata
Share of the aggregate amount of all disbursements made with respect to the
Standby Letters of Credit be deemed to have irrevocably purchased an undivided
participation in each Advance made as a consequence of such disbursement. If at
the time a disbursement is made the unpaid balance of Advances exceeds or would
exceed, with the making of such disbursement, the maximum amounts permitted
under this Agreement and if such disbursement is not reimbursed by Borrower
within two (2) Business Days, then Agent shall promptly notify each Revolving
Lender, and upon Agent's demand each Revolving Lender shall pay to Agent such
Revolving Lender's Pro Rata Share of such unreimbursed disbursement together
with such Revolving Lender's Pro Rata Share of Agent's unreimbursed costs and
expenses relating to such unreimbursed disbursement. Upon receipt by Agent of a
repayment from Borrower of any amount disbursed by Agent for which Agent had
already been reimbursed by the Lenders, Agent shall deliver to each of the
Revolving Lenders that Revolving Lender's Pro Rata Share of such repayment. Each
Revolving Lender's participation commitment shall continue until the last to
occur of any of the following events: (A) Agent ceases to be obligated to issue
or to cause the issuance of Standby Letters of Credit hereunder; (B) no Standby
Letter of Credit issued hereunder remains outstanding and uncancelled; or (C)
all Persons (other than Borrower) have been fully reimbursed for all payments
made under or relating to Standby Letters of Credit.
(g) The obligations of a Revolving Lender to make payments to the
Agent for the account of the Agent or the L/C Issuer with respect to a Standby
Letter of Credit shall be irrevocable, without any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the Loan Documents;
(ii) the existence of any claim, setoff, defense or other
right that Borrower may have at any time against a beneficiary named in such
Standby Letter of Credit or any transferee of such Standby Letter of Credit (or
any Person for which any such transferee may be acting), the Agent, L/C Issuer,
any Lender, or any other person, whether in connection with this Agreement, such
Standby Letter
5
of Credit, the transactions contemplated herein or any related transactions
(including any underlying transactions between Borrower or any other party and
the beneficiary named in such Standby Letter of Credit);
(iii) any draft, certificate or any other document
presented under such Standby Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement or any of the
Loan Documents;
(v) any failure by the Agent to provide any notices
required pursuant to this Agreement relating to such Standby Letter of Credit;
(vi) any payment by the L/C Issuer under any of the
Standby Letters of Credit against presentation of a draft or certificate which
does not comply with the terms of such Standby Letter of Credit (if, in the good
faith opinion of the L/C Issuer, such prepayment is deemed to be appropriate);
or
(vii) the occurrence and continuation of any Default or
Event of Default;
provided, however, that after paying in full its reimbursement obligation
hereunder, nothing herein shall adversely affect the right of Borrower or any
Lender, as the case may be, to commence any proceeding against such L/C Issuer
for any wrongful disbursement made by such L/C Issuer under a Standby Letter of
Credit as a result of acts or omissions constituting gross negligence or willful
misconduct on the part of such L/C issuer.
2.7 TERM LOAN
Subject to the terms and conditions set forth in this Agreement, each
Term Lender agrees to loan to Borrower on the Closing Date its Pro Rata Share of
the Term Loan, which is in the aggregate original principal amount of the
Maximum Loan Amount. The Term Loan is not a revolving credit facility and may
not be drawn, repaid and redrawn. Any repayments of principal on the Term Loan
shall be applied to permanently reduce the Term Loan and Maximum Loan Amount.
The obligations of the Term Lenders hereunder are several and not joint. The
Term Loan shall be evidenced by Term Notes, payable to the order of each Term
Lender in the principal amount of the Commitment of the applicable Term Lender,
duly executed and delivered by Borrower. The Term Notes shall evidence the
aggregate Indebtedness of Borrower to Term Lenders under the Term Loan. Each
Term Lender hereby is authorized, but is not obligated, to enter the amount of
such Lender's Pro Rata Share of outstanding principal of the Term Loan and the
amount of each payment or prepayment of principal and interest thereon on the
reverse of or on an attachment to such Term Lender's Term Note. On the Closing
Date, Borrower irrevocably authorizes Agent to disburse the proceeds of the Term
Loan to the applicable account(s) of Borrower as set forth on Schedule 2.4, in
all cases for credit to the applicable Borrower (or to such other account as to
which the Borrower shall instruct Agent in writing) via Federal funds wire
transfer.
2.8 INTEREST ON THE TERM NOTES
Interest on the outstanding balance of the Term Loan under the Term
Notes shall be payable monthly in arrears on the first day of each calendar
month at an annual rate of Prime Rate plus 5.00%; provided, however, that,
notwithstanding any other provision of any Loan Document, the interest on the
outstanding principal balance of the Term Loan under the Term Notes shall be not
less than 10.00%, in each case calculated on the basis of a 360-day year and for
the actual number of calendar days elapsed in
6
each interest calculation period. Interest accrued on the Term Loan shall be due
and payable on the first day of each calendar month commencing on August 1,
2002, and continuing until the later of the expiration of the Term and the full
performance and irrevocable payment in full in cash of the Obligations and
termination of this Agreement. Advances under the Revolving Facility may be made
automatically by Lenders for the payment of interest and principal on the Term
Loan and other Obligations on the date when due to the extent available and as
provided for herein.
2.9 REPAYMENT OF TERM LOAN; MATURITY
Payment of principal (in addition to the interest payments in Section
2.8) and all other amounts outstanding under the Term Loan shall be made
quarterly in arrears as follows:
(a) $625,000 per calendar quarter shall be due and payable on each
of October 1, 2003, January 1, 2004, April 1, 2004 and July 1, 2004;
(b) $750,000 per calendar quarter shall be due and payable on each
of October 1, 2004, January 1, 2005, April 1, 2005 and July 1, 2005;
(c) $812,500 per calendar quarter shall be due and payable on each
of October 1, 2005, January 1, 2006, April 1, 2006 and July 1, 2006;
(d) $937,500 per calendar quarter shall be due and payable on each
of October 1, 2006, January 1, 2007 and April 1, 2007;
(e) all remaining outstanding amounts under the Term Loan shall be
due and payable in full on the last day of the Term; and
(f) the unpaid principal of the Term Loan and all other
Obligations under the Term Loan shall be due and payable in full, and the Term
Notes shall mature, if not earlier in accordance with this Agreement, on the
Maturity Date.
2.10 MANNER OF PAYMENT
Any payments made by Borrower (other than payments automatically paid
through Advances under the Revolving Facility as provided herein), shall be made
only by wire transfer on the date when due, without offset or counterclaim, in
U.S. dollars, in immediately available funds to such account as may be indicated
in writing by Agent to Borrower from time to time. Any such payment received
after 2:00 p.m. New York City time on any date shall be deemed received on the
following Business Day. Whenever any payment hereunder shall be stated to be due
or shall become due and payable on a day other than a Business Day, the due date
thereof shall be extended to, and such payment shall be made on, the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of payment of any interest (at the interest rate
then in effect during such extension) and/or fees, as the case may be.
2.11 REPAYMENT OF EXCESS ADVANCES
Any balance of Advances under the Revolving Facility outstanding at any
time in excess of the lesser of (a) the Facility Cap in existence at such time
or (b) the Availability minus the outstanding Letter of Credit Obligations shall
be immediately due and payable by Borrower without the necessity of any
7
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred or is continuing and shall be paid in the manner specified in Section
2.10.
2.12 OTHER MANDATORY PREPAYMENTS
In addition to and without limiting any provision of any Loan Document:
(a) if a Change of Control occurs, on or prior to the first
Business Day following the date of such Change of Control, Borrower shall prepay
the Loans and all other Obligations in full in cash together with accrued
interest thereon to the date of prepayment and all other amounts owing to Agent
and Lenders under the Loan Documents; and
(b) if Borrower or any of its Subsidiaries, in any transaction or
series of related transactions, sells any of its material assets or other
properties (other than in the ordinary course of business and sales of assets
that are replaced within 180 calendar days with similar assets), Borrower shall
prepay the Revolving Loans with the proceeds thereof to the extent such assets
are included in the Availability under the Borrowing Base, and the Term Loan to
the extent such assets are not included in the Availability under the Borrowing
Base, to be applied pro rata to the remaining principal payments due on the Term
Loan; and
(c) if Borrower or any of its Subsidiaries, in any transaction or
series of transactions, (i) sells or issues any securities, capital stock or
ownership interests (other than Permitted Securities), (ii) receives any
property damage insurance award or receives any insurance proceeds of any kind
that are not used within 180 calendar days to repair or replace the property or
assets covered thereby, or (iii) incurs any Indebtedness except for Permitted
Indebtedness, then it shall apply 100% of the proceeds thereof to the prepayment
of the Loans and the Obligations, first pro rata to the remaining principal
payments due on the Term Loan and then to the Revolving Facility; and
(d) upon consummation of the 2002 Rights Offering, Borrower shall
prepay the Term Loans to the extent of any cash proceeds received in connection
with such 2002 Rights Offering in excess of $1,100,000, with such proceeds to be
applied pro rata to the remaining principal payments due on the Term Loan; and
(e) beginning with Borrower's fiscal year 2003, and until such
time as the Obligations relating to the Term Loan are indefeasibly paid in full
in cash, fifty percent (50%) of Borrower's Excess Cash Flow for each fiscal year
shall be paid by Borrower to Agent, for the ratable benefit of Term Lenders, and
shall be applied by Agent to reduce the Obligations relating to the Term Loan.
Such payments shall be made within ten (10) days after the day of delivery to
Agent of Borrower's annual audited financial statements, but in any event not
later than one hundred (100) calendar days after the end of the fiscal year to
which such Excess Cash Flow relates. Such payments are to be applied pro rata to
the remaining payments due on the Term Loan; provided, however, during the
existence of any Event of Default, such payments shall be applied to the
Obligations relating to the Term Loan at such time and in such manner and order
as Agent shall decide in its sole discretion.
Notwithstanding anything contained in this Section 2.12 to the
contrary, if any Overadvance exists at the time a payment is due under this
Section 2.12, such payment shall be applied first to eliminate the Overadvance
and then shall be distributed according to the provisions hereof. An
"Overadvance" shall exist if the outstanding balance of all Advances and Letter
of Credit Obligations shall exceed the lesser of (i) the Facility Cap and (ii)
Availability.
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2.13 PAYMENTS BY AGENT
Should any amount required to be paid under any Loan Document be unpaid
after it is due and payable, such amount may be paid by Agent to the extent
availability then exists, for the account of Lenders, which payment shall be
deemed a request for an Advance under the Revolving Facility as of the date such
payment is due, and Borrower irrevocably authorizes disbursement of any such
funds to Agent, for the benefit of Lenders, by way of direct payment of the
relevant amount, interest or Obligations. No payment or prepayment of any amount
by Agent, Lenders or any other Person shall entitle any Person to be subrogated
to the rights of Agent and/or Lenders under any Loan Document unless and until
the Obligations have been fully performed and paid irrevocably in cash and this
Agreement has been terminated. Any sums expended by Agent and/or Lenders as a
result of Borrower's or any Guarantor's failure to pay, perform or comply with
any Loan Document or any of the Obligations may be charged to Borrower's account
as an Advance under the Revolving Facility and added to the Obligations.
2.14 GRANT OF SECURITY INTEREST; COLLATERAL
(i) To secure the payment and performance of the Obligations, each
Borrower hereby grants to Agent, for the benefit of itself and the Lenders, a
valid, perfected, continuing first priority (other than with respect to property
or assets covered by Priority Permitted Liens) security interest in and Lien
upon, and pledges to Agent, for the benefit of itself and the Lenders, all of
its right, title and interest in and to and upon all of Borrower's assets, now
owned or hereafter acquired, including, without limitation, all of the following
property and interests in property of Borrower:
(a) all of Borrower's tangible personal property,
including without limitation all present and future Goods, Inventory and
Equipment (including items of equipment which are or become Fixtures), Software
and Computer Hardware and Software, now owned or hereafter acquired;
(b) all of Borrower's intangible personal property,
including without limitation all present and future Accounts, securities,
Contract Rights, Permits, General Intangibles, Chattel Paper, Investment
Property, Intellectual Property, Documents, Instruments, Deposit Accounts,
Letter-of-Credit Rights and Supporting Obligations, rights to the payment of
money or other forms of consideration of any kind, tax refunds, insurance
proceeds (including, without limitation, proceeds of any life insurance policy),
now owned or hereafter acquired, and all intangible and tangible personal
property relating to or arising out of any of the foregoing;
(c) all of Borrower's present and future Government
Contracts and rights thereunder and the related Government Accounts and proceeds
thereof, now or hereafter owned or acquired by Borrower; provided, however, that
Agent shall not have a security interest in any rights under any Government
Contract of Borrower or in the related Government Account where the taking of
such security interest would be a violation of an express prohibition contained
in the Government Contract (for purposes of this limitation, the fact that a
Government Contract is subject to, or otherwise refers to, Title 31, ss. 203 or
Title 41, ss. 15 of the United States Code shall not be deemed an express
prohibition against assignment thereof) or is prohibited by applicable law; and
(d) any and all additions to any of the foregoing, and
any and all replacements, products and proceeds (including insurance proceeds)
of any of the foregoing.
(ii) Notwithstanding the foregoing provisions of this Section 2.14,
such grant of a security interest shall not extend to, and the term "Collateral"
shall not include, any General Intangibles of Borrower to the extent that (but
only to the extent that) (i) such General Intangibles are not assignable or
capable of being encumbered as a matter of law or under the terms of any license
or other agreement
9
applicable thereto (but solely to the extent that any such restriction shall be
enforceable under applicable law) without the consent of the licensor thereof or
other applicable party thereto, and (ii) such consent has not been obtained;
provided, however, that the foregoing grant of a security interest shall extend
to, and the term "Collateral" shall include, each of the following: (a) any
General Intangible which is in the nature of an Account or a right to the
payment of money or a proceed of, or otherwise related to the enforcement or
collection of, any Account or right to the payment of money, or goods which are
the subject of any Account or right to the payment of money, (b) any and all
proceeds of any General Intangible that is otherwise excluded to the extent that
the assignment, pledge or encumbrance of such proceeds is not so restricted, and
(c) upon obtaining the consent of any such licensor or other applicable party
with respect to any such otherwise excluded General Intangible, such General
Intangible as well as any and all proceeds thereof that might theretofore have
been excluded from such grant of a security interest and from the term
"Collateral."
(iii) In addition to the foregoing, to secure the payment and
performance of the Obligations, each Borrower has pledged to Agent, for its
benefit and the benefit of the Lenders, all of the securities it owns in the
other Borrowers or any other Person pursuant to the Stock Pledge Agreement to
which it is a party.
(iv) Each Borrower has full right and power to grant to Agent, for
the benefit of itself and the Lenders, a perfected, first priority (other than
with respect to property or assets covered by Priority Permitted Liens) security
interest and Lien in the Collateral pursuant to this Agreement. Upon the
execution and delivery of this Agreement, and upon the filing of the necessary
financing statements and delivery of the necessary stock certificates, control
and/or possession, as applicable, without any further action, Agent, for the
benefit of itself and the Lenders, will have a good, valid and first priority
(other than with respect to property or assets covered by Priority Permitted
Liens) and perfected Lien and security interest in the Collateral, subject to no
transfer or other restrictions or Liens of any kind in favor of any other Person
except for Permitted Liens. No financing statement relating to any of the
Collateral is on file in any public office except those (a) on behalf of Agent,
for the benefit of itself and the Lenders, and/or (b) in connection with
Permitted Liens. Borrower is not a party to any agreement, document or
instrument that conflicts with this Section 2.14 or that otherwise relates to
the Collateral.
2.15 COLLATERAL ADMINISTRATION
(a) All Collateral (except Deposit Accounts and Collateral in the
possession of Agent) will at all times be kept by Borrower at the locations set
forth on Schedule 5.18B hereto and shall not, without 30 calendar days prior
written notice to Agent, be moved therefrom, and in any case shall not be moved
outside the continental United States. Borrower shall keep accurate and complete
records of its Collateral and all payments and collections on Accounts and shall
submit such records to Agent on such periodic bases as Agent may request. Any of
the Agent's or any Lender's officers, employees, representatives or agents shall
have the right, upon reasonable notice to Borrower during normal business hours,
in the name of Agent or any Lender, any designee of Agent, any Lender or
Borrower, to verify the validity, amount or any other matter relating to the
Collateral; provided, however, no such notice shall be required during the
occurrence and continuation of any Default or Event of Default. Borrower shall
cooperate fully with Agent and Lenders in an effort to facilitate and promptly
conclude such verification process. In addition to and notwithstanding any
provision of any Loan Document, Agent shall have the right at all times after
the occurrence and during the continuation of an Event of Default to notify
Persons owing Accounts to Borrower that their Accounts have been assigned to
Agent and to collect such Accounts directly in its own name and to charge
collection costs and expenses, including reasonable attorney's fees, to
Borrower. Borrower shall endeavor in the first instance to make collection of
its Accounts for Agent, for the account of Lenders.
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(b) As and when determined by Agent in its Permitted Discretion,
Agent will perform the searches described in clauses (i) and (ii) below against
Borrower (the results of which are to be consistent with Borrower's
representations and warranties under this Agreement), all at Borrower's expense:
(i) UCC searches with the Secretary of State and local filing offices of each
jurisdiction where Borrower and/or any Guarantors are organized and/or maintain
their respective executive offices, a place of business or assets; and (ii)
judgment, federal tax lien and corporate and partnership tax lien searches, in
each jurisdiction searched under clause (i) above.
(c) Upon Agent's request, Borrower shall immediately deliver to
Agent all items for which Agent must receive possession to obtain a perfected
Lien and security interest and all notes, certificates, documents of title,
certificates of title, chattel paper, warehouse receipts, instruments, and any
other similar instruments constituting Collateral, if any; provided, however, so
long as no Event of Default exists and is continuing, Borrower shall not be
required to deliver certificates of title to Agent or perfect Agent's Lien
thereon if such certificates of title relate to Collateral having an aggregate
value of less than $50,000.
(d) Borrower shall, and shall cause its Subsidiaries to, keep
accurate and complete records of its Accounts and Inventory and all payments and
collections thereon and shall submit such records to Agent on such periodic
bases as Agent may reasonably request. In addition, (i) if Accounts of Borrower
in an aggregate face amount in excess of $50,000 become ineligible because they
fall within one of the specified categories of ineligibility set forth in the
definition of Eligible Receivables, or (ii) if Eligible Inventory Costs of
Borrower in an aggregate face amount in excess of $50,000 become ineligible
because they fall within one of the specified categories of ineligibility set
forth in the definition of Eligible Inventory Costs, Borrower shall notify Agent
of such occurrence no later than five (5) Business Days following such
occurrence and the Borrowing Base shall thereupon be adjusted to reflect such
occurrence. After the occurrence and during the continuation of an Event of
Default, if requested by Agent, Borrower shall execute and deliver to Agent, and
shall cause each of its Subsidiaries to execute and deliver, formal written
assignments of all of its Accounts as Agent may request, including all Accounts
created since the date of the last assignment, together with copies of claims,
invoices and/or other information related thereto. To the extent that
collections from such assigned accounts exceed the amount of the Obligations,
such excess amount shall not accrue interest in favor of Borrower but shall be
promptly remitted to Borrower upon written request in accordance with the terms
of this Agreement.
(e) Borrower (i) shall provide prompt written notice to its
current bank to transfer all items, collections and remittances to the
Concentration Account, (ii) shall provide prompt written notice to each Account
Debtor that Agent, for itself and the benefit of the Lenders, has been granted a
lien and security interest in, upon and to all Accounts applicable to such
Account Debtor and shall direct or shall have directed each Account Debtor to
make payments to the appropriate Blocked Account, and Borrower hereby authorizes
Agent and/or Lenders, upon any failure to send such notices or directions within
ten (10) calendar days after the date of this Agreement (or ten (10) calendar
days after the Person becomes an Account Debtor), to send any and all similar
notices and directions to such Account Debtors, and (iii) shall do anything
further that may be lawfully required by Agent and/or any Lender to secure
Agent, for the benefit of itself and Lenders, and effectuate the intentions of
the Loan Documents.
2.16 POWER OF ATTORNEY
Agent is hereby irrevocably made, constituted and appointed the true
and lawful attorney for Borrower (without requiring Borrower to act as such)
with full power of substitution to do the following: (i) upon the occurrence and
during the continuation of an Event of Default, endorse the name of any such
Person upon any and all checks, drafts, money orders and other instruments for
the payment of money that are payable to such Person and constitute collections
on such Person's Accounts; (ii) execute and file
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in the name of Borrower any financing statements, schedules, assignments,
instruments, documents, and statements that it is or they are obligated to give
Agent under any of the Loan Documents; and (iii) do such other and further acts
and deeds in the name of Borrower that Agent may deem necessary or desirable to
enforce, make, create, maintain, continue or enforce or perfect Agent's, for the
benefit of itself and Lenders, security interest or lien or rights in any
Collateral. In addition, if Borrower breaches its obligation hereunder to direct
payments of Accounts or the proceeds of any other Collateral to the appropriate
Blocked Account, Agent, as the irrevocably made, constituted and appointed true
and lawful attorney for such Person pursuant to this paragraph, may, by the
signature or other act of any of Agent's officers or authorized signatories
(without requiring any of them to do so), direct any federal, state or private
payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral
to the appropriate Blocked Account.
2.17 NOTES
Upon Agent's or any Lender's request, and in any event within 5
Business Days after any such request, Borrower shall execute and deliver to
Agent new Notes in such smaller amounts as Agent or Lender shall specify,
provided that the aggregate principal amount of such new Notes does not exceed
the aggregate principal amount of the Notes outstanding at the time such request
is made.
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE
3.1 COMMITMENT FEE
On or before the Closing Date, Borrower shall pay to Agent, for the
ratable benefit of Revolving Lenders, $650,000 as a nonrefundable commitment
fee. On or before the Closing Date, Borrower shall pay to Agent, for the ratable
benefit of Term Lenders, $250,000 as a nonrefundable commitment fee.
3.2 UNUSED LINE FEE
Borrower shall pay to Agent, for the ratable benefit of Revolving
Lenders, an unused line fee (the "UNUSED LINE FEE") in an amount equal to 1.0%
(per annum) of the difference derived by subtracting (a) the daily average
amount of the Advances and Letter of Credit Obligations outstanding during the
preceding month, from (b) the average amount of the Commitment during such
month. The Unused Line Fee shall be payable monthly in arrears on the first day
of each successive calendar month (starting with the month in which the Closing
Date occurs).
3.3 COLLATERAL MANAGEMENT FEE
Borrower shall pay Agent for its own account a collateral management
fee (the "COLLATERAL MANAGEMENT FEE") in an amount equal to .50% (per annum) of
the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month. The Collateral Management Fee shall be
payable monthly in arrears on the first day of each successive calendar month
(starting with the month in which the Closing Date occurs).
3.4 EARLY TERMINATION FEE
If Borrower terminates this Agreement under Section 11.1 hereof, (a
"TERMINATION"), then, at the effective date of any such Termination, Borrower
shall pay Agent, for the account of Lenders
12
(in addition to the then outstanding principal, accrued interest and other
Obligations owing pursuant to the terms of this Agreement and any other Loan
Document), as yield maintenance for the loss of bargain and not as a penalty, an
amount equal to the Termination Fee. As means of clarification, Borrower shall
not be obligated to pay the Termination Fee more than once.
3.5 STANDBY LETTER OF CREDIT FEES
Borrower shall pay to the L/C Issuer, for the ratable benefit of the
Revolving Lenders, a standby letter of credit fee equal to 3% per annum (the
"STANDBY LETTER OF CREDIT FEE") of the aggregate undrawn face amount of all
outstanding Standby Letters of Credit issued for the account of Borrower, which
fee shall be payable monthly in arrears on each day that interest under the
Revolving Facility is payable hereunder. Upon the occurrence and during the
continuance of an Event of Default, all Standby Letter of Credit Fees shall be
payable on demand at a rate equal to the Standby Letter of Credit Fee plus 6%
per annum, in each case on the aggregate undrawn face amount of all outstanding
Standby Letters of Credit issued for the account of Borrower. In addition, upon
the issuance of any Standby Letter of Credit, Borrower shall pay to the L/C
Issuer, for its own account, a one-time issuance fee equal to .125% of the face
amount of such Standby Letter of Credit. Borrower shall also pay on demand the
normal and customary administrative charges for issuance, amendment,
negotiation, renewal or extension of any Standby Letter of Credit imposed by the
L/C Issuer.
3.6 COMPUTATION OF FEES; LAWFUL LIMITS
All fees hereunder shall be computed on the basis of a year of 360 days
and for the actual number of days elapsed in each calculation period, as
applicable. In no contingency or event whatsoever, whether by reason of
acceleration or otherwise, shall the interest and other charges paid or agreed
to be paid to Agent, for the benefit of Lenders, for the use, forbearance or
detention of money hereunder exceed the maximum rate permissible under
applicable law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If, due to any circumstance whatsoever,
fulfillment of any provision hereof, at the time performance of such provision
shall be due, shall exceed any such limit, then, the obligation to be so
fulfilled shall be reduced to such lawful limit, and, if Agent or Lenders shall
have received interest or any other charges of any kind which might be deemed to
be interest under applicable law in excess of the maximum lawful rate, then such
excess shall be applied first to any unpaid fees and charges hereunder, then to
unpaid principal balance owed by Borrower hereunder, and if the then remaining
excess interest is greater than the previously unpaid principal balance, Agent
and Lenders shall promptly refund such excess amount to Borrower and the
provisions hereof shall be deemed amended to provide for such permissible rate.
The terms and provisions of this Section 3.6 shall control to the extent any
other provision of any Loan Document is inconsistent herewith.
3.7 DEFAULT RATE OF INTEREST
Upon the occurrence and during the continuation of an Event of Default,
the Applicable Rate of interest in effect at such time with respect to the
Obligations shall be increased by 3% per annum (the "DEFAULT RATE").
3.8 JOINT AND SEVERAL LIABILITY/CROSS-GUARANTEE
(a) Each Borrower acknowledges that all Borrowers are jointly and
severally liable for all of the Obligations under the Loan Documents. Each
Borrower expressly (i) understands, agrees and acknowledges that Borrowers are
all affiliated entities by common ownership, (ii) agrees to have the
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availability of common loans instead of separate loans, (iii) understands,
agrees and acknowledges that Agent and Lenders hereby will extend such common
loans on the terms herein provided, (iv) understands, agrees and acknowledges
that Agent and Lenders will be lending against, and relying on a lien upon, all
of the Borrowers' assets even though the proceeds of the Loans made hereunder
may not be advanced directly to a particular Borrower, (v) understands, agrees
and acknowledges that each Borrower will nonetheless benefit by the making of
the Loans hereunder by Agent and Lenders and the availability of loans of a size
greater than each could independently warrant, and (vi) understands, agrees and
acknowledges that all of the representations, warranties, covenants,
obligations, conditions, agreements and other terms contained in the Loan
Documents shall be applicable to and binding upon each Borrower as set forth in
the Loan Documents.
(b) Each Borrower hereby guarantees the prompt payment and
performance in full of all Obligations. Such constitutes a guarantee of payment
and not of collection. Each Borrower's obligations under this Agreement shall,
to the fullest extent permitted by law, be unconditional irrespective of (i) the
validity or enforceability, avoidance, or subordination of the Obligations of
any other Borrower or of any promissory note or other document evidencing all or
any part of the Obligations of any other Borrower, (ii) the absence of any
attempt to collect the Obligations from any other Borrower, any Guarantor, or
any other security therefor, or the absence of any other action to enforce the
same, (iii) the waiver, consent, extension, forbearance, or granting of any
indulgence by the Agent and/or any Lender with respect to any provision of any
instrument evidencing the Obligations of any other Borrower or Guarantor, or any
part thereof, or any other agreement now or hereafter executed by any other
Borrower or Guarantor and delivered to the Agent and/or any Lender, (iv) the
failure by the Agent and/or any Lender to take any steps to perfect and maintain
its security interest in, or to preserve its rights to, any security or
collateral for the Obligations of any other Borrower or Guarantor, (v) the
Agent's and/or any Lender's election, in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by any other Borrower,
as debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the
disallowance of all or any portion of the Agent's and/or any Lender's claim(s)
for the repayment of the Obligations of any other Borrower under Section 502 of
the Bankruptcy Code, or (viii) any other circumstances which might constitute a
legal or equitable discharge or defense of a guarantor or of any other Borrower.
With respect to any Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to Advances or other
extensions of credit made to any of the other Borrowers hereunder, such Borrower
waives, until the Obligations (other than contingent obligations and indemnities
that survive repayment of the Loans and termination of the Commitments) shall
have been paid in full and this Agreement shall have been terminated, any right
to enforce any right of subrogation or any remedy which the Agent and/or any
Lender now has or may hereafter have against any other Borrower, any endorser or
any Guarantor of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to the Agent and/or
any Lender to secure payment of the Obligations or any other liability of any
Borrower to the Agent and/or any Lender. During any Event of Default, the Agent
may proceed directly and at once, without notice, against any Borrower to
collect and recover the full amount, or any portion of the Obligations, without
first proceeding against any other Borrower or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that the Agent shall be under no obligation to marshal any assets in favor of
any Borrower or against or in payment of any or all of the Obligations.
(c) Each Borrower is obligated to repay the Obligations as joint
and several obligors under this Agreement. To the extent that any Borrower
shall, under this Agreement as a joint and several obligor, repay any of the
Obligations constituting Advances made to another Borrower hereunder or other
Obligations incurred directly and primarily by any other Borrower (an
"ACCOMMODATION PAYMENT"), then the Borrower making such Accommodation Payment
shall be entitled to contribution and
14
indemnification from, and be reimbursed by, each of the other Borrowers in an
amount, for each of such other Borrowers, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Borrower's
Allocable Amount and the denominator of which is the sum of the Allocable
Amounts of all of the Borrowers. As of any date of determination, the "ALLOCABLE
AMOUNT" of each Borrower shall be equal to the maximum amount of liability for
Accommodation Payments which could be asserted against such Borrower hereunder
without (a) rendering such Borrower "insolvent" within the meaning of Section
101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer
Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (b)
leaving such Borrower with unreasonably small capital or assets, within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section
5 of the UFCA, or (c) leaving such Borrower unable to pay its debts as they
become due within the meaning of Section 548 of the Bankruptcy Code or Section 4
of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution,
indemnification, and reimbursement under this Section shall be subordinate in
right of payment to the prior payment in full of the Obligations. The provisions
of this Section 3.8 shall, to the extent expressly inconsistent with any
provision in any Loan Document, supersede such inconsistent provision.
3.9 ISSUED SHARES
As additional consideration for the extensions of credit hereunder and
as more fully described in the Stockholders' Rights Agreement and the
Registration Rights Agreement, Parent shall issue and deliver to CapitalSource
Holdings LLC (i) the Issued Shares on the Closing Date, and (ii) immediately
upon the closing of the 2002 Rights Offering, shares of common stock of Parent
equal to 5.25% of New Shares, as illustrated on Schedule 3.9.
3.10 ALLOCATION OF PURCHASE PRICE
Under both GAAP consistently applied and the regulations of the
Internal Revenue Service, the issuance to CapitalSource of the Term Notes and to
CapitalSource Holdings LLC of the Issued Shares for an aggregate purchase price
equal to the aggregate principal amount of the Term Notes being so purchased
results in the creation of "original issue discount" on each Term Note (which
original issue discount may also be deemed to constitute the value of any Issued
Shares issued in connection with the issuance of such Term Notes), and such
regulations require the determination of the value of any common stock so
delivered. Pursuant to GAAP consistently applied and applicable Treasury
Regulations, Borrower, Agent and CapitalSource agree to allocate $11,300,000 of
the purchase price to the Term Notes payable to CapitalSource and the remaining
$1,200,000 of the purchase price to the Issued Shares and that such allocation
reflects the relative fair market values of the Term Notes payable to
CapitalSource and the Issued Shares as of their issue dates. As a result, the
Term Notes payable to CapitalSource will be issued with an aggregate original
issue discount of $1,200,000 to be allocated ratably to each Term Note payable
to CapitalSource. Borrower, Agent and CapitalSource agree to recognize and
adhere to the determinations and allocations of original issue discount and
valuation of the Issued Shares set forth herein for all federal and state income
tax purposes. In the event of any proposed transfer of any Term Note by
CapitalSource, CapitalSource shall, prior to such transfer, xxxx such Term Note
with a legend pertaining to the original issue discount in the form required by
Treasury Regulation Section 1.1275-3(b)(1).
3.11 BORROWER REPRESENTATION
Each Borrower irrevocably appoints Union as its agent for all purposes
relevant to this Agreement, including the giving and receipt of notices and
execution and delivery of all documents, instruments, and certificates
contemplated herein and all modifications hereto. Any acknowledgment,
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consent, direction, certification, or other action which might otherwise be
valid or effective only if given or taken by all or any Borrower acting singly,
shall be valid and effective if given or taken only by Union, whether or not any
of the other Borrowers joins therein, and the Agent and the Lenders shall have
no duty or obligation to make further inquiry with respect to the authority of
Union under this Section 3.11, provided that nothing in this Section 3.11 shall
limit the effectiveness of, or the right of the Agent and the Lenders to require
and rely upon, any notice, document, instrument, certificate, acknowledgment,
consent, direction, certification, or other action to be delivered by each
Borrower pursuant to this Agreement. Union shall receive each Advance and shall
record the same on its books and records.
IV. CONDITIONS PRECEDENT
4.1 CONDITIONS TO INITIAL ADVANCE AND CLOSING
The obligations of Lenders to consummate the transactions contemplated
herein and to make the initial Advance under the Revolving Facility (the
"INITIAL ADVANCE") and fund the Term Loan are subject to the satisfaction (or
waiver), in the sole judgment of Lenders, of the following on the Closing Date:
(a) (i) Borrower shall have delivered to Agent (A) the Loan
Documents to which it is a party, each duly executed by an authorized officer of
Borrower, and (B) a Borrowing Certificate for the Initial Advance under the
Revolving Facility executed by an authorized officer of Borrower, and (ii) each
Guarantor, if any, shall have delivered to Agent the Loan Documents to which
such Guarantor is a party, each duly executed and delivered by such Guarantor or
an authorized officer of such Guarantor, as applicable;
(b) all in form and substance satisfactory to Agent in its
Permitted Discretion, Agent shall have received (i) a report of Uniform
Commercial Code financing statement, tax and judgment lien searches performed
with respect to Borrower and any Guarantor in each jurisdiction determined by
Agent in its reasonable discretion, and such report shall show no Liens on the
Collateral (other than Permitted Liens and Liens that will be terminated on the
Closing Date), (ii) each document (including, without limitation, any Uniform
Commercial Code financing statement) required by any Loan Document or under law
or requested by Agent to be filed, registered or recorded to create, in favor of
Agent, for the benefit of Lenders, a first priority (other than with respect to
property or assets covered by Priority Permitted Liens) and perfected security
interest upon the Collateral, and (iii) evidence of each such filing,
registration or recordation and of the payment by Borrower of any necessary fee,
tax or expense relating thereto;
(c) Agent shall have received (i) the Charter and Good Standing
Documents, all in form and substance acceptable to Agent, (ii) a certificate of
the corporate secretary or assistant secretary of each Borrower dated the
Closing Date, as to the incumbency and signature of the Persons executing the
Loan Documents, in form and substance acceptable to Agent, (iii) the written
legal opinions of counsel and/or special counsel for Borrower and each
Guarantor, if any, in each case in form and substance satisfactory to Agent and
its counsel and usual and customary for transactions of this type; and (iv) a
certificate executed by an authorized officer of each Borrower, which shall
constitute a representation and warranty by such Borrower as of the Closing Date
and the applicable Borrowing Date and the date of funding of the Term Loan that
the conditions contained in this Agreement have been satisfied;
(d) Agent shall have received a certificate of the chief financial
officer (or, in the absence of a chief financial officer, the chief executive
officer) of Union (individually) and Acorn (on a consolidated basis), in form
and substance satisfactory to Agent (each, a "SOLVENCY CERTIFICATE"), certifying
(i) the solvency of such Person after giving effect to the transactions and the
Indebtedness contemplated by the Loan Documents, and (ii) as to such Person's
financial resources and ability to meet its obligations and
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liabilities as they become due, to the effect that as of the Closing Date and
the Borrowing Date for the Initial Advance and the date of funding of the Term
Loan and after giving effect to such transactions and Indebtedness: (A) the
assets of such Person, at a Fair Valuation, exceed the total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) of
such Person, and (B) no unreasonably small capital base with which to engage in
its anticipated business exists with respect to such Person;
(e) Lenders shall have completed examinations, the results of
which shall be satisfactory in form and substance to Lenders, of the Collateral,
the financial statements and the books, records, business, obligations,
financial condition and operational state of Borrower, and Borrower shall have
demonstrated to Lenders' satisfaction that (i) its operations comply, in all
respects deemed material by Lenders, in their sole judgment, with all applicable
federal, state, foreign and local laws, statutes and regulations, (ii) its
operations are not the subject of any governmental investigation, evaluation or
any remedial action which could result in any expenditure or liability deemed
material by Lenders, in their sole judgment, and (iii) it has no liability
(whether contingent or otherwise) that is deemed material by Lenders, in their
sole judgment;
(f) Agent and Lenders shall have received all fees, charges and
expenses due and payable to Agent and Lenders on or prior to the Closing Date
pursuant to the Loan Documents;
(g) all in form and substance satisfactory to Agent in its
Permitted Discretion, Agent shall have received such consents, approvals and
agreements, including, without limitation, any applicable Landlord Waivers and
Consents with respect to any and all leases set forth on Schedule 5.4, from such
third parties as Agent and its counsel shall determine are necessary or
desirable with respect to (i) the Loan Documents and/or the transactions
contemplated thereby, and/or (ii) claims against Borrower or any Guarantor or
the Collateral;
(h) Borrower shall be in compliance with Section 7.7 and Section
6.5, and Agent shall have received original certificates of all such required
insurance policies confirming that they are in effect and that the premiums due
and owing with respect thereto have been paid in full and naming Agent, for the
benefit of itself and Lenders, as loss payee and additional insured, as
appropriate;
(i) all corporate and other proceedings, documents, instruments
and other legal matters in connection with the transactions contemplated by the
Loan Documents (including, but not limited to, those relating to corporate and
capital structures of Borrower) shall be reasonably satisfactory to Agent;
(j) no default shall exist and be continuing pursuant to any
obligations of Borrower or any Guarantor under any material contract, and
Borrower and each Guarantor shall be in compliance with applicable laws and
there shall exist no fact or circumstance which, with the passage of time, the
giving of notice, or both, could reasonably be expected to constitute or become
a default under any material contract to which Borrower or any Guarantor is a
party or any law to which Borrower is subject;
(k) each Borrower shall have established a Blocked Account
pursuant to Section 2.5;
(l) Agent shall have received copies of all Permits required for
Borrower and each Guarantor to conduct the business in which it is currently
engaged or is contemplated pursuant to the Loan Documents the failure of which
to have could reasonably be expected to have a Material Adverse Effect;
(m) Lenders shall have completed their legal due diligence
examinations of Borrower, the results of which shall be satisfactory in form and
substance to Lenders;
(n) Lenders shall have received evidence (i) of repayment in full
and termination of all liabilities and obligations (other than contingent
liabilities and indemnities that survive repayment of the
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Loans and termination of the Commitments) of Borrower to Xxxxxx Financial, Inc.,
and the other lenders and participants in the Borrower's senior credit facility
existing immediately prior to the Closing Date, and all related documents,
agreements and instruments and of all Liens and Uniform Commercial Code
financing statements relating thereto, including, without limitation, any Liens
and/or Uniform Commercial Code financing statements covering or relating to any
assets or properties of any shareholder of Borrower, (ii) of release and
termination of any and all Liens and/or Uniform Commercial Code financing
statements in, on, against or with respect to any of the Collateral (other than
Permitted Liens), and (iii) that any and all existing lockbox arrangements are
either terminated or made subject to and covered by a Lockbox Agreement as
required pursuant to Section 2.5;
(o) after giving effect to the Initial Advance, Borrower must have
Excess Availability of at least $3,000,000 and the sum of the Revolving Loans
and the Letter of Credit Obligations shall not exceed $25,000,000;
(p) there shall not have occurred any Material Adverse Change or
Material Adverse Effect from that which was reflected on the financial
statements provided to Agent or any liabilities or obligations of any nature
with respect to Borrower which would reasonably be likely to cause a Material
Adverse Effect;
(q) Parent shall have a net operating loss carry forward of at
least Forty Million Dollars ($40,000,000);
(r) Lenders shall have received evidence in form and substance
satisfactory to Lenders that Ten Million Dollars ($10,000,000) of cash shall
have been advanced to Parent by Oaktree Capital Management, LLC and/or its
affiliates in connection with the 2002 Subordinated Debt and the 2002 Purchase
Agreement;
(s) Lenders shall have received evidence in form and substance
satisfactory to Lenders that the HLHZ Note shall have been issued;
(t) Lenders shall have received evidence that the Adjusted EBITDA
of Borrower for the twelve (12) month period ending on April 28, 2002 shall be
at least Ten Million Dollars ($10,000,000);
(u) Borrower shall have entered into binding employment and
non-compete agreements with A. Xxxxxxx Xxxxx and Xxxx X. Xxxxx, in form and
substance satisfactory to Agent;
(v) the subordinated Indebtedness of Borrower to OCM Principal
Opportunities Fund, L.P. and TCW Special Credits and their affiliates in the
approximate amount of $8,200,000 shall have been converted to Series A Preferred
Stock of Parent pursuant to the 2002 Purchase Agreement;
(w) Agent shall have received from each Borrower a completed IRS
Form 8821; and
(x) Agent and Lenders shall have received a title commitment, for
each Real Property, in form and substance satisfactory to Agent and Lenders.
4.2 CONDITIONS TO EACH ADVANCE AND FUNDING OF TERM LOAN
The obligations of any Lender to make any Advance (including, without
limitation, the Initial Advance) and/or to fund the Term Loan are subject to the
satisfaction, in the sole judgment of Agent (any Lender in the case of whether a
Default or Event of Default exists), of the following additional conditions
precedent:
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(a) Borrower shall have delivered to Agent, in the case of an
Advance, a Borrowing Certificate for the Advance, executed by an authorized
officer of Borrower, which shall constitute a representation and warranty by
Borrower as of the Borrowing Date, that the conditions contained in this Section
4.2 have been satisfied.
(b) each of the representations and warranties made by Borrower in
or pursuant to this Agreement shall be accurate, before and after giving effect
to such Advance and/or funding of the Term Loan, Borrower shall be in compliance
with all covenants, agreements and obligations under the Loan Documents, and no
Default or Event of Default shall have occurred or be continuing or would exist
after giving effect to the requested Advance or funding of the Term Loan on such
date;
(c) the aggregate principal amount of Term Loan shall not exceed
the Maximum Loan Amount and immediately after giving effect to the requested
Advance, the aggregate outstanding principal amount of Advances under the
Revolving Facility shall not exceed the lesser of (a) the Availability minus the
Letter of Credit Obligations and (b) the Facility Cap then in existence as of
such Borrowing Date;
(d) there shall be no liabilities or obligations with respect to
Borrower of any nature whatsoever which, either individually or in the
aggregate, would reasonably be likely to have a Material Adverse Effect; and
(e) Agent shall have received all fees, charges and expenses
payable to Agent and/or Lenders on or prior to such date pursuant to the Loan
Documents that are due and payable.
4.3 NO OVERADVANCES
No Lender may make an Advance at any time that Excess Availability is
negative before or after giving effect to such Advance.
V. REPRESENTATIONS AND WARRANTIES
Each Borrower, jointly and severally, represents and warrants as of the
date hereof, the Closing Date, each Borrowing Date and the date of funding of
the Term Loan as follows:
5.1 ORGANIZATION AND AUTHORITY
Borrower is a corporation duly organized, validly existing and in good
standing under the laws of its state of formation. Borrower (a) has all
requisite power and authority to own its properties and assets (including,
without limitation, the Collateral) and to carry on its business as now being
conducted and as contemplated in the Loan Documents, (b) is duly qualified to do
business in the jurisdictions set forth on Schedule 5.1, which are all of the
jurisdictions in which failure so to qualify could reasonably be expected to
have a Material Adverse Effect, and (c) has all requisite power and authority
(i) to execute, deliver and perform the Loan Documents to which it is a party,
(ii) to borrow hereunder, (iii) to consummate the transactions contemplated
under the Loan Documents, and (iv) to grant the Liens with regard to the
Collateral pursuant to the Security Documents to which it is a party. Borrower
is not an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or is controlled by such an
"investment company."
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5.2 LOAN DOCUMENTS
The execution, delivery and performance by Borrower of the Loan
Documents to which it is a party, and the consummation of the transactions
contemplated thereby, (a) have been duly authorized by all requisite action of
Borrower and have been duly executed and delivered by or on behalf of Borrower;
(b) do not violate any provisions of (i) applicable law, statute, rule,
regulation, ordinance or tariff applicable to Borrower, (ii) any order of any
Governmental Authority binding on Borrower or any of its properties, the effect
of which could reasonably be expected to have a Material Adverse Effect, or
(iii) the certificate of incorporation or bylaws (or any other equivalent
governing agreement or document) of Borrower, or any agreement between Borrower
and its shareholders or among any such shareholders; (c) are not in conflict
with, and do not result in a breach or default of or constitute an event of
default, or an event, fact, condition or circumstance which, with notice or
passage of time, or both, would constitute or result in a conflict, breach,
default or event of default under, any indenture, agreement or other instrument
to which Borrower is a party, or by which the properties or assets of Borrower
are bound, the effect of which could reasonably be expected to have a Material
Adverse Effect; (d) except as set forth therein, will not result in the creation
or imposition of any Lien of any nature upon any of the properties or assets of
Borrower, and (e) except as set forth on Schedule 5.2, do not require the
consent, approval or authorization of, or filing, registration or qualification
with, any Governmental Authority or any other Person that have not been made or
obtained. When executed and delivered, each of the Loan Documents to which
Borrower is a party will constitute the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, subject to
the effect of any applicable bankruptcy, moratorium, insolvency, reorganization
or other similar law affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law or in
equity).
5.3 SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS
Borrower has no Subsidiaries other than those persons listed as
Subsidiaries on Schedule 5.3, each of which (other than the Foreign Subsidiary)
is a Borrower or Guarantor. Schedule 5.3 states (i) the authorized and issued
capitalization of each Borrower, (ii) the number and class of equity securities
issued and outstanding of Borrower, (iii) the record owners thereof of each
Borrower other than the Parent (including options, warrants and other rights to
acquire any of the foregoing), (iv) each officer or director of the Parent who
owns equity securities of the Parent, (v) each holder of five percent (5%) of
more of the issued and outstanding capital stock of the Parent, and (vi) each
holder of options, warrants or other rights to acquire the capital stock of the
Parent. The outstanding equity securities of Borrower have been duly authorized
and validly issued and are fully paid and nonassessable and each Person listed
on Schedule 5.3 owns beneficially and of record all of the equity securities it
is listed as owning free and clear of any Liens other than Liens created by the
Loan Documents. Schedule 5.3 also lists the directors of each Borrower. Except
as listed on Schedule 5.3, Borrower does not (i) own any Investment Property or
(ii) own any interest or participate or engage in any joint venture, partnership
or similar arrangements with any Person. Each Subsidiary of Union and each
Subsidiary of Parent (other than Union and the Foreign Subsidiary), does not
conduct any operating business and has no material assets.
5.4 PROPERTIES
Borrower (a) is the sole owner and has good, valid and marketable title
to, or a valid leasehold interest in or right to use, all of its properties and
assets, including the Collateral, whether personal or real, subject to no
transfer restrictions or Liens of any kind except for Permitted Liens, and (b)
is in compliance in all material respects with each lease or license to which it
is a party or otherwise bound. Schedule 5.4 lists all real properties (and their
locations) owned or leased by or to, and all other assets or property that are
leased or licensed by, Borrower and all leases (including leases of leased real
property) covering or
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with respect to such properties and assets. Borrower enjoys peaceful and
undisturbed possession under all such leases and such leases are all the leases
necessary for the operation of such properties and assets, are valid and
subsisting and are in full force and effect. All personal property and assets of
Borrower are in good repair, working order and condition (normal wear and tear
excepted) and are suitable and adequate for the uses for which they are being
used. No Borrower or Guarantor owns any Equipment or Inventory supplied or
entrusted by Rubbermaid Incorporated.
5.5 OTHER AGREEMENTS
Borrower is not (a) a party to any judgment, order or decree or any
agreement, document or instrument, or subject to any restriction, which would
materially adversely affect its ability to execute and deliver, or perform
under, any Loan Document or to pay the Obligations, (b) in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any agreement, document or instrument to which it is a party or to
which any of its properties or assets are subject, which default, if not
remedied within any applicable grace or cure period, could reasonably be
expected to have a Material Adverse Effect, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would
constitute or result in a conflict, breach, default or event of default under,
any of the foregoing which, if not remedied within any applicable grace or cure
period could reasonably be expected to have a Material Adverse Effect, or (c) a
party or subject to any agreement, document or instrument with respect to, or
obligation to pay any, service or management fee with respect to, the ownership,
operation, leasing or performance of any of its business. Except as set forth on
Schedule 5.5, there are no existing or proposed agreements, arrangements,
understandings or transactions between Borrower and any of Borrower's officers,
directors, stockholders, employees or affiliates or any members of their
respective immediate families.
5.6 LITIGATION
There is no action, suit, proceeding or investigation pending or, to
its knowledge, threatened against Borrower that (a) questions or could prevent
the validity of any of the Loan Documents or the right of Borrower to enter into
any Loan Document or to consummate the transactions contemplated thereby, (b)
could reasonably be expected to be or have, either individually or in the
aggregate, any Material Adverse Change or Material Adverse Effect, or (c) could
reasonably be expected to result in any Change of Control or other change in the
current ownership, control or management of Borrower. Borrower is not aware that
there is any basis for the foregoing. Borrower is not a party or subject to any
order, writ, injunction, judgment or decree of any Governmental Authority that
could reasonably be expected to cause a Material Adverse Effect. There is no
action, suit, proceeding or investigation initiated by Borrower currently
pending that could reasonably be expected to have a Material Adverse Effect.
Borrower has no existing accrued and/or unpaid Indebtedness to any Governmental
Authority or any other governmental payor unless such Indebtedness relates to
unpaid taxes which Borrower disputes in good faith and maintains adequate
reserves therefor.
5.7 HAZARDOUS MATERIALS
Borrower is in compliance in all material respects with all applicable
Environmental Laws. Borrower has not been notified of any action, suit,
proceeding or investigation (a) relating in any way to compliance by or
liability of Borrower under any Environmental Laws, (b) which otherwise deals
with any Hazardous Substance or any Environmental Law, or (c) which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Substance.
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5.8 TAX RETURNS; GOVERNMENTAL REPORTS
Borrower (a) has filed all federal, state, foreign (if applicable) and
local tax returns and other reports which are required by law to be filed by
Borrower, and (b) has paid all taxes, assessments, fees and other governmental
charges, including, without limitation, payroll and other employment related
taxes, in each case that are due and payable, except only for items that
Borrower is currently contesting in good faith and that are described on
Schedule 5.8.
5.9 FINANCIAL STATEMENTS AND REPORTS
All financial statements and financial information relating to Borrower
that have been or may hereafter be delivered to Agent by Borrower are (a)
consistent with the books of account and records of Borrower, (b) have been
prepared in accordance with GAAP on a consistent basis throughout the indicated
periods, except that the unaudited financial statements contain no footnotes or
year-end adjustments, and (c) present fairly the consolidated financial
condition, assets and liabilities and results of operations of Borrower at the
dates and for the relevant periods indicated in accordance with GAAP on a basis
consistently applied. Borrower has no material obligations or liabilities of any
kind not disclosed in such audited financial information or statements, and
since the date of the most recent financial statements submitted to Agent, there
has not occurred any Material Adverse Change or Material Adverse Effect or, to
Borrower's knowledge, any other event or condition that could reasonably be
expected to have a Material Adverse Effect.
5.10 COMPLIANCE WITH LAW
Borrower (a) is in compliance with all laws, statutes, rules,
regulations, ordinances and tariffs of any Governmental Authority applicable to
Borrower and/or Borrower's business, assets or operations, and (b) is not in
violation of any order of any Governmental Authority or other board or tribunal,
except, in the case of both (a) and (b), where noncompliance or violation could
not reasonably be expected to have a Material Adverse Effect. There is no event,
fact, condition or circumstance which, with notice or passage of time, or both,
would constitute or result in any noncompliance with, or any violation of, any
of the foregoing, in each case except where noncompliance or violation could not
reasonably be expected to have a Material Adverse Effect. Borrower has not
received any notice that Borrower is not in compliance in any material respect
with any of the requirements of any of the foregoing. Borrower has (i) not
engaged in any Prohibited Transactions as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder, (ii) not failed to meet any applicable
minimum funding requirements under Section 302 of ERISA in respect of its plans
and no funding requirements have been postponed or delayed, (iii) no any
knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any of the employee benefit plans, (iv) no fiduciary responsibility
under ERISA for investments with respect to any plan existing for the benefit of
Persons other than its employees or former employees, or (v) not withdrawn,
completely or partially, from any multi-employer pension plans so as to incur
liability under the MultiEmployer Pension Plan Amendments of 1980, except, as to
each of clauses (i) through (iv), for which would not constitute a Material
Adverse Effect. With respect to Borrower, there exists no event described in
Section 4043 of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof,
for which the thirty (30) day notice period contained in 12 C.F.R. ss. 2615.3
has not been waived. Borrower has maintained in all material respects all
records required to be maintained by any applicable Governmental Authority.
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5.11 INTELLECTUAL PROPERTY
Except as set forth on Schedule 5.11, Borrower does not own or license,
and is not a party to, any patents, patent applications, trademarks, trademark
applications, service marks, registered copyrights, copyright applications,
copyrights, trade names, software or licenses. The items listed on Schedule 5.11
constitute all of the Intellectual Property necessary or required for the
operation of Borrower's business. All such items are in full force and effect
and not in conflict with the rights of others, except in those instances which
could not reasonably be expected to have a Material Adverse Effect. Borrower is
not in breach of or default under the provisions of any of the foregoing, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect.
5.12 LICENSES AND PERMITS; LABOR
Borrower is in compliance with and has all Permits necessary or
required by applicable law or Governmental Authority for the operation of its
businesses except where noncompliance, violation or lack thereof could not
reasonably be expected to have a Material Adverse Effect. Schedule 5.12 lists
all Permits necessary or required by applicable law or Governmental Authority
for the operation of its businesses as of the Closing Date except where
noncompliance, violation or lack thereof could not reasonably be expected to
have a Material Adverse Effect. All of the foregoing are in full force and
effect and not in conflict with the rights of others, except in those instances
which could not reasonably be expected to have a Material Adverse Effect.
Borrower is not (a) in breach of or default under the provisions of any of the
foregoing, nor is there any event, fact, condition or circumstance which, with
notice or passage of time or both, would constitute or result in a conflict,
breach, default or event of default under, any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected
to have a Material Adverse Effect, and (b) has not been, involved in any labor
dispute, strike, walkout or union organization which could reasonably be
expected to have a Material Adverse Effect.
5.13 NO DEFAULT; SOLVENCY
There does not exist any Default or Event of Default or any event,
fact, condition or circumstance which, with the giving of notice or passage of
time or both, would constitute or result in a Default or Event of Default. Each
of Union (individually) and Acorn (on a consolidated basis) is and, after giving
effect to the transactions and the Indebtedness contemplated by the Loan
Documents, will be solvent and able to meet its obligations and liabilities as
they become due, and the assets of each Borrower, at a Fair Valuation, exceed
the total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person, and no unreasonably small capital base
with which to engage in its anticipated business exists with respect to any
Borrower.
5.14 DISCLOSURE
No Loan Document nor any other agreement, document, certificate, or
statement furnished to Agent by or on behalf of Borrower in connection with the
transactions contemplated by the Loan Documents, nor any representation or
warranty made by Borrower in any Loan Document, contains any untrue statement of
material fact or omits to state any fact necessary to make the statements
therein taken as a whole not materially misleading. There is no fact known to
Borrower which has not been disclosed to Agent in writing which could reasonably
be expected to have a Material Adverse Effect.
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5.15 EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN CONTRACTS
Except as contemplated by the Loan Documents or as otherwise set forth
on Schedule 5.15, Borrower (a) has no outstanding Indebtedness, (b) is not
subject or party to any mortgage, note, indenture, indemnity or guarantee of,
with respect to or evidencing any Indebtedness of any other Person, or (c) does
not own or hold any equity or long-term debt investments in, and does not have
any outstanding advances to or any outstanding guarantees for, the obligations
of, or any outstanding borrowings from, any Person. Borrower has performed all
material obligations required to be performed by Borrower pursuant to or
connection with any items listed on Schedule 5.15 and there has occurred no
breach, default or event of default of a material obligation under any document
evidencing any such items or any fact, circumstance, condition or event which,
with the giving of notice or passage of time or both, would constitute or result
in a breach, default or event of default thereunder. Except as set forth on
Schedule 5.15, Borrower, directly or indirectly, has not made, and there does
not exist, any loans, advances or guarantees to or for the benefit of any Person
or assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable for or upon or incur any obligation of any Person.
5.16 INVENTORY RECORDS
Borrower keeps correct and accurate records itemizing and describing
the SKU, type, quality, location and quantity of any Inventory coming into the
possession of Borrower and the book value thereof.
5.17 INSURANCE
Borrower has in full force and effect such insurance policies as are
customary in its industry and as may be required pursuant to Section 6.5 hereof.
All such insurance policies are listed and described on Schedule 5.17. Borrower
has not assumed or is subject to any risks or liabilities other than those
relating to its Business.
5.18 NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL
During the preceding five years, Borrower has not conducted business
under or used any name (whether corporate, partnership or assumed) other than as
shown on Schedule 5.18A. Borrower is the sole owner of all of its names listed
on Schedule 5.18A, and any and all business done and invoices issued in such
names are Borrower's sales, business and invoices. Each trade name of Borrower,
if any, represents a division or trading style of Borrower. Borrower maintains
its places of business and chief executive offices only at the locations set
forth on Schedule 5.18B or, after the Closing Date, as disclosed to Agent in
writing in accordance with Section 7.4, and all Accounts of Borrower arise,
originate and are located, and all of the Collateral and all books and records
in connection therewith or in any way relating thereto or evidencing the
Collateral are located and shall be only, in and at such locations. All of the
Collateral is located only in the continental United States. Schedule 5.18C
lists all of Borrower's Deposit Accounts and Investment Property.
5.19 NON-SUBORDINATION
The Obligations are not subordinated in any way to any other
obligations of Borrower or to the rights of any other Person.
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5.20 ACCOUNTS
In determining which Accounts are Eligible Receivables, Agent may rely
on all statements and representations made by Borrower in writing with respect
to any Account. Unless otherwise indicated in writing to Agent, each Account of
Borrower (a) is genuine and in all material respects what it purports to be and
is not evidenced by a judgment, (b) arises out of a completed, bona fide sale
and delivery of goods or rendering of services by Borrower in the ordinary
course of business and in accordance with the terms and conditions of all
purchase orders, contracts, certifications, participations, certificates of need
and other documents relating thereto or forming a part of the contract between
Borrower and the Account Debtor, (c) is for a liquidated amount maturing as
stated in a claim or invoice covering such sale of goods or rendering of
services, a copy of which has been furnished or is available to Agent, (d)
together with Agent's security interest therein, is not and will not be in the
future (by voluntary act or omission by Borrower), subject to any offset, lien,
deduction, defense, dispute, counterclaim or other adverse condition, is
absolutely owing to Borrower and is not contingent in any respect or for any
reason, (e) there are no facts, events or occurrences which in any way impair
the validity or enforceability thereof or tend to reduce the amount payable
thereunder from the face amount of the claim or invoice and statements delivered
to Agent with respect thereto, (f) to the extent it would have a Material
Adverse Effect, (i) the Account Debtor thereunder had the capacity to contract
at the time any contract or other document giving rise thereto was executed and
(ii) such Account Debtor is solvent, (g) to the Borrower's knowledge, there are
no proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectability thereof, (h) has been
billed and forwarded to the Account Debtor for payment in accordance with
applicable laws and is in compliance and conformance with any requisite
procedures, requirements and regulations governing payment by such Account
Debtor with respect to such Account, and (i) Borrower has obtained and currently
has all Permits necessary in the generation thereof.
5.21 SURVIVAL
Borrower makes the representations and warranties contained herein with
the knowledge and intention that Agent and Lenders are relying and will rely
thereon. All such representations and warranties will survive the execution and
delivery of this Agreement, the Closing, the making of the Advances and the
funding of the Term Loan.
VI. AFFIRMATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that, until
full performance and satisfaction, and indefeasible payment in full in cash, of
all the Obligations and termination of this Agreement:
6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION
(a) Financial Reports. Borrower shall furnish to Agent (i) as soon
as available and in any event within ninety (90) calendar days after the end of
each fiscal year of Borrower (or, if an extension has been properly filed with
the Securities Exchange Commission regarding the filing of financial statements,
then one hundred (105) calendar days after the end of such fiscal year of
Borrower), audited annual consolidated financial statements of Borrower,
including the notes thereto, consisting of a consolidated and consolidating
balance sheet at the end of such completed fiscal year and the related
consolidated and consolidating statements of income, consolidated statements of
retained earnings, cash flows and owners' equity for such completed fiscal year,
which financial statements shall be prepared and
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certified without qualification by an independent certified public accounting
firm reasonably satisfactory to Agent and accompanied by related management
letters, if available, (ii) as soon as available and in any event within
forty-five (45) days after the end of each Accounting Quarter of Borrower (or,
if an extension has been properly filed with the Securities Exchange Commission
regarding the filing of financial statements, then fifty-five (55) calendar days
after the end of such Accounting Quarter of Borrower), unaudited consolidated
financial statements of Borrower consisting of a consolidated and consolidating
balance sheet and statements of income, and consolidated statements of retained
earnings and cash flows and owners' equity as of the end of the immediately
preceding fiscal quarter, (iii) as soon as available and in any event within
thirty (30) calendar days after the end of each Accounting Month, unaudited
financial statements of Borrower consisting of a consolidated and consolidating
balance sheet and statement of income, and consolidated statements of retained
earnings, cash flows and owners' equity as of the end of the immediately
preceding Accounting Month and (iv) as soon as available and in any event within
thirty (30) calendar days after the end of each Accounting Month, a listing of
all proposed adjustments to EBITDA during such Accounting Month. All such
financial statements shall be prepared in accordance with GAAP consistently
applied with prior periods (subject, as to interim statements, to lack of
footnotes and year-end adjustments). With each quarterly and annual financial
statement, Borrower shall also deliver a compliance certificate of its chief
financial officer in the form reasonably satisfactory to Agent stating that (A)
such person has reviewed the relevant terms of the Loan Documents and the
condition of Borrower, (B) no Default or Event of Default has occurred or is
continuing, or, if any of the foregoing has occurred or is continuing,
specifying the nature and status and period of existence thereof and the steps
taken or proposed to be taken with respect thereto, and (C) Borrower is in
compliance with all financial covenants in this Agreement attached as Annex I
hereto. Such certificate shall be accompanied by the calculations necessary to
show compliance with the financial covenants in a form satisfactory to the
Agent. The consolidating financial statements required hereunder are not
required to be audited.
(b) Other Materials. Borrower shall furnish to Agent as soon as
available, and in any event within ten (10) calendar days after the preparation
or issuance thereof or at such other time as set forth below or on Annex II to
this Agreement, as applicable: (i) copies of such financial statements (other
than those required to be delivered pursuant to Section 6.1(a)) prepared by, for
or on behalf of Borrower and any other notes and reports related thereto and
other documents and materials listed on Annex II to this Agreement, which is
incorporate herein and made a part hereof, including, without limitation, any
pro forma financial statements, (ii) any reports, returns, information, notices
and other materials that any Borrower shall send to all or any class or series
of its stockholders at any time together with any and all supporting
documentation related thereto, (iii) within 15 calendar days after the end of
each Accounting Month for such month, a credit memo report, accounts receivable
detailed aging and categorizing, accounts payable detailed aging, and a
reconciliation of the accounts receivable and accounts payable to the general
ledger and financial statements, (iv) copies of any reports submitted to
Borrower by its independent accountants in connection with any interim audit of
the books of such Person or any of its affiliates and copies of each management
control letter provided by such independent accountants, (v) copies of any and
all materials, documents, instrument and other items that relate to, secure,
evidence, give rise to or generate or otherwise involve the Collateral, and (vi)
such additional information, documents, statements, reports and other materials
as Agent may request in its Permitted Discretion from time to time.
(c) Notices. Borrower shall promptly, and in any event within 5
Business Days after Borrower or any authorized officer of Borrower obtains
knowledge thereof, notify Agent in writing of (i) any pending litigation, suit,
investigation, arbitration, dispute resolution proceeding or administrative or
regulatory proceeding brought or initiated by or against Borrower or otherwise
affecting or involving or relating to Borrower or any of its property or assets
to the extent (A) the amount in controversy exceeds $100,000 singly or $250,000
in the aggregate for all such events, or (B) to the extent any of the foregoing
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seeks injunctive relief, (ii) the occurrence of any Default or Event of Default,
which notice shall specify the nature and status thereof, the period of
existence thereof and what action is proposed to be taken with respect thereto,
(iii) any other development, event, fact, circumstance or condition that could
reasonably be expected to have a Material Adverse Effect, in each case
describing the nature and status thereof and the action proposed to be taken
with respect thereto, (iv) any notice received by Borrower from any payor of a
claim, suit or other action such payor has, claims or has filed against Borrower
for an amount in excess of $100,000 singly or $250,000 in the aggregate, (v) any
matter(s) in the amount of $100,000, singly or $250,000 in the aggregate, in
existence at any one time affecting the value, enforceability or collectability
of any of the Collateral, (vi) any notice given by Borrower to any other lender
of Borrower and shall furnish to Agent a copy of such notice, (vii) receipt of
any notice or request from any Governmental Authority regarding any liability or
claim of liability in the amount equal to or exceeding $100,000 singly or
$250,000 in the aggregate, (viii) receipt of any notice by Borrower regarding
termination of any material lease or any senior executive, (ix) if any Account
or other Collateral becomes evidenced or secured by an instrument or chattel
paper, (x) the filing, recording or assessment of any federal, state, local or
foreign tax lien against the Collateral or Borrower, (xi) any action taken by
any Governmental Authority (or any notice of any of the foregoing) with respect
to Borrower or any Collateral, (xii) any change in the corporate name of any
Borrower or Guarantor, and/or (xiii) any actual employee strike or significant
union activity.
(d) Consents. Borrower shall obtain and deliver to Agent from time
to time all required consents, approvals and agreements from such third parties
as Agent shall determine are necessary or desirable in its Permitted Discretion
and that are reasonably satisfactory to Agent with respect to (i) the Loan
Documents and the transactions contemplated thereby, (ii) claims against
Borrower, or the Collateral, and/or (iii) any agreements, consents, documents or
instruments to which Borrower is a party or by which any properties or assets of
Borrower or any of the Collateral is or are bound or subject, including, without
limitation, Landlord Waivers and Consents with respect to leases.
(e) Operating Budget. Borrower shall furnish to Agent on or prior
to the Closing Date and for each fiscal year of Borrower thereafter in draft
form not less than thirty (30) calendar days prior to the commencement of such
fiscal year and in final form not more than sixty (60) calendar days following
the commencement of such fiscal year, consolidated month by month projected
operating budgets, projections, profit and loss statements, income statements,
balance sheets and cash flow reports of and for Borrower for such upcoming
fiscal year (including an income statement for each month and a balance sheet as
at the end of the last month in each fiscal quarter), and annual projections for
the next 2 years, in each case prepared in accordance with GAAP consistently
applied with prior periods (subject to lack of footnotes and year-end
adjustments).
(f) Shareholder Reports and Government Filings. Borrower shall
furnish to Agent, concurrently with the sending or filing thereof, a copy of any
proxy statement, financial statements or reports which Borrower has made
available to its shareholders as a class or any class or series of shareholders
and a copy of any regular, periodic and special reports or registration
statements which Borrower files with the Securities and Exchange Commission, any
stock exchange or any Governmental Authority.
(g) Investment Property. Borrower shall (i) promptly, and in any
event within ten (10) Business Days after Borrower (A) establishes any
securities account, money market account or any similar account, or (B) becomes
the owner of any Investment Property, notify Agent of such, and thereafter (ii)
deliver to Agent, within twenty (20) Business Days, documentation to perfect
Agent's, for its benefit and the benefit of the Lenders, Lien thereon, in each
case in form and substance reasonably acceptable to Agent. Upon request by
Agent, Borrower shall (i) notify Agent of its establishment of any Deposit
Account, and (ii) deliver to Agent, within twenty (20) Business Days,
documentation to perfect
27
Agent's, for its benefit and the benefit of the Lenders, Lien thereon, in form
and substance reasonably acceptable to Agent.
(h) Commercial Tort Claims. Borrower shall promptly notify Agent
of any commercial tort claim acquired by Borrower, and unless otherwise
consented by to Agent, Borrower shall enter into documentation satisfactory to
Agent to grant to Agent a first priority perfected Lien in such commercial tort
claim.
6.2 PAYMENT OF OBLIGATIONS
Borrower shall make full and timely indefeasible payment in cash of the
principal of and interest on the Loans, Advances and all other Obligations.
Simultaneously upon any prepayment of the Revolving Loan and termination of the
Revolving Facility, Borrower shall make full indefeasible payment in cash of the
principal of and interest on the Term Loan and all other Obligations arising
under or relating to the Term Loan.
6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS
Borrower shall (a) conduct its business in accordance with good
business practices customary to its industry, (b) engage principally in the same
or similar lines of business substantially as heretofore conducted, (c) collect
its Accounts in the ordinary course of business, (d) maintain all of its
material properties, assets and equipment used in its business in good repair,
working order and condition (normal wear and tear excepted and except as may be
disposed of in the ordinary course of business and in accordance with the terms
of the Loan Documents), (e) from time to time to make all necessary repairs,
renewals and replacements thereof, (f) maintain and keep in full force and
effect its existence and all material Permits and qualifications to do business
and good standing in its jurisdiction of formation and each other jurisdiction
in which the ownership or lease of property or the nature of its business makes
such Permits or qualification necessary and in which failure to maintain such
Permits or qualification could reasonably be likely to have a Material Adverse
Effect; (g) remain in good standing and maintain operations in all jurisdictions
in which currently located, except where the failure to remain in good standing
or maintain operations could not reasonably be expected to have a Material
Adverse Effect, and (h) maintain, comply with and keep in full force and effect
its existence and all Intellectual Property and Permits the loss of which or
failure to maintain could reasonably be likely to have a Material Adverse
Effect.
6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS
Borrower shall, unless the failure to do such could not reasonably be
expected to have a Material Adverse Effect, (a) comply with all laws, statutes,
rules, regulations, ordinances and tariffs of all Governmental Authorities
applicable to it or its business, assets or operations, (b) pay all taxes,
assessments, fees, governmental charges, claims for labor, supplies, rent and
all other obligations or liabilities of any kind, except liabilities being
contested in good faith and against which adequate reserves have been
established, (c) perform in accordance with its terms each contract, agreement
or other arrangement to which it is a party or by which it or any of the
Collateral is bound, (d) maintain and comply with all Permits necessary to
conduct its business and comply with any new or additional requirements that may
be imposed on it or its business, (e) comply with all Intellectual Property in
accordance with the Intellectual Property Security Agreement, and (f) properly
file all reports required to be filed with any Governmental Authority.
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6.5 INSURANCE
Borrower shall (a) keep all of its insurable properties and assets
adequately insured in all material respects against losses, damages and hazards
as are customarily insured against by businesses engaging in similar activities
or owning similar assets or properties and at least the minimum amount required
by applicable law and any agreement to which Borrower is a party or pursuant to
which Borrower provides any services, including, without limitation, liability,
errors and omissions and property and business interruption insurance, as
applicable; and maintain general public liability insurance at all times against
liability on account of damage to persons and property having such limits,
deductibles, exclusions and co-insurance and other provisions as are customary
for a business engaged in activities similar to those of Borrower; and (b)
maintain insurance under all applicable workers' compensation laws; all of the
foregoing insurance policies to (i) be reasonably satisfactory in form and
substance to Agent, (ii) name Agent, for the benefit of itself and Lenders, as
loss payee and additional insured thereunder, and (iii) expressly provide that
they cannot be altered, amended or modified in any material respect (including,
without limitation, with respect to amounts of coverage, beneficiaries and/or
loss payees and additional insureds) or canceled without thirty (30) calendar
days prior written notice to Agent and that they inure to the benefit of Agent,
for the benefit of itself and Lenders, notwithstanding any action or omission or
negligence of or by Borrower, or any insured thereunder.
6.6 TRUE BOOKS
Borrower shall (a) keep (in accordance GAAP) books of record and
account in accordance with commercially reasonable business practices in which
true and correct entries are made of all of its and their dealings and
transactions in all material respects; and (b) set up and maintain on its books
such reserves as may be required by GAAP with respect to doubtful accounts and
all taxes, assessments, charges, levies and claims and with respect to its
business, and include such reserves in its quarterly as well as year end
financial statements.
6.7 INSPECTION; PERIODIC AUDITS
Borrower shall permit the representatives of Agent, at the expense of
Borrower (which in the case of third party expenses shall be reasonable), from
time to time during normal business hours upon reasonable notice, to (a) visit
and inspect any of Borrower's offices or properties or any other place where
Collateral is located to inspect the Collateral and/or to examine or audit all
of Borrower's books of account, records, reports and other papers, (b) make
copies and extracts therefrom, and (c) discuss Borrower's business, operations,
prospects, properties, assets, liabilities, condition and/or Accounts with its
officers and independent public accountants (and by this provision such officers
and accountants are authorized to discuss the foregoing), provided, however,
that no such notice shall be required (i) to visit and to inspect any location
containing books and records and to conduct an examination and audit thereof or
(ii) to visit and to inspect any location if an Event of Default has occurred
and is continuing; further provided, however, such visits and inspections shall
be limited to four (4) times during each calendar year so long as no Event of
Default exists and is continuing.
6.8 FURTHER ASSURANCES; POST CLOSING
At Borrower's cost and expense, Borrower shall (a) within ten (10)
Business Days after Agent's demand, take such further actions, obtain such
consents and approvals and duly execute and deliver such further agreements,
assignments, instructions or documents as Agent may reasonably request in its
Permitted Discretion with respect to the purposes, terms and conditions of the
Loan Documents and the consummation of the transactions contemplated thereby,
whether before, at or after the performance
29
and/or consummation of the transactions contemplated hereby or the occurrence
and continuation of a Default or Event of Default, (b) without limiting and
notwithstanding any other provision of any Loan Document, execute and deliver,
or cause to be executed and delivered, such agreements and documents, and take
or cause to be taken such actions, and otherwise perform, observe and comply
with such obligations, as are set forth on Schedule 6.8, and (c) upon the
exercise by Agent, any Lender or any of their affiliates of any power, right,
privilege or remedy pursuant to any Loan Document or under applicable law or at
equity which requires any consent, approval, registration, qualification or
authorization of any Person (including, without limitation, any Governmental
Authority), execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments and other documents that may be so
required for such consent, approval, registration, qualification or
authorization. Without limiting the foregoing, upon the exercise by Agent, any
Lender or any of their affiliates of any right or remedy under any Loan Document
which requires any consent, approval or registration with, consent,
qualification or authorization by, any Person, Borrower shall execute and
deliver, or cause the execution and delivery of, all applications, certificates,
instruments and other documents that Agent, any Lender or such affiliate may be
required to obtain for itself or on its behalf for such consent, approval,
registration, qualification or authorization.
6.9 PAYMENT OF INDEBTEDNESS
Except as otherwise prescribed in the Loan Documents, Borrower shall
pay, discharge or otherwise satisfy at or before maturity (subject to applicable
grace periods and, in the case of trade payables, to ordinary course payment
practices) all of its material obligations and liabilities, except when the
amount or validity thereof is being contested in good faith by appropriate
proceedings and such reserves as Agent may deem proper and reasonably necessary
in its Permitted Discretion shall have been made.
6.10 LIEN SEARCHES
If Liens other than Permitted Liens exist, Borrower immediately shall
take, execute and deliver all actions, documents and instruments necessary to
release and terminate such Liens.
6.11 USE OF PROCEEDS
Borrower shall use the proceeds from Advances under the Revolving
Facility or under the Term Loan only for the purposes set forth in the recitals
to this Agreement.
6.12 COLLATERAL DOCUMENTS; SECURITY INTEREST IN COLLATERAL
Upon reasonable notice, Borrower shall make available to Agent during
normal business hours copies of any and all documents, instruments, materials
and other items that relate to, secure, evidence, give rise to or generate or
otherwise involve Collateral, including, without limitation, Accounts and
Inventory of such Person. Borrower shall (i) execute, obtain, deliver, file,
register and/or record any and all financing statements, continuation
statements, stock powers, instruments and other documents, or cause the
execution, filing, registration, recording or delivery of any and all of the
foregoing, that are necessary or required under law or otherwise or reasonably
requested by Agent to be executed, filed, registered, obtained, delivered or
recorded to create, maintain, perfect, preserve, validate or otherwise protect
the pledge of the Collateral to Agent and Agent's, for its benefit and the
benefit of the Lenders, perfected first priority (other than with respect to
property or assets covered by Priority Permitted Liens) Lien on the Collateral
(and Borrower irrevocably grants Agent the right, at Agent's option, to file any
or all of the foregoing), (ii) maintain, or cause to be maintained, at all
times, the pledge of the Collateral to
30
Agent and Agent's, for its benefit and the benefit of the Lenders, first
priority (other than with respect to property or assets covered by Priority
Permitted Liens) and perfected Lien on the Collateral, (iii) immediately upon
learning thereof, report to Agent any reclamation, return or repossession of
goods in excess of $100,000 (individually or in the aggregate), and (iv) defend
the Collateral and Agent's, for its benefit and the benefit of the Lenders,
first priority (other than with respect to property or assets covered by
Priority Permitted Liens) and perfected Lien thereon against all claims and
demands of all Persons at any time claiming the same or any interest therein
adverse to Agent, and pay all costs and expenses (including, without limitation,
in-house documentation and diligence fees and legal expenses and reasonable
attorneys' fees and expenses) in connection with such defense, which may at
Agent's discretion be added to the Obligations.
6.13 TAXES AND OTHER CHARGES
All payments and reimbursements to Agent, for its own account and/or
for the benefit of Lenders, made under any Loan Document shall be free and clear
of and without deduction for all taxes, levies, imposts, deductions,
assessments, charges or withholdings, and all liabilities with respect thereto
of any nature whatsoever, excluding taxes to the extent imposed on each Lender's
net income. If Borrower of any Guarantor shall be required by law to deduct any
such amounts from or in respect of any sum payable under any Loan Document to
Agent, for its own account and/or for the benefit of Lenders, then the sum
payable to Agent, for its own account and/or for the benefit of Lenders, shall
be increased as may be necessary so that, after making all required deductions,
each Lender receives an amount equal to the sum it would have received had no
such deductions been made. Notwithstanding any other provision of any Loan
Document, if at any time after the Closing or the making of any Advance or
funding of the Term Loan (a) any change in any existing law, regulation, treaty
or directive or in the interpretation or application thereof, (b) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (c) compliance by Agent or any Lender with any request or directive
from any Governmental Authority: (i) subjects Agent or such Lender to any tax,
levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation
of payments to Agent, for its own account and/or for the benefit of Lenders, of
any amount payable thereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment fees or other
fees payable hereunder or changes in the rate of tax on the overall net income
of Agent and/or each Lender), or (ii) imposes on Agent or Lenders any other
condition or increased cost in connection with the transactions contemplated
thereby or participations therein; and the result of any of the foregoing is to
increase the cost to Agent or Lenders of making or continuing or maintaining any
Loan hereunder or to reduce any amount receivable hereunder, then, in any such
case, Borrower shall promptly pay to Agent, for its own account and/or for the
benefit of Lenders, any additional amounts necessary to compensate Agent and
each Lender, on an after-tax basis, for such additional cost or reduced amount
as determined by Agent and/or such Lender. If Agent or any Lender becomes
entitled to claim any additional amounts pursuant to this Section 6.13 it shall
promptly notify Borrower of the event by reason of which Agent or such Lender
has become so entitled, and each such notice of additional amounts payable
pursuant to this Section 6.13 submitted by Agent or such Lender to Borrower
shall, absent manifest error, be final, conclusive and binding for all purposes.
Without limiting or being limited by any other provision of any Loan Document,
Borrower at all times shall retain and use a Person reasonably acceptable to
Agent to process, manage and pay its payroll taxes and shall cause to be
delivered to Agent within ten (10) calendar days after the end of each
Accounting Month a report of its payroll taxes for the immediately preceding
Accounting Month and evidence of payment thereof.
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VII. NEGATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that, until
full performance and satisfaction, and indefeasible payment in full in cash, of
all the Obligations (other than contingent obligations and indemnities that
survive repayment of the Loans and termination of the Commitments) and
termination of this Agreement:
7.1 FINANCIAL COVENANTS
Borrower shall not violate and shall fully comply with the financial
covenants set forth on Annex I to this Agreement, which annex is incorporated
herein and made a part hereof.
7.2 INDEBTEDNESS
Borrower shall not create, incur, assume or suffer to exist any
Indebtedness, except the following (collectively, "PERMITTED INDEBTEDNESS"): (a)
Indebtedness under the Loan Documents, (b) any Indebtedness set forth on
Schedule 7.2; (c) Capitalized Lease Obligations incurred after the Closing Date
and Indebtedness incurred pursuant to purchase money Liens permitted by Section
7.3(e); provided, that the aggregate amount thereof outstanding at any time
shall not exceed $1,000,000, (d) Subordinated Debt; provided, that Subordinated
Debt created after the Closing Date shall be limited to a principal amount of
$12,500,000 (when aggregated with the outstanding balance of the Term Loan at
any time of determination), and (e) accounts payable to trade creditors and
current operating expenses (other than for borrowed money) which are not aged
more than sixty (60) days from the due date, in each case incurred in the
ordinary course of business and paid within such time period, unless the same
are being contested in good faith and by appropriate and lawful proceedings and
such reserves, if any, with respect thereto as are required by GAAP and deemed
adequate by Borrower's independent accountants shall have been reserved to the
satisfaction of Agent in its sole discretion, and (e) intercompany Indebtedness
among Borrowers, provided, that the Foreign Subsidiary shall not incur such
Indebtedness in an amount in excess of $100,000. Borrower shall not make
prepayments on any existing or future Indebtedness to any Person other than to
Agent, for its own account and/or for the benefit of Lenders, or to the extent
specifically permitted by this Agreement or any subsequent agreement between
Borrower, Agent and Lenders. Notwithstanding anything else in this Agreement to
the contrary, the Foreign Subsidiary shall not receive any Advance or investment
from any Borrower in excess of $100,000 in the aggregate.
7.3 LIENS
Borrower shall not create, incur, assume or suffer to exist any Lien
upon, in or against, or pledge of, any of the Collateral or any of its
properties or assets or any of its shares, securities or other equity or
ownership or partnership interests, whether now owned or hereafter acquired,
except the following (collectively, "PERMITTED LIENS"): (a) Liens under the Loan
Documents or otherwise arising in favor of Agent, for the benefit of itself and
Lenders, (b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained by such Person in
accordance with GAAP to the satisfaction of Agent in its sole discretion, (c)
(i) statutory Liens of landlords (provided that any such landlord has executed a
Landlord Waiver and Consent in form and substance satisfactory to Agent) and of
carriers, warehousemen, mechanics, materialmen, and (ii) other Liens imposed by
law or that arise by operation of law in the ordinary course of business from
the date of creation thereof, in each case only for amounts not yet due or which
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained by
such Person in accordance with GAAP
32
to the satisfaction of Agent in its sole discretion, (d) Liens incurred or
deposits made in the ordinary course of business (including, without limitation,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to secure
the performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other similar obligations,
(e) purchase money Liens (i) securing Indebtedness permitted under Section
7.2(c), or (ii) in connection with the purchase by such Person of equipment in
the normal course of business; provided, that such payables, Indebtedness and
amounts shall not exceed any limits on Indebtedness provided for herein and
shall otherwise be Permitted Indebtedness hereunder, (f) Liens necessary and
desirable for the operation of such Person's business, provided, that Agent has
consented to such Liens in writing before their creation and existence and the
priority of such Liens and the debt secured thereby are both subject and
subordinate in right of repayment, liens, security and remedies and in all other
respects to the Liens securing the Collateral and to the Obligations and all of
the rights and remedies of Agent and each Lender, all in form and substance
satisfactory to Agent in its sole discretion; (g) Liens disclosed on Schedule
7.3; (h) Liens resulting from deposits to secure liability to insurance
carriers; and (i) easements, rights of way and other similar encumbrances not
interfering in any material respect with the business of Borrower.
7.4 INVESTMENTS; INVESTMENT PROPERTY; NEW FACILITIES OR COLLATERAL;
SUBSIDIARIES
Borrower, directly or indirectly, shall not (a) merge with, purchase,
own, hold, invest in or otherwise acquire any obligations or stock or securities
of, or any other interest in, or all or substantially all of the assets of, any
Person or any division of any Person or any joint venture or any other
Investment Property (except those as of the Closing Date set forth on Schedule
5.3 or mergers between Borrowers), or (b) make or permit to exist any loans,
advances or guarantees to or for the benefit of any Person or assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable for or upon
or incur any obligation of any Person (other than those created by the Loan
Documents and Permitted Indebtedness set forth on Schedule 7.2 and other than
(i) trade credit extended in the ordinary course of business, (ii) advances for
business travel and similar temporary advances made in the ordinary course of
business to officers, directors and employees, (iii) the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, (iv) cash and cash equivalents and (v) intercompany
Indebtedness among Borrowers, provided, that the Foreign Subsidiary shall not
incur such Indebtedness in an amount in excess of $100,000). Borrower, directly
or indirectly, shall not purchase, lease, own, operate, hold, invest in or
otherwise acquire any property or asset or any Collateral that is not located at
the locations set forth on Schedule 5.18B, unless Borrower shall provide to
Agent at least thirty (30) Business Days prior written notice. Borrower shall
have no Subsidiaries unless such Subsidiaries execute a joinder agreement and
become a party to this Agreement and such other Loan Documents as Agent shall
determine in its Permitted Discretion and the securities of such Subsidiaries
are pledged to Agent, for its benefit and the benefit of the Lenders, pursuant
to a Stock Pledge Agreement.
7.5 DIVIDENDS; REDEMPTIONS; EQUITY
Notwithstanding any provision of any Loan Document, Borrower shall not
(a) declare, pay or make any dividend or distribution on any shares of capital
stock or other securities or interests (other than dividends or distributions
payable in its stock, or split-ups or reclassifications of its stock) (provided,
however, Borrower may pay dividends on its common stock in an amount, when
combined with any repurchases allowed under clause (b) below and prior dividends
under this clause (a) (each for the immediately preceding 12 month period), not
to exceed 50% of Borrower's Net Income for the immediately preceding four (4)
Accounting Quarter-period, if (i) the Term Loan is paid in full, (ii) no Default
or Event of Default then exists, and (iii) Borrower has Excess Availability of
at least $5,000,000 after giving effect to such dividends), (b) apply any of its
funds, property or assets to the acquisition, redemption or other retirement of
any capital stock or other securities or interests or of any options to
33
purchase or acquire any of the foregoing (provided, however, that the Parent may
redeem or repurchase its common stock from (i) employees, non-employee
directors, consultants and other advisors pursuant to, but only to the extent
required under, the terms of the related employment or other
compensation-related agreements and/or incentive stock plans as long as no
Default or Event of Default has occurred and is continuing or would be caused by
or result therefrom and (ii) from other shareholders in an amount, when combined
with dividends allowed by clause (a) above and prior repurchases under this
clause (b) (each for the immediately preceding 12 month period), not to exceed
50% of Borrower's Net Income for the immediately preceding four (4) Accounting
Quarter-period, if (A) the Term Loan is paid in full, (B) no Default or Event of
Default then exists, and (C) Borrower has Excess Availability of at least
$5,000,000 after giving effect to such repurchases), (c) otherwise make any
payments, dividends or Distributions to any stockholder, director, member,
partner or other equity owner in such Person's capacity as such, (d) make any
payment of any management, service or related or similar fee to any Person;
provided, however, Borrower may make such payments not in excess of $300,000
annually, so long as no Event of Default has occurred which is continuing, or
(e) issue or create any capital stock or other equity securities (other than
Permitted Securities).
7.6 TRANSACTIONS WITH AFFILIATES
Notwithstanding any provision of any Loan Document, Borrower shall not
enter into or consummate any transaction of any kind with any of its affiliates
or any of their respective affiliates other than: (a) salary, bonus, employee
stock option and other compensation and employment arrangements with directors
or officers in the ordinary course of business, (b) distributions and dividends
permitted pursuant to Section 7.5, (c) transactions with Agent or any affiliate
of Agent, (d) transactions and payments under and pursuant to written agreements
entered into by and between Borrower and one or more of its affiliates that both
(i) reflect and constitute transactions and payments on overall terms at least
as favorable to Borrower as would be the case in an arm's length transaction
between unrelated parties of equal bargaining power, and (ii) are subject to
such terms and conditions as determined by Agent in its Permitted Discretion;
provided, that notwithstanding the foregoing or any provision of any Loan
Document Borrower shall not (except as between or among Borrowers) (A) enter
into or consummate any transaction or agreement pursuant to which it becomes a
party to any mortgage, note, indenture or guarantee evidencing any Indebtedness
of any of its affiliates or otherwise to become responsible or liable, as a
guarantor, surety or otherwise, pursuant to agreement for any Indebtedness of
any such affiliate, (B) make any payment to any of its affiliates in excess of
$50,000 singly or $100,000 in the aggregate without the prior written consent of
Agent, (e) transactions in the ordinary course of business consistent with past
practices among Borrower and the other Borrower or Guarantors or (f) payments
made pursuant to the 2002 Rights Offering and the 2002 Purchase Agreement.
Notwithstanding any other provision of any Loan Document, Borrower shall not
make or suffer to exist any payment or transaction permitted under Section 7.6,
or make any payment to an affiliate if a Default or Event of Default has
occurred and remains in effect or would be caused by or result therefrom.
7.7 CHARTER DOCUMENTS; FISCAL YEAR; DISSOLUTION; USE OF PROCEEDS; LIFE
INSURANCE; DISPOSITION OF COLLATERAL; TAXES; TRADE NAMES
Borrower shall not (a) amend, modify, restate or change its certificate
of incorporation (other than pursuant to the 2002 Rights Offering) or bylaws or
similar charter documents in a manner that would be adverse to Agent or any
Lender, (b) change its state of organization or change its corporate name, (c)
change its fiscal year, (d) amend, alter or suspend or terminate or make
provisional in any material way, any Permit the suspension, amendment,
alteration or termination of which could reasonably be expected to have a
Material Adverse Effect without the prior written consent of Agent, which
consent shall not be unreasonably withheld, (e) wind up, liquidate or dissolve
(voluntarily or involuntarily) or commence or suffer any proceedings seeking or
that would result in any of the foregoing (except as
34
permitted pursuant to Section 7.4), (f) use any proceeds of any Loans for
"purchasing" or "carrying" "margin stock" as defined in Regulations U or X of
the Board of Governors of the Federal Reserve System for any use not
contemplated or permitted by this Agreement, (g) sell, lease, transfer, pledge,
assign or otherwise dispose of any Collateral or any interest therein (except as
permitted under this Agreement), (h) engage, directly or indirectly, in any
business other than the Business, (i) change its federal tax employer
identification number or establish new or additional trade names without
providing not less than thirty (30) days advance written notice to Agent, or (j)
revoke, alter or amend any Tax Information Authorization (on IRS Form 8821 or
otherwise) given to Agent.
7.8 TRANSFER OF ASSETS
(a) Borrower shall not sell, lease, transfer, pledge, assign or
otherwise dispose of any interest in any Collateral or any interest therein, or
agree to do any of the foregoing, except that:
(i) Borrower may lease (other than by a sale-leaseback
transaction) as lessee real or personal property or surrender all or a portion
of a lease of the same, in each case in the ordinary course of business (so long
as such lease does not create or result in and is not otherwise a Capitalized
Lease Obligation prohibited under this Agreement), provided that such consents
and/or landlord waivers as are required by Agent in its Permitted Discretion are
signed and delivered to Agent and Lenders with respect to any lease of real
property;
(ii) Borrower may sell obsolete or replaced equipment or
excess equipment no longer needed in the ordinary course of business;
(iii) Borrower may sell Inventory in the ordinary course of
business; and
(iv) Borrower may sell material assets or properties so
long as Borrower complies with the mandatory prepayment provisions of Section
2.12 in connection therewith;
provided, however, Borrower must obtain the consent of Lenders prior to selling
any assets pursuant to clauses (ii) and (iv) above in excess of $1,000,000 in
the aggregate during each fiscal year (provided that Borrower may sell up to
$2,000,000 of assets without Lenders' consent in any one year during the Term)
or $5,000,000 in the aggregate during the Term;
(b) Borrower shall not transfer any Collateral in excess of
$100,000 in the aggregate, whether in one transaction or a series of
transactions, to any of its locations not owned for which it has not obtained a
Landlord Waiver and Consent or has not obtained Agent's prior written consent.
(c) Borrower shall not transfer any Collateral with a value in
excess of $100,000 or business activities of Borrower to the Foreign Subsidiary,
unless Borrower has given Lender at least 30 Business Days' prior written notice
thereof and unless Borrower and the Foreign Subsidiary have executed and
delivered such documentation and taken such other actions as required by Lender
in its Permitted Discretion to provide Agent, for its benefit and for the
benefit of Lenders, a perfected, first priority Lien on all of the assets and
properties of such Foreign Subsidiary.
7.9 CONTINGENT OBLIGATIONS AND RISKS
Borrower shall not enter into any Contingent Obligations or assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
for or upon or incur any obligation of any
35
Person. Borrower shall not assume or become subject to any risks or liabilities
other than those relating to its Business.
7.10 TRUTH OF STATEMENTS
Borrower shall not furnish to Agent or any Lender any certificate or
other document that contains any untrue statement of a material fact or that
omits to state a material fact necessary to make it not misleading when taken as
a whole at the time and in light of the circumstances under which it was
furnished.
7.11 PAYMENT ON SUBORDINATED DEBT
Except pursuant to the 2002 Rights Offering, Borrower shall not (a)
make any payment of any part or all of any principal of the Subordinated Debt,
(b) repurchase, redeem or retire any instrument evidencing any such Subordinated
Debt prior to maturity, (c) make any payment of interest on any Subordinated
Debt except pursuant to the issuance of additional promissory notes which are
subordinated to the same extent as the Subordinated Debt, or (d) enter into any
agreement (oral or written) which could in any way be construed to amend,
modify, alter or terminate any one or more instruments or agreements evidencing
or relating to any Subordinated Debt in a manner adverse to Agent or any Lender,
as determined by Agent in its Permitted Discretion. In connection with the 2002
Rights Offering, Borrower may apply up to $1,100,000 of the cash proceeds
therefrom to accrued interest and principal on the HLHZ Note, accrued interest
on the 2002 Subordinated Debt and expenses associated therewith of no more than
$150,000.
7.12 NON-HYPOTHECATION ON REAL PROPERTY
Borrower shall not pledge or xxxxx x Xxxx on any real property which it
owns.
VIII. EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
"Event of Default:"
(a) Borrower shall fail to pay any amount on the Obligations or
provided for in any Loan Document when due, or, in respect only of any interest
payment and fees required under Sections 2.3 or 2.8 or Article III, within three
(3) Business Days of when due (whether on any payment date, at maturity, by
reason of acceleration, by notice of intention to prepay, by required prepayment
or otherwise);
(b) any representation, statement or warranty made or deemed made
by any Borrower or Guarantor in any Loan Document or in any other certificate,
document, report or opinion delivered in conjunction with any Loan Document to
which it is a party, shall not be true and correct in all material respects or
shall have been false or misleading in any material respect on the date when
made or deemed to have been made (except to the extent already qualified by
materiality, in which case it shall be true and correct in all respects and
shall not be false or misleading in any respect);
(c) Borrower or any Guarantor or other party thereto, other than
Agent or any Lender, shall be in violation, breach or default of, or shall fail
to perform, observe or comply with any covenant, obligation or agreement set
forth in, any Loan Document and such violation, breach, default or failure shall
not be cured within the applicable period set forth in the applicable Loan
Document; provided that, with respect to the affirmative covenants set forth in
Article VI (other than Sections 6.3, 6.8, 6.9 and 6.11
36
for which there shall be no cure period and Section 6.2 for which there shall be
a cure period to the extent indicated in subsection (a) above), there shall be a
30 calendar day cure period commencing from the earlier of (i) Receipt by such
Person of written notice of such breach, default, violation or failure, and (ii)
the time at which such Person or any authorized officer thereof knew or became
aware, or should have known or been aware, of such failure, violation, breach or
default. Notwithstanding the above, if Borrower is in violation of any financial
covenant in Section 7.1 relating to EBITDA, such violation shall be considered
cured upon receipt by Agent of a Make Well Investment to the extent required to
be added to EBITDA and which thereby causes such covenant to be in compliance;
(d) (i) any of the Loan Documents ceases to be in full force and
effect, or (ii) any Lien created thereunder ceases to constitute a valid first
priority (other than with respect to property or assets covered by Priority
Permitted Liens) perfected Lien on the Collateral in accordance with the terms
thereof, or Agent, for the benefit of itself and Lenders, ceases to have a valid
perfected first priority security interest in any of the Collateral or any
securities pledged to Agent, for the benefit of itself and Lenders, pursuant to
the Security Documents;
(e) one or more final judgments or decrees is rendered against
Borrower or any Guarantor in an amount in excess of $250,000 individually or
$500,000 in the aggregate, which is/are not covered by insurance proceeds and
is/are not satisfied within three (3) Business Days of becoming final, excluding
any judgment or decree which may not be executed on during any appeal;
(f) (i) any default or breach occurs, which is not cured or
waived, (x) in the payment of any amount with respect to any Indebtedness (other
than the Obligations) of Borrower or any Guarantor in excess of $100,000
individually or in the aggregate, (y) in the performance, observance or
fulfillment of any provision contained in any agreement, contract, document or
instrument to which Borrower or any Guarantor is a party or to which any of
their properties or assets are subject or bound (1) that is a material (as
determined by Agent in its Permitted Discretion) agreement of Borrower and such
default or breach continues for more than any applicable grace period or permits
the other party thereto to terminate such agreement, setoff any amounts or
otherwise reduce or limit any amounts owed by such other party thereunder, (2)
under or pursuant to which any Indebtedness in excess of $100,000 individually
or in the aggregate was issued, created, assumed, guaranteed or secured and such
default or breach continues for more than any applicable grace period or permits
the holder of any such Indebtedness to accelerate the maturity thereof, or (3)
that is between Borrower or any Guarantor and Agent or any Lender or affiliate
of Agent or any Lender (other than the Loan Documents), or (ii) any Indebtedness
of Borrower or any Guarantor in excess of $100,000 individually or in the
aggregate is declared to be due and payable or is required to be prepaid (other
than by a regularly scheduled payment) prior to the stated maturity thereof, or
any obligation of such Person for the payment of Indebtedness in excess of
$100,000 individually or in the aggregate (other than the Obligations) is not
paid when due or within any applicable grace period, or any such obligation
becomes or is declared to be due and payable before the expressed maturity
thereof, or there occurs an event which, with the giving of notice or lapse of
time, or both, would cause any such obligation to become, or allow any such
obligation to be declared to be, due and payable;
(g) Borrower or any Guarantor shall (i) be unable to pay its debts
generally as they become due, (ii) file a petition under any insolvency statute,
(iii) make a general assignment for the benefit of its creditors, (iv) commence
a proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial part of its property,
or (v) file a petition seeking reorganization or liquidation or similar relief
under any Debtor Relief Law or any other applicable law or statute;
(h) (i) a court of competent jurisdiction shall (A) enter an
order, judgment or decree appointing a custodian, receiver, trustee, liquidator
or conservator of Borrower or any Guarantor or the whole or any substantial part
of any such Person's properties, which shall continue unstayed and in effect for
a period of sixty (60) calendar days, (B) shall approve a petition filed against
Borrower or any
37
Guarantor seeking reorganization, liquidation or similar relief under the any
Debtor Relief Law or any other applicable law or statute, which is not dismissed
within sixty (60) calendar days or, (C) under the provisions of any Debtor
Relief Law or other applicable law or statute, assume custody or control of
Borrower or any Guarantor or of the whole or any substantial part of any such
Person's properties, which is not irrevocably relinquished within sixty (60)
calendar days, or (ii) there is commenced against Borrower or any Guarantor any
proceeding or petition seeking reorganization, liquidation or similar relief
under any Debtor Relief Law or any other applicable law or statute, which (A) is
not unconditionally dismissed within sixty (60) calendar days after the date of
commencement, or (B) is with respect to which Borrower or Guarantor takes any
action to indicate its approval of or consent;
(i) (i) any Change of Control occurs, or (ii) any Material Adverse
Effect or Material Adverse Change occurs, or is reasonably expected to occur;
(j) an event of default occurs under any other Loan Document and
remains unremedied for any applicable cure period;
(k) uninsured damage to, or loss, theft or destruction of, any
portion of the Collateral occurs that exceeds $250,000 in the aggregate;
(l) Borrower or any Guarantor or any of their respective directors
or senior officers is criminally indicted or convicted of or under (a) a felony,
or (b) any law that could lead to a forfeiture of any Collateral;
(m) the issuance of any process for levy, attachment or
garnishment or execution upon or prior to any judgment against Borrower or any
Guarantor or any of their property or assets which is/are not satisfied, stayed,
vacated, dismissed or discharged within thirty (30) calendar days of being
issued or executed; or
(n) Borrower or any Guarantor does, or enters into or becomes a
party to any agreement or commitment to do, or cause to be done, any of the
things described in this Article VIII or otherwise prohibited by any Loan
Document (subject to any cure periods set forth therein);
then, and in any such event, notwithstanding any other provision of any Loan
Document, (I) Agent may (and at the request of Requisite Lenders, shall), by
notice to Borrower (i) terminate Lenders' obligations hereunder, whereupon the
same shall immediately terminate, and (ii) declare all or any of the Loans
and/or Notes, all interest thereon and all other Obligations to be due and
payable immediately (except in the case of an Event of Default under Section
8(d), (g), or (h), in which event all of the foregoing shall automatically and
without further act by Agent or any Lender be due and payable and Lenders
obligations hereunder shall terminate; provided, that, with respect to
non-material breaches or violations that constitute Events of Default under
clause (ii) of Section 8(d), there shall be a 5 Business Day cure period
commencing from the earlier of (A) Receipt by the applicable Person of written
notice of such breach or violation or of any event, fact or circumstance
constituting or resulting in any of the foregoing, and (B) the time at which
such Person or any authorized officer thereof knew or became aware, or should
have known or been aware, of such breach or violation and resulting Event of
Default or of any event, fact or circumstance constituting or resulting in any
of the foregoing)), in each case without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower, and
(II) effective immediately, without any action of Agent or Lenders, no action
permitted to be taken under Article VII hereof may be taken.
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IX. RIGHTS AND REMEDIES AFTER DEFAULT
9.1 RIGHTS AND REMEDIES
(a) In addition to the acceleration provisions set forth in
Article VIII above, upon the occurrence and continuation of an Event of Default,
Agent shall have the right to (and at the request of Requisite Lenders, shall)
exercise any and all rights, options and remedies provided for in any Loan
Document, under the UCC or at law or in equity, including, without limitation,
the right to (i) apply any property of Borrower or any Guarantor held by Agent,
for the benefit of Lenders, or Lenders to reduce the Obligations, (ii) foreclose
the Liens created under the Loan Documents, (iii) realize upon, take possession
of and/or sell any Collateral or securities pledged, with or without judicial
process, without giving any warranties and Agent may specifically disclaim
warranties of title and the like, (iv) exercise all rights and powers with
respect to the Collateral as Borrower or any Guarantor, as applicable, might
exercise, (v) collect and send notices regarding the Collateral, with or without
judicial process, (vi) by its own means or with judicial assistance, enter any
premises at which Collateral and/or pledged securities are located, or render
any of the foregoing unusable or dispose of the Collateral and/or pledged
securities on such premises without any liability for rent, storage, utilities,
or other sums, and no Borrower or Guarantor shall resist or interfere with such
action, (vii) at Borrower's expense, require that all or any part of the
Collateral be assembled and made available to Agent at any place designated by
Agent, (viii) reduce or otherwise change the Facility Cap and/or the Maximum
Loan Amount, and/or (ix) relinquish or abandon any Collateral or securities
pledged or any Lien thereon. Notwithstanding any provision of any Loan Document,
Agent, in its Permitted Discretion, shall have the right, at any time that
Borrower fails to do so, and from time to time, without prior notice, to: (i)
obtain insurance covering any of the Collateral to the extent required
hereunder; (ii) pay for the performance of any of Obligations; (iii) discharge
taxes, levies and/or Liens on any of the Collateral that are in violation of any
Loan Document unless Borrower is in good faith with due diligence by appropriate
proceedings contesting those items; and (iv) pay for the maintenance, repair
and/or preservation of the Collateral. Such expenses and advances shall be added
to the Obligations until reimbursed to Agent and shall be secured by the
Collateral, and such payments by Agent shall not be construed as a waiver by
Agent or Lenders of any Event of Default or any other rights or remedies of
Agent and Lenders.
(b) Borrower agrees that notice received by it at least ten (10)
calendar days before the time of any intended public sale, or the time after
which any private sale or other disposition of Collateral is to be made, shall
be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Agent without prior notice to Borrower. At any sale or
disposition of Collateral or securities pledged, Agent may (to the extent
permitted by applicable law) purchase all or any part thereof free from any
right of redemption by Borrower or any Guarantor which right is hereby waived
and released. Borrower, jointly and severally, covenants and agrees not to, and
not to permit or cause any of its Subsidiaries to, interfere with or impose any
obstacle to Agent's exercise of its rights and remedies with respect to the
Collateral. In dealing with or disposing of the Collateral or any part thereof,
Agent and Lenders shall not be required to give priority or preference to any
item of Collateral or otherwise to marshal assets or to take possession or sell
any Collateral with judicial process.
9.2 APPLICATION OF PROCEEDS
In addition to any other rights, options and remedies Agent and Lenders
have under the Loan Documents, the UCC, at law or in equity, all dividends,
interest, rents, issues, profits, fees, revenues, income and other proceeds
collected or received from collecting, holding, managing, renting, selling, or
otherwise disposing of all or any part of the Collateral or any proceeds
thereof, prior to the acceleration of the Obligations, shall be applied in
accordance with the order of priority set forth in Section 2.5, and after
39
the acceleration of the Obligations shall be applied in the following order of
priority: (i) first, to the payment of all costs and expenses of such
collection, storage, lease, holding, operation, management, sale, disposition or
delivery and of conducting Borrower's business and of maintenance, repairs,
replacements, alterations, additions and improvements of or to the Collateral,
and to the payment of all sums which Agent or Lenders may be required or may
elect to pay, if any, for taxes, assessments, insurance and other charges upon
the Collateral or any part thereof, and all other payments that Agent or Lenders
may be required or authorized to make under any provision of this Agreement
(including, without limitation, in each such case, in-house documentation and
diligence fees and legal expenses, search, audit, recording, professional and
filing fees and expenses and reasonable attorneys' fees and all expenses,
liabilities and advances made or incurred in connection therewith); (ii) second,
to the payment of all fees, expense reimbursements, actual expenses related to
indemnities and other amounts due Agent (in such capacity) and the L/C Issuer
(in such capacity); (iii) third, to the payment of all interest, fees and actual
expenses related to indemnities due to the Revolving Lenders, (iv) fourth, to
the payment of all outstanding Advances and Letter of Credit Obligations; (v)
fifth, to the payment of all outstanding principal and interest on the Term
Loans; (vi) sixth, to all other Obligations; (vii) seventh, to the satisfaction
of indebtedness secured by any subordinate security interest of record in the
Collateral if written notification of demand therefor is received before
distribution of the proceeds is completed, provided, that, if requested by
Agent, the holder of a subordinate security interest shall furnish reasonable
proof of its interest, and unless it does so, Agent and Lenders need not address
their claims; and (viii) eighth, to the payment of any surplus then remaining to
Borrower, unless otherwise provided by law or directed by a court of competent
jurisdiction, provided that Borrower shall be liable for any deficiency if such
proceeds are insufficient to satisfy the Obligations or any of the other items
referred to in this section.
9.3 RIGHTS TO APPOINT RECEIVER
Without limiting and in addition to any other rights, options and
remedies Agent and Lenders have under the Loan Documents, the UCC, at law or in
equity, upon the occurrence and continuation of an Event of Default, Agent shall
have the right to apply for a receiver appointed by a court of competent
jurisdiction in any action taken by Agent to enforce its and Lenders' rights and
remedies in order to manage, protect and preserve the Collateral and continue
the operation of the business of Borrower and to collect all revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership including the compensation of the receiver and to
the payments as aforesaid until a sale or other disposition of such Collateral
shall be finally made and consummated.
9.4 ATTORNEY IN FACT
Borrower hereby irrevocably appoints Agent, for its benefit and the
benefit of Lenders, as its attorney in fact to take any action Agent deems
necessary or desirable upon the occurrence and continuation of an Event of
Default to protect and realize upon its and Lenders' Lien in the Collateral,
including the execution and delivery of any and all documents or instruments
related to the Collateral in Borrower's name, and said appointment shall create
in Agent, for its benefit and the benefit of Lenders, a power coupled with an
interest.
9.5 BLOCKED ACCOUNTS
Without limiting and in addition to any other rights, options and
remedies, Agent and Lenders have under the Loan Documents, the UCC, at law or in
equity, upon the occurrence and continuation of any Event of Default, Agent
shall have the right to require that all amounts in all Deposit Accounts of
Borrower and that all cash payments received by Borrower are paid and delivered
directly into a blocked account under the sole dominion and control of Lender
and that all such amounts are immediately
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transferred into a depository account or accounts maintained by Agent or an
affiliate of Agent at such bank as Agent may determine in its sole discretion.
9.6 RIGHTS AND REMEDIES NOT EXCLUSIVE
Agent shall have the right in its sole discretion to determine which
rights, Liens and/or remedies Agent or Lenders may at any time pursue,
relinquish, subordinate or modify, and such determination will not in any way
modify or affect any of Agent's or Lenders' rights, Liens or remedies under any
Loan Document, applicable law or equity. The enumeration of any rights and
remedies in any Loan Document is not intended to be exhaustive, and all rights
and remedies of Agent described in any Loan Document are cumulative and are not
alternative to or exclusive of any other rights or remedies which Agent
otherwise may have. The partial or complete exercise of any right or remedy
shall not preclude any other further exercise of such or any other right or
remedy.
X. WAIVERS AND JUDICIAL PROCEEDINGS
10.1 WAIVERS
Except as expressly provided for herein, Borrower hereby waives demand,
presentment, protest, all defenses with respect to any and all instruments and
all notices and demands of any description, and the pleading of any statute of
limitations as a defense to any demand under any Loan Document. To the extent
allowed under applicable law, Borrower hereby waives any and all defenses and
counterclaims it may have or could interpose in any action or procedure brought
by Agent or any Lender to obtain an order of court recognizing the assignment
of, or Lien of Agent, for the benefit of itself and Lenders, in and to, any
Collateral.
10.2 DELAY; NO WAIVER OF DEFAULTS
No course of action or dealing, renewal, release or extension of any
provision of any Loan Document, or single or partial exercise of any such
provision, or delay, failure or omission on Agent's or Lenders' part in
enforcing any such provision shall affect the liability of Borrower or any
Guarantor or operate as a waiver of such provision or affect the liability of
Borrower or any Guarantor or preclude any other or further exercise of such
provision. No waiver by any party to any Loan Document of any one or more
defaults by any other party in the performance of any of the provisions of any
Loan Document shall operate or be construed as a waiver of any future default,
whether of a like or different nature, and each such waiver shall be limited
solely to the express terms and provisions of such waiver. Notwithstanding any
other provision of any Loan Document, by completing the Closing under this
Agreement and/or by making Advances and/or funding under the Term Loan, neither
Agent nor any Lender waives any breach of any representation or warranty of
under any Loan Document, and all of Agent's and Lenders' claims and rights
resulting from any such breach or misrepresentation are specifically reserved.
10.3 JURY WAIVER
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN
ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT
TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH PARTY HEREBY
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AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS
TO TRIAL BY JURY.
10.4 [RESERVED.]
10.5 AMENDMENT AND WAIVERS
(a) Except as otherwise provided herein, no amendment,
modification, termination, or waiver of any provision of this Agreement or any
Loan Document, or consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by Requisite
Lenders, Agent and Borrower; provided, that no amendment, modification,
termination, or waiver shall, unless in writing and signed by each Lender
directly affected thereby, do any of the following and that the agreement of
Borrower shall not be required for any amendment, modification, termination, or
waiver that does any of the following (other than item (vi) below to the extent
adverse to Borrower): (i) increase the Commitment of any Lender (which action
shall be deemed to directly affect all Lenders); (ii) reduce the principal of,
rate of interest on or fees payable with respect to any Loan; (iii) extend the
scheduled due date, reduce the amount due on any scheduled due date, of any
installment of principal, interest, or fees payable with respect to any Loan, or
waive, forgive, extend, defer or postpone the payment thereof; (iv) change the
percentage of the Commitments, of the aggregate unpaid principal amount of the
Loans, or of Lenders which shall be required for Lenders or any of them to take
any action hereunder (which action shall be deemed to directly affect all
Lenders); (v) except as otherwise permitted herein or in the other Loan
Documents, release Borrower or any Guaranty or release any of the Collateral
(which action shall be deemed to directly affect all Lenders); (vi) amend,
modify or waive this Section 10.5 or the definitions of the terms used in this
Section 10.5 insofar as the definitions affect the substance of this Section
10.5 (which action shall be deemed to directly affect all Lenders); (vii) change
the definition of LC Issuer, or (viii) consent to the assignment or other
transfer by Borrower or any other party (other than Agent or any Lender) to any
Loan Documents of any of their rights and obligations under any Loan Document;
and, provided, further, that no amendment, modification, termination or waiver
affecting the rights or duties of Agent under any Loan Document shall in any
event be effective, unless in writing and signed by Agent, in addition to
Lenders required herein above to take such action.
(b) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent, the benefit of itself and the benefit of Lenders, to take
additional Collateral pursuant to any Loan Document.
(c) Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 10.5 shall be binding upon Agent, each
Lender and Borrower.
XI. EFFECTIVE DATE AND TERMINATION
11.1 EFFECTIVENESS AND TERMINATION
Subject to each Lender's rights to terminate and cease making and
funding Loans upon the occurrence and during the continuation of any Event of
Default, this Agreement shall continue in full force and effect until the full
performance and indefeasible payment in cash of all Obligations, unless
42
terminated sooner as provided in this Section 11.1. Borrower may terminate this
Agreement at any time upon not less than thirty (30) calendar days' prior
written notice to Agent and upon full performance and indefeasible payment in
full in cash of all Obligations on or prior to such 30th calendar day after
Receipt by Agent of such written notice. Upon any termination by Borrower of the
Commitment to make Revolving Loans, the obligation of Lenders to make Advances
under the Revolving Facility shall terminate. All of the Obligations shall be
immediately due and payable upon any such termination on the termination date
stated in any notice of termination (the "TERMINATION DATE"); provided, that,
notwithstanding any other provision of any Loan Document, the Termination Date
shall be effective no earlier than the first Business Day of the month following
the expiration of the thirty (30) calendar days' prior written notice period.
Notwithstanding any other provision of any Loan Document, no termination of this
Agreement shall affect any Lender's or Agent's rights or any of the Obligations
existing as of the effective date of such termination, and the provisions of the
Loan Documents shall continue to be fully operative until the Obligations have
been fully performed and indefeasibly paid in cash in full. The Liens granted to
Agent, for the benefit of itself and Lenders, under the Security Documents and
the financing statements filed pursuant thereto and the rights and powers of
Agent and Lenders shall continue in full force and effect notwithstanding the
fact that Borrower's borrowings hereunder may from time to time be in a zero or
credit position until all of the Obligations have been fully performed and
indefeasibly paid in full in cash.
11.2 SURVIVAL
All obligations, covenants, agreements, representations, warranties,
waivers and indemnities made by Borrower or any Guarantor in any Loan Document
shall survive the execution and delivery of the Loan Documents, the Closing, the
making and funding of the Loans and any termination of this Agreement until all
Obligations are fully performed and indefeasibly paid in full in cash. The
obligations and provisions of Sections 3.5, 3.6, 6.13, 10.1, 10.3, 11.1, 11.2,
12.4, 12.7, 12.9 and 12.10 and Article XI-A shall survive termination of the
Loan Documents and any payment, in full or in part, of the Obligations.
XI-A. AGENCY PROVISIONS
11-A.1 AGENT
(a) Appointment. Each Lender hereby designates and appoints
CapitalSource as the administrative agent and the collateral agent, under this
Agreement and the other Loan Documents, and each Lender hereby irrevocably
authorizes CapitalSource, as the administrative agent and the collateral agent
for such Lender, to take such action or to refrain from taking such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are delegated to the
Agent by the terms of this Agreement and the other Loan Documents, together with
such other powers as are reasonably incidental thereto. CapitalSource hereby
agrees that, so long as CapitalSource is the Agent, its aggregate Commitments
shall be equal to or greater than any other Lender's aggregate Commitments.
Agent agrees to act as such on the conditions contained in this Article 11-A.
The provisions of this Article 11-A are solely for the benefit of Agent and
Lenders, and Borrower shall have no rights as a third-party beneficiary of any
of the provisions hereof. Agent may perform any of its duties hereunder, or
under the Loan Documents, by or through its agents or employees.
(b) Nature of Duties. In performing its functions and duties under
this Agreement, Agent is acting solely on behalf of Lenders and its duties are
administrative in nature and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for
Lenders, other than as expressly set forth herein and in the other Loan
Documents, or Borrower. Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or
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in the other Loan Documents. Agent shall not have by reason of this Agreement or
any other Loan Document a fiduciary relationship in respect of any Lender.
Except for information, notices, reports, and other documents expressly required
to be furnished to Lenders by the Agent hereunder or given to the Agent for the
account of or with copies for Lenders, each Lender shall make its own
independent investigation of the financial condition and affairs of Borrower in
connection with the extension of credit hereunder and shall make its own
appraisal of the creditworthiness of Borrower, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the Closing Date or at any time or times thereafter. If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send prior written notice
thereof to each Lender. Agent shall promptly notify (in writing) each Lender any
time that the applicable percentage of Lenders have instructed Agent to act or
refrain from acting pursuant hereto.
(c) Rights, Exculpation, Etc. Neither Agent nor any of its
officers, directors, managers, members, equity owners, employees or agents shall
be liable to any Lender for any action lawfully taken or omitted by them
hereunder or under any of the other Loan Documents, or in connection herewith or
therewith. Notwithstanding the foregoing, Agent shall be obligated on the terms
set forth herein for performance of its express duties and obligations
hereunder, and Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith, and if any such apportionment
or distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account. Agent shall not be responsible
to any Lender for any recitals, statements, representations or warranties made
by Borrower herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectability, or sufficiency of this Agreement or any of the
other Loan Documents or the transactions contemplated thereby, or for the
financial condition of Borrower. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions,
or conditions of this Agreement or any of the Loan Documents or the financial
condition of Borrower, or the existence or possible existence of any Default or
Event of Default. Agent may at any time request instructions from Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the other Loan Documents Agent is permitted or required to take or to
grant, and Agent shall be absolutely entitled to refrain from taking any action
or to withhold any approval and shall not be under any liability whatsoever to
any Person for refraining from taking any action or withholding any approval
under any of the Loan Documents until it shall have received such instructions
from the applicable percentage of Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting under this Agreement or any of the other
Loan Documents in accordance with the instructions of the applicable percentage
of Lenders and notwithstanding the instructions of Lenders, Agent shall have no
obligation to take any action if it, in good faith believes that such action
exposes Agent or any of its officers, directors, managers, members, equity
owners, employees or agents to any personal liability unless Agent receives an
indemnification reasonably satisfactory to it from Lenders with respect to such
action.
(d) Reliance. Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message or other communication (including any writing, telex, telecopy or
telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the other Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel, independent accountants,
and other experts selected by Agent in its sole discretion.
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(e) Indemnification. Each Lender, severally and not jointly,
agrees to reimburse and indemnify and hold harmless Agent and its officers,
directors, managers, members, equity owners, employees and agents (to the extent
not reimbursed by Borrower or the Guarantors, if any), ratably according to
their respective Pro Rata Share in effect on the date on which indemnification
is sought under this subsection of the total outstanding obligations (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with their Pro Rata Share immediately prior to such date of the total
outstanding obligations), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances, or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against Agent or any of its officers, directors,
managers, members, equity owners, employees or agents in any way relating to or
arising out of this Agreement or any of the other Loan Documents or any action
taken or omitted by Agent under this Agreement or any of the other Loan
Documents; provided, however, that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements resulting
from Agent's gross negligence or willful misconduct. The obligations of Lenders
under this Article 11-A shall survive the payment in full of the Obligations and
the termination of this Agreement.
(f) CapitalSource Individually. With respect to the Loans made by
it, and the Notes issued to it, CapitalSource shall have and may exercise the
same rights and powers hereunder and under the other Loan Documents and is
subject to the same obligations and liabilities as and to the extent set forth
herein and the other Loan Documents as any other Lender. The terms "Lenders" or
"Requisite Lenders" or any similar terms shall, unless the context clearly
otherwise indicates, include CapitalSource in its individual capacity as a
Lender or one of the Requisite Lenders. CapitalSource may lend money to, and
generally engage in any kind of banking, trust or other business with Borrower
or any Subsidiary of Borrower as if it were not acting as Agent pursuant hereto.
(g) Successor Agent.
(i) Resignation. Agent may resign from the performance of
all or part of its functions and duties hereunder at any time by giving at least
thirty (30) days' prior written notice to Borrower and Lenders. Such resignation
shall take effect upon the acceptance by a successor Agent of appointment
pursuant to clause (ii) below or as otherwise provided below.
(ii) Appointment of Successor. Upon any such notice of
resignation pursuant to clause (g)(i) above, Requisite Lenders shall appoint a
successor Agent. If a successor Agent shall not have been so appointed within
said thirty (30) day period, the retiring Agent, upon notice to Borrower, may,
on behalf of Lenders, then appoint a successor Agent who shall serve as Agent
until such time, as Requisite Lenders, appoint a successor Agent as provided
above. If no successor Agent has been appointed pursuant to the foregoing within
said thirty (30) day period, the resignation shall become effective and
Requisite Lenders shall thereafter perform all the duties of Agent hereunder,
until such time, if any, as Requisite Lenders appoint a successor Agent as
provided above.
(iii) Successor Agent. Upon the acceptance of any
appointment as Agent under the Loan Documents by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and, upon the
earlier of such acceptance or the effective date of the retiring Agent's
resignation, the retiring Agent shall be discharged from its duties and
obligations under the Loan Documents, except that any indemnity rights or other
rights in favor of such retiring Agent shall continue. After any retiring
Agent's resignation as Agent
45
under the Loan Documents, the provisions of this Article 11-A shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under the Loan Documents.
(h) Collateral Matters.
(i) Collateral. Each Lender agrees that any action taken
by the Agent or the Requisite Lenders (or, where required by the express terms
of this Agreement, a greater proportion of Lenders) in accordance with the
provisions of this Agreement or of the other Loan Documents relating to the
Collateral, and the exercise by the Agent or the Requisite Lenders (or, where so
required, such greater proportion) of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all of Lenders and the Agent. Without limiting the
generality of the foregoing, the Agent shall have the sole and exclusive right
and authority to (i) act as the disbursing and collecting agent for Lenders with
respect to all payments and collections arising in connection herewith and with
the Loan Documents in connection with the Collateral; (ii) execute and deliver
each Loan Document relating to the Collateral and accept delivery of each such
agreement delivered by Borrower or any of its Subsidiaries; (iii) act as
collateral agent for Lenders for purposes of the perfection of all security
interests and Liens created by such agreements and all other purposes stated
therein; (iv) manage, supervise and otherwise deal with the Collateral; (v) take
such action as is necessary or desirable to maintain the perfection and priority
of the security interests and Liens created or purported to be created by the
Loan Documents relating to the Collateral, and (vi) except as may be otherwise
specifically restricted by the terms hereof or of any other Loan Document,
exercise all remedies given to such Agent and Lenders with respect to the
Collateral under the Loan Documents relating thereto, applicable law or
otherwise.
(ii) Release of Collateral. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion, to release any Lien
granted to or held by Agent for the benefit of Lenders upon any property covered
by this Agreement or the Loan Documents (A) upon termination of this Agreement
and payment and satisfaction in full of all Obligations; (B) constituting
property being sold or disposed of if Borrower certifies to Agent that the sale
or disposition is made in compliance with the provisions of this Agreement (and
Agent may rely in good faith conclusively on any such certificate, without
further inquiry); or (C) constituting property leased to Borrower under a lease
which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended by
Borrower to be, renewed or extended.
(iii) Confirmation of Authority; Execution of Releases.
Without in any manner limiting Agent's authority to act without any specific or
further authorization or consent by Lenders (as set forth in Section
11-A.1(h)(i) and (ii)), each Lender agrees to confirm in writing, upon request
by Borrower, the authority to release any property covered by this Agreement or
the Loan Documents conferred upon Agent under Section 11-A.1(h)(ii). So long as
no Event of Default is then continuing, upon receipt by Agent of confirmation
from the requisite percentage of Lenders, of its authority to release any
particular item or types of property covered by this Agreement or the Loan
Documents, and upon at least five (5) Business Days prior written request by
Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the Liens
granted to Agent for the benefit of Lenders herein or pursuant hereto upon such
Collateral; provided, however, that (A) Agent shall not be required to execute
any such document on terms which, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (B) such release shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of Borrower or any Subsidiary of Borrower, in respect of), all
interests retained by Borrower or any Subsidiary of Borrower, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
46
(iv) Absence of Duty. Agent shall have no obligation
whatsoever to any Lender or any other Person to assure that the property covered
by this Agreement or the Loan Documents exists or is owned by Borrower or is
cared for, protected or insured or has been encumbered or that the Liens granted
to Agent on behalf of Lenders herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure, or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent in this Section 11-A.1(h) or in any of the Loan Documents, it being
understood and agreed that in respect of the property covered by this Agreement
or the Loan Documents or any act, omission, or event related thereto, Agent may
act in any manner it may deem appropriate, in its discretion, given Agent's own
interest in property covered by this Agreement or the Loan Documents as one of
Lenders and that Agent shall have no duty or liability whatsoever to any of the
other Lenders; provided, that Agent shall exercise the same care which it would
in dealing with loans for its own account. Notwithstanding the foregoing, Agent
shall be liable with respect to its own gross negligence or willful misconduct.
(i) Agency for Perfection. Each Lender hereby appoints Agent as
agent for the purpose of perfecting Lenders' security interest in Collateral
which, in accordance with Article 9 of the UCC in any applicable jurisdiction,
can be perfected only by possession. Should any Lender (other than Agent) obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent's request therefor, shall deliver such Collateral to Agent
or in accordance with Agent's instructions.
(j) Exercise of Remedies. Except as set forth in Section 11-A.3,
each Lender agrees that it will not have any right individually to enforce or
seek to enforce this Agreement or any Loan Document or to realize upon any
collateral security for the Loans, it being understood and agreed that such
rights and remedies may be exercised only by Agent.
11-A.2 CONSENTS
(a) In the event Agent requests the consent of a Lender and does
not receive a written denial thereof within ten (10) Business Days after such
Lender's receipt of such request, then such Lender will be deemed to have given
such consent so long as such request contained a notice stating that such
failure to respond within ten (10) Business Days would be deemed to be a consent
by such Lender.
(b) In the event Agent requests the consent of a Lender in a
situation where such Lender's consent would be required and such consent is
denied, then Agent may, at its option, require such Lender to assign its
interest in the Loans to Agent for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due such
Lender, which interest in the Loans will be assigned by such Lender when such
principal, interest and fees are paid to such Lender. In the event that Agent
elects to require any Lender to assign its interest to Agent pursuant to this
Section 11-A.2, Agent will so notify such Lender in writing within forty-five
(45) days following such Lender's denial, and such Lender will assign its
interest to Agent no later than five (5) days following receipt of such notice.
11-A.3 SET OFF AND SHARING OF PAYMENTS
In addition to any rights and remedies now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default, each Lender is
hereby authorized by Borrower at any time or from time to time, to the fullest
extent permitted by law, with reasonably prompt subsequent notice to Borrower or
to any other Person (any prior or contemporaneous notice being hereby expressly
waived) to set off and to appropriate and to apply any and all (a) balances
(general or special, time or demand, provisional or final) held by such
47
Lender or such holder at any of its offices for the account of Borrower or any
of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries), and (b) other property at any time held or owing
by such Lender or such holder to or for the credit or for the account of
Borrower or any of its Subsidiaries, against and on account of any of the
Obligations which are not paid when due; except that no Lender or any such
holder shall exercise any such right without the prior written notice to Agent;
provided, however, that the failure to give notice to Borrower or to any other
Person shall not affect the validity of such set-off and application. Any Term
Lender which has exercised its right to set off or otherwise has received any
payment on account of the Obligations shall, to the extent the amount of any
such set off or payment exceeds its Pro Rata Share of payments obtained by all
of the Term Lenders on account of such Obligations, purchase for cash (and the
other Term Lenders or holders of the Term Loan shall sell) participations in
each such other Term Lender's or holder's Pro Rata Share of Obligations as would
be necessary to cause such Term Lender to share such excess with each other Term
Lenders or holders in accordance with their respective Pro Rata Shares;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such purchasing Term Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery. Any Revolving Lender which has exercised its right to set off or
otherwise has received any payment on account of the Obligations shall, to the
extent the amount of any such set off or payment exceeds its Pro Rata Share of
payments obtained by all the Revolving Lenders on account of such Obligations
shall, to the extent the amount of any such set off or payment exceeds it Pro
Rata Share of payments obtained by all the Revolving Lenders on account of such
Obligations, purchase for cash (and the other Revolving Lenders or holders of
Revolving Loans shall sell) participations in each such other Revolving Lender's
or holder's Pro Rata Share of the Obligations as would be necessary to cause
such Revolving Lender to share such excess with each other Revolving Lenders or
holders in accordance with their respective Pro Rata Share; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such purchasing Revolving Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery. Borrower agrees, to the fullest extent permitted by law, that (a) any
Lender or holder may exercise its right to set off with respect to amounts in
excess of its Pro Rata Share of the Obligations and may sell participations in
such excess to other Lenders and holders, and (b) any Lender or holder so
purchasing a participation in the Loans made or other Obligations held by other
Lenders or holders may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender or holder were a direct holder of Loans and other Obligations in the
amount of such participation.
11-A.4 DISBURSEMENT OF FUNDS
Agent may, on behalf of Revolving Lenders, disburse funds to Borrower
for Advances requested. Each Revolving Lender shall reimburse Agent on demand
for its Pro Rata Share of all funds disbursed on its behalf by Agent, or if
Agent so requests, each Revolving Lender will remit to Agent its Pro Rata Share
of any Advance before Agent disburses same to Borrower. If Agent elects to
require that funds be made available prior to disbursement to Borrower, Agent
shall advise each Revolving Lender by telephone, telex or telecopy of the amount
of such Revolving Lender's Pro Rata Share of such requested Advance no later
than one (1) Business Day prior to the funding date applicable thereto, and each
such Revolving Lender shall pay Agent such Revolving Lender's Pro Rata Share of
such requested Loan, in same day funds, by wire transfer to Agent's account not
later than 3:00 p.m. (Eastern Time). If any Revolving Lender fails to pay the
amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly
notify Borrower, and Borrower shall immediately repay such amount to Agent. Any
repayment required pursuant to this Section 11-A.4 shall be without premium or
penalty. Nothing in this Section 11-A.4 or elsewhere in this Agreement or the
other Loan Documents, including without limitation the provisions of Section
11-A.5, shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its commitments
hereunder or to prejudice any rights that Agent or Borrower may have against any
Lender as a result of any default by such Lender hereunder.
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11-A.5 SETTLEMENTS; PAYMENTS AND INFORMATION
(a) Advances and Payments; Payments; Interest and Fee Payments.
(i) The amount outstanding pursuant to Advances may
fluctuate from day to day through Agent's disbursement of funds to, and receipt
of funds from, Borrower. In order to minimize the frequency of transfers of
funds between Agent and each Revolving Lender notwithstanding terms to the
contrary set forth in Section 11-A.4, Advances and repayments may be settled
according to the procedures described in Sections 11-A.5(a)(ii) and
11-A.5(a)(iii) of this Agreement. Payments of principal, interest and fees in
respect of the Loans will be settled, in accordance with each Revolving Lender's
Pro Rata Share on the first Business Day after such payments are received.
Notwithstanding these procedures, each Revolving Lender's obligation to fund its
Pro Rata Share of any Advances made by Agent to Borrower will commence on the
date such Advances are made by Agent; provided, however, nothing contained in
this Agreement shall obligate a Lender to make an Advance at any time an Event
of Default exists. Such payments will be made by such Revolving Lender without
set-off, counterclaim or reduction of any kind.
(ii) Once each week, or more frequently (including daily),
if Agent so elects (each such day being a "SETTLEMENT DATE"), Agent will advise
each Revolving Lender by 1 p.m. (Eastern Time) by telephone, telex, or telecopy
of the amount of each such Revolving Lender's Pro Rata Share of the outstanding
Advances. In the event payments are necessary to adjust the amount of such
Revolving Lender's share of the Advances to such Revolving Lender's Pro Rata
Share of the Advances, the party from which such payment is due will pay the
other, in same day funds, by wire transfer to the other's account not later than
3:00 p.m. (Eastern Time) on the Business Day following the Settlement Date.
(iii) On the first Business Day of each month ("INTEREST
SETTLEMENT DATE"), Agent will advise each Revolving Lender by telephone or
facsimile of the amount of interest and fees charged to and collected from
Borrower for the proceeding month in respect of the Advances. Provided that such
Revolving Lender has made all payments required to be made by it under this
Agreement, Agent will pay to such Revolving Lender, by wire transfer to such
Revolving Lender's account (as specified by such Revolving Lender on Schedule A
of this Agreement as amended by such Revolving Lender from time to time after
the date hereof pursuant to the notice provisions contained herein or in the
applicable Lender Addition Agreement) not later than 3 p.m. (Eastern Time) on
the next Business Day following the Interest Settlement Date such Revolving
Lender's share of such interest and fees.
(b) Availability of Lenders' Pro Rata Share.
(i) Unless Agent has been notified by a Revolving Lender
prior to any proposed funding date of such Revolving Lender's intention not to
fund its Pro Rata Share of the Advance amount requested by Borrower, Agent may
assume that such Revolving Lender will make such amount available to Agent on
the proposed funding date or the Business Day following the next Settlement
Date, as applicable; provided, however, nothing contained in this Agreement
shall obligate a Lender to make an Advance at any time an Event of Default
exists. If such amount is not, in fact, made available to Agent by such
Revolving Lender when due, Agent will be entitled to recover such amount on
demand from such Revolving Lender without set-off, counterclaim, or deduction of
any kind.
(ii) Nothing contained in this Section 11-A.5(b) will be
deemed to relieve a Lender of its obligation to fulfill its commitments or to
prejudice any rights Agent or Borrower may have against such Lender as a result
of any default by such Lender under this Agreement.
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(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrower and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to Borrower or paid to
any other Person pursuant to any solvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
11-A.6 DISSEMINATION OF INFORMATION
Agent will distribute promptly to Lenders copies of all notices,
schedules, reports, projections, financial statements, agreements and other
material and other information, including, but not limited to, financial and
reporting information received from Borrower or its Subsidiaries or generated by
a third party (and excluding only internal information generated by
CapitalSource for its own use as a Lender or as Agent), as provided for in this
Agreement and the other Loan Documents as received by the Agent. Agent shall not
be liable to Lenders for any failure to comply with its obligations under this
Section 11-A.6, except to the extent that such failure is attributable to
Agent's gross negligence or willful misconduct.
XII. MISCELLANEOUS
12.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE
The Loan Documents shall be governed by and construed in accordance
with the internal laws of the State of Maryland without giving effect to its
choice of law provisions. Any judicial proceeding against Borrower with respect
to the Obligations, any Loan Document or any related agreement may be brought in
any federal or state court of competent jurisdiction located in the State of
Maryland. By execution and delivery of each Loan Document to which it is a
party, Borrower (i) accepts the non-exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby, (ii)
waives personal service of process, (iii) agrees that service of process upon it
may be made by certified or registered mail, return receipt requested, pursuant
to Section 12.5 hereof, and (iv) waives any objection to jurisdiction and venue
of any action instituted hereunder and agrees not to assert any defense based on
lack of jurisdiction, venue, convenience or forum non conveniens. Nothing shall
affect the right of Agent or any Lender to serve process in any manner permitted
by law or shall limit the right of Agent or any Lender to bring proceedings
against Borrower in the courts of any other jurisdiction having jurisdiction.
Any judicial proceedings against Agent or any Lender involving, directly or
indirectly, the Obligations, any Loan Document or any related agreement shall be
brought only in a federal or state court located in the State of Maryland. All
parties acknowledge that they participated in the negotiation and drafting of
this Agreement with the assistance of counsel and that, accordingly, no party
shall move or petition a court construing this Agreement to construe it more
stringently against one party than against any other.
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12.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS
(a) Each Lender may at any time assign all or a portion of its
rights and delegate all or a portion of its obligations under this Agreement and
the other Loan Documents (including all its rights and obligations with respect
to the Loans) to one or more Persons (a "TRANSFEREE"); provided, (i) that such
Transferee and such assigning Lender shall execute and deliver to Agent for
acceptance and recording in the Register, a Lender Addition Agreement and (ii)
such assignments shall involve Obligations of not less than $5,000,000 or, if
less, the remaining Commitment of such Lender. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Lender Addition Agreement, (i) the Transferee thereunder shall be a
party hereto and, to the extent provided in such Lender Addition Agreement, have
the same rights, benefits and obligations as it would if it were a Lender
hereunder, (ii) the assigning Lender shall be relieved of its obligations
hereunder with respect to its Commitment or assigned portion thereof, as the
case may be, to the extent that such obligations shall have been expressly
assumed by the Transferee pursuant to such Lender Addition Agreement (and, in
the case of a Lender Addition Agreement covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto but shall nevertheless
continue to be entitled to the benefits of Sections 12.4 and 12.7). Borrower
hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the Transferee and that the Transferee shall be
considered to be a "Lender" hereunder. Borrower may not sell, assign or transfer
any interest in this Agreement, any of the other Loan Documents, or any of the
Obligations, or any portion thereof, including Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder.
(b) Each Lender may at any time sell participations in all or any
part of its rights and obligations under this Agreement and the other Loan
Documents (including all its rights and obligations with respect to the Loans)
to one or more Persons (a "PARTICIPANT"). In the event of any such sale by a
Lender of a participation to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan (and any Note evidencing such Loan) for
all purposes under this Agreement and the other Loan Documents and the Borrower
and the Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. Any agreement pursuant to which any Lender shall sell
any such participation shall provide that such Lender shall retain the sole
right and responsibility to exercise such Lender's rights and enforce each of
the Borrower's obligations hereunder, including the right to consent to any
amendment, supplement, modification or waiver of any provision of this Agreement
or any of the other Loan Documents; provided, that such participation agreement
may provide that such Lender will not agree, without the consent of the
Participant, to any amendment, supplement, modification or waiver of: (i) any
reduction in the principal amount, interest rate or fees payable with respect to
any Loan in which such holder participates; (ii) any extension of the
termination date of this Agreement or the date fixed for any payment of
principal, interest or fees payable with respect to any Loan in which such
holder participates; and (iii) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this Agreement or the
Loan Documents). Borrower hereby acknowledges and agrees that the Participant
under each participation shall, solely for the purposes of Sections 10.5 and
12.4 and 12.7 of this Agreement be considered to be a "Lender" hereunder.
(c) The Agent, on behalf of the Borrower, shall maintain at its
address referred to in Section 12.5 a copy of each Lender Addition Agreement
delivered to it and a register (the "REGISTER") for the recordation of the names
and addresses of the Lenders and the Commitment of, and the principal amount of
the Loans owing to, and the Notes evidencing such Loans owned by, each Lender
from time to time. Notwithstanding anything in this Agreement to the contrary,
each of the Borrower, the Agent and the
51
Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loan, the Notes and the Commitment recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Notwithstanding anything in this Agreement to the contrary, no
assignment under subsection 12.2(a) of any rights or obligations under or in
respect of the Loans or the Notes evidencing such Loans shall be effective
unless and until the Agent shall have recorded the assignment pursuant to
subsection 12.2(c). Upon its receipt of a Lender Addition Agreement executed by
an assigning Lender and an Transferee, the Agent shall (i) promptly accept such
Lender Addition Agreement and (ii) on the effective date determined pursuant
thereto record the information contained therein in the Register and give prompt
notice of such acceptance and recordation to the Lenders and the Borrower. On or
prior to such effective date, the assigning Lender shall surrender any
outstanding Notes held by it all or a portion of which are being assigned, and
the Borrower, at its own expense, shall, upon the request of the Agent by the
assigning Lender or the Transferee, as applicable, execute and deliver to the
Agent, within 5 Business Days of any request, new Notes to reflect the interest
held by the assigning Lender and its Transferee.
(e) Except as otherwise provided in this Section 12.2 no Lender
shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans or
other Obligations owed to such Lender. Each Lender may furnish any information
concerning Borrower and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees and
participants).
(f) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement, including, without limitation, the
Loans owing to it and the Notes held by it and the other Loan Documents and
Collateral.
(g) Borrower agrees to use its commercially reasonable best
efforts to assist any Lender in assigning or selling participations in all or
any part of any Loans made by such Lender to another Person identified by such
Lender.
(h) Notwithstanding anything in this Agreement to the contrary,
(i) CapitalSource and its affiliates shall not be required to execute and
deliver a Lender Addition Agreement in connection with any transaction involving
its affiliates or lenders, (ii) no lender to or funding source of CapitalSource
or its affiliates shall be considered a Transferee and (iii) there shall be no
limitation or restriction on CapitalSource's ability to assign or otherwise
transfer any Loan Document to any such affiliate or lender; provided, however,
CapitalSource shall continue to be liable as a "Lender" under the Loan Documents
unless such affiliate or lender executes a Lender Addition Agreement and thereby
becomes a "Lender."
(i) The Loan Documents shall inure to the benefit of each Lender,
Agent, Transferees, Participants and all future holders of the Note, the
Obligations and/or any of the Collateral, and each of their respective
successors and assigns. Each Loan Document shall be binding upon the Persons
other than Lender and Agent that are parties thereto and their respective
successors and assigns, and no such Person may assign, delegate or transfer any
Loan Document or any of its rights or obligations thereunder without the prior
written consent of Agent. No rights are intended to be created under any Loan
Document for the benefit of any third party donee, creditor or incidental
beneficiary of Borrower or any Guarantor. Nothing contained in any Loan Document
shall be construed as a delegation to Agent or any Lender of any other Person's
duty of performance. BORROWER ACKNOWLEDGES AND AGREES THAT AGENT OR ANY LENDER
AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND REISSUE (WITHOUT
SUBSTANTIVE CHANGES OTHER THAN THOSE RESULTING
52
FROM SUCH DIVISION) THE NOTES, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS.
Each Transferee and Participant shall have all of the rights and benefits with
respect to the Obligations, Notes, Collateral and/or Loan Documents held by it
as fully as if the original holder thereof, provided that, notwithstanding
anything to the contrary in any Loan Document, no Borrower shall be obligated to
pay under this Agreement to any Transferee or Participant any sum in excess of
the sum which it would have been obligated to pay to Lenders had such
participation not been effected. Notwithstanding any other provision of any Loan
Document, Agent and Lenders may disclose to any Transferee or Participant all
information, reports, financial statements, certificates and documents obtained
under any provision of any Loan Document.
12.3 APPLICATION OF PAYMENTS
To the extent that any payment made or received with respect to the
Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other Person under any Debtor Relief Law,
common law or equitable cause or any other law, then the Obligations intended to
be satisfied by such payment shall be revived and shall continue as if such
payment had not been received by Agent or any Lender. Except as specifically
provided in this Agreement, any payments with respect to the Obligations
received shall be credited and applied in such manner and order as Agent shall
decide in its sole discretion.
12.4 INDEMNITY
Borrowers jointly and severally shall indemnify Agent and each Lender,
their respective affiliates and managers, members, officers, employees,
affiliates, agents, representatives, successors, assigns, accountants and
attorneys (collectively, the "INDEMNIFIED PERSONS") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, reasonable fees and disbursements of counsel and in-house
documentation and diligence fees and legal expenses) which may be imposed on,
incurred by or asserted against any Indemnified Person with respect to or
arising out of, or in any litigation, proceeding or investigation instituted or
conducted by any Person with respect to any aspect of, or any transaction
contemplated by or referred to in, or any matter related to, any Loan Document
or any agreement, document or transaction contemplated thereby, whether or not
such Indemnified Person is a party thereto, except to the extent that any of the
foregoing arises out of the gross negligence, bad faith or willful misconduct of
such Indemnified Person. If any Indemnified Person uses in-house counsel for any
purpose for which Borrower is responsible to pay or indemnify, Borrower
expressly agrees that its indemnification obligations include reasonable charges
for such work commensurate with the fees that would otherwise be charged by
outside legal counsel selected by such Indemnified Person in its sole discretion
for the work performed. Agent agrees to give Borrower reasonable notice of any
event of which Agent becomes aware for which indemnification may be required
under this Section 12.4, and Agent may elect (but is not obligated) to direct
the defense thereof; provided, that the selection of counsel shall be subject to
Borrower's consent, which consent shall not be unreasonably withheld or delayed,
and Borrower shall be entitled to participate in the defense of any matter for
which indemnification may be required under this Section 12.4 and to employ
counsel at its own expense to assist in the handling of such matter. Any
Indemnified Person may, in its reasonable discretion, take such actions as it
deems necessary and appropriate to investigate, defend or settle any event or
take other remedial or corrective actions with respect thereto as may be
necessary for the protection of such Indemnified Person or the Collateral,
subject to Borrower's prior approval of any settlement, which shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, if any insurer
agrees to undertake the defense of an event (an "INSURED EVENT"), Agent agrees
not to exercise its
53
right to select counsel to defend the event if that would cause Borrower's
insurer to deny coverage; provided, however, that Agent reserves the right to
retain counsel to represent any Indemnified Person with respect to an Insured
Event at its sole cost and expense. To the extent that Agent or any Lender
obtains recovery from a third party other than an Indemnified Person of any of
the amounts that Borrower has paid to Agent or any Lender pursuant to the
indemnity set forth in this Section 12.4, then Agent and/or Lender shall
promptly pay to Borrower the amount of such recovery. Without limiting any of
the foregoing, Borrowers jointly and severally indemnifies the Indemnified
Parties for all claims for brokerage fees or commissions (other than claims of a
broker with whom such Indemnified Party has directly contracted in writing)
which may be made in connection with respect to any aspect of, or any
transaction contemplated by or referred to in, or any matter related to, any
Loan Document or any agreement, document or transaction contemplated thereby.
12.5 NOTICE
Any notice or request under any Loan Document shall be given to any
party to this Agreement at such party's address set forth beneath its signature
on the signature page to this Agreement, or at such other address as such party
may hereafter specify in a notice given in the manner required under this
Section 12.5. Any notice or request hereunder shall be given only by, and shall
be deemed to have been received upon (each, a "RECEIPT"): (i) registered or
certified mail, return receipt requested, on the date on which such received as
indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one (1) Business Day after deposit with such courier, or
(iii) facsimile or electronic transmission, in each case upon telephone or
further electronic communication from the recipient acknowledging receipt
(whether automatic or manual from recipient), as applicable.
12.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES
If any provision of any Loan Document is adjudicated to be invalid
under applicable laws or regulations, such provision shall be inapplicable to
the extent of such invalidity without affecting the validity or enforceability
of the remainder of the Loan Documents which shall be given effect so far as
possible. The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan
Documents. The Loan Documents may be executed in one or more counterparts (which
taken together, as applicable, shall constitute one and the same instrument) and
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will
be bound by its own facsimile signature and that it accepts the facsimile
signature of each other party.
12.7 EXPENSES
Except for brokerage fees or commissions owed by Agent or Lenders to
brokers with whom Agent, Lenders and/or their affiliates have contracted with
respect to the transactions contemplated by the Loan Documents, Borrower shall
pay, whether or not the Closing occurs, all costs and expenses incurred by
Agent, Lenders and/or their affiliates, including, without limitation,
documentation and diligence fees and expenses, all search, audit, appraisal,
recording, professional and filing fees and expenses and all other out-of-pocket
charges and expenses (including, without limitation, UCC and judgment and tax
lien searches and UCC filings and fees for post-Closing UCC and judgment and tax
lien searches and wire transfer fees and audit expenses), and reasonable
attorneys' fees and expenses, (i) in any effort to enforce, protect or collect
payment of any Obligation or to enforce any Loan Document or any related
agreement, document or instrument, (ii) in connection with entering into,
negotiating, preparing, reviewing and executing the Loan Documents and/or any
related agreements, documents or instruments, (iii) arising in any way out of
administration of the Obligations or the taking or refraining from taking by
Agent or
54
Lender of any action requested by Borrower, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Agent's, for the
benefit of itself and Lenders, Liens in any of the Collateral or securities
pledged under the Loan Documents, whether through judicial proceedings or
otherwise, (v) in defending or prosecuting any actions, claims or proceedings
arising out of or relating to Agent's and Lenders' transactions with Borrower,
(vi) in seeking, obtaining or receiving any advice with respect to its rights
and obligations under any Loan Document and any related agreement, document or
instrument, (vii) arising out of or relating to any Default or Event of Default
or occurring thereafter or as a result thereof, (viii) in connection with all
actions, visits, audits and inspections undertaken by Agent or Lenders or their
affiliates pursuant to the Loan Documents, and/or (ix) in connection with any
modification, restatement, supplement, amendment, waiver or extension of any
Loan Document and/or any related agreement, document or instrument. All of the
foregoing shall be charged to Borrower's account and shall be part of the
Obligations. If Agent, any Lender or any of their affiliates uses in-house
counsel for any purpose under any Loan Document for which Borrower is
responsible to pay or indemnify, Borrower expressly agrees that its Obligations
include reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Agent, such Lender or
such affiliate in its sole discretion for the work performed. Without limiting
the foregoing, Borrower shall pay all taxes (other than taxes based upon or
measured by each Lender's income or revenues or any personal property tax), if
any, in connection with the issuance of any Note and the filing and/or recording
of any documents and/or financing statements.
12.8 ENTIRE AGREEMENT
This Agreement and the other Loan Documents to which Borrower is a
party constitute the entire agreement between Borrower, Agent and Lenders with
respect to the subject matter hereof and thereof, and supersede all prior
agreements and understandings (including but not limited to the Commitment
Letter dated June 17, 2002 between Parent and CapitalSource and the term sheet
dated on or about May 3, 2002 between the Parent and CapitalSource), if any,
relating to the subject matter hereof or thereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing signed by Borrower and Agent. Except as set
forth in and subject to Section 10.5, no provision of any Loan Document may be
changed, modified, amended, restated, waived, supplemented, discharged, canceled
or terminated orally or by any course of dealing or in any other manner other
than by an agreement in writing signed by Borrower, Agent and Lenders (or
Requisite Lenders, as appropriate); provided, that no consent or agreement by
Borrower shall be required to amend, modify, change, restate, waive, supplement,
discharge, cancel or terminate any provision of Article 11-A so long as no
additional duties are required to be assumed by Borrower. Each party hereto
acknowledges that it has been advised by counsel in connection with the
negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions hereof.
The schedules attached hereto may be amended or supplemented by Borrower upon
delivery to Agent of such amendments or supplements and, except as otherwise
provided in this Agreement, the written approval thereof by Agent.
12.9 APPROVALS AND DUTIES
Unless expressly provided herein to the contrary, any approval,
consent, waiver or satisfaction of Agent or Lenders with respect to any matter
that is subject of any Loan Document may be granted or withheld by Agent or
Lenders, as applicable, in their sole and absolute discretion. Other than
Agent's duty of reasonable care with respect to Collateral delivered pursuant to
the Stock Pledge Agreement, Agent and Lenders shall have no responsibility for
or obligation or duty with respect to any of the Collateral or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights pertaining thereto.
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12.10 CONFIDENTIALITY AND PUBLICITY
Except to the extent disclosure is required by applicable law, Agent
and each Lender reserve the right to review and approve all materials that
Borrower or any of its affiliates prepares that contain Agent's or such Lender's
name or describe or refer to any Loan Document, any of the terms thereof or any
of the transactions contemplated thereby. Except to the extent disclosure is
required by applicable law, Borrower shall not, and shall not permit any of its
affiliates to, use either Agent's or any Lender's name (or the name of any of
Agent's or any Lender's affiliates) in connection with any of its business
operations, provided, that Borrower may disclose the Lender's name, the
aggregate principal amount of the Loans outstanding and other principal terms of
such Loans to its shareholders and prospective purchasers of debt or equity
securities of Borrower so long as Borrower informs such prospective purchasers
of the confidential nature of such information and such Persons agree in writing
not to disclose the same to any other Person and to be bound by the
confidentiality provisions of this Agreement. Nothing contained in any Loan
Document is intended to permit or authorize Borrower or any of its affiliates to
contract on behalf of Agent or any Lender. Further, the Borrower agrees that
Agent or any affiliate of Agent may (i) disclose a general description of
transactions arising under the Loan Documents for advertising, marketing or
other similar purposes, and (ii) use any Borrower's or Guarantor's name, logo or
other indicia germane to such party in connection with such advertising,
marketing or other similar purposes.
12.11 RELEASE OF COLLATERAL
Promptly following full performance and satisfaction and indefeasible
payment in full in cash of all Obligations (other than contingent obligations
and indemnities that survive repayment of the Loans and termination of the
Commitments) and the termination of this Agreement, the Liens created hereby
shall terminate and Agent and Lenders shall execute and deliver such documents
as are necessary to release Lenders' Liens in the Collateral and shall return
the Collateral to Borrower. Agent and Lenders shall not be deemed to have made
any representation or warranty with respect to any Collateral so delivered
except that such Collateral is free and clear, on the date of such delivery, of
any and all Liens arising from such Person's own acts.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[SIGATURES APPEAR ON THE FOLLOWING PAGE]
56
IN WITNESS WHEREOF, each of the parties has duly executed this
Revolving Credit, Term Loan and Security Agreement as of the date first written
above.
BORROWER:
ACORN PRODUCTS, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
------------------------------------
Title: VP and CFO
-----------------------------------
000 X. Xxxxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-MAIL: xxxxxx@xxxxxxxxxx.xxx
UNIONTOOLS, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
------------------------------------
Title: VP and CFO
-----------------------------------
000 X. Xxxxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-MAIL: xxxxxx@xxxxxxxxxx.xxx
AGENT AND LENDER:
CAPITALSOURCE FINANCE LLC
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
------------------------------------
Title: Senior Vice President
-----------------------------------
CapitalSource Finance LLC
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Corporate Finance Group,
Portfolio Manager
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-MAIL: xxxxxxxxx@xxxxxxxxxxxxx.xxx
LENDER:
THE PROVIDENT BANK
By: /s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxxx
------------------------------------
Title: Vice President
-----------------------------------
The Provident Bank
Xxx Xxxx Xxxxxx Xxxxxx, 000X
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx,
Vice President
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-MAIL: xxx.xxxxxxx@xxxxxxxxxxxxx.xxx
ANNEXES
Annex I Financial Covenants
Annex II Reporting Requirements
EXHIBITS
Exhibit A Form of Borrowing Certificate
SCHEDULES
Schedule A Lenders/Commitments
Schedule A-1 Adjusted EBITDA Add-Backs
Schedule 2.4 Borrower's Bank Accounts
Schedule 3.9 New Share Calculation
Schedule 5.1 Qualifications to do Business
Schedule 5.2 Loan Documents and Consents
Schedule 5.3 Subsidiaries, Capitalization and Ownership Interests
Schedule 5.4 Real Properties
Schedule 5.5 Other Agreements
Schedule 5.8 Tax Returns and Governmental Reports
Schedule 5.11 Intellectual Property
Schedule 5.12 Licenses and Permits
Schedule 5.15 Existing Indebtedness
Schedule 5.17 Insurance
Schedule 5.18A Trade Names
Schedule 5.18B Location of Offices, Records and Collateral
Schedule 5.18C Deposit Accounts and Investment Property
Schedule 6.8 Further Assurances and Post Closing Deliverables
Schedule 7.2 Permitted Indebtedness
Schedule 7.3 Permitted Liens
ANNEX I
FINANCIAL COVENANTS
1) LEVERAGE RATIO
As measured on each of the following Covenant Test Dates for
the Test Periods then ending, Leverage Ratio shall not exceed the following
ratios:
ACCOUNTING
QUARTER ENDED
(ON OR ABOUT) LEVERAGE RATIO
------------------ --------------
June 30, 2002 3.75:1.00
September 30, 2002 3.50:1.00
December 31, 2002 4.00:1.00
---------------------------------------------
March 31, 2003 4.00:1.00
June 30, 2003 3.75:1.00
September 30, 2003 3.50:1.00
December 31, 2003 3.75:1.00
---------------------------------------------
March 31, 2004 3.50:1.00
June 30, 2004 3.25:1.00
September 30, 2004 2.50:1.00
December 31, 2004 3.25:1.00
---------------------------------------------
March 31, 2005 3.25:1.00
June 30, 2005 3.00:1.00
September 30, 2005 2.25:1.00
December 31, 2005 3.00:1.00
---------------------------------------------
March 31, 2006 3.00:1.00
June 30, 2006 3.00:1.00
September 30, 2006 2.25:1.00
December 31, 2006 3.00:1.00
March 31, 2007 3.00:1.00
---------------------------------------------
2) MINIMUM ADJUSTED EBITDA
As measured on each of the following Covenant Test Dates for
the Test Periods then ending, Adjusted EBITDA for the applicable Test Period
shall not be less than the following:
ACCOUNTING
QUARTER ENDED
(ON OR ABOUT) MINIMUM ADJUSTED EBITDA
------------------ -----------------------
June 30, 2002 $ 9,500,000
September 30, 2002 9,500,000
December 31, 2002 9,500,000
----------------------------------------------
March 31, 2003 9,500,000
June 30, 2003 10,000,000
September 30, 2003 10,000,000
December 31, 2003 10,000,000
----------------------------------------------
March 31, 2004 11,000,000
June 30, 2004 11,000,000
September 30, 2004 11,000,000
December 31, 2004 11,000,000
----------------------------------------------
March 31, 2005 12,000,000
June 30, 2005 12,000,000
September 30, 2005 12,000,000
1
December 31, 2005 12,000,000
----------------------------------------------
March 31, 2006 13,000,000
June 30, 2006 13,000,000
September 30, 2006 13,000,000
December 31, 2006 13,000,000
March 31, 2007 13,000,000
----------------------------------------------
The above minimum Adjusted EBITDA levels shall be reduced by an amount equal to
20% of the amount of any prepayment of the Term Loan pursuant to Section 2.12
for the Test Period in which such prepayment occurs and each Test Period
thereafter, which prepayment results from cash equity contributed to and
retained by Borrower within such Test Period.
3) FIXED CHARGE COVERAGE RATIO
Starting with the Covenant Test Date for the Accounting
Quarter ending on June 30, 2002, and on all Covenant Test Dates thereafter, as
measured and determined on each Covenant Test Date, the Fixed Charge Coverage
Ratio shall not be less than 1.25:1.00.
4) CAPITAL EXPENDITURES
Borrower shall not permit its Capital Expenditures in the
aggregate to exceed (i) $3,000,000 during fiscal year 2002, and (ii) $4,000,000
during any fiscal year after 2002.
For purposes of the covenants set forth in this Annex I, the
terms listed below shall have the following meanings:
"Adjusted EBITDA" shall mean EBITDA plus the amounts listed on
the attached Schedule A-1.
"Capital Expenditures" shall mean the sum (without
duplication) of all expenditures (whether paid in cash or accrued as
liabilities) that are or are required to be treated as capital expenditures
under GAAP, minus any proceeds from insurance or proceeds from dispositions of
assets permitted by this Agreement that have been reinvested in the same or
similar assets.
"EBITDA" shall mean the sum, without duplication, of the
following: Net Income determined in accordance with GAAP, plus, (a) interest
expense used in the calculation of Net Income, (b) taxes on income, (c)
depreciation expense, (d) amortization expense, (e) all other non-cash charges
approved by Agent, (f) loss from any sale of assets, other than sales in the
ordinary course of business, all of the foregoing determined in accordance with
GAAP, and (g) any Make Well Investment (unless Agent has determined in its
reasonable discretion that any applicable breach of Section 7.1 related to such
Make Well Investment is the result of a Material Adverse Change) (provided that
such Make Well Investment shall be considered made on the immediately preceding
Covenant Test Date), less (h) all non-cash income, and (i) gain from any sale of
assets, other than sales in the ordinary course of business, all of the
foregoing determined in accordance with GAAP.
"Fixed Charge Coverage Ratio" shall mean, for Borrower on a
consolidated basis, at any date of determination, the ratio of (a) Adjusted
EBITDA, minus non-financed Capital Expenditures, minus cash taxes paid, to (b)
Fixed Charges, each for the Test Period ended on such date.
"Fixed Charges" shall mean, the sum of the following for
Borrower, on a consolidated basis: (a) Total Debt Service, (b) dividends paid,
and (c) cash paid for stock repurchases.
2
"Interest Expense" shall mean total cash interest expense
(including attributable to conditional sales contracts, Capital Leases and other
title retention agreements in accordance with GAAP) of Borrower on a
consolidated basis with respect to all outstanding Indebtedness including
capitalized interest but excluding (i) commissions, discounts and other fees
owed with respect to letters of credit and bankers' acceptance financing, and
(ii) net costs under Interest Rate Agreements.
"Interest Rate Agreement" shall mean any interest rate swap,
cap or collar agreement or other similar agreement or arrangement designed to
hedge the position with respect to interest rates.
"Leverage Ratio" shall mean, at any date of determination, for
Borrower on a consolidated basis, the ratio of (i) Total Debt on such date, plus
the aggregate liability of Borrower pursuant to any letter of credit or surety
bond as of the Accounting Quarter ended on such date to (ii) Adjusted EBITDA for
the Test Period ended on such date.
"Net Income" shall mean the net income (or loss) of Borrower
on a consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP; provided, that there shall be excluded (i)
the income (or loss) of any Person in which any other Person (other than
Borrower) has a joint interest, except to the extent of the amount of dividends
or other distributions actually paid to a Borrower by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Borrower or is merged into or consolidated with a Borrower or that
Person's assets are acquired by a Borrower, (iii) the income of any Subsidiary
of Borrower to the extent that the declaration or payment of dividends or
similar distributions of that income by that Subsidiary is not at the time
permitted by operation of the terms of the charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary, (iv) compensation expense resulting from the issuance of
capital stock, stock options or stock appreciation rights issued to former or
current employees, including officers, of a Borrower, or the exercise of such
options or rights, in each case to the extent the obligation (if any) associated
therewith is not expected to be settled by the payment of cash by a Borrower or
any affiliate thereof, and (v) compensation expense resulting from the
repurchase of capital stock, options and rights described in clause (iv) of this
definition of Net Income.
"Total Debt" shall mean, at any date of determination, the
total Indebtedness of Borrower (including all Indebtedness and Obligations under
the Loan Documents) on a consolidated basis, excluding (i) the 2002 Subordinated
Debt, (ii) the HLHZ Note and (iii) current operating liabilities.
"Total Debt Service" shall mean the sum of (i) scheduled or
other required payments of principal on Total Debt, (ii) any other fees due or
payable with respect to, in connection with or on Total Debt, and (iii) Interest
Expense.
3
ANNEX II
REPORTING REQUIREMENTS
1. Weekly Borrowing Base with rollforward of A/R and current inventory
reporting from perpetual.
2. Monthly borrowing base and calculation of ineligibles.
3. Monthly Accounts Receivable Summary Aging
4. Monthly Accounts Receivable Detailed Aging (electronic copy)
5. Monthly A/R reconciliation to general ledger
6. Monthly Accounts Payable Aging
7. Month End Inventory Detail by Location
8. Month End Inventory Perpetual on MS Excel with 12 Month Sales History
for Each Part, 12 Month Usage History for Each Part, and Forecasted
Sales for Each Part
9. Month End Inventory By Type Report which lists the inventory by Product
Class
10. Month End Private Label Inventory Report
11. Month End Outplant Report which lists all inventory at outside
processors and warehouses
12. Month End Excess Inventory Spreadsheet and backup reports including the
Finished Goods Inventory Overview and Raw Materials and Subassemblies
Overview Reports
13. Month End New Part Number Report with the date it was introduced into
the inventory
14. Month End In-Transit Inventory Report
15. Monthly Inventory Reconciliation
1
APPENDIX A
DEFINITIONS
"Account Debtor" shall mean any Person who is obligated under
an Account.
"Accounting Month" shall mean each monthly accounting period
within each Accounting Quarter.
"Accounting Quarter" shall mean the approximate three month
period beginning on the Monday after the Sunday closest to the last day of a
calendar quarter and ending on the Sunday closest to the last day of the
following calendar quarter, in each case taken as one accounting period.
"Accounts" shall mean all "accounts" (as defined in the UCC)
of Borrower (or, if referring to another Person, of such other Person),
including without limitation, accounts, accounts receivables, monies due or to
become due and obligations in any form (whether arising in connection with
contracts, Contract Rights, instruments, general intangibles or chattel paper),
in each case whether arising out of goods sold or services rendered or from any
other transaction and whether or not earned by performance, now or hereafter in
existence, and all documents of title or other documents representing any of the
foregoing, and all collateral security and guaranties of any kind, now or
hereafter in existence, given by any Person with respect to any of the
foregoing.
"Advances" shall mean a borrowing under the Revolving
Facility. Any amounts paid by Agent or any Lender on behalf of Borrower or any
Guarantor under any Loan Document shall be an Advance for purposes of this
Agreement.
"Affiliate" or "affiliate" shall mean, as to any Person, any
other Person (a) that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person, (b) who is a director or officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above
with respect to such Person, or (c) which, directly or indirectly through one or
more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended, as the same is in effect on
the date hereof) of five percent (5%) or more of any class of the outstanding
voting stock, securities or other equity or ownership interests of such Person .
For purposes of this definition, the term "control" (and the correlative terms,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies, whether through ownership of securities or other
interests, by contract or otherwise.
"Applicable Rate" shall mean the interest rates applicable
from time to time to Loans under this Agreement.
"Blocked Accounts" shall mean the lockbox and accounts
maintained by Borrower at the Lockbox Banks into which all collections or
payments on their Accounts and other Collateral and other cash payments received
by Borrower are paid.
"Borrowing Base" shall mean, as of any date of determination,
the net collectible value of (a) Eligible Receivables and (b) Eligible Inventory
Costs, as determined with reference to the most recent Borrowing Certificate and
otherwise in accordance with this Agreement; provided, however, that if as of
such date the most recent Borrowing Certificate is of a date more than four (4)
Business Days before or after such date, then, without limiting any other
remedies that may be available to Agent, the Borrowing Base shall be determined
by Agent in its sole discretion.
1
"Borrowing Certificate" shall mean a Borrowing Certificate
substantially in the form of Exhibit A hereto.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which the Federal Reserve or Agent is closed.
"Capital Lease" shall mean, as to any Person, a lease of any
interest in any kind of property or asset by that Person as lessee that is,
should be or should have been recorded as a "capital lease" on the balance sheet
of such Person in accordance with GAAP.
"Capitalized Lease Obligations" shall mean all obligations of
any Person under Capital Leases of Borrower, in each case, taken at the amount
thereof accounted for as a liability in accordance with GAAP.
"Change of Control" shall mean, with respect to Borrower, the
occurrence of any of the following: (i) a merger, consolidation, reorganization,
recapitalization or share or interest exchange, sale or transfer or any other
transaction or series of transactions in which its stockholders immediately
prior to such transaction or series of transactions receive, in exchange for the
stock or interests owned by them, cash, property or securities of the resulting
or surviving entity or any affiliate thereof, and, as a result thereof, Persons
who, individually or in the aggregate, were holders of 50% or more of its voting
stock, securities or equity, partnership or ownership interests immediately
prior to such transaction or series of transactions hold less than 50% of the
voting stock, securities or other equity, partnership or ownership interests of
the resulting or surviving entity or such affiliate thereof, (ii) a direct or
indirect sale, transfer or other conveyance or disposition, in any single
transaction or series of transactions, of all or substantially all of its
assets, (iii) any "change in/of control" or "sale" or "disposition" or similar
event as defined in any certificate or incorporation or statement of
designations of any Borrower or in any document governing indebtedness of such
Person in excess of $100,000 singly or in the aggregate which gives the holder
of such indebtedness the right to accelerate or otherwise require payment of
such indebtedness prior to the maturity date thereof, (iv) investment funds
managed by Oaktree Capital Management, LLC and The TCW Group, Inc. combined
cease to be the record owners of at least 50.1% of the voting stock of the
Parent, (v) investment funds managed by Oaktree Capital Management, LLC and The
TCW Group, Inc. combined cease to be entitled to elect or appoint at least two
directors of the Parent's Board of Directors, (vi) A. Xxxxxxx Xxxxx ceases to be
employed as Chief Executive Officer of the Parent or his employment agreement is
assigned by either of the Borrowers or he otherwise becomes disabled and is not
replaced within 60 calendar days by an interim Chief Executive Officer, and
within 180 calendar days by a permanent Chief Executive Officer, each to Agent's
satisfaction as determined in its Permitted Discretion, or any such replacement
Chief Executive Officer ceases such employment or otherwise becomes disabled
unless replaced in the same time periods and to Agent's satisfaction as
determined in its Permitted Discretion, or (vii) any "Change of Control" as
defined in the Employment Agreement dated June 11, 2002 among Parent, Union and
A. Xxxxxxx Xxxxx.
"Charter and Good Standing Documents" shall mean, for each
Borrower (i) a copy of the certificate or articles of incorporation or formation
(or other charter document) certified as of a date not more than five (5)
Business Days before the Closing Date by the applicable Governmental Authority
of the jurisdiction of incorporation or organization of Borrower, (ii) a copy of
the bylaws or similar organizational documents of certified as of a date not
more than five (5) Business Days before the Closing Date by the corporate
secretary or assistant secretary of Borrower, (iii) an original certificate of
good standing as of a date reasonably acceptable to Agent issued by the
applicable Governmental Authority of the jurisdiction of incorporation or
organization of Borrower and of every other jurisdiction in which Borrower has
an office or is otherwise required to be in good standing, and (iv) copies of
the resolutions of the Board of Directors and, if required, stockholders
authorizing the execution, delivery and
2
performance of the Loan Documents to which Borrower is a party, certified by an
authorized officer of such Person as of the Closing Date.
"Chattel Paper" has the meaning given such term in the UCC.
"Closing" shall mean the satisfaction, or written waiver by
Agent, of all of the conditions precedent set forth in this Agreement required
to be satisfied prior to the consummation of the transactions contemplated
hereby.
"Closing Date" shall mean the date the Closing occurs.
"Collateral" shall mean, collectively and each individually,
all collateral and/or security granted and/or securities pledged to Agent, for
the benefit of itself and Lenders, by Borrower and/or Guarantors, if any,
pursuant to the Loan Documents including, without limitation, the items set
forth in Section 2.14 of this Agreement.
"Commitment" or "Commitments" shall mean, (i) with respect to
the Revolving Facility, as to any Revolving Lender, the aggregate commitment of
such Revolving Lender to make Advances, as set forth on Schedule 1 or in the
most recent Lender Addition Agreement executed by such Revolving Lender, (ii) as
to all Revolving Lenders, the aggregate commitment of all Lenders to make
Advances, (iii) with respect to the Term Loan, as to any Term Lender, the
aggregate commitment of such Term Lender to fund the Term Loan, as set forth on
Schedule 1 or in the most recent Lender Addition Agreement executed by such Term
Lender, (iii) as to all Term Lenders, the aggregate commitment of all Term
Lenders to fund the Term Loan, and (iv) as to all Lenders, the aggregate
commitments of all Lenders to fund the Loans, in each case as the same may be
reduced or terminated pursuant to Section 2.7, Article VIII or Section 12.2 as
then in effect.
"Computer Hardware and Software" shall mean all of Borrower's
rights (including rights as licensee and lessee) with respect to (a) computer
and other electronic data processing hardware, including all integrated computer
systems, central processing units, memory units, display terminals, printers,
computer elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware; (b) all Software and all
software programs designed for use on the computers and electronic data
processing hardware described in clause (a) above, including all operating
system software, utilities and application programs in any form (source code and
object code in magnetic tape, disk or hard copy format or any other listings
whatsoever) and any other Software; (c) any firmware associated with any of the
foregoing; and (d) any documentation for hardware, Software and firmware
described in clauses (a), (b) and (c) above, including flow charts, logic
diagrams, manuals, specifications, training materials, charts and pseudo codes.
"Contingent Obligations" shall mean, as to any Person, any
obligation of such Person guaranteeing or intending to guaranty any
Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of
any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or to
hold harmless the owner of such primary obligation against loss in respect
thereof, provided, however, that the term "Contingent Obligation" shall
3
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Contract Right" shall mean any right of Borrower to payment
under a contract for the sale or lease of goods or the rendering of services,
which right is at the time not yet earned by performance.
"Covenant Test Date" shall mean the last calendar day of each
Accounting Quarter.
"Debtor Relief Law" shall mean, collectively, the Bankruptcy
Code of the United States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief laws from time to time in
effect affecting the rights of creditors generally, as amended from time to
time.
"Default" shall mean any event, fact, circumstance or
condition that, with the giving of applicable notice or passage of time or both,
would constitute or be or result in an Event of Default.
"Deposit Account" shall mean, individually and collectively,
any Blocked Accounts and all bank or other depository accounts of Borrower.
"Distribution" shall mean any fee, payment, bonus or other
remuneration of any kind, and any repayment of or debt service on loans or other
indebtedness.
"Document" has the meaning given such term in the UCC.
"Eligible Inventory Costs" shall mean the value of Borrower's
saleable Inventory, after taking into account all discounts, which Inventory is
maintained in the ordinary course of the Borrower's business which Agent, in its
Permitted Discretion, deems Eligible Inventory Costs unless:
(a) such Inventory is not subject to a valid perfected
first priority security interest in favor of Agent, for the benefit of itself
and Lenders;
(b) any consent, license, approval or authorization
required to be obtained by Borrower in connection with the granting of the
security interest under the Security Documents or in connection with manufacture
or sale of such Inventory has not been or was not duly obtained and is not in
full force and effect;
(c) any covenant, representation or warranty contained in
this Agreement or in any other Loan Document with respect to such Inventory has
been breached and remains uncured;
(d) such Inventory is not owned by Borrower;
(e) such Inventory does not comply, or was not
manufactured in compliance, in all material respects with all applicable
requirements of all statutes, laws, rules, regulations, ordinances, codes,
policies, rules of common law, and the like, now or hereafter in effect, of any
Governmental Authority, including any judicial or administrative interpretations
thereof, and any judicial or administrative orders, consents, decrees or
judgments;
4
(f) such Inventory does not, or at the time of its
purchase from the vendor did not, constitute "inventory" under Article 9 of the
UCC as then in effect in the jurisdiction whose law governs perfection of the
security interest;
(g) the Person for whose account such Inventory is being
or was produced has commenced a voluntary case under any federal bankruptcy or
state or federal insolvency laws or has made an assignment for the benefit of
creditors, or if a decree or order for relief has been entered by a court having
jurisdiction in respect of such Person in an involuntary case under any federal
bankruptcy or state or federal insolvency laws, or if any other petition or
application for relief under any federal bankruptcy or state or federal
insolvency laws has been filed against such Person, or if such Person has
failed, suspended business, ceased to be solvent, called a meeting of its
creditors, or has consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs;
(h) the transfer of such Inventory to Borrower by vendor,
supplier or other Person did not constitute a valid sale and transfer to
Borrower of all right, title and interest of such Person in the Inventory
enforceable against all creditors of and purchasers from the vendor;
(i) (A) Borrower is not the sole owner of all right,
title and interest in and to such Inventory, (B) Borrower does not have a valid
ownership interest therein free and clear of all Liens other than Liens granted
under the Loan Documents, or (C) any offsets, defenses or counterclaims have
been asserted or threatened in writing against such Inventory;
(j) such Inventory is not in good working order or is
damaged;
(k) such Inventory is not located at a location which is
covered by a Landlord Waiver and Consent;
(l) such Inventory consists only of packing materials,
displays, supplies or discontinued product;
(m) such Inventory is subject to a bona fide dispute or
is or has been classified by Borrower as counterfeit or fraudulent;
(n) such Inventory has been sold (excluding pre-billed
Inventory), assigned, or otherwise encumbered by Borrower or any Guarantor
except pursuant to the Loan Documents;
(o) such Inventory has been returned or is subject to a
quality assurance hold;
(p) such Inventory is held as samples or for sale to
employees;
(q) such Inventory is in-transit;
(r) such Inventory constitutes custom work-in-process
Inventory, custom finished goods, obsolete or slow-moving Inventory, private
label Inventory (excluding private label Inventory for Craftsmen, Sears, Turf
King and Ace Hardware);
(s) such Inventory consists of a discontinued product or
prototype;
(t) such Inventory is not located in the United States;
or
5
(u) such Inventory fails to meet such other
specifications and requirements which may from time to time be established by
Agent, or such Inventory otherwise is not satisfactory to Agent, as determined
in the Permitted Discretion of Agent.
"Eligible Receivables" shall mean each Account arising in the
ordinary course of Borrower's business from the sale of goods or rendering of
services which Agent, in its Permitted Discretion, deems an Eligible Receivable
unless:
(a) it is not subject to a valid perfected first priority
security interest in favor of Agent, for the benefit of itself and Lenders,
subject to no other Lien;
(b) it is not evidenced by an invoice, statement or other
documentary evidence satisfactory to Agent; provided, that Agent in its sole
discretion may from time to time include as Accounts that are not evidenced by
an invoice, statement or other documentary evidence satisfactory to Agent as
Eligible Receivables and determine the advance rates, liquidity factors and
reserves applicable to Advances made on any such Accounts;
(c) it arises out of services rendered or a sale made to,
or out of any other transaction between with, one or more affiliates of
Borrower;
(d) it remains unpaid for longer than 60 calendar days
after the original due date;
(e) with respect to all Accounts owed by any particular
Account Debtor and/or its affiliates, if more than 25% of the aggregate balance
of all such Accounts owing from such Account Debtor and/or its affiliates remain
unpaid for longer than 60 calendar days after the original due date;
(f) with respect to all Accounts owed by any particular
Account Debtor and/or its affiliates, 50% or more of all such Accounts are not
deemed Eligible Receivables for any reason hereunder (which percentage may, in
Agent's sole discretion, be increased or decreased);
(g) with respect to all Accounts owed by any particular
Account Debtor and/or its affiliates, if such Accounts exceed 10% (such
percentage or any other percentage now or hereafter established for any
particular Account Debtor, a "CONCENTRATION LIMIT") of the gross dollar value of
all Eligible Receivables at any one time; provided, that the Concentration Limit
for each of the following Account Debtors shall be as follows: Home Depot - 35%,
Sears - 35%, Lowe's - 35% (all of which Concentration Limits may, in Agent's
Permitted Discretion, be increased or decreased);
(h) any covenant, agreement, representation or warranty
contained in any Loan Document with respect to such Account has been breached
and remains uncured;
(i) the Account Debtor for such Account has commenced a
voluntary case under any Debtor Relief Law or has made an assignment for the
benefit of creditors, or a decree or order for relief has been entered by a
court having jurisdiction in respect of such Account Debtor in an involuntary
case under any Debtor Relief Law, or any other petition or application for
relief under any Debtor Relief Law has been filed against such Account Debtor,
or such Account Debtor has failed, suspended business, ceased to be solvent,
called a meeting of its creditors, or has consented to or suffered a receiver,
trustee, liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs, or Borrower, in the ordinary
course of business, should have known of any of the foregoing;
6
(j) it arises from the sale of property or services
rendered to one or more Account Debtors outside the continental United States or
that have their principal place of business or chief executive offices outside
the continental United States;
(k) it represents the sale of goods or rendering of
services to an Account Debtor on a xxxx-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper or an instrument of any kind or has been
reduced to judgment;
(l) the applicable Account Debtor for such Account is any
Governmental Authority, unless rights to payment of such Account have been
assigned to Agent, for the benefit of itself and Lenders, pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727, et seq.
and 41 U.S.C. Section 15, et seq.), or otherwise all with applicable statutes or
regulations respecting the assignment of government Accounts have been complied
with;
(m) it is subject to any offset, credit (including any
resource or other income credit or offset), deduction, defense, discount,
chargeback, freight claim, allowance, adjustment, dispute or counterclaim, or is
contingent in any respect or for any reason;
(n) there is any agreement with an Account Debtor for any
deduction from such Account, except for discounts or allowances made in the
ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each invoice
related thereto, such that only the discounted amount of such Account after
giving effect to such discounts and allowances shall be considered an Eligible
Receivable;
(o) any return, rejection or repossession of goods or
services related to it has occurred;
(p) it is not payable to Borrower;
(q) Borrower has agreed to accept or has accepted any
non-cash payment for such Account;
(r) it constitutes a re-billing of an amount previously
billed;
(s) with respect to any Account arising from the sale of
goods, the goods have not been shipped to the Account Debtor or its designee;
(t) with respect to any Account arising from the
performance of services, the services have not been actually performed or the
services were undertaken in violation of any law;
(u) it was generated during December, January, February
or March and has a due date on or after the following July 1;
(v) it constitutes a billing for a sample; or
(w) it fails to meet such other specifications and
requirements which may from time to time be established by Agent or is not
otherwise satisfactory to Agent, as determined in Agent's Permitted Discretion
and as communicated to Borrower within a reasonable time of such determination
by Agent.
7
"Environmental Laws" shall mean, collectively and each
individually ,the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendment and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act, the Toxic Substances Control Act,
the Clean Air Act, the Clean Water Act, any other "Superfund" or "Superlien" law
and all other federal, state and local and foreign environmental, land use,
zoning, health, chemical use, safety and sanitation laws, statutes, ordinances
and codes relating to the protection of the environment and/or governing the
use, storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances, in each case, as amended, and
the rules, regulations, policies, guidelines, interpretations, decisions, orders
and directives of Governmental Authorities with respect thereto.
"Equipment" has the meaning given such term in the UCC.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"Event of Default" shall mean the occurrence of any event set
forth in Article VIII.
"Excess Availability" shall mean (i) the lesser of (a) the
Facility Cap and (b) Availability, minus (ii) the outstanding balance of all
Advances and Letter of Credit Obligations.
"Excess Cash Flow" shall mean, for any fiscal year, without
duplication, an amount equal to the sum of (i) EBITDA (less any Make Well
Investment included in such calculation), plus (ii) an amount equal to the
aggregate net cash proceeds of the sale, lease, transfer or other disposition of
assets by Borrower during such period to the extent not (a) reinvested in other
assets constituting Collateral upon which Agent has a first and prior Lien, or
(b) required to be applied to mandatory prepayments or payments on the
Indebtedness of Borrower, less (iii) cash taxes and cash interest paid, plus
(iv) the amount of any tax refunds or credits received by Borrower during such
period, less (v) an amount equal to the non-financed Capital Expenditures of
Borrower for such period, less (vi) an amount equal to all principal payments on
the Term Loan, less (vii) an amount equal to any stock repurchases made by
Borrower in cash.
"Facility Cap" shall mean $32,500,000, subject to adjustment
as provided in this Agreement.
"Fair Valuation" shall mean the determination of the value of
the consolidated assets of a Person on the basis of the amount which may be
realized by a willing seller within a reasonable time through collection or sale
of such assets at market value on a going concern basis to an interested buyer
who is willing to purchase under ordinary selling conditions in an arm's length
transaction.
"Fixtures" has the meaning given such term in the UCC.
"Foreign Subsidiary" shall mean Razorback International,
Limited, which is a direct, wholly-owned Subsidiary of the Parent.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"General Intangibles" has the meaning given such term in the
UCC.
"Goods" has the meaning given such term in the UCC.
8
"Governmental Authority" shall mean any federal, state,
municipal, national, local or other governmental department, court, commission,
board, bureau, agency or instrumentality or political subdivision thereof, or
any entity or officer exercising executive, legislative or judicial, regulatory
or administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia, including but not limited to the Federal Communications Commission
and any similar state regulatory authority.
"Government Account" shall be defined to mean all Accounts
arising out of or with respect to any Government Contract.
"Government Contracts" shall mean all contracts with the
United States government or any other Governmental Authority or any agency of
any of the foregoing, and all amendments, modifications and supplements thereto.
"Guarantor" shall mean, collectively and each individually,
XxXxxxx-Xxxxxxx Company, Inc., VHG Tools, Inc., VSI Fasteners, Inc., Hawthorne
Tools, Inc., Pinetree Tools, Inc., and any other guarantors of the Obligations
or any part thereof.
"Guaranty" shall mean, collectively and each individually, all
guarantees executed by any Guarantors including, without limitation, any
guarantees set forth in any Stock Pledge Agreement executed by any Person
relating to the securities of Borrower or any of its Subsidiaries.
"Hazardous Substances" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in or subject to any applicable Environmental Law.
"HLHZ Note" shall mean the 12% Convertible Note Due 2005,
dated the Closing Date from Parent, payable to Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, in
the principal amount of $1,200,000.
"Indebtedness" of any Person shall mean, without duplication,
(a) all items which, in accordance with GAAP, would be included in determining
total liabilities as shown on the liability side of the balance sheet of such
Person as of the date as of which Indebtedness is to be determined, including
any lease which, in accordance with GAAP would constitute Indebtedness
(specifically excluding any operating lease), (b) all indebtedness secured by
any mortgage, pledge, security, Lien or conditional sale or other title
retention agreement to which any property or asset owned or held by such Person
is subject, whether or not the indebtedness secured thereby shall have been
assumed, (c) all indebtedness of others which such Person has directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly liable.
"Instrument" has the meaning given such term in the UCC.
"Intellectual Property" shall mean all past, present and
future: trade secrets, know-how and other proprietary information; trademarks,
internet domain names, service marks, trade dress, trade names, business names,
designs, logos, slogans (and all translations, adaptations, derivations and
combinations of the foregoing) indicia and other source and/or business
identifiers, and the goodwill of
9
the business relating thereto and all registrations or applications for
registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights, unpatented inventions (whether or not
patentable); patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to xxx for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.
"Intellectual Property Security Agreement" shall mean that
certain Intellectual Property Security Agreement executed by Borrower in favor
of Agent, for the benefit of itself and Lenders, as such may be modified,
amended or supplemented from time to time.
"Inventory" shall mean all "inventory" (as defined in the UCC)
of Borrower (or, if referring to another Person, of such other Person), now
owned or hereafter acquired, and all documents of title or other documents
representing any of the foregoing, and all collateral security and guaranties of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Investment Property" shall have the meaning given such term
in the UCC.
"Issued Shares" shall mean those certain 319,109 shares of
common stock of Parent issued to CapitalSource Holdings LLC on the Closing Date.
"Landlord Waiver and Consent" shall mean a waiver/consent in
form and substance reasonably satisfactory to Agent from the owner/lessor of any
premises not owned by Borrower at which any of the Collateral is now or
hereafter located for the purpose of providing Agent access to such Collateral,
in each case as such may be modified, amended or supplemented from time to time.
"L/C Issuer" shall mean The Provident Bank, an Ohio banking
corporation, as long as it remains a Lender under this Agreement.
"Lender Addition Agreement" shall mean an agreement among
Agent, a Lender and such Lender's assignee regarding their respective rights and
obligations with respect to assignments of the Loans and other interests under
this Agreement and the other Loan Documents, in form and substance acceptable to
Agent.
"Lenders" shall mean the financial institutions, from time to
time named on Schedule A under the headings "Revolving Lenders" and "Term
Lenders", their respective successors and permitted assigns (but not, except as
expressly set forth herein, any participant that is not otherwise a party to
this Agreement).
"Letter of Credit Obligations" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn amount of all Standby
Letters of Credit and (ii) the aggregate unreimbursed amount of all drawn
Standby Letters of Credit.
"Letter-of-Credit Right" shall mean a letter-of-credit right
as defined in the UCC.
10
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, transfer or other restriction, lien or charge of any kind
(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement or any lease in the nature thereof), or any
other arrangement pursuant to which title to the property is retained by or
vested in some other Person for security purposes.
"Loan" or "Loans" shall mean, individually and collectively,
the Term Loan and the Revolving Facility and all Advances thereunder.
"Loan Documents" shall mean, collectively and each
individually, this Agreement, the Notes, the Security Documents, the Guarantees,
the Uniform Commercial Code Financing Statements, the 2002 Subordinated Debt
(limited to the subordination provisions thereof), the HLHZ Note (limited to the
subordination provisions thereof), the Landlord Waiver and Consents, the
Borrowing Certificates and all other agreements, documents, instruments and
certificates heretofore or hereafter executed or delivered to Agent or Lenders
in connection with any of the foregoing or the Loans, as the same may be
amended, modified or supplemented from time to time.
"Make Well Investment" shall mean (i) one or more cash equity
investments in Parent in an aggregate amount not to exceed $2,000,000 during the
Term, which investment is made within five (5) days after the applicable
reporting requirement deadline set forth in Section 6.1(a)(ii), and the proceeds
of such investment are used to prepay the Term Loan; provided, however, any such
investment shall not be permitted in two consecutive calendar quarters, and (ii)
one or more cash equity investments in Parent in an aggregate amount not to
exceed $2,000,000 during the Term, to the extent such investment is equal to
documented non-recurring project expenses that are not included as an add-back
to Adjusted EBITDA pursuant to Schedule A-1 and the proceeds of such investment
are used to prepay the Term Loan; provided, however, any such investment shall
not be permitted in more than two consecutive calendar quarters.
"Material Adverse Effect" or "Material Adverse Change" shall
mean any event, condition or circumstance or set of events, conditions or
circumstances or any change(s) which (i) has, had or could reasonably be
expected to have any material adverse effect upon or change in the validity or
enforceability of any Loan Document, (ii) has been or could reasonably be
expected to be material and adverse to the value of any of the Collateral taken
as a whole or to the business, operations, properties, assets or liabilities of
Borrower and/or any Guarantor, taken as a whole, or (iii) has materially
impaired or could reasonably be expected to materially impair the ability of
Borrower or any Guarantor to perform the Obligations or to consummate the
transactions under the Loan Documents executed by such Person.
"Mortgages" shall mean, collectively, the Open-End Mortgage,
Security Agreement, Assignments of Rents and Fixture Filings to be filed in Ohio
and the Mortgage, Security Agreement and Assignment of Leases, Rents and
Profits, and Fixture Filing to be filed in New York, in each case executed by
Union in favor of Agent, for the benefit of itself and Lenders, and by which
Union granted and conveyed to Agent, for the benefit of itself and Lenders, as
security for the Obligations, a Lien upon each of the Real Properties.
"Maturity Date" shall mean the earlier of (i) the occurrence
of an Event of Default if required pursuant hereto or Agent's demand upon an
Event of Default, and (ii) the last day of the Term.
"Negative Pledge Agreement" shall mean the Negative Pledge
Agreements executed by Union in favor of Agent covering all owned real property
of Borrower and Guarantors which is not subject to a Mortgage.
11
"New Shares" shall mean all shares of common stock of Parent
granted under Parent's Management Restricted Stock Plan and Director Restricted
Stock Plan, and created due to the conversion of the HLHZ Note, the 2002
Subordinated Debt and the Series A Preferred Stock.
"Note" shall mean, collectively and each individually, the
Revolving Notes and the Term Notes.
"Obligations" shall mean all present and future obligations,
Indebtedness and liabilities of Borrower and/or any Guarantor to Agent or
Lenders at any time and from time to time of every kind, nature and description,
direct or indirect, secured or unsecured, joint and several, absolute or
contingent, due or to become due, matured or unmatured, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated,
including, without limitation, all of the foregoing under any of the Loan
Documents or otherwise relating to Notes and/or Loans, or arising out of
overdrafts on checking, deposit or other accounts or electronic funds transfers
(whether through automatic clearing houses or otherwise) or out of a Person's
non-receipt of, or inability to collect, funds or otherwise not being made whole
in connection with depository transfer checks or other similar arrangements,
including, without limitation, interest, all applicable fees, charges and
expenses and/or all amounts paid or advanced by Agent or Lenders on behalf of or
for the benefit of Borrower and/or any Guarantor for any reason at any time,
including in each case obligations of performance as well as obligations of
payment and interest that accrue after the commencement of any proceeding under
any Debtor Relief Law by or against any such Person.
"Payment Office" shall mean initially the address set forth
beneath the Agent's name on the signature page of this Agreement, and
thereafter, such other office of Agent, if any, which it may designate by notice
to Borrower to be the Payment Office.
"Permit" shall mean collectively all licenses, leases, powers,
permits, franchises, certificates, authorizations, approvals, certificates of
need, provider numbers and other rights.
"Permitted Discretion" shall mean a determination or judgment
made in good faith in the exercise of reasonable (from the perspective of a
secured lender) credit or business judgment.
"Permitted Indebtedness" shall mean Indebtedness of Borrower
permitted under Section 7.2.
"Permitted Securities" shall mean (i) the HLHZ Note, (ii) the
notes issued in connection with 2002 Subordinated Debt, (iii) the Series A
Preferred Stock, (iv) any common stock issued in connection with the 2002 Rights
Offering, (v) the Issued Shares and (vi) any other shares of equity capital
stock of Parent that by their terms (or by the terms of any security into which
it is convertible or for which it is exchangeable) or upon the happening of any
event or otherwise (A) do not mature and are not putable or redeemable pursuant
to a sinking fund obligation or otherwise, (B) are not convertible or
exchangeable for Indebtedness or any securities that are not Permitted
Securities, (C) are not redeemable at the option of the holder thereof, in whole
or in part, in each case on or prior to the date six months after the earlier of
the end of the Term or the actual indefeasible payment in full of the
Obligations, (D) do not have payments of dividends on or prior to the date six
months after the earlier of the end of the Term or the actual indefeasible
payment in full of the Obligations, and (E) are unsecured and by operation of
law or by legally binding agreement are subordinated in right of repayment,
liens, security and remedies to all of the Obligations and to all of Lenders'
rights, Liens and remedies.
12
"Person" shall mean an individual, a partnership, a
corporation, a limited liability company, a business trust, a joint stock
company, a trust, an unincorporated association, a joint venture, a Governmental
Authority or any other entity of whatever nature.
"Prime Rate" shall mean a fluctuating interest rate per annum
equal at all times to the rate of interest announced publicly from time to time
by Citibank, N.A. as its base rate; provided, that such rate is not necessarily
the best rate offered to its customers, and, should Agent be unable to determine
such rate, such other indication of the prevailing prime rate of interest as may
reasonably be chosen by Agent; provided, that each change in the fluctuating
interest rate shall take effect simultaneously with the corresponding change in
the Prime Rate.
"Priority Permitted Liens" shall mean Permitted Liens
contemplated by and permitted pursuant to Section 7.3(e) and/or (g).
"Pro Rata Share" shall mean (a) with respect to matters
relating to a particular Commitment of a Revolving Lender, Advances or any
Standby Letter of Credit, the percentage obtained by dividing (i) such
Commitment of that Revolving Lender by (ii) all such Commitments of all
Revolving Lenders; provided, however, that if any Commitment is terminated
pursuant to the terms hereof or any Lender does not fund an Advance because of
the existence of an Event of Default, then "Pro Rata Share" means the percentage
obtained by dividing (x) the aggregate amount of such Revolving Lender's
outstanding Loans related to such Commitment by (y) the aggregate amount of all
outstanding Loans related to such Commitment, (b) with respect to matters
relating to a particular Term Loan of a Term Lender, the percentage obtained by
dividing (i) the aggregate amount of such Term Lender's outstanding Term Loans
by (ii) the aggregate amount of all outstanding Term Loans, and (c) with respect
to all other matters, the percentage obtained by dividing (i) the aggregate
amount of a Lender's Loans outstanding and such Lender's Commitment by (ii) the
aggregate amount of all Lenders' Loans outstanding and all Lender's Commitments;
in any case as such percentage may be adjusted by assignments permitted pursuant
to Section 12.3.
"Real Property" shall mean that certain real property of Union
located in (a) Hebron, Ohio, (b) Delaware, Ohio, and (c) Frankfort, New York,
each as more particularly described in its respective Mortgage.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of the Closing Date among Parent,
CapitalSource Holdings LLC, OCM Principal Opportunities Fund, L.P. and Xxxxxxxx
Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc.
"Requisite Lenders" shall mean (a) with respect to matters
relating to Revolving Lenders, Revolving Lenders holding or being responsible
for 50.1% or more of the sum of (a) all outstanding Revolving Loans and Letter
of Credit Obligation, and all unutilized Commitments to make Advances, and (b)
with respect to matters relating to Term Lenders, Term Lenders holding or being
responsible for 50.1% or more of the sum of all outstanding Term Loans, and (c)
with respect to all other matters, Lenders holding or being responsible for
50.1% or more of all outstanding Loans and unutilized Commitments.
"Revolving Lenders" shall mean the financial institutions from
time to time named on Schedule 1 under the heading "Revolving Lenders", their
respective successors and permitted assigns (but not, except as expressly set
forth herein, any Participant that is not otherwise a party to this Agreement).
"Revolving Loans" shall mean, collectively, the Advances made
by Revolving Lenders to Borrower in the maximum aggregate principal amount equal
to the Facility Cap.
13
"Revolving Note(s)" shall mean, individually and collectively,
the Revolving Notes and any additional promissory note(s) payable to the order
of each Revolving Lender executed by Borrower evidencing the Revolving Facility
and Advances thereunder, as the same may be modified, amended or supplemented
from time to time.
"Security Agreement" shall mean, collectively and
individually, all security agreements executed by any Guarantor, in each case,
as may be modified, amended or supplemented from time to time.
"Security Documents" shall mean this Agreement, Intellectual
Property Security Agreement, Mortgages, Negative Pledge Agreements, each
Guaranty, Security Agreement, Stock Pledge Agreements, Lockbox Agreements,
Uniform Commercial Code Financing Statements and all other documents or
instruments necessary to create or perfect the Liens in the Collateral, as such
may be modified, amended or supplemented from time to time.
"Series A Preferred Stock" shall mean the preferred stock
issued pursuant to the 2002 Purchase Agreement.
"Software" shall mean software as defined in the UCC.
"Standby Letters of Credit" shall mean those stand-by letters
of credit issued for Borrower's account in accordance with the terms of Section
2.6.
"Stockholders' Rights Agreement" shall mean that certain
Stockholders' Rights Agreement dated as of the Closing Date, among Parent,
CapitalSource Holdings LLC, OCM Principal Opportunities Fund, L.P. and Xxxxxxxx
Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc.
"Stock Pledge Agreement" shall mean, collectively and
individually, if applicable, all stock pledge agreements executed by and between
Borrower, and/or Guarantors and Agent and/or Lenders, in each case as such may
be modified, amended or supplemented from time to time.
"Subordinated Debt" shall mean the HLHZ Note, the 2002
Subordinated Debt and any other Indebtedness of Borrower that has a cash
interest payment requirement of no more than 12% per annum, does not require any
principal amortization prior to June 28, 2007, is unsecured, subordinated in
right of repayment, liens, security and remedies to all of the Obligations and
to all of Agent's and Lenders' rights, Liens and remedies and in form and
substance satisfactory to Agent in its sole discretion.
"Subsidiary" shall mean, (i) as to Borrower, any Person in
which more than 50% of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by Borrower or one or more of its
Subsidiaries, and (ii) as to any other Person, any Person in which more than 50%
of all equity, membership, partnership or other ownership interests is owned
directly or indirectly by such Person or by one or more of such Person's
Subsidiaries.
"Supporting Obligation" shall mean supporting obligation as
defined in the UCC.
"Termination Fee" shall mean an amount equal to (i) the Yield
Maintenance Fee, if such Termination is after the Closing Date but on or before
June 28, 2004 or (ii) 1% of the Commitment then in effect if such Termination is
after June 28, 2004 but on or before June 28, 2005; provided, however, if such
Termination results from a sale of all of the capital stock of Borrower or a
Change of Control described in clause (i), (ii) (iv) or (v) of the definition of
Change of Control, then such fee shall be equal
14
to (i) the Yield Maintenance Fee, if such Termination is after the Closing Date
but on or before June 28, 2003 or (ii) 1% of the Commitment then in effect if
such Termination is after June 28, 2003 but on or before June 28, 2004.
"Term" shall mean the period commencing on the Closing Date
and ending on December 28, 2004; provided, that this period shall be
automatically extended to June 28, 2007 when Parent completes the 2002 Rights
Offering, and the 2002 Subordinated Debt and the Series A Preferred Stock are
converted to common stock of Parent.
"Term Lenders" shall mean the financial institutions from time
to time named on Schedule 1 under the heading "Term Lenders", their respective
successors and permitted assigns (but not, except as expressly set forth herein,
any Participant that is not otherwise a party to this Agreement.
"Term Loan" shall mean, collectively, the term loans made by
Term Lenders to Borrower in the maximum aggregate principal amount of the
Maximum Loan Amount.
"Term Note(s)" shall mean, individually and collectively, the
Term Note and any additional promissory note(s) payable to the order of each
Term Lender executed by Borrower evidencing the Term Loan thereunder, as the
same may be modified, amended or supplemented from time to time.
"Test Period" shall mean the trailing four (4) Accounting
Quarter-period ending on the applicable Covenant Test Date as specified in this
Agreement or any annex hereto, in each case taken as one accounting period.
"2002 Purchase Agreement" shall mean the Purchase Agreement
dated as of June 26, 2002, by and among Parent, Union and the 2002 Purchasers.
"2002 Purchasers" shall mean TCW Special Credits Fund III, TCW
Special Credits Fund IIIB, TCW Special Credits Trust IIIB, The Common Fund For
Bond Investments, Inc., Delaware State Employees' Retirement Fund, Weyerhaeuser
Company Master Retirement Trust (TCW), TCW Special Credits Trust, TCW Special
Credits Trust IV, TCW Special Credits Trust IV-A, TCW Special Credits Fund IV,
TCW Special Credits Plus Fund and OCM Principal Opportunities Fund, L.P.
"2002 Rights Offering" shall mean the offering to all
shareholders of Parent the opportunity to purchase shares of common stock of
Parent, in form and substance acceptable to Agent in its sole discretion.
"2002 Subordinated Debt" shall mean the Subordinated Debt of
Parent to the 2002 Purchasers incurred pursuant to the 2002 Purchase Agreement
and evidenced by that certain 12% Convertible Note Due 2005, dated the Closing
Date, in the principal amount of $10,000,000.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Maryland from time to time.
"Yield Maintenance Fee" shall mean an amount equal to the
difference between (x) the maximum total interest and fees which could be earned
on the Loans through June 28, 2004 (or, if such Yield Maintenance Fee is
computed because of the proviso in the definition of "Termination Fee", June 28,
2003), and (y) the total interest and fees actually paid by the Borrower to the
Lenders on the Loans prior to the date of prepayment.
15
SCHEDULE A
Lenders/Commitments
REVOLVING LENDERS REVOLVING COMMITMENT
----------------- --------------------
CAPITALSOURCE FINANCE LLC $22,500,000
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
THE PROVIDENT BANK $10,000,000
Xxx Xxxx Xxxxxx Xxxxxx, 000X
Xxxxxxxxxx, Xxxx 00000
-----------
TOTAL: $32,500,000
===========
TERM LENDERS TERM LOAN
------------ -----------
CAPITALSOURCE FINANCE LLC $12,500,000
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
-----------
TOTAL: $12,500,000
===========
SCHEDULE A-1
Adjusted EBITDA Add-Backs
1. Expenses related to the relocation of the Columbus, OH Distribution
Center of up to $2,600,000 incurred during fiscal year 2002.
2. Expenses related to the capital restructuring and sale of Borrower of
up to $1,900,000 incurred during the period from May 1, 2002 until
December 31, 2002.
3. Expenses related to customer buybacks of up to $500,000 for each fiscal
year.
4. Management incentive expenses of up to $750,000 for fiscal year 2002.
5.
HISTORICAL ADJUSTMENTS TO EBITDA Q3FY01 Q4FY01 Q1FY01 APR-02
-------------------------------- ------ ------ ------ ------
Post Retirement Medical (1,350) -- -- --
Workers Comp - Prior Yrs 300 200 -- --
Mgmt Incentive - Restr Stk and Comp -- 312 579 --
Sale/Recapitalization Exp -- 539 -- 104
Payless Preference Claim -- 300 -- --
Distribution Center -- -- -- 53
Customer Buyback -- -- 362 --
Loss on Asset Disposal -- -- -- 32
Assembly Project -- -- -- --
Total Adjustments (1,050) 1,351 941 189
6. Other historical adjustments to EBITDA through the Term, in each case
subject solely to the approval of Agent.
* All of such expenses must be supported by documentation sufficient to Agent in
its Permitted Discretion.
