COMPILATION
of
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
As Amended
This Compilation is made and prepared by American Builders & Contractors
Supply Co., Inc., a Delaware corporation ("Borrower"), with its principal place
of business and chief executive office at Xxx XXX Xxxxxxx, Xxxxxx, Xxxxxxxxx
00000, as follows:
RECITALS
--------
a. Borrower is party to the certain Amended and Restated Loan and
Security Agreement dated as of July 1, 1993, by and among Borrower,
NationsBank of Texas, N.A., in its capacity as Agent ("Agent"), American
National Bank and Trust Company of Chicago, in its capacity as Co-Agent
(the "Co-Agent"), and the following financial institutions: NationsBank of
Texas, N.A., American National Bank and Trust Company of Chicago,
BankAmerica Business Credit, Inc., LaSalle Business Credit, Inc., Xxxxxx
Trust and Savings Bank, Fleet Capital Corporation and Sanwa Business Credit
Corporation (each a "Lender" and collectively "Lenders"), as amended by
each of the following:
First Amendment to Amended and Restated Loan and Security Agreement
dated as of September 2, 1994;
Waiver and Second Amendment to Amended and Restated Loan and Security
Agreement dated as of June 19, 1995;
Third Amendment to Amended and Restated Loan and Security Agreement
dated as of September 18, 1995;
Waiver and Fourth Amendment to Amended and Restated Loan and Security
Agreement dated as of September 30, 1995;
Waiver and Fifth Amendment to Amended and Restated Loan and Security
Agreement dated as of December 29, 1995;
Waiver and Sixth Amendment to Amended and Restated Loan and Security
Agreement dated as of February 8, 1996;
Waiver and Seventh Amendment to Amended and Restated Loan and Security
Agreement undated but entered into as of September 10, 1996;
Waiver and Eighth Amendment to Amended and Restated Loan and Security
Agreement dated as of March 28, 1996; and
Ninth Amendment to Amended and Restated Loan and Security Agreement
dated as of May 7, 1997;
(collectively the "Loan and Security Agreement"), pursuant to which the
Lenders have extended financial accommodations to the Borrower from time to
time as provided therein.
b. For ease of reference, Borrower has prepared the following
compilation to present the Loan and Security Agreement in a single document
which is the substantive equivalent of the Loan and Security Agreement, as
follows:
COMPILATION
1. DEFINITIONS.
1.1 General Terms. The terms "Agent", "Borrower", "Co-Agent",
"Lender" and "Lenders" shall have the meanings defined for such terms,
respectively, in the above preamble and Recitals. In addition, when used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean the party who is obligated on or under an
Account.
"Accounts" shall mean all present and future accounts receivable and
other rights of the Borrower to payment for goods sold or leased or for
services rendered, which are not evidenced by instruments or chattel paper,
and whether or not they have been earned by performance.
"Accounts Trial Balance" shall have the meaning assigned to such term
in Section 3.1.
"Affiliate" shall mean any Person (a) that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is
under common control with the Borrower, (b) that directly or beneficially
owns or holds twenty-five percent (25%) or more of any class of the voting
stock of the Borrower or (c) twenty-five percent (25%) or more of any class
of whose voting stock (or in the case of a Person which is not a
corporation, twenty-five percent (25%) or more of the equity interest) is
owned directly or beneficially or held by the Borrower.
"Affiliates Investments Limit" means an amount, determined as of the
first day of each January, April, July and October (which amount, upon each
such determination, shall remain fixed until the next determination), equal
to the sum of Ten Million Dollars ($10,000,000.00) plus an amount (not less
than $0.00) equal to ten percent (10.0%) of the amount by which the net
income of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP for the period (taken as one accounting
period) beginning on January 1, 1997 and ending on the last day of the most
recently completed fiscal quarter, exceeds the aggregate amount of
dividends, if any, paid by the Borrower during such period pursuant to, and
to the extent allowed by, clause (i) of Section 8.10."
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"Agent" shall mean NationsBank of Texas, N.A. in its capacity as Agent
hereunder, and any successor agent hereunder."
"Applicable Margin" shall mean (a) with respect to a Floating Rate
Loan, an amount equal to zero percent (0.00%), and (b) with respect to a
Eurodollar Loan, an amount equal to one and one-quarter percent (1.25%).
"Blocked Accounts" shall have the meaning assigned to such term in
Section 3.6.
"Borrowing Date" shall mean a date on which a Eurodollar Loan is made
hereunder.
"Borrowing Notice" shall have the meaning ascribed to such term in
Section 2.11.
"Business Day" shall mean (a) with respect to any borrowing, payment
or rate selection of Eurodollar Loans, a day other than Saturday or Sunday
on which banks are open for business in Dallas, Texas and on which dealings
in United States Dollars are carried in the London interbank market and (b)
for all other purposes, a day other than Saturday or Sunday on which banks
are open for business in Dallas, Texas.
"Co-Agent" shall mean American National Bank and Trust Company of
Chicago in its capacity as Co-Agent hereunder, and any successor co-agent
hereunder.
"Code" shall mean the Uniform Commercial Code of the State of
Illinois.
"Collateral" shall mean all property and interests in property now
owned or hereafter acquired by the Borrower or any other Person in or upon
which a security interest, lien or mortgage is granted to the Agent or any
Lender by the Borrower or such other Person in order to secure the
Liabilities, whether under this Agreement, the other Financing Agreements
or under any other documents, instruments or writings executed by the
Borrower or any other Person and delivered to the Agent or any Lender.
"Collateral Report" shall have the meaning assigned to such term in
Section 3.1.
"Collecting Banks" shall have the meaning assigned to such term in
Section 3.6.
"Corporate Base Rate" shall mean the prime or base rate of interest
publicly announced from time to time by the Agent, whether or not such rate
is the best rate available. Any change in the Corporate Base Rate shall be
effective as of the effective date stated in the announcement by the Agent
of such change.
"Default" shall mean the occurrence or existence of any one or more of
the following events: (a) the Borrower fails to pay any of the Liabilities
when such Liabilities are due, declared due or demanded; (b) the Borrower
or any guarantor of the Liabilities fails or neglects to perform, keep or
observe any of the covenants, conditions, promises, or agreements contained
in this Agreement or any of the other Financing Agreements, and in the
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case of failure or neglect to perform, keep or observe any of the
covenants, conditions, promises or agreements contained in Sections 7.1
(solely with respect to the Borrower's obligations to keep its books or
records and accounts in accordance with GAAP), 7.3, 7.4, 7.8 or 7.11, such
failure or neglect shall continue for ten (10) days after an officer of the
Borrower located in Beloit, Wisconsin learns thereof or ten (10) days after
the Agent provides the Borrower with written notice thereof; (c) any
written warranty or representation heretofore, now or hereafter made by the
Borrower, or any guarantor of the Liabilities in connection with this
Agreement or any of the other Financing Agreements is untrue or incorrect
in any material respect, or any information contained in any schedule,
certificate, statement, report, financial data, notice, or writing
furnished at any time by the Borrower to the Agent or any Lender is untrue
or incorrect in any material respect, on the date as of which the facts set
forth therein are stated or certified; (d) judgments or orders requiring
aggregate payments in excess of one Hundred Thousand Dollars ($100,000),
for which the Borrower's insurer has not admitted liability, in writing, or
assumed the continued defense in the case where the judgment arises, shall
be rendered against the Borrower and such judgments or orders shall remain
unsatisfied or undischarged and in effect for thirty (30) consecutive days
without a stay of enforcement or execution; (e) a notice of lien, levy, or
assessment is filed or recorded with respect to ten percent (10%) or more
of the Collateral by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipality or other
governmental agency or any taxes or debts owing at any time or times
hereafter to any one or more of them become a lien upon ten percent (10%)
or more of the Collateral; provided, that this clause (e) shall not apply
to any liens, levies, or assessments which the Borrower or its Subsidiary
is contesting in good faith (provided the Borrower or its Subsidiary has
complied with the provisions of clauses (a) and (b) of Section 7.4) or
which relate to current taxes not yet due and payable; (f) ten percent
(10%) or more of the assets of the Borrower or any of its Subsidiaries or
the Collateral is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and on or
before the thirtieth (30th) day thereafter such assets are not returned to
the Borrower or the owner thereof, as applicable, and/or such writ,
distress warrant or levy is not dismissed, stayed or lifted; (g) a
proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed
against the Borrower, any of its Subsidiaries or any guarantor of the
Liabilities and such proceeding remains undismissed and unstayed for a
period of sixty (60) days, or a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency or receivership law or
statute is filed by the Borrower, any of its Subsidiaries or any guarantor
of the Liabilities, or the Borrower, any of its Subsidiaries or any
guarantor of the Liabilities makes an assignment for the benefit of
creditors, or the Borrower, any of its Subsidiaries or any guarantor of the
Liabilities authorizes any of the foregoing by proper corporate action, as
applicable; (h) the Borrower or any of its Subsidiaries voluntarily or
involuntarily dissolves or is dissolved; (i) the Borrower, any of its
Subsidiaries or any guarantor of the Liabilities becomes insolvent or fails
generally to pay its debts as they become due; (j) the Borrower, any of its
Subsidiaries or any guarantor of the Liabilities is enjoined, restrained,
or in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business
affairs; provided, that the affected business affairs of any guarantor of
the Liabilities have a direct impact upon the business affairs of the
Borrower; (k) a breach by the
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Borrower, any of its Subsidiaries or any guarantor of the Liabilities shall
occur under any material agreement, document or instrument (other than an
agreement, document or instrument evidencing the lending of money), whether
heretofore, now or hereafter existing between the Borrower, any of its
Subsidiaries or such guarantor and any other Person, and such breach shall
continue beyond any applicable cure period contained in such agreement,
document or instrument; provided, that with respect to any guarantor of the
Liabilities, such agreement, document or instrument pertains to the
business affairs of the Borrower; (1) a breach by the Borrower, any of its
Subsidiaries or any guarantor of the Liabilities shall occur under any
written agreement, document or instrument evidencing the lending of money,
except for trade payables and normal accruals arising in the ordinary
course of business which are not evidenced by any promissory note or
similar written instrument, with respect to which the aggregate principal
balance is equal to or greater than Two Hundred Thousand Dollars
($200,000), whether theretofore, now or hereafter existing between the
Borrower, any of its Subsidiaries or such guarantor and any other Person,
and the effect thereof would be to permit the acceleration of the
indebtedness thereunder; provided, that with respect to any guarantor of
the Liabilities, such written agreement, document or instrument pertains to
the business affairs of the Borrower and provided further, that the Default
created by this clause (1) shall exist only for so long as the relevant
indebtedness may be accelerated; (m) any guarantor of the Liabilities shall
terminate or revoke the obligations of such guarantor under the applicable
guarantee agreement or breach any of the terms of such guarantee agreement
or any of the other Financing Agreements to which such guarantor is a
party; (n) a breach shall occur under the Subordination Agreement, or a
breach or default shall occur under the Senior Subordinated Notes or the
Indenture; (o) there shall occur any loss, theft, substantial damage or
destruction of any item or items of Collateral (a "Loss") if (i) the amount
of such Loss with respect to which an insurer has not admitted liability,
in writing, within a reasonable time after the occurrence of such Loss,
exceeds Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate or
(ii) any such Loss results in an interruption of the business of the
Borrower or any of its Subsidiaries (which shall conclusively be presumed
to concern more than one (1) business location of the Borrower) which is
not, in the Agent's reasonable discretion, adequately covered by business
interruption insurance; (p) the Borrower, any of its Subsidiaries or any
guarantor of the Liabilities shall be indicted for any crime for which
forfeiture of a material amount of its or his property is a potential
penalty; (q) Xxxxxxx X. Xxxxxxxxx or his wife, their personal
representatives and estates, cumulatively shall cease to own either
directly or indirectly less than fifty-one percent (51%) of the Borrower's
outstanding voting securities; and (r) a material and adverse change shall
occur in the business, operations or financial condition of the Borrower or
any of its Subsidiaries or a material and adverse change shall occur in the
financial condition or the business affairs pertaining to the Borrower of
any guarantor of the Liabilities.
"EBITDA" means net income before interest, taxes depreciation and
amortization, determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.
"Eligible Accounts" shall have the meaning assigned to such term in
Section 3.2.
"Eligible Inventory" shall have the meaning assigned to such term in
Section 3.10.
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"Environmental Laws" shall mean all federal, state and local laws,
statutes, rules, regulations, ordinances, programs, permits, guidances,
orders and consent decrees relating to health, safety and environmental
matters applicable to the business and property of the Borrower and its
Subsidiaries. Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et seq., as amended; the Toxic
Substance Act, 15 U.S.C. (S) 2601 et seq., as amended; the Clean Water Act,
33 U.S.C. (S) 466 et seq., as amended; the Clean Air Act, 42 U.S.C. (S)
7401 et seq., as amended; state and federal superlien and environmental
cleanup programs; and U.S. Department of Transportation regulations.
"Environmental Notice" shall mean any summons, citation, directive,
information request, notice of potential responsibility, notice of
violation or deficiency, order, claim, complaint, investigation,
proceeding, judgment, letters or other written communication, actual or
threatened, from the United States Environmental Protection Agency or other
federal, state or local agency or authority, or any other entity or
individual, public or private, concerning any intentional or unintentional
act or omission which involves management of Hazardous Substances on or off
the property and is received by an officer or center manager of the
Borrower; the imposition of any lien on property, including but not limited
to liens asserted by government entities in connection with Responses to
the presence or Release of Hazardous Substances; any alleged violation of
or responsibility under Environmental Laws; and, after due inquiry and
investigation, any knowledge of any facts which could give rise to any of
the above is received or obtained by an officer or center manager of the
Borrower.
"Equipment" shall mean all of the Borrower's machinery, equipment,
fixtures and other tangible personal property, other than Inventory,
Rolling Stock and office equipment, whether located on the Borrower's
premises or located elsewhere, together with any and all accessions, parts
and appurtenances thereto, whether presently owned or hereafter acquired by
the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each trade or business, including the
Borrower, whether or not incorporated, which together with the Borrower
would be treated as a single employer under Section 4001 of ERISA.
"Eurodollar Base Rate" shall mean, with respect to a Eurodollar Loan
for the relevant Eurodollar Interest Period, the rate of interest per annum
(rounded upwards, if necessary, to the nearest one-one hundredth of one
percent (1/100 of 1.0%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in United States
dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Eurodollar Interest Period for a term comparable
to such Eurodollar Interest Period. If for any reason such rate is not
available, the term "Eurodollar Base Rate" shall mean, with respect to any
Eurodollar Loan for a particular Eurodollar Interest Period, the rate of
interest per annum (rounded upwards, if necessary, to the nearest one-one
hundredth of
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one percent (1/100 of 1.0%) appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in United States dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Eurodollar Interest Period for a term comparable to such
Eurodollar Interest Period, provided, that if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates. As used herein, "Telerate Page 3750"
refers to the British Bankers Association Libor Rates (determined at 11:00
a.m. (London time) that are published by Dow Xxxxx Telerate, Inc.
"Eurodollar Interest Period" shall mean, with respect to a Eurodollar
Loan, a period of one (1), two (2), three (3) or four (4) months commencing
on a Business Day selected by the Borrower pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which
corresponds numerically to such date one (1), two (2), three (3) or four
(4) months thereafter, provided, that if there is no such numerically
corresponding day in such first (lst), second (2nd), third (3rd) or fourth
(4th) succeeding month, such Eurodollar Interest Period shall end on the
last Business Day of such first (lst), second (2nd), third (3rd) or fourth
(4th) succeeding month. If a Eurodollar Interest Period would otherwise end
on a day which is not a Business Day, such Eurodollar Interest Period shall
end on the next succeeding Business Day, provided, that if said next
succeeding Business Day falls in a new month, such Eurodollar Interest
Period shall end on the immediately preceding Business Day.
"Eurodollar Loan" shall mean the portion of the Revolving Loans which
bears interest at a Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to a Eurodollar Loan for
the relevant Eurodollar Interest Period, the sum of the Eurodollar Base
Rate applicable to that Eurodollar Interest Period plus the Applicable
Margin in effect at the beginning of such Eurodollar Interest Period.
"Event of Default" shall mean an event which through the passage of
time or the service of notice or both would (assuming no action is taken by
the Borrower to cure the same) mature into a Default.
"Excess Availability" shall mean (a) the lesser of (i) the Maximum
Facility less the aggregate undrawn face amount of the then outstanding
Letters of Credit, and (ii) Loan Availability less the aggregate undrawn
face amount of the then outstanding Letters of Credit, minus (b) the sum of
the outstanding balance of the Revolving Loans and the aggregate undrawn
face amount of the then outstanding Letters of Credit, but in no event
shall Excess Availability be less than zero (0).
"Financials" shall have the meaning assigned to such term in Section
6.4.
"Financing Agreements" shall mean this Agreement and all other
agreements, instruments and documents, including without limitation
security agreements, loan agreements, notes, guarantees, mortgages, deeds
of trust, subordination agreements, intercreditor agreements, pledges,
powers of attorney, consents, assignments, collateral assignments,
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reimbursement agreements, contracts, leases, financing statements and all
other written matter whether heretofore, now, or hereafter executed by or
on behalf of the Borrower, any of its Affiliates or any guarantor of the
Liabilities and delivered to the Agent or any Lender, together with all
agreements and documents referred to therein or contemplated thereby, as
each may be amended, modified, supplemented or extended from time to time,
but shall exclude all agreements, instruments and documents pertaining to
loans made by any Lender to Xxxxxxx X. Xxxxxxxxx, individually.
"Floating Rate" shall mean, with respect to a Floating Rate Loan, a
rate per annum equal to the sum of the Corporate Base Rate plus the
Applicable Margin, changing when and as the Corporate Base Rate changes.
"Floating Rate Loan" shall mean the portion of the Revolving Loan
which bears interest at a Floating Rate.
"Funded Debt" means indebtedness that matures more than one year from
the date of creation thereof, or that is directly or indirectly renewable
or extendible at the option of such Person under a revolving credit or
similar arrangement obligating the payee to renew or extend credit over a
period of more than one year from the date of such creation, determined on
a consolidated basis for the Borrower and its Subsidiaries.
"GAAP" shall mean generally accepted accounting principles as used by
the Financial Accounting Standards Board, as in effect from time to time,
consistently applied.
"General Intangibles" shall mean all general intangibles, choses in
action, causes of action and all other intangible personal property of the
Borrower of every kind and nature wherever located and whether presently
owned or hereafter acquired by the Borrower (other than Accounts),
including without limitation corporate or other business records,
inventions, designs, patents, patent applications, service marks, service
xxxx applications, trademarks, trademark applications, tradenames,
tradestyles, trade secrets, goodwill, registrations, computer software,
operational manuals, product formulas for industrial processes, blueprints,
drawings, copyrights, copyright applications, licenses, license agreements,
permits, operating rights and authorities to move heavy equipment,
franchises, customer lists, tax refunds, tax refund claims and the like.
"Hazardous Substances" shall mean hazardous substances, hazardous
wastes, hazardous waste constituents and reaction by-products, hazardous
materials, pesticides, oil and other petroleum products, and toxic
substances, including asbestos and PCBS, as those terms are defined
pursuant to Environmental Laws.
"Indenture" means the certain Indenture dated as of May 7, 1997 among
the Borrower, certain Subsidiaries of the Borrower and NorWest Bank
Minnesota, National Association, and any renewals, extensions,
modifications, amendments or restatements thereof, which governs the Senior
Subordinated Notes.
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"Initial Term" shall have the meaning assigned to such term in Section
2.8.
"Inventory" shall mean any and all inventory and goods, including
without limitation goods in transit, wheresoever located, whether now owned
or hereafter acquired by the Borrower, which are held for sale or lease,
furnished under any contract of service or held as raw materials, work-in-
process or supplies, and all materials used or consumed in the Borrower's
business, and shall include such property the sale or other disposition of
which has given rise to Accounts and which has been returned to or
repossessed or stopped in transit by the Borrower.
"Inventory Sublimit" shall have the meaning assigned to such term in
subsection 2.1(ii).
"Letters of Credit" shall have the meaning assigned to such term in
Section 2.2.
"Liabilities" shall mean all of the Borrower's liabilities,
obligations and indebtedness to the Agent and/or any of the Lenders of any
and every kind and nature, whether heretofore, now or hereafter owing,
arising, due or payable and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct, contingent, fixed
or otherwise (including obligations of performance) and whether arising or
existing under written agreement, oral agreement or by operation of law,
but only to the extent that the foregoing arises under or in connection
with the Borrower's indebtedness and obligations to the Agent and/or any of
the Lenders under this Agreement (including without limitation all
"Liabilities" defined by the Existing Loan Agreement and renewed and
continued hereunder) and the other Financing Agreements and the Borrower's
reimbursement obligations with respect to any Letter of Credit.
"Loan Account" shall have the meaning assigned to such term in Section
2.4.
"Loan Availability" shall have the meaning assigned to such term in
Section 2.1.
"Manage" or "Management" shall mean to generate, handle, manufacture,
process, treat, store, use, re-use, refine, recycle, reclaim, blend or burn
for energy recovery, incinerate, accumulate speculatively, transport,
transfer, dispose of, release, threaten to release or abandon Hazardous
Substances.
"Maximum Facility" shall mean the maximum amount which the Lenders
have agreed to consider as a ceiling on the outstanding principal balance
of the Revolving Loans to be made and Letters of Credit to be issued under
this Agreement. The Maximum Facility shall be Two Hundred Million Dollars
($200,000,000.00).
"Monthly Report" shall have the meaning assigned to such term in
Section 3.1.
"Multiemployer Plan" shall have the meaning assigned to such term in
Section 6.23.
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"Overadvance" shall mean the amount, if any (determined upon the
funding of any Revolving Loan) by which the aggregate amount of all
Revolving Loans exceeds the Loan Availability.
"PBGC" shall have the meaning assigned to such term in Section 6.23.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party, or government (whether national,
federal, state, provincial, county, city, municipal or otherwise, including
without limitation any instrumentality, division, agency, body or
department thereof).
"Plan" shall have the meaning assigned to such term in Section 6.23.
"Prohibited Transaction" shall have the meaning assigned to such term
in Section 6.23.
"Projections" shall mean, collectively, the consolidated and
consolidating projected financial statements of the Borrower and its
Subsidiaries delivered pursuant to Section 6.4 and those required to be
delivered to the Agent pursuant to Section 7.1. Each set of Projections
shall cover the one (1) year period immediately following the date thereof,
shall be prepared on a monthly basis in a manner substantially consistent
with the initial set of Projections delivered pursuant to Section 6.4,
shall be reasonably satisfactory, in substance, to the Agent and the
Lenders, and shall include: (a) projected balance sheets, (b) projected
cash flow statements, (c) projected profit and loss statements, (d)
projected capital expenditures detailed by anticipated major expenditures
and (e) appropriate supporting details and statements of underlying
assumptions.
"Pro Rata Share" shall mean the percentage interest of each of the
Lenders as indicated on the signature pages to this Agreement.
"Release" shall mean any actual or threatened spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of Hazardous Substances into the
environment, as "environment" is defined in CERCLA.
"Reportable Event" shall have the meaning assigned to such term in
Section 6.23.
"Requisite Lenders" shall mean Lenders having, in the aggregate, Pro
Rata Shares of at least fifty-one percent (51.0%).
"Respond" or "Response" shall mean any action taken pursuant to
Environmental Laws to correct, remove, remediate, cleanup, prevent,
mitigate, monitor, evaluate, investigate or assess the Release of a
Hazardous Substance.
"Revolving Credit Notes" shall have the meaning assigned to such term
in Section 2.1.
"Revolving Loans" shall have the meaning assigned to such term in
Section 2.1.
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"Rolling Stock" shall mean the Borrower's forklifts, lift trucks,
motor vehicles, trailers and other rolling stock, whether located on the
Borrower's premises or located elsewhere together with any and all
accessions, parts and appurtenances thereto, including but not limited to
conveyors, booms, scissor beds and cranes, whether presently owned or
hereafter acquired by the Borrower.
"Senior Subordinated Notes" means the certain 10.625% Senior
Subordinated Notes due 2007, executed and issued by the Borrower in an
aggregate principal amount not exceeding One Hundred Million Dollars
($100,000,000.00) pursuant to the Indenture, and any and all renewals,
extensions, modifications, amendments or restatements thereof to the extent
accomplished in compliance with the prior consent of the Agent as required
by Section 8.20.
"Store Acquisition" shall mean the purchase of assets in connection
with the purchase of an "Additional Store" as provided in Section 8.3.
"Subordination Agreement" shall mean the Subordination Agreement dated
as of December 12, 1990, executed by GAF Corporation (or its successors-in-
interest) in favor of the Agent and the Lenders, and consented to by the
Borrower, as such agreement may be amended, modified or reaffirmed from
time to time.
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power
to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
by the Borrower or any partnership or joint venture of which more than
fifty percent (50%) of the outstanding equity interests are at the time,
directly or indirectly, owned by the Borrower. Subsidiary' includes,
without limitation, each of Mule-Hide Products Company, Inc. and Amcraft
Building Products Co., Inc., respectively.
"Subordinated Seller Obligations" shall have the meaning assigned to
such term in the definition of "Tangible Net Worth" as provided in this
Section 1.1.
"Tangible Net Worth" shall mean the total assets minus total
liabilities (excluding the Senior Subordinated Notes and excluding
Subordinated Seller Obligations, if any, defined hereinbelow) decreased by
the Affiliates Investments Limit and decreased by the book value of all
intangible assets (other than Accounts), including without limitation,
patents, brand names, trademarks, licenses, goodwill, customer lists,
mailing lists, subscription lists, organization expenses, and deferred
costs, determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP. In connection with the foregoing,
"Subordinated Seller Obligations" means purchase money obligations of the
Borrower incurred in connection with the purchase of Additional Stores (not
exceeding the maximum amount permitted under Section 8.3) to the extent
such obligations are expressly made subject to a written subordination
agreement among the holder of such obligations, the Borrower, the Agent and
the Lenders, in form satisfactory to the Agent and the Lenders, which
provides
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(without limitation) that (i) such obligations are subordinate in right of
payment and claim in favor of all Liabilities from time to time existing,
(ii) the Borrower's obligation to pay, and such holder's right to receive,
payments of such obligations shall be suspended upon written notice by the
Agent to such holder and the Borrower, which notice may be issued by the
Agent at any time in its discretion whether or not any Default or Event of
Default is in existence, (iii) in any event, prepayment of such obligations
is prohibited without the prior written consent of the Agent and the
Lenders and (iv) such holder may not exercise any remedies against the
Borrower in respect of collection or enforcement of such obligations until
the Financing Agreements have been terminated and all Liabilities have been
paid in full.
"Tax Code" shall have the meaning assigned to such term in Section
6.23.
"Term" shall have the meaning assigned to such term in Section 2.8.
1.2 Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined herein shall have the meanings customarily
given them in accordance with GAAP.
1.3 Others Defined in Code. All terms contained in this Agreement
(and which are not otherwise specifically defined herein) shall have the
meanings provided by the Code to the extent the same are used or defined
therein.
1.4 Effect of Amendment and Restatement. Upon the execution and
delivery of this Agreement, the obligations of the Borrower to repay the loans
and advances arising under the Existing Loan Agreement shall continue in full
force and effect and the liens and security interests securing payment thereof
shall be continuing, but shall now be governed by the terms of this Agreement
and each of the other Financing Agreements (exclusive of the Existing Loan
Agreement).
2. CREDIT.
2.1 Revolving Loans. Provided there does not then exist a Default or
an Event of Default, and subject to the provisions of Section 4, each Lender
will, from time to time, up to and including the last day of the Initial Term
or, if extended pursuant to Section 2.8, any subsequent Term, upon the
Borrower's request made in the manner set forth in Section 4.1, advance to the
Borrower on a revolving credit basis (the "Revolving Loans") such Lender's Pro
Rata Share of an aggregate amount equal to up to the lesser of (a) the Maximum
Facility, less the aggregate undrawn face amount of the then outstanding Letters
of Credit and (b) an amount equal to (i) Loan Availability less (ii) the
aggregate undrawn face amount of the then outstanding Letters of Credit. As
used herein, "Loan Availability" at any time shall mean the sum of the
following:
(i) up to eighty-five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
Account Debtors in connection therewith) then outstanding under existing
Eligible Accounts at such time, less such reserves as the Agent in its sole
discretion elects to establish; plus
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(ii) up to the lesser of (x) sixty percent (60%) (sixty-five percent
(65%) during the period from December 1 of each year through and including
June 30 of the following year) of Eligible Inventory, less such reserves as
the Agent in its sole discretion elects to establish and (y) the "Inventory
Sublimit. The "Inventory Sublimit" (a) at any time during the period from
December 1 of each year through and including June 30 of the following
year, shall be an amount equal to sixty percent (60.0%) of the aggregate
amount of Revolving Loans outstanding at any such time, and (b) at any time
during the period from July 1 of each year through and including November
30 of such year, shall be an amount equal to fifty percent (50.0%) of the
aggregate amount of Revolving Loans outstanding at any such time.
Each Lender irrevocably agrees that it shall make its Pro Rata share of each
Revolving Loan available to the Agent in accordance with the terms of this
Agreement. Payments made by the Agent to any Person on account of any Letter of
Credit shall constitute Revolving Loans hereunder, the proceeds of which shall
be used to reimburse the Agent for such payments. Each advance to the Borrower
under this Section 2.1 shall be in integral multiples of Five Thousand Dollars
($5,000) (other than Revolving Loans created by payment on a Letter of Credit)
and shall, on the day of such advance, be deposited, in immediately available
funds, in the Borrower's demand deposit account with the Agent, or in such other
account as the Borrower may, from time to time, designate. The indebtedness of
the Borrower under this Section 2.1 shall be evidenced by revolving credit notes
of even date herewith issued by the Borrower to the Lenders in the form attached
hereto as Exhibit A (the "Revolving Credit Notes"). The provisions of the
Revolving Credit Notes notwithstanding, the Liabilities evidenced by the
Revolving Credit Notes shall become immediately due and payable upon the earlier
to occur of (A) the last day of the Initial Term or, if extended pursuant to
Section 2.8, any subsequent Term and (B) the acceleration of the Liabilities.
The Borrower agrees that if at any time the sum of the outstanding principal
amount of the Revolving Loans plus the aggregate undrawn face amount of all
outstanding Letters of Credit shall exceed the lesser of (a) the Maximum
Facility and (b) Loan Availability, the Borrower shall promptly pay the Agent,
for the account of the Lenders, such amount as is necessary to eliminate such
excess.
2.2 Letters of Credit. Provided there does not then exist a Default
or an Event of Default, and subject to the provisions of Section 4, the Agent
may, in its sole discretion, from time to time, up to and including the seventy-
fifth (75th) day before the last day of the Initial Term or, if extended
pursuant to Section 2.8, any subsequent Term, issue upon the Borrower's request
and for the Borrower's account, irrevocable standby and documentary letters of
credit (collectively, the "Letters of Credit"). The aggregate undrawn face
amount of outstanding Letters of Credit (a) shall not at any time exceed Ten
Million Dollars ($10,000,000) and (b) shall serve to reduce the amount otherwise
available for Revolving Loans. Payments made by the Agent to any Person on
account of any Letter of Credit shall constitute Revolving Loans hereunder, the
proceeds of which shall be used to reimburse the Agent for such payments. No
Letter of Credit shall have an expiry date later than the last day of the
Initial Term or. any renewal Term, if applicable. Applications for the issuance
of Letters of Credit must be received by the Agent, in a form satisfactory to
the Agent, at least three (3) Business Days prior to the requested issuance date
thereof. It is expressly understood and agreed by the Borrower that nothing
contained in this Agreement shall, at any time, require the Agent to issue
Letters of Credit and the issuance of such Letters of Credit shall at all times
be in the Agent's sole discretion. The Borrower hereby agrees to protect,
indemnify, pay and save the Agent harmless from and against any and all claims,
actions, causes of action, judgments, suits, obligations, demands,
13
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees and disbursements) which it may incur or be subject to as a
consequence, direct or indirect, of the issuance of the Letters of Credit, or
any drawing or purported drawing thereunder, other than as a result of the gross
negligence or willful misconduct of the Agent. Except for the Agent's gross
negligence or willful misconduct, the Borrower shall assume all risks of the
acts, omissions or misuse of the Letters of Credit by the beneficiaries thereof.
Except for the Agent's gross negligence or willful misconduct, the Agent shall
not be responsible: (a) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of the Letters of Credit, even if it
should in fact prove to be in any or all aspects invalid, insufficient,
inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign the
Letters of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(c) for errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (d) for errors in interpretation of technical terms; (e) for
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under the Letters of Credit or of the proceeds thereof;
and (f) for any consequences arising from causes beyond the control of the
Agent.
2.3 Principal Balance of Liabilities Not to Exceed the Maximum
Facility. The sum of the aggregate outstanding principal balance of the
Revolving Loans made under this Agreement and the aggregate face amount of the
outstanding Letters of Credit shall not, at any given time, exceed the lesser of
(a) the Maximum Facility and (b) an amount equal to the sum of (i) Loan
Availability at such time plus (ii) the amount of any Overadvance to the limited
extent allowed by Agent in its discretion pursuant to Section 11.9(b). The
Borrower agrees that if at any time any such excess shall arise, the Borrower
shall promptly pay to the Agent, for the account of the Lenders, such amount as
may be necessary to eliminate such excess. The Borrower further agrees that if
at any time the Inventory Sublimit or any of the other limits or ratios
contained in Section 2.1 or 2.2 are exceeded, the Borrower shall promptly pay to
the Agent, for the account of the Lenders, such amount as may be necessary to
eliminate such excess.
2.4 Borrower's Loan Account. The Agent shall maintain a loan account
(the "Loan Account") on its books in which shall be recorded (a) all Revolving
Loans made by the Lenders, or the Agent for the account of the Lenders, to the
Borrower pursuant to this Agreement, (b) all payments made by the Borrower on
all such Revolving Loans and (c) all other appropriate debits and credits as
provided in this Agreement or any of the other Financing Agreements, including
without limitation all fees, charges, expenses and interest. All entries in the
Borrower's Loan Account shall be made in accordance with the Agent's customary
accounting practices pursuant to GAAP as in effect from time to time. The
Borrower promises to pay the amount reflected as owing by it under its Loan
Account and all of its other obligations hereunder as such amounts become due or
are demanded or declared due pursuant to the terms of this Agreement.
2.5 Statements. All Revolving Loans to, and Letters of Credit issued
for the benefit of, the Borrower, and all other debits and credits provided for
in this Agreement or any of the other Financing Agreements, shall be evidenced
by entries made by the Agent in its internal data control systems showing the
date, amount and reason for each such debit or credit. Until such time
14
as the Agent shall have rendered to the Borrower written statements of account
as provided herein, the balance in the Borrower's Loan Account, as set forth on
the Agent's most recent computer printout, shall be rebuttably presumptive
evidence of the amounts due and owing the Agent and the Lenders by the Borrower.
From time to time, the Agent shall render to the Borrower a statement setting
forth the balance of the Borrower's Loan Account, including principal, interest,
expenses and fees. Each such statement shall be subject to subsequent
adjustment by the Agent but shall, absent manifest errors or omissions, be
rebuttably presumed correct and to that extent binding upon the Borrower and
shall constitute an account stated unless, within thirty (30) days after receipt
of any statement from the Agent, the Borrower shall deliver to the Agent written
objection thereto specifying the error or errors, if any, contained in such
statement.
2.6 Interest and Fees.
(a) The Borrower shall pay to the Agent, for the account of the
Lenders, interest on the outstanding principal balance of (i) the Floating Rate
Loan at the Floating Rate and (ii) the Eurodollar Loan at the applicable
Eurodollar Rate. Notwithstanding the foregoing, upon the written election by
the Agent, following the occurrence and during the continuance of a Default, the
Borrower shall pay to the Agent, for the account of the Lenders, interest on the
outstanding principal balance of the Revolving Loans at the per annum rate of
two percent (2%) plus the interest rate otherwise in effect (the "Default
Rate"). Interest shall be payable monthly in arrears on the first day of each
calendar month commencing August 1, 1993, and shall be computed on the basis of
a year of three hundred sixty (360) days for the actual number of days elapsed.
(b) The Borrower shall pay to the Agent, for the account of the
Lenders, an unused facility fee equal to one-fourth percent (.25%) per annum of
the lesser of (i) Twenty-Five Million Dollars ($25,000,000.00) or (ii) the
amount by which the Maximum Facility exceeds the sum of the average outstanding
Revolving Loans during the immediately preceding calendar month plus the average
aggregate undrawn face amount of the Letters of Credit issued and outstanding
during the immediately preceding calendar month, computed on the basis of a year
of three hundred sixty (360) days for the actual number of days elapsed, which
shall be payable monthly in arrears on the first day of each calendar month
commencing February 1, 1996.
(c) The Borrower shall pay to the Agent, for the account of the
Lenders, a Letter of Credit fee equal to one percent (1.00%) per annum of the
average aggregate undrawn face amount of the Letters of Credit issued and
outstanding during the immediately preceding calendar month, computed on the
basis of a year of three hundred sixty (360) days for the actual number of days
elapsed. In addition, the Borrower will pay to the Agent, for its own account,
the Agent's customary issuance and processing charges and fees for letters of
credit. All of the foregoing fees and charges shall be payable monthly in
arrears on the first day of each calendar month commencing August 1, 1993. Upon
the written election of the Agent, following the occurrence and during the
continuance of a Default, the Letter of Credit fee shall be charged at the per
annum rate of three percent (3.00%) of the average aggregate undrawn face amount
of the Letters of Credit issued and outstanding during the immediately preceding
calendar month.
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(d) As a monthly servicing fee to the Agent (i) the Borrower shall pay
to the Agent, for its own account, a monthly servicing fee, payable monthly in
arrears on the last day of each calendar month, of $7,083.33 per month.
2.7 Method for Making Payments. All payments that the Borrower is
required to make to the Agent or the Lenders under this Agreement or under any
of the other Financing Agreements shall be made in immediately available funds
not later than 1:00 p.m. (Dallas, Texas time) on the date of payment at the
Agent's office at 000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, or at such other place
as the Agent directs from time to time, or in the Agent's sole discretion, by
appropriate debits to the Loan Account. Payments made after 1:00 p.m. (Dallas,
Texas time) shall be deemed to have been made on the next succeeding Business
Day.
2.8 Term of this Agreement. Subject to all other terms and
conditions hereof, this Agreement shall be effective until June 30, 2000 (the
"Initial Term") and shall automatically extend for successive one year periods
(each a "Term") of one year (each extending through the next succeeding June 30)
unless terminated by the Borrower or the Agent or any Lender by written notice
of intention to terminate this Agreement as of the end of the Initial Term or
any such Term, as the case may be, which, in order to be effective, must be
delivered to all other parties to this Agreement at least sixty (60) days prior
to the end of the Initial Term or any such Term, as the case may be. Following
timely delivery of any such notice, unless otherwise agreed in writing by the
Borrower, the Agent and all Lenders, this Agreement shall terminate as of the
expiration of the Initial Term or any such Term, as the case may be, provided
that (a) all of the Agent's and each Lender's rights and remedies under this
Agreement and (b) the security interests reaffirmed and created under Section
5.1 and under any of the other Financing Agreements, shall survive any such
termination until all of the Liabilities under this Agreement and the other
Financing Agreements have been paid in full. In addition, the Agent may at any
time demand repayment of the Liabilities and the Liabilities may be accelerated
as set forth in Section 9.1. Upon the effective date of termination, all of the
Liabilities shall become immediately due and payable without notice or demand.
Notwithstanding any termination, until all of the Liabilities hereunder shall
have been fully paid and satisfied, the Agent shall be entitled to retain its
security interests, for the benefit of the Lenders, in and to all existing and
future Collateral and the Borrower shall continue to remit collections of
Accounts and proceeds as provided herein.
2.9 Optional Prepayments. The Borrower may, at its option, prepay at
any time during the Initial Term or any subsequent Term all or any portion of
the Liabilities. Subject to the requirements of Section 2.11(c), prepayments of
a portion of the Liabilities may be made by the Borrower without incurring a
premium or prepayment fee; provided, if the Borrower prepays all of the
Liabilities in full and terminates this Agreement at any time prior to June 30,
1998, the Borrower shall pay the Agent, for the account of the Lenders, as
liquidated damages and compensation for the costs of the Lenders' being prepared
to make funds available to the Borrower under this Agreement, a prepayment fee
equal to one quarter of one percent (.25%) of the Maximum Facility.
Notwithstanding the foregoing, no fee shall be payable under this Section 2.9
with respect to a prepayment occurring (i) after the Revolving Loans have been
accelerated or (ii) after the Agent, on behalf of the Lenders, has requested in
writing that the Borrower attempt to prepay the Revolving Loans.
16
2.10 Limitation on Charges. In no contingency or event whatsoever
shall the amount of interest under the Financing Agreements paid by Borrower,
received by Agent or Lenders, agreed to be paid by Borrower, or requested or
demanded to be paid by Agent, exceed the maximum rate of interest permitted from
day to day by any applicable state or federal law (the "Maximum Rate"). In the
event any such sums paid by Borrower would exceed the Maximum Rate, such excess
amount shall automatically be applied to any unpaid principal or, if the amount
of such excess exceeds said unpaid principal, such excess shall be paid to
Borrower. All sums paid, or agreed to be paid, by Borrower which are or
hereafter may be construed to be compensation for the use, forbearance, or
detention of money shall be amortized, prorated, spread and allocated in respect
of the Liabilities throughout the full term of this Agreement until the
Liabilities are paid in full. Notwithstanding any provisions contained in the
Financing Agreements, or in any notes or other related documents executed
pursuant hereto, Agent and Lenders shall never be entitled to receive, collect
or apply as interest any amount in excess of the Maximum Rate and, in the event
Agent or Lenders ever receive, collect, or apply any amount that otherwise would
be in excess of the Maximum Rate, such amount shall automatically be deemed to
be applied in reduction of the unpaid principal balance of the Liabilities and,
if such principal balance is paid in full, any remaining excess shall forthwith
be paid to Borrower. In determining whether or not the interest paid or payable
under any specific contingency exceeds the Maximum Rate, Borrower and Agent
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as a standby fee, commitment fee, prepayment charge,
delinquency charge or reimbursement for a third-party expense rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
amortize, prorate, allocate and spread in equal parts throughout the entire
period during which the indebtedness was outstanding the total amount of
interest at any time contracted for, charged or received. Nothing herein
contained shall be construed or so operate as to require Borrower to pay any
interest, fees, costs, or charges greater than is permitted by applicable law.
Subject to the foregoing, Borrower hereby agrees that the actual effective rate
of interest from time to time existing with respect to loans under this
Agreement, taking into account all amounts agreed to by Borrower or charged or
received by Lenders or Agent under the Financing Agreements which may be deemed
to be interest under applicable law, shall be deemed to be a rate which is
agreed to and stipulated by Borrower, Lenders and Agent in accordance with
applicable law.
2.11 Method of Selecting Rate Options; Additional Provisions
Regarding Eurodollar Loans.
(a) Except as otherwise provided herein, the Borrower may select a
Eurodollar Rate with respect to any Revolving Loans permitted under this
Agreement and as provided by this Section 2.11; provided, that no more than five
(5) Eurodollar Interest Periods may be in existence at any one time; and
provided, further, that at all times the amount of the Floating Rate Loans shall
be sufficient so that application of the proceeds of Accounts in accordance with
Section 3.6 will not necessitate a payment of the Eurodollar Loan on a day other
than the last day of the applicable Eurodollar Interest Period. Revolving Loans
shall bear interest at the Floating Rate unless the Borrower provides a
Borrowing Notice to the Agent and each Lender in the form of Exhibit F (a
"Borrowing Notice"), signed by a duly authorized officer of the Borrower,
irrevocably electing that a portion of the Revolving Loans is to bear interest
at a Eurodollar Rate. The Borrowing Notice shall be delivered to the Agent and
each Lender not later than three (3) Business Days before the Borrowing Date for
each Eurodollar Loan, and shall specify:
17
(i) the Borrowing Date of such proposed Eurodollar Loan, which shall
be a Business Day;
(ii) the aggregate amount of such proposed Eurodollar Loan, each of
which shall be in the minimum principal amount of Five Million Dollars
($5,000,000) and in integral multiples of One Million Dollars ($1,000,000);
and
(iii) the Eurodollar Interest Period applicable thereto.
Each Eurodollar Loan shall bear interest from and including the first day of the
Eurodollar Interest Period applicable thereto to (but not including) the last
day of such Eurodollar Interest Period at the interest rate determined as
applicable to such Eurodollar Loan, but interest on such Eurodollar Loan shall
be payable as provided in subsection 2.6(a). If at the end of a Eurodollar
Interest Period for an outstanding Eurodollar Loan the Borrower has failed to
elect to continue such Eurodollar Loan as a Eurodollar Loan by providing an
appropriate Borrowing Notice to the Agent and each Lender as set forth above,
then such Eurodollar Loan shall be converted to a Floating Rate Loan on and
after the last day of such Eurodollar Interest Period. An outstanding Floating
Rate Loan may be converted to a Eurodollar Loan at any time subject to the
notice provisions and the limitations set forth above. The Borrower may not
select a Eurodollar Rate for a portion of the Revolving Loans if there exists a
Default or an Event of Default. The Borrower shall select Eurodollar Interest
Periods with respect to Eurodollar Loans so that no Eurodollar Interest Period
expires after the end of the Initial Term or, if extended pursuant to Section
2.8, any subsequent Term.
(b) If any Lender determines that maintenance of a Eurodollar Loan
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, such Lender shall suspend the availability of the
Eurodollar Rate option and require any Eurodollar Loans owing to it to be
converted to a Floating Rate Loan; or if any Lender determines that (i) deposits
of a type or maturity appropriate to match fund Eurodollar Loans are not
available, such Lender shall suspend the availability of the Eurodollar Rate
option after the date of any such determination, or (ii) the Eurodollar Rate
does not accurately reflect the cost of making a Eurodollar Loan, such Lender
shall suspend the availability of the Eurodollar Rate option after the date of
any such determination.
(c) If any payment of a Eurodollar Loan occurs on a date which is not
the last day of the applicable Eurodollar Interest Period, whether because of
acceleration, prepayment or otherwise, or a Eurodollar Loan is not made on the
date specified by the Borrower because the Borrower has not satisfied the
conditions precedent to such Eurodollar Loan contained in this Agreement or has
otherwise breached the terms of this Agreement, the Borrower will indemnify the
Lenders for any loss or cost incurred by any of them resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Eurodollar Loan, provided, however,
that each Lender, as applicable, shall to the extent practical, notify the
Borrower of any expected loss or cost in advance and attempt in good faith to
mitigate or avoid any such loss or cost.
(d) A Lender shall deliver a written statement as to the amount due,
if any, under paragraph (c) above. Such written statement shall set forth in
reasonable detail the calculations upon
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which the Lender determined such amount and shall be presumed correct.
Determination of amounts payable under such paragraph in connection with a
Eurodollar Loan shall be calculated as though the Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Revolving Loan whether in fact that is the case or not. Unless otherwise
provided herein, the amount specified in the written statement shall be payable
on demand after receipt by the Borrower of the written statement.
2.12 Yield Protection. If in the reasonable interpretation of the
Agent or any Lender the adoption of any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) after the date hereof, or any change therein after the
date hereof, or any change in the interpretation or administration thereof after
the date hereof, or the compliance of the Agent or any Lender therewith after
the date hereof,
(a) subjects the Agent or any Lender to any tax, duty, charge, fee,
deduction or withholding on or from payments due from the Borrower
(excluding taxation of the overall net income of the Agent or the Lenders),
or changes the basis of taxation of payments to the Agent or any Lender in
respect of the Financing Agreements or other amounts due it hereunder, or
(b) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, the Agent or
any Lender, or
(c) imposes or increases or renders applicable any special deposit,
assessment, insurance charge, reserve or liquidity or other similar
requirement (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by the Agent or any
Lender, or
(d) imposes any other condition the result of which is to increase the
cost to the Agent or any Lender of making, funding or maintaining advances
or reduces any amount receivable by the Agent or any Lender in connection
with advances, or requires the Agent or any Lender to make any payment
calculated by reference to the amount of advances held or interest received
by it, by an amount deemed material by the Agent or such Lender, or
(e) affects the amount of capital required or expected to be
maintained by the Agent or any Lender or any corporation controlling the
Agent or any Lender and the Agent or such Lender determines the amount of
capital required is increased by or based upon the existence of this
Agreement or its obligation to make loans hereunder or of commitments of
this type,
then, within fifteen (15) days of demand by the Agent or any Lender, the
Borrower shall pay the Agent or such Lender that portion of such increased
expense incurred (including, in the case of clause (e), any reduction in the
rate of return on capital to an amount below that which it could have achieved
but for such law, rule, regulation, policy, guideline or directive and after
taking into account the Agent's or such Lender's policies as to capital
adequacy) or reduction in an amount received
19
which the Agent or such Lender determines is attributable to making, funding and
maintaining the Financing Agreements; provided, that the Borrower shall not be
liable for any portion of such increased expense incurred or reduction in such
amount received by the Agent or any Lender unless the Agent or such Lender
notifies the Borrower of such increased expense or reduction in amount received
within ninety (90) days of the date the Agent or such Lender actually learns of
such increased expense or reduction in amount received; provided, further, that
in the event the Borrower objects to such increased expense, the Borrower may
prepay the Liabilities, terminate this Agreement, and, in such event, the
Borrower shall incur no prepayment penalty as described in Section 2.9.
3. REPORTING AND ELIGIBILITY REQUIREMENTS/COLLATERAL.
3.1 Reports. The Borrower shall submit to the Agent, not later than
the last day of each month, a report (the "Monthly Report"), accompanied by a
certificate in the form attached hereto as Exhibit B, which shall be signed by
the Borrower's president or treasurer or such other officers as the Agent may
reasonably approve from time to time. The Monthly Report shall include, as of
the last business day of the preceding month: (a) an aged trial balance of
Accounts (the "Accounts Trial Balance") indicating which Accounts remain unpaid
thirty (30), sixty (60) and ninety (90) days past the invoice date thereof,
based on end-of-the-month agings, and listing the names of all applicable
Account Debtors; (b) a reconciliation of Inventory and Accounts in the forms
attached hereto as Exhibit C; (c) a schedule of Inventory valued at rolling
average FIFO cost (the "Schedule of Inventory") and separately listing (i) the
total value of all Inventory owned by the Borrower and in the Borrower's
possession, listed by location, (ii) all Inventory owned by the Borrower and in
the possession of any public warehouseman or other bailee (and specifying the
amount of Inventory at each such location) and (iii) all obsolete and slow-
moving Inventory if requested by the Agent; (d) an aging with respect to
accounts payable if requested by the Agent; (e) the outstanding principal
balance of the Liabilities (which representation regarding the balance of the
Liabilities will not, in any event, be binding on the Agent or any Lender); (f)
a listing of all outstanding guarantees of the Borrower and its Subsidiaries, if
any; and (g) if requested by the Agent, a schedule listing the payments due by
the Borrower during the prior month to taxing authorities and listing by
location the payments due by the Borrower during the prior month to real estate
lessors, public warehousemen and bailees of the Borrower's Inventory and the due
dates of all such payments, together with a representation by the Borrower
concerning whether all such payments have been made on or before their
respective due dates (and if so requested by the Agent, copies of canceled
checks, receipts or other reasonably satisfactory evidence that such payments
were made).
In addition, (i) at least once during each calendar week, provided that
Excess Availability (as defined below) exceeds $25,000,000.00 or (ii) on each
Business Day on which Excess Availability is equal to or less than
$25,000,000.00 or (iii) in any event, on each Business Day if required by Agent
at any time, from time to time, in its discretion, the Borrower shall provide
the Agent with a written report in the form of Exhibit D hereto (the "Collateral
Report") signed by the Borrower's president or treasurer or such other officers
as the Agent may reasonably approve from time to time, describing, in a form and
with such specificity as is satisfactory to the Agent, all Eligible Accounts
created or acquired by the Borrower subsequent to the immediately preceding
Collateral Report, and all changes to Eligible Inventory on a monthly basis or
on such shorter periodic basis as the Agent may require from time to time. The
Collateral Report shall also contain a calculation of Loan Availability based on
the most current information with regard to Eligible Accounts and Eligible
20
Inventory. The Borrower shall furnish copies of any other reports or
information, in a form and with such specificity as is reasonably satisfactory
to the Agent, concerning Accounts and Inventory included, described or referred
to in the Collateral Reports and any other documents in connection therewith
requested by the Agent, including without limitation, but only if specifically
requested, copies of all invoices and purchase orders prepared in connection
with such Accounts and Inventory. The Collateral Reports shall also include, in
a form and with such specificity as is reasonably satisfactory to the Agent,
information on all amounts collected by the Borrower on Accounts collected by
the Borrower subsequent to the immediately preceding Collateral Report. The
Collateral Reports shall also contain such additional information as the Agent
shall reasonably require.
3.2 Eligible Accounts. The Agent shall have the sole right, in its
discretion, to determine which Accounts are eligible ("Eligible Accounts"). In
addition, without limiting the Agent's discretion, unless otherwise agreed by
the Agent in writing, the following Accounts are not Eligible Accounts: (a)
Accounts which remain unpaid more than ninety (90) days from the invoice date
based upon the end-of-the-month aging; (b) all Accounts owing by a single
Account Debtor, including currently scheduled Accounts, if fifty percent (50%)
or more of the balance owing by such Account Debtor to the Borrower is
ineligible for any reason; (c) Accounts with respect to which the Account Debtor
is a director, officer, employee, Subsidiary or Affiliate of the Borrower; (d)
Accounts with respect to which the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless the
Borrower assigns its right to payment of such Accounts to the Agent pursuant to,
and in full compliance with, the Assignment of Claims Act of 1940, as amended;
(e) Accounts with respect to which the Account Debtor is not a resident of the
continental United States; (f) Accounts in dispute or with respect to which the
Account Debtor has asserted in writing or either the Borrower or the Agent has
reason to believe the Account Debtor is entitled to assert a counterclaim or has
asserted in writing or either the Borrower or the Agent has reason to believe
the Account Debtor is entitled to assert a right of setoff; (g) Accounts with
respect to which the prospect of payment or performance by the Account Debtor is
or will be impaired, as determined by the Agent in the exercise of its
discretion; (h) Accounts with respect to which the Agent does not have a first
and valid fully perfected security interest; (i) Accounts with respect to which
the Account Debtor is the subject of bankruptcy or a similar insolvency
proceeding or has made an assignment for the benefit of creditors or whose
assets have been conveyed to a receiver or trustee; (j) Accounts with respect to
which the Account Debtor's obligation to pay the Account is conditional upon the
Account Debtor's approval or is otherwise subject to any repurchase obligation
or return right, as with sales made on a xxxx-and-hold, guaranteed sale, sale-
and-return, sale on approval or consignment basis; (k) Accounts to the extent
that the Account Debtor's indebtedness to the Borrower exceeds a credit limit
determined by the Agent in the Agent's discretion; (1) Accounts with respect to
which the Account Debtor is located in New Jersey, Minnesota, Tennessee or
Indiana unless the Borrower (i) has received a certificate of authority to do
business, and is in good standing, in such state, or (ii) has filed a Notice of
Business Activities Report (or other comparable required report) with the proper
authorities of such state for the then current year; (m) Accounts which arise
out of sales not made in the ordinary course of the Borrower's business; (n)
Accounts with respect to which the Account Debtor has returned to the Borrower
all or any portion of the Inventory the sale of which gave rise to such
Accounts; and (o) Accounts with respect to which any document or agreement
executed or delivered in connection therewith, or any procedure used in
connection with any such document or agreement, fails in any material respect to
comply with the requirements of applicable law, or with respect to which any
representation or warranty contained in this Agreement is untrue. If the
21
Borrower determines that a previously scheduled Eligible Account ceases to be an
Eligible Account under any of the above described criteria, the Borrower shall
notify the Agent thereof at the earliest reasonable opportunity.
3.3 Account Warranties. With respect to Accounts scheduled, listed
or referred to on the initial Accounts Trial Balance, on any subsequent Accounts
Trial Balance or on any Collateral Report or Monthly Report, the Borrower
warrants and represents to the Agent and each Lender that: (a) it is the lawful
owner of such Accounts and it has the right to subject such Accounts to a
security interest in favor of the Agent, for the benefit of the Lenders; (b)
they are genuine, are in all respects what they purport to be, and are not
evidenced by a judgment; (c) they represent undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in the documents
delivered to the Agent with respect thereto; (d) the amounts shown on the
respective Accounts Trial Balance, the respective Collateral Report or Monthly
Report, the Borrower's books and records, and all invoices and statements which
may be delivered to the Agent with respect thereto, are actually and absolutely
owing to the Borrower and are not in any way contingent; (e) no payments have
been or shall be made thereon except payments immediately delivered to the Agent
pursuant to this Agreement; (f) there are no setoffs, counterclaims or disputes
asserted, or, to the best of the Borrower's knowledge, existing, with respect
thereto and the Borrower has not made any agreement with any Account Debtor for
any deduction therefrom except a discount or allowance allowed by the Borrower
in the ordinary course of its business for prompt payment; (g) there are no
facts, events or occurrences of which the Borrower has knowledge which in any
way impair the validity or enforcement thereof or tend to reduce the amount
payable thereunder as shown on the respective Accounts Trial Balance, the
respective Collateral Report or Monthly Report, the Borrower's books and
records, and all invoices and statements delivered to the Agent with respect
thereto; (h) to the best of the Borrower's knowledge, all Account Debtors have
the capacity to contract and are solvent; (i) the services furnished and/or
goods sold giving rise thereto were not, at the time of sale by the Borrower to
any Account Debtor, subject, to any lien, claim, encumbrance or security
interest except that of the Agent, for the benefit of the Lenders, and except as
specifically permitted below; (j) the Borrower has no knowledge of any fact or
circumstance which would tend to impair the validity or collectibility thereof;
(k) to the best of the Borrower's knowledge, there are no proceedings or actions
which are threatened or pending against any Account Debtor which might result in
any material adverse change in such Account Debtor's financial condition; and
(1) such Accounts satisfy the objective criteria for inclusion as Eligible
Accounts set forth in Section 3.2.
3.4 Verification of Accounts. The Agent shall have the right, at any
time or times hereafter, in the Agent's name or in the name of a nominee of the
Agent, to verify the validity, amount or any other matter relating to any
Accounts, by mail, telephone, telegraph or otherwise. The Agent shall promptly
notify the Borrower of the commencement of a verification process; provided,
that it is understood and agreed that the Agent shall not be required to specify
which Accounts of the Borrower are to be verified.
3.5 Account Covenants. With respect to those Accounts with an
aggregate balance in excess of Two Hundred Fifty Thousand Dollars ($250,000),
the Borrower shall, upon an officer of the Borrower located in Beloit, Wisconsin
learning thereof, promptly: (a) inform the Agent in writing of any material
delay in the Borrower's performance of any of its obligations to any Account
Debtor or of any assertion of any claims, offsets or counterclaims by any
Account Debtor;
22
(b) furnish to and inform the Agent of all material adverse information relating
to the financial condition of any Account Debtor; and (c) notify the Agent in
writing if any of its then existing Accounts scheduled to the Agent with respect
to which the Lenders have made advances, are no longer Eligible Accounts.
3.6 Collection of Accounts and Payments. Upon the request of the
Agent from time to time the Borrower shall establish accounts (the "Blocked
Accounts") in the Borrower's name with a financial institution or institutions
reasonably acceptable to the Agent, to which the Borrower will immediately
deposit all payments made with respect to Accounts or for Inventory or services
provided by the Borrower in the identical form in which such payment was made,
whether by cash or check. Each financial institution with which a Blocked
Account is established shall acknowledge and agree, in a manner satisfactory to
the Agent, that the amounts on deposit in such Blocked Account are the sole and
exclusive property of the Agent, for the account of the Lenders, that such
financial institution has no right to setoff (except for NSF or "stop payment"
checks or other returned items) against the Blocked Account, and that such
financial institution will wire, or otherwise transfer in immediately available
funds in a manner satisfactory to the Agent, funds deposited in the Blocked
Account on a daily basis as such funds are collected. The Borrower agrees that
all payments received by the Agent, whether in respect of the Accounts or as
proceeds of other Collateral or otherwise, will be applied on account of the
Liabilities upon final collection. The Borrower and any Affiliates,
shareholders, directors, officers, employees, agents or those Persons acting for
or in concert with the Borrower shall, acting as trustee for the Agent, receive
any monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts, Inventory or other Collateral which come into the
possession or under the control of the Borrower or any Affiliates, shareholders,
directors, officers, employees, agents or those Persons acting for or in concert
with the Borrower, and immediately upon receipt thereof shall remit the same or
cause the same to be remitted, in kind, to the Blocked Accounts or as set forth
below. Upon the occurrence and during the continuation of a Default or an Event
of Default, the Borrower shall upon the direction of the Agent direct all of the
Borrower's Account Debtors to direct payments of Accounts to post office boxes
maintained by a financial institution selected by the Agent (the "Collecting
Banks") pursuant to an agreement satisfactory to the Agent. The Collecting
Banks will agree that all payments made to such post office boxes shall be
deposited to the Blocked Accounts in a manner satisfactory to the Agent. The
Collecting Banks will also agree that the amounts deposited in the post office
boxes are the sole and exclusive property of the Agent, for the benefit of the
Lenders, and that such Collecting Banks have no right to setoff against such
amounts. The Borrower agrees to pay to the Agent any and all fees, costs and
expenses which the Agent incurs in connection with opening and maintaining the
post office boxes maintained by the Collecting Banks and the Blocked Accounts
and depositing for collection by the Agent any check or item of payment received
and/or delivered to the Agent on account of the Liabilities.
3.7 Appointment of the Agent as the Borrower's Attorney-in-Fact. The
Borrower hereby irrevocably designates, makes, constitutes and appoints the
Agent (and all Persons designated by the Agent) as the Borrower's true and
lawful attorney-in-fact, and authorizes the Agent, in the Borrower's or the
Agent's name, to do the following: (i) at any time after the occurrence of a
Default (a) demand payment of Accounts; (b) enforce payment of Accounts by legal
proceedings or otherwise; (c) exercise all of the Borrower's rights and remedies
with respect to proceedings brought to collect any Account; (d) sell or assign
any Account upon such terms, for such amount and at such time or times as the
Agent deems advisable; (e) settle, adjust, compromise, extend or renew any
23
Account; (f) discharge and release any Account; (g) prepare, file and sign the
Borrower's name on any proof of claim in bankruptcy or other similar document
against any Account Debtor; (h) notify the post office authorities to change the
address for delivery of the Borrower's mail to an address designated by the
Agent, have access to any lock box or postal box into which any of the
Borrower's mail is deposited, and open and dispose of all mail addressed to the
Borrower; (i) endorse the Borrower's name upon any chattel paper, document,
instrument, invoice or similar document or agreement relating to any Account or
any goods pertaining thereto; and (j) do all acts and things which are
necessary, in the Agent's reasonable discretion, to fulfill the Borrower's
obligations under this Agreement; and (ii) at any time, (x) take control in any
manner of any item of payment or proceeds thereof; (y) endorse the Borrower's
name upon any items of payment or proceeds thereof and deposit the same in the
Agent's account on account of the Liabilities; and (z) sign the Borrower's name
on any verification of Accounts and notices thereof to Account Debtors.
3.8 Chattel Paper and Instruments. Immediately upon the Borrower's
receipt thereof, the Borrower shall deliver or cause to be delivered to the
Agent, with appropriate endorsement and assignment to vest title, with full
recourse to the Borrower, and possession in the Agent, all chattel paper and
instruments which the Borrower now owns or may at any time or times hereafter
acquire.
3.9 Notice to Account Debtors. The Agent may, in its sole
discretion, at any time or times after the occurrence of a Default, and without
prior notice to the Borrower, notify any or all Account Debtors that the
Accounts have been assigned to the Agent, for the benefit of the Lenders, that
the Agent, for the benefit of the Lenders, has a security interest therein, and
that all payments upon the Accounts be made directly to the Agent or any account
designated by the Agent.
3.10 Eligible Inventory. The Agent shall have the sole right, in its
discretion, to determine which Inventory is eligible ("Eligible Inventory").
Without limiting the Agent's discretion, unless otherwise agreed by the Agent in
writing, the following Inventory is not Eligible Inventory: (a) Inventory which
is in transit; (b) Inventory which is not either currently usable or currently
salable in the ordinary course of the Borrower's business; (c) Inventory which
is obsolete or slow-moving; (d) Inventory which the Agent determines, in the
exercise of its discretion and in accordance with the Agent's customary business
practices, to be unacceptable due to age, type, category and/or quantity; (e)
Inventory with respect to which the Agent does not have a first and valid fully
perfected security interest; (f) Inventory which is stored with a bailee,
consignee, warehouseman or similar third party, unless the Borrower has (i)
previously complied with the terms of Section 3.13 with respect to such stored
Inventory and (ii) received satisfactory Uniform Commercial Code searches of the
Borrower's name at such location; and (g) Inventory as to which any
representation or warranty contained in this Agreement is untrue. If the
Borrower determines that previously scheduled Inventory ceases to be Eligible
Inventory under any of the above described criteria, the Borrower shall notify
the Agent thereof at the earliest reasonable opportunity.
3.11 Inventory Warranties. With respect to Inventory scheduled,
listed or referred to in any Monthly Report or Collateral Report, the Borrower
warrants that, except to the extent that the Borrower has otherwise notified the
Agent in writing (a) it is the lawful owner of such Inventory and has the right
to subject such Inventory to a security interest in favor of the Agent, for the
benefit of the Lenders; (b) it is located on one of the premises listed on
Schedule 3.11 and is not in transit;
24
(c) it is not subject to any lien or security interest whatsoever except for the
security interests granted to the Agent, for the benefit of the Lenders,
hereunder and except as specifically permitted below; (d) it is of good and
merchantable quality, free from any defects which would affect the market value
of such Inventory; and (e) it satisfies the objective criteria for inclusion as
Eligible Inventory set forth in Section 3.10.
3.12 Inventory Records. The Borrower shall maintain a perpetual
inventory system which, with reasonable accuracy, tracks all of the Borrower's
Inventory and with reasonable accuracy itemizes and describes the kind, type,
quantity and value of Inventory and of Eligible Inventory, the Borrower's cost
therefor and daily withdrawals therefrom and additions thereto, all of which
records shall be available during the Borrower's usual business hours at the
request of any of the Agent's or any Lender's officers, employees or agents. In
addition, the Borrower shall conduct a physical count of the Inventory at least
once each calendar year and following each physical inventory, shall supply the
Agent with a report in a form and with such specificity as may be reasonably
satisfactory to the Agent concerning such physical count of the Inventory.
3.13 Safekeeping of Inventory and Inventory Covenants. Neither the
Agent nor any Lender shall be responsible for: (a) the safekeeping of the
Inventory; (b) any loss or damage to the Inventory; (c) any diminution in the
value of the Inventory; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. All risk of loss, damage,
destruction or diminution in value of the Inventory shall be borne by the
Borrower absent the gross negligence or willful misconduct of the Agent or any
Lender. No Inventory shall be stored with a bailee, warehouseman, consignee or
similar third party unless the Borrower first (i) obtains the Agent's written
consent which shall not be unreasonably withheld and (ii) furnishes to the Agent
such agreements, instruments and documents as the Agent shall in its sole
discretion specify with respect to such stored Inventory, including without
limitation any negotiable warehouse receipts or other documents of title. The
Borrower shall not sell any Inventory to any customer on a xxxx-and-hold basis.
The Borrower shall notify the Agent if the Borrower has on its premises for
processing or otherwise, inventory or other goods owned by other Persons and the
Borrower agrees to keep all such inventory and goods segregated from the
Borrower's own Inventory.
3.14 Equipment Warranties. With respect to the Equipment, the
Borrower warrants that, (a) except as disclosed on Schedule 3.14, it is owned by
the Borrower and is located on one of the premises listed on Schedule 3.11, (b)
it is not subject to any lien or security interest whatsoever except for the
liens and security interests specifically permitted below, and (c) it is in
working condition and repair and is currently used or usable in the Borrower's
business.
3.15 Equipment Records. The Borrower shall at all times hereafter
keep reasonably correct and accurate records itemizing and describing the kind,
type, age and condition of the Equipment, the Borrower's cost therefor and
accumulated depreciation thereon; and retirements, sales, or other dispositions
thereof, all of which records shall be available during the Borrower's usual
business hours at the request of any of the Agent's or any Lender's officers,
employees or agents.
3.16 Safekeeping of Equipment. Neither the Agent nor any Lender
shall be responsible for: (a) the safekeeping of the Equipment; (b) any loss or
damage to the Equipment; (c) any diminution in the value of the Equipment; or
(d) any act or default of any repairman, bailee or any
25
other Person with respect to the Equipment. All risk of loss, damage,
destruction or diminution in value of the Equipment shall be borne by the
Borrower absent the gross negligence or willful misconduct of the Agent.
3.17 Real Property. The Borrower represents and warrants that all of
the real property owned by the Borrower is disclosed on Schedule 3.17(a) and
that all of the real property leased to the Borrower is disclosed on Schedule
3.17(b).
3.18 Maintenance of Properties. Unless otherwise consented to by the
Agent in writing, which consent shall not be unreasonably withheld, the Borrower
shall and shall cause its Subsidiaries to maintain or cause to be maintained in
good repair, working order and condition, ordinary wear and tear excepted, all
of the material assets and properties now or hereafter owned, leased or
otherwise possessed by it and shall make or cause to be made all needful and
proper repairs, renewals, replacements and improvements thereto.
4. CONDITIONS OF ADVANCES.
Notwithstanding any other provisions contained in this Agreement, the
making of any Revolving Loan or the issuance of any Letter of Credit provided
for in this Agreement shall be condi tioned upon the following:
4.1 The Borrower's Request. The Agent shall have received, by no
later than 2:00 p.m. (Dallas, Texas time) on the day on which a Revolving Loan
is requested to be made hereunder and by no later than 2:00 p.m. (Dallas, Texas
time) on the third (3rd) Business Day preceding the day on which a Letter of
Credit is requested to be issued, (a) a telephonic request from an officer of
the Borrower (or any Person authorized by the Borrower pursuant to a written
list provided to the Agent), for a Revolving Loan or a Letter of Credit in a
specific amount, (b) copies of all reports and documents not previously
delivered but required to be delivered to the Agent under this Agreement or any
of the other Financing Agreements, and (c) in the case of a Letter of Credit, an
application therefor as described in Section 2.2. Unless otherwise stated to
the Agent in writing by the Borrower at the time of any such request, each such
request for a Revolving Credit Loan or Letter of Credit shall automatically be
deemed, without necessity of further certification or ratification by the
Borrower, to be a representation and warranty by the Borrower to the Agent, for
the benefit of the Lenders, that the funding of any such Revolving Credit Loan
or the issuance of any such Letter of Credit, and the resulting incurrence of
indebtedness and obligations in connection therewith, is permitted under the
Indenture and would not cause or otherwise result in a "Default" or "Event of
Default" as defined by the Indenture. The Agent shall have no liability to the
Borrower or any other Person as a result of acting on any telephonic request
that the Agent believes in good faith to have been made by any Person set forth
on Schedule 4.1.
4.2 Financial Condition. No material adverse change, as determined
by the Agent in its sole discretion, in the business, financial condition or
operations of the Borrower shall have occurred at any time or times subsequent
to the most recent request for a Revolving Loan or Letter of Credit under this
Agreement.
26
4.3 No Default. Neither a Default nor an Event of Default shall have
occurred and be continuing.
4.4 Other Requirements. The Agent shall have received, in form and
substance reasonably satisfactory to the Agent, all certificates, orders,
authorities, consents, affidavits, schedules, instruments, security agreements,
financing statements, mortgages and other documents which are provided for
hereunder, or which the Agent may at any time reasonably request. Without
limitation of the foregoing, the Borrower shall have caused each of its
Subsidiaries to execute (i) a continuing unlimited guaranty agreement in favor
of the Agent, for the benefit of the Lenders, pursuant to which each such
Subsidiary shall guarantee the prompt payment and performance of the Liabilities
and all other obligations of the Borrower under the Financing Agreements and
(ii) a security agreement pursuant to which each such Subsidiary shall grant to
the Agent, for the benefit of the Lenders, a continuing first priority security
interest and lien in and to all property of the type or nature specified in
Section 5.1, at any time owned or acquired by such Subsidiary, as continuing
security for the Liabilities and for such Subsidiary's obligations under such
guaranty agreement, (iii) together with such UCC-1 financing statements as may
be required by the Agent, which in each case shall be in form and substance
satisfactory to the Agent and (iv) such documentation in respect of existence
and authorizing resolutions as the Agent may request, in each case in form and
substance satisfactory to the Agent and the Lenders.
4.5 Representations and Warranties. All of the representations and
warranties contained in this Agreement or any of the other Financing Agreements,
including without limitation those set forth in Section 6, shall be true and
correct as of the date the request for the Revolving Loan or Letter of Credit is
made, as though made on and as of such date.
5. COLLATERAL.
5.1 Security Interest. To secure payment and performance in full of
the obligations arising under the Existing Loan Agreement and the other
Financing Agreements defined therein, the Borrower previously granted to the
Agent, for the benefit of the Lenders, a right of setoff against and a
continuing security interest in and to certain of the Borrower's property and
interests in property, whenever acquired and wherever located (as set forth with
more specificity in the Existing Loan Agreement). The Borrower acknowledges
that such property and interests in property remain subject to a right of setoff
against and a continuing security interest of the Agent, for the benefit of the
Lenders (which rights and security interests were granted and continued pursuant
to the Existing Loan Agreement and related Financing Agreements) and that all of
such property and interests in property will constitute Collateral for the
Liabilities. Accordingly, the Borrower hereby reaffirms the prior grant of a
right of setoff against and a continuing security interests in and to certain of
the Borrower's property and interests in property, as more specifically
described below, whenever acquired and wheresoever located, and to secure
payment and performance in full of the Liabilities, the Borrower hereby grants
to the Agent, for the benefit of the Lenders, a right of setoff against and a
continuing security interest in and to the following property and interests in
property, whether now owned or hereafter owned or acquired by the Borrower and
wheresoever located: (a) Accounts, contract rights, General Intangibles, chattel
paper, instruments, notes, letters of credit, warehouse receipts, shipping
documents, documents and documents of title; (b) Inventory; (c) Equipment; (d)
deposit accounts (general or special) with, and credits and other claims
against, Agent or any Lender,
27
or any other financial institution with which the Borrower maintains deposits;
(e) monies, and any and all other property and interests in property of the
Borrower now or hereafter coming into the actual possession, custody or control
of the Agent or any Lender or any agent or affiliate of the Agent or any Lender
in any way or for any purpose (whether for safekeeping, deposit, custody,
pledge, transmission, collection or otherwise) (but excluding Rolling Stock);
(f) interests in leases of real or personal property, whether as lessor or
lessee (including any option to purchase thereunder); (g) all insurance proceeds
of or relating to any of the foregoing; (h) books and records relating to any of
the foregoing and to the Borrower's business; and (i) all accessions and
additions to, substitutions for, and replacements, products and proceeds of any
of the foregoing.
5.2 Preservation of Collateral and Perfection of Security Interests
Therein. The Borrower shall execute and deliver to the Agent, concurrently with
the execution of this Agreement, and at any time or times hereafter at the
request of the Agent, all uniform commercial Code financing statements or other
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by the Agent) as the Agent may request, in a form
satisfactory to the Agent, to perfect and keep perfected the security interests
in the Collateral granted by the Borrower to the Agent, for the benefit of the
Lenders, herein and in the other Financing Agreements or to otherwise protect
and preserve the Collateral and the Agent's security interests therein. Should
the Borrower fail to do so, the Agent is authorized to sign any such financing
statements as the Borrower's agent. The Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. At any time or
times hereafter at the request of the Agent, the Borrower shall execute and
deliver to the Agent such instruments and documents as the Agent, in its sole
discretion, requests in order to protect and preserve the Collateral and perfect
and enforce the Agent's security interests therein, for the benefit of the
Lenders. The Borrower shall pay all costs of filing or recording such
instruments and documents in all public offices deemed necessary by the Agent.
5.3 Loss of Value of Collateral. The Borrower shall immediately
notify the Agent of any material loss or depreciation in the value of the
Collateral, other than loss or depreciation occurring in the ordinary course of
the Borrower's business.
5.4 Cash Collateral. In the event that the Agent has issued any
Letters of Credit for the account of the Borrower, the Agent may, at any time
after (a) the occurrence of a Default or an Event of Default, (b) demand by the
Agent for payment of the Liabilities as provided in Section 9.1 hereof, (c)
there exists no unpaid principal balance of the Liabilities, (d) this Agreement
shall terminate for any reason pursuant to Section 2.8 above or (e) at any time,
the sum of (i) the outstanding principal balance of the Revolving Loans plus
(ii) the aggregate undrawn face amount of all Letters of Credit shall exceed the
sum of (A) Loan Availability plus (B) the aggregate undrawn face amount of all
Letters of Credit, request of the Borrower, and the Borrower shall thereupon
deliver to the Agent, cash collateral for any Letter of Credit issued for the
account of the Borrower. If the Borrower fails to deliver such cash to the Agent
promptly upon the Agent's request therefor, the Agent may, without limiting the
Agent's rights or remedies arising from such failure to deliver cash, retain, as
cash collateral, cash proceeds of the Borrower's Collateral in an amount equal
to the aggregate undrawn face amount of all Letters of Credit then outstanding.
To the extent that the Agent retains proceeds in accordance with the immediately
preceding sentence at any time any Liabilities are outstanding, the Agent shall
apply such cash and cash collateral to the payment of such
28
Liabilities, including without limitation to the payment of any or all of the
Borrower's reimbursement obligations with respect to any Letter of Credit. To
the extent that no Liabilities are outstanding at such time, the Agent may (but
shall not be obligated to) (y) invest the same in a savings account, under which
deposits are available for immediate withdrawal, with the Agent or such other
bank as the Agent may, in its sole discretion select, or (z) hold the same as a
credit balance in an account with the Agent in the Borrower's name. Interest
payable on any such savings account described in the foregoing sentence shall be
collected by the Agent and shall be paid to the Borrower as it is received by
the Agent, less any fees owing by the Borrower to the Agent with respect to any
Letter of Credit and less any amounts necessary to pay any of the Borrower's
Liabilities which may be due and payable at such time. The Agent shall have no
obligation to pay interest on any credit balances in any account opened for the
Borrower pursuant to this Agreement.
5.5 Agent Not Obligated or Liable. The Agent shall have no
obligation whatsoever to the other Lenders or to any other Person to assure that
the Collateral exists or is owned by the Borrower or is cared for, protected or
insured or that the liens or security interests granted to the Agent, for the
benefit of the 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 or continue exercising, any
of the rights, authorities and powers granted or available to the Agent in this
Agreement, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Agent may act in any manner it
may deem appropriate, in its sole discretion, given the Agent's own interest in
the Collateral as one of the Lenders; provided that the Agent shall not engage
in gross negligence or willful misconduct.
6. WARRANTIES.
The Borrower represents and warrants to the Agent and to each of the
Lenders that as of the date of this Agreement, and continuing as long as any
Liabilities remain outstanding, and (even if there shall be no Liabilities
outstanding) as long as this Agreement remains in effect:
6.1 Corporate Existence. The Borrower and each of its Subsidiaries,
if any, is a corporation duly organized and in good standing under the laws of
the state of its incorporation and is duly qualified as a foreign corporation
and in good standing under the laws of all other states where the nature and
extent of the business transacted by it or the ownership of its assets makes
such qualification necessary, except those states in which the failure to
qualify does not and will not have a material adverse effect on the business or
condition of such corporation, financial or otherwise. The state of
incorporation of the Borrower and all states in which the Borrower is qualified
to do business as of the date hereof, are listed on Schedule 6.1 attached
hereto.
6.2 Corporate Authority. The execution and delivery by the Borrower
and each of its Subsidiaries, if any, as applicable, of this Agreement and all
of the other Financing Agreements and the performance of each such corporation
of its obligations hereunder and thereunder: (a) are within such corporation's
corporate powers; (b) are duly authorized by such corporation's Board of
Directors and, if necessary, such corporation's shareholders; (c) are not in
contravention of the terms of such corporation's Certificate or Articles of
Incorporation, as applicable, or By-Laws, or of any material indenture,
agreement or undertaking to which such corporation is a party or by which such
corporation or any of its property is bound; (d) do not, as of the execution
hereof, require any
29
governmental consent, registration or approval; (e) do not contravene any
contractual or governmental restriction binding upon such corporation; and (f)
will not, except as contemplated herein, result in the imposition of any lien,
charge, security interest or encumbrance upon any property of such corporation
under any existing indenture, mortgage, deed of trust, loan or credit agreement
or other material agreement or instrument to which such corporation is a party
or by which it or any of its property may be bound or affected.
6.3 Binding Effect. This Agreement and all of the other Financing
Agreements are the legal, valid and binding obligations of the Borrower and each
of its Subsidiaries, if any, as applicable, and are enforceable against the
Borrower and each of its Subsidiaries, if any, as applicable, in accordance with
their terms.
6.4 Financial Data. The Borrower has furnished to the Agent and each
Lender (a) its audited consolidated financial statements dated December 31,
1996, (b) its unaudited interim consolidated financial statements dated April
30, 1997 and (c) Projections dated April 28, 1997, covering the period January
1, 1997 to and including December 31, 2000 (collectively referred to as the
"Financials"). All of the Financials (other than the Projections) have been,
and all financial statements to be furnished after the date hereof in accordance
with Section 7.1 (other than the Projections) will be, prepared in accordance
with the books and records of the Borrower and its Subsidiaries, if any, and
either fairly present or will fairly present, as applicable, the consolidated
and consolidating financial condition of the Borrower and its Subsidiaries at
the dates thereof and the results of operations for the periods indicated
(subject, in the case of unaudited financial statements, to normal year-end
adjustments). All of the Financials (other than the Projections) have been, and
all financial statements to be provided after the date hereof will be, prepared
in conformity with GAAP. The Projections furnished on the date hereof have
been, and the Projections to be furnished in accordance with Section 7.1 will
be, prepared by the Borrower and its financial personnel in light of the past
business of the Borrower and its subsidiaries and represent or will represent,
as applicable, as of the date thereof, the good faith belief of the Borrower and
such personnel as to the most probable course of the business of the Borrower
and its Subsidiaries, subject to the assumptions and qualifications stated
therein. Absent a finding by the Agent of a material adverse change in the
business, financial condition or operations of the Borrower and absent a breach
of any of the financial covenants contained in this Agreement, the failure by
the Borrower to achieve any of the Projections will not, in and of itself,
constitute a Default. All information, reports and other papers and data
furnished or to be furnished to the Agent or any Lender have been and will be,
at the time the same are so furnished to the Agent or any Lender, accurate and
correct in all material respects and complete insofar as necessary to give the
Agent and each Lender a true and accurate knowledge of the subject matter
thereof. Since the date of the Financials, there has been no material adverse
change in the financial condition, results of operations or business of the
Borrower or any of its Subsidiaries, if any.
6.5 Liens and Encumbrances; Locations. Except (a) as disclosed on
Schedule 6.5 attached hereto, (b) as contemplated in Section 8.1 or (c) as
otherwise contemplated herein, all of the Collateral of the Borrower and its
Subsidiaries, if any, is and will continue to be owned by the Borrower or a
Subsidiary, has been fully paid for and is free and clear of all security
interests, liens, claims, and encumbrances. All Collateral is and shall be kept
only at the locations
30
specified on Schedule 3.11 and such other locations as the Agent has received
written notice of prior to the placement of Collateral thereon.
6.6 Solvency. The Borrower and each of its Subsidiaries, if any, is
solvent, is able to pay its debts as they become due and has capital sufficient
to carry on its business and all businesses in which it is about to engage, and
now owns property having a value both at fair valuation, and at present fair
saleable value, greater than the amount required to pay its debts, including
without limitation the Liabilities. The Eligible Inventory and Eligible
Accounts supporting the Revolving Loans to the Borrower are sufficient in value
to provide the Borrower with sufficient working capital and excess Loan
Availability to enable it to profitably operate its business, meet all debt
amortization requirements and perform its obligations under the Financing
Agreements and the other agreements evidencing indebtedness of the Borrower.
Neither the Borrower nor any of its Subsidiaries, if any, will be rendered
insolvent by the execution and delivery of any of the Financing Agreements or by
completion of the transactions contemplated hereunder or thereunder.
6.7 Principal Place of Business. The principal place of business and
chief executive office of the Borrower and each of its Subsidiaries, if any, is
located at Xxx XXX Xxxxxxx, Xxxxxx, Xxxxxxxxx 00000. If any change in such
location occurs, the Borrower shall promptly notify the Agent thereof. As of
the date hereof, the books and records of the Borrower and each of its
Subsidiaries, if any, and all records of account are located at the principal
place of, business and chief executive office of the Borrower, and if any change
in such location occurs, the Borrower shall promptly notify the Agent thereof.
6.8 Other Corporate Names. Except as disclosed on Schedule 6.8
attached hereto, neither the Borrower nor any of its Subsidiaries, if any, has
used any corporate or fictitious name (including any tradename, tradestyle,
assumed name, division name or any similar name), other than the corporate name
shown on such corporation's Certificate or Articles of Incorporation, as
applicable.
6.9 Tax Liabilities. The Borrower and each of its Subsidiaries, if
any, has filed all federal, state and local tax reports and returns required by
any law or regulation to be filed by it, except for extensions duly obtained,
and has either duly paid all taxes, duties and charges indicated due on the
basis of such returns and reports, or made adequate provision for the payment
thereof, and the assessment of any material amount of additional taxes in excess
of those paid and reported is not reasonably expected.
6.10 Loans. Except as disclosed on Schedule 6.10 attached hereto,
and except for trade payables and normal accruals arising in the ordinary course
of the Borrower's business since the date of the latest financial statements
delivered to the Agent and the Lenders pursuant to Section 7.1, neither the
Borrower nor any of its Subsidiaries, if any, is obligated on any loan or other
indebtedness for borrowed money in excess of Twenty-Five Thousand Dollars
($25,000) or Fifty Thousand Dollars ($50,000) in the aggregate.
31
6.11 Margin Securities. Neither the Borrower nor any of its
Subsidiaries, if any, owns any margin securities and none of the Revolving Loans
advanced hereunder will be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System. If requested by any Lender, the Borrower will furnish such
Lender with a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in said Regulation. The Borrower also warrants that no
part of the proceeds of the loans to be made hereunder will be used by it for
any purpose which violates, or which is inconsistent with, the provisions of
Regulation X of said Board of Governors.
6.12 Subsidiaries; Joint Ventures; Partnerships. The Borrower has no
Subsidiaries other than Mule-Hide Products Company, Inc. and Amcraft Building
Products Co., Inc., respectively. The Borrower is not engaged in any joint
venture or partnership with any other Person.
6.13 Litigation and Proceedings. Except as disclosed on Schedule
6.13 attached hereto, no judgments are outstanding against the Borrower or any
of its subsidiaries, if any, nor is there now pending or, to the best of the
Borrower's knowledge, threatened, any litigation, contested claim, or federal,
state or municipal governmental proceeding by or against the Borrower or any of
its Subsidiaries, except judgments and pending or threatened litigation,
contested claims and governmental proceedings which are not, in the aggregate,
material to the financial condition, results of operations or business of the
Borrower or any of its Subsidiaries, if any.
6.14 Other Agreements. Except as disclosed on Schedule 6.13 attached
hereto, neither the Borrower nor any of its Subsidiaries, if any, is in default
under any agreement, contract, lease, or commitment to which it is a party or by
which it is bound, the breach of which could be material to the financial
condition, results of operations or business of the Borrower or any of its
Subsidiaries, if any. The Borrower knows of no dispute regarding any agreement,
contract, lease, or commitment which is material to the continued financial
success and well-being of the Borrower or any of its Subsidiaries, if any.
6.15 Employee Controversies. Except as disclosed on Schedule 6.15
attached hereto, (a) there are no controversies pending or, to the best of the
Borrower's knowledge, threatened, between the Borrower or any of its
Subsidiaries, if any, and any of their respective employees, other than employee
grievances arising in the ordinary course of business which are not, in the
aggregate, material to the continued financial success and well-being of the
Borrower or any of its Subsidiaries, if any, (b) the Borrower and each of its
Subsidiaries, if any, is in material compliance with all federal and state laws
respecting employment and employment terms, conditions and practices and (c)
neither the Borrower nor any of its Subsidiaries, if any, has any union
representation questions, grievances, discrimination or unfair labor practice
complaints pending or threatened against it which are, in the aggregate,
material to the continued financial success and well being of the Borrower or
any of its Subsidiaries, if any.
32
6.16 Compliance with Laws and Regulations. The execution and
delivery by the Borrower and each of its Subsidiaries, if any, as applicable, of
this Agreement and all of the other Financing Agreements and the performance of
the Borrower's obligations hereunder and thereunder are not in contravention of
any law or laws. The Borrower and each of its Subsidiaries, if any, has
obtained all licenses, authorizations, approvals and permits necessary in
connection with the operation of its business of which the failure to obtain
could be material to the financial condition, results of operations or business
of the Borrower or any of its Subsidiaries, if any. The Borrower and each of
its Subsidiaries, if any, is in compliance with all laws, orders, regulations
and ordinances of all federal, foreign, state and local governmental authorities
relating to its business operations and the assets, with which the failure to
comply could be material to the financial condition, results of operations or
business of the Borrower or any of its Subsidiaries, if any.
6.17 Patents, Trademarks, Licenses. The Borrower and each of its
Subsidiaries, if any, possesses adequate licenses, patents, patent applications,
copyrights, service marks, trade marks, trademark applications, tradestyles,
tradenames and similar assets to continue to conduct its business as heretofore
conducted by it, all of which are described on Schedule 6.17 attached hereto.
6.18 Environmental Matters. Except as disclosed on Schedule 6.18
attached hereto, (a) the Borrower and each of its Subsidiaries, if any, has
complied in all material respects with Environmental Laws regarding transfer,
construction on and operation of its business and property, including but not
limited to notifying authorities, observing restrictions on use, transferring,
modifying or obtaining permits, licenses, approvals and registrations, making
required notices, certifications and submissions, complying with financial
liability requirements, Managing Hazardous Substances and Responding to the
presence or Release of Hazardous Substances connected with operation of the
business or property; (b) the noncompliance by the Borrower or any of its
Subsidiaries, if any, with Environmental Laws would not have a material adverse
effect on its business, operations, prospects, assets, property or condition
(financial or otherwise); (c) neither the Borrower nor any of its Subsidiaries,
if any, has any material contingent liability with respect to the Management of
any Hazardous Substance; (d) during the term of this Agreement, neither the
Borrower nor any of its Subsidiaries, if any, shall permit others to, Manage,
whether on or off their respective property, Hazardous Substances connected with
the operation of its business or property, except in material compliance with
Environmental Laws; (e) the Borrower and each of its Subsidiaries, if any, shall
take prompt action in compliance with Environmental Laws to Respond to the on-
site or off-site Release of Hazardous Substances connected with the operation of
its business or property; and (f) neither the Borrower nor any of its
Subsidiaries, if any, has received any Environmental Notice.
6.19 Fees to Third Parties. Neither the Borrower nor any of its
Subsidiaries, if any, is in any way obligated to any Person in respect of any
finder's or broker's fee or similar commission in connection with the closing of
the transactions evidenced by the Financing Agreements. The Borrower agrees to
indemnify the Agent and each Lender and hold the Agent and each Lender harmless
from any claims for any such fees or commissions from any Persons.
33
6.20 Securities Matters. The making of the Revolving Loans and the
issuance of the Letters of Credit hereunder, the application of the proceeds and
repayment thereof by the Borrower, and the consummation of the transactions
contemplated by the Financing Agreements, have not and will not violate any
provision of any federal or state securities statutes, rules or regulations, or
any order issued by the Securities and Exchange Commission (collectively,
"Securities Laws"). The Borrower agrees to indemnify the Agent and each Lender
and hold the Agent and each Lender harmless from the claims of any Persons in
connection with any Securities Laws.
6.21 Disclosure. Except as corrected prior to the date hereof in
writing, no information provided or statements made by the Borrower or its
representatives, or by any Subsidiary or its representatives, in writing to the
Agent or any Lender contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.22 Equity Ownership. Schedule 6.22 attached hereto sets forth the
number of shares of each class of common and preferred stock authorized for each
of the Borrower and each of its subsidiaries, if any, the number of shares of
each such class of stock outstanding, the owners of such shares and the number
of shares of each such class of stock owned by each such owner. The outstanding
capital stock of the Borrower and each of the Subsidiaries, if any, is duly
authorized, validly issued, fully paid and nonassessable.
6.23 Pension Related Matters. Each employee pension or benefit plan
(other than a multiemployer plan within the meaning of Section 3 (37) of ERISA
and to which the Borrower or any ERISA Affiliate has or had any obligation to
contribute (a "Multiemployer Plan")) to which Section 4021(a) of ERISA applies
and (a) which is maintained for employees of the Borrower or any of its ERISA
Affiliates or (b) to which the Borrower or any of its ERISA Affiliates made, or
was required to make, contributions at any time within the preceding five (5)
years (a "Plan"), maintained by the Borrower or any ERISA Affiliate and each
Multiemployer Plan complies, and has been administered in accordance, with its
term and all material applicable requirements of ERISA and of the Internal
Revenue Code of 1986, as amended (the "Tax Code") and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Tax Code setting forth those requirements. No "Reportable Event," "Prohibited
Transaction" (as each is defined below) or withdrawal from a Multiemployer Plan
has occurred and no funding deficiency described in Section 302 of ERISA exists
with respect to any Plan or Multiemployer Plan which could have a material
adverse effect on the financial condition, results of operation or business of
the Borrower or any ERISA Affiliate. The Borrower and each ERISA Affiliate has
satisfied all of the funding standards applicable to such Plans and
Multiemployer Plans under Section 302 of ERISA and Section 412 of the Tax Code
and the Pension Benefit Guaranty Corporation ("PBGC") has not instituted any
proceedings, and there exists no event or condition which would constitute
grounds for the institution of proceedings by PBGC, to terminate any Plan or
Multiemployer Plan under Section 4042 or ERISA which could have a material
adverse effect on the financial condition, results of operation or business of
the Borrower or any ERISA Affiliate. Neither the Borrower nor any ERISA
Affiliate has taken any steps to terminate any Plan, which termination could
have a material adverse effect on the financial condition, results
34
of operation or business of the Borrower or any ERISA Affiliate. Neither the
Borrower nor any ERISA Affiliate has taken any steps to terminate its
participation in any Multiemployer Plan or withdraw from any Multiemployer Plan,
which termination or withdrawal could have a material adverse effect on the
financial condition, results of operations or business of the Borrower or any
ERISA Affiliate. The Borrower and each ERISA Affiliate has made all
contributions to each Plan and each Multiemployer Plan to which it has become
obligated to contribute as to which the failure to make contributions could have
a material adverse effect on the financial condition, results of operation or
business of the Borrower or any ERISA Affiliate. The Borrower is not aware of
any assessments or assertions of withdrawal liability against it or any ERISA
Affiliate with respect to any Plan or Multiemployer Plan. The aggregate
potential withdrawal liability under all Multiemployer Plans to which the
Borrower and each ERISA Affiliate is obligated to contribute is less than an
amount which, if all such liabilities were incurred, could have a material
adverse effect on the financial condition, results of operation or business of
the Borrower or any ERISA Affiliate. For purposes hereof, (i) a "Prohibited
Transaction" shall mean, with respect to any Plan, any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of ERISA or
the transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c) (1) of the Tax Code which is not exempt by reason
of Section 4975 (c) (2) or Section 4975 (d) of the Tax Code, or the transitional
rules of Section 2003(c) of ERISA and (ii) a "Reportable Event" shall mean (x) a
reportable event described in Section 4043 of ERISA and regulations thereunder,
(y) a withdrawal by a substantial employer from a single-employer plan which is
a Plan and which has two or more contributing sponsors at least two of which are
not under common control, as referred to in Section 4063(b) of ERISA, or (z) a
cessation of operations at a facility causing more than twenty percent (20%) of
plan participants to be separated from employment, as referred to in Section
4068(f) of ERISA.
7. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, as long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) as long as
this Agreement remains in effect:
7.1 Financial Statements. Except as otherwise expressly provided for
herein, the Borrower shall and shall cause each of its Subsidiaries, if any, to
keep proper books of record and account in which full and true entries will be
made of all dealings or transactions of or in relation to the business and
affairs of such corporation, in accordance with GAAP, and the Borrower shall
cause to be furnished to the Agent and each Lender: (a) as soon as practicable
and in any event within thirty (30) days after the end of each month (i)
statements of income, retained earnings and cash flow of the Borrower and its
Subsidiaries, if any, for such month and for the period from the beginning of
the then current calendar year to the end of such month and a balance sheet of
the Borrower and its Subsidiaries, if any, as of the end of such month,
accompanied by, in comparative form, figures for the corresponding periods in
the immediately preceding calendar year, all in reasonable detail and certified
as accurate by the president or the treasurer of the Borrower, subject to
changes resulting from normal year-end adjustments (such certification to be in
the form of Exhibit E attached hereto), (ii) copies of all operating statements
for such month prepared by the Borrower and its Subsidiaries, if any, for their
internal use, including without limitation statements of cash flow, purchases
and sales of Inventory and other
35
similar data as the Lender may reasonably request, and (iii) a comparison of
actual cash flow and capital expenditures with amounts budgeted for such month;
(aa) as soon as practicable and in any event within forty-five (45) days after
the end of each calendar quarter, (i) statements of income, retained earnings
and cash flow of the Borrower and its Subsidiaries for such calendar quarter and
for the period from the beginning of the then current calendar year to the end
of such quarter and a balance sheet of the Borrower and its Subsidiaries as of
the end of such quarter, accompanied by, in comparative form, figures for the
corresponding periods in the immediately preceding calendar year, all in
reasonable detail and certified as accurate by the president or the treasurer of
the Borrower, subject to changes resulting from normal year-end adjustments
(such certification to be in the form of Exhibit "E" attached hereto, adjusted
as necessary for presentation of quarterly statements); (b) as soon as
practicable and in any event within one hundred twenty (120) days after the end
of each calendar year, statements of income, retained earnings and cash flow of
the Borrower and its Subsidiaries, if any, for such year, and a balance sheet of
the Borrower and its Subsidiaries, if any, as of the end of such year, setting
forth in each case, in comparative form, corresponding figures for the period
covered by the preceding annual audit and as of the end of the preceding
calendar year, all in reasonable detail and satisfactory in scope to the Agent
and examined by independent certified public accountants selected by the
Borrower and reasonably satisfactory to the Agent, whose opinion shall be
unqualified and otherwise in scope and substance satisfactory to the Lender; (c)
as soon as practicable and in any event within thirty (30) days before the end
of each calendar year of the Borrower, Projections for the succeeding calendar
year, and within thirty (30) days after the close of each calendar month during
such one (1) year period, a statement in which the actual results of such month
are compared with the corresponding forecasts contained in such Projections; (d)
as soon as practicable and in any event within ten (10) days of delivery to the
Borrower, a copy of any letter issued by the Borrower's independent certified
public accountants or other management consultants with respect to the
Borrower's financial or accounting systems or controls; (e) as soon as
practicable (but in any event not more than five (5) days after the president or
the treasurer of the Borrower obtains knowledge of the occurrence of an event or
the existence of a circumstance giving rise to a Default or an Event of
Default), notice of any and all Defaults and Events of Default hereunder; and
(f) and with reasonable promptness, such other business or financial data as the
Agent or any Lender may reasonably request. Whether or not required by the
rules or regulations of the Securities and Exchange Commission (the "SEC"), the
Borrower will deliver to the Agent and the Lenders (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Form 10-Q and Form 10-K, respectively, as if the Borrower were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Risks of Operations" and, with respect to annual
information only, a report thereon by the Borrower's independent certified
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K as if the Borrower were required to file such report, in
each case within the time periods specified in the SEC's rules and regulations.
In addition, and without limitation by the foregoing, the Borrower shall also
promptly deliver to the Agent and the Lenders any and all other filings, reports
and information at any time, from time to time, filed with or furnished by the
Borrower or any of its Subsidiaries to the SEC.
All financial statements delivered to the Agent and the Lenders pursuant to
the requirements of this Section 7.1 (except where otherwise expressly
indicated) shall be prepared in accordance with GAAP; all such financial
statements delivered pursuant to clause (a) thereof shall be separately prepared
and presented for the Borrower and each of its Subsidiaries, respectively, and
all financial
36
statements delivered pursuant to clause (aa) and clause (b) thereof shall be
prepared on a consolidated and consolidating basis for the Borrower and its
Subsidiaries. Together with each delivery of financial statements required by
subsections 7.1(a), 7.1(aa), 7.1(b) and 7.1(c) above, the Borrower shall deliver
to the Agent and each Lender an officer's certificate (i) stating that there
exists no Default or Event of Default (such certification to be in the form of
Exhibit E attached hereto), or, if any Default or Event of Default exists,
specifying the nature thereof, the period of existence thereof and what action
the Borrower proposes to take with respect thereto and (ii) including a specific
line item disclosing the aggregate financial obligations of the Borrower and its
Subsidiaries for rental payments, principal payments, interest payments, service
charges, or otherwise, under all leases, lease acquisition agreements,
capitalized lease arrangements, conditional sales contracts, purchase money
security arrangements and other similar arrangements. Together with each
delivery of financial statements required by subsection 7.l(b) above, the
Borrower shall deliver to the Agent and each Lender a certificate of the
accountants who performed the audit in connection with such statements stating
that in making the audit necessary to the issuance of a report on such financial
statements, they have obtained no knowledge of any Default or Event of Default,
or, if such accountants have obtained knowledge of a Default or Event of
Default, specifying the nature and period of existence thereof. Such
accountants shall not be liable by reason of any failure to obtain knowledge of
any Default or Event of Default which would not be disclosed in the ordinary
course of an audit. The Agent and each Lender shall exercise reasonable efforts
to keep such information, and all information acquired as a result of any
inspection conducted in accordance with Section 7.2, confidential, provided,
that the Agent and each Lender may communicate such information to (w) any other
Person in accordance with the customary practices of commercial banks relating
to routine trade inquiries, (x) any regulatory authority having jurisdiction
over such Lender, (y) any other Person in connection with such Lender's sale of
any participations in the Liabilities, or (z) any other Person in connection
with the exercise of the Agent's or any Lender's rights hereunder or under any
of the other Financing Agreements. The Borrower authorizes the Agent and each
Lender to discuss the financial condition of the Borrower with the Borrower Is
independent certified public accountants and agrees that such discussion or
communication shall be without liability to any of the Agent, any Lender or the
Borrower's independent certified public accountants.
7.2 Inspection. The Agent or any Lender, or any Person designated by
the Agent or any Lender in writing, shall have the right, from time to time
hereafter, to call at the Borrower's or any Subsidiary's, if any, place or
places of business (or any other place where the Collateral or any information
relating thereto is kept or located) upon reasonable notice during ordinary
business hours, and, without hindrance or delay, (a) to inspect, audit, check
and make copies of and extracts from such corporation's books, records,
journals, orders, receipts and any correspondence and other data relating to its
business or to any transactions between the parties hereto, (b) to make such
verification concerning the Collateral as the Agent or any Lender may consider
reasonable under the circumstances and (c) to discuss the affairs, finances and
business of such corporation with any officers, employees or directors of such
corporation. The Borrower shall pay on demand all reasonable photocopying
expenses incurred by the Agent or any Lender under this Section 7.2.
37
7.3 Conduct of Business. The Borrower shall and shall cause each of
its Subsidiaries, if any, to maintain its corporate existence, shall maintain in
full force and effect all licenses, permits, authorizations, bonds, franchises,
leases, patents, trademarks, contracts and other rights necessary or desirable
to the profitable conduct of its business, shall continue in, and limit its
operations to, the same general line of business as that presently conducted and
shall comply with all applicable laws, orders, regulations and ordinances of all
federal, foreign, state and local governmental authorities except for such laws,
orders, regulations and ordinances the violation of which would not, in the
aggregate, have a material adverse effect on such corporation's financial
condition, results of operations or business.
7.4 Claims and Taxes. Absent the Agent's and each Lender's gross
negligence or willful misconduct, the Borrower agrees to indemnify and hold the
Agent and each Lender and their respective affiliates, officers, directors,
employees, attorneys and agents harmless from and against any and all claims,
demands, liabilities, losses, damages, penalties, costs and expenses (including
attorneys' and paralegals' fees) relating to or in any way arising out of the
possession, use, operation or control of any of the Borrower's or any
Subsidiary's, if any, assets. The Borrower shall pay or cause to be paid all
license fees, bonding premiums and related taxes and charges and shall pay or
cause to be paid all of the Borrower's and each Subsidiary's, if any, real and
personal property taxes, assessments and charges and all of the Borrower's and
each Subsidiary's, if any, franchise, income, unemployment, use, excise, old age
benefit, withholding, sales and other taxes and other governmental charges
assessed against the Borrower or any subsidiary, if any, or payable by the
Borrower or any Subsidiary, if any, at such times and in such manner as to
prevent any penalty from accruing or any lien or charge from attaching to its
property; provided, that the Borrower or such Subsidiary, if any, as applicable,
shall have the right to contest in good faith, by an appropriate proceeding
promptly initiated and diligently conducted, the validity, amount or imposition
of any such tax, assessment or charge, and upon such good faith contest to delay
or refuse payment thereof, if (a) such corporation establishes adequate reserves
to cover such contested taxes, assessments or charges and (b) such contest does
not have a material adverse effect on the financial condition of such
corporation, the ability of such corporation to pay any of the Liabilities, or
the priority or value of the Agent's security interest in the Collateral.
7.5 Costs and Expenses as Additional Liabilities. The Borrower shall
reimburse the Agent for all expenses and reasonable fees paid or incurred in
connection with (a) the documentation, negotiation and closing of the Revolving
Loans and other transactions described herein and in the other Financing
Agreements, (b) any amendment, waiver or consent executed in connection with
this Agreement or any of the other Financing Agreements and (c) the enforcement
or preservation of the Agent's and each Lender's rights under this Agreement and
any of the other Financing Agreements, including without limitation stamp,
document, transfer, filing and recording fees and the expenses and reasonable
fees of the Agent's auditors, attorneys and paralegals, whether such expenses
and fees are incurred by the Agent prior to or after the date hereof. All such
costs and expenses incurred by the Agent with respect to the documentation,
negotiation, enforcement, collection and protection of the Agent's interests in
the Collateral, including without limitation the cost of such appraisals and
environmental update inspections as may hereafter be required by the Agent,
shall be additional Liabilities of the Borrower to the
38
Agent, payable on demand, and secured by the Collateral and shall, if not paid
by the Borrower when due or demanded, bear interest at the rate applicable to
Floating Rate Loans.
7.6 The Borrower's Liability Insurance. The Borrower shall and shall
cause each of its Subsidiaries, if any, to maintain, at its expense, such public
liability and third party property damage insurance in such amounts and with
such deductibles as is ordinarily maintained by other Persons engaged in similar
businesses and shall deliver to the Agent the original (or a certified) copy of
each policy of insurance and evidence of the payment of all premiums therefor.
Such policies of insurance shall contain an endorsement showing the Agent and
each Lender as additional insured thereunder and providing that the insurance
company will give the Agent at least thirty (30) days prior written notice
before any such policy or policies of insurance shall be altered or canceled.
7.7 The Borrower's Property Insurance. The Borrower shall and shall
cause each of its Subsidiaries, if any, to, at its expense, keep and maintain
its assets insured against loss or damage by fire, theft, explosion, spoilage
and all other hazards and risks ordinarily insured against by other owners or
users of such properties in similar businesses in an amount at least equal to
the full insurable value of all such property. All such policies of insurance
shall be in form and substance satisfactory to the Agent. The Borrower shall
deliver to the Agent the original (or a certified) copy of each policy of
insurance and evidence of payment of all premiums therefor. Such policies of
insurance shall contain an endorsement, in form and substance satisfactory to
the Agent, showing all loss payable to the Agent, as its interests may appear,
as provided below in this Section 7.7. Such endorsement, or an independent
instrument furnished to the Agent, shall provide that such insurance company
will give the Agent at least thirty (30) days prior written notice before any
such policy or policies of insurance shall be altered or canceled and that no
act or default of the Borrower, any Subsidiary, if any, or any other Person
shall affect the right of the Agent to recover under such policy or policies of
insurance in case of loss or damage. The Borrower hereby directs all insurers
under such policies of insurance to pay all proceeds of insurance policies
directly to the Agent as its interests may exist and the Agent shall, in its
sole discretion, either apply such proceeds against the Liabilities (in such
order as the Agent, in its sole discretion, may determine) or permit the
Borrower to use such proceeds to restore or rebuild the damaged property. The
Borrower irrevocably makes, constitutes and appoints the Agent (and all
officers, employees or agents designated by the Agent), during the continuance
of a Default, as the Borrower's true and lawful attorney-in-fact for the purpose
of making, settling and adjusting claims under all such policies of insurance,
endorsing the name of the Borrower or any Subsidiary, if any, on any check,
draft, instrument or other item of payment received by the Borrower or the Agent
pursuant to any such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. If the Borrower or any
subsidiary, if any, at any time or times hereafter, shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then the Agent, without waiving or
releasing any obligation or default by the Borrower hereunder, may at any time
or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which the Agent deems advisable, and the amount so
expended shall be part of the Liabilities,
39
payable on demand and secured by the Collateral and shall, if not paid by the
Borrower when due or demanded, bear interest at the rate applicable to Floating
Rate Loans.
7.8 Pension Plans. The Borrower shall and shall cause each ERISA
Affiliate to (a) make contributions to all of the Plans and Multiemployer Plans
in a timely manner and in a sufficient amount to comply with the requirements of
ERISA; (b) comply with all material requirements of ERISA and the Tax Code which
relate to Plans and Multiemployer Plans, the failure to comply with which could
have a material adverse effect on the financial condition, results of operation
or business of the Borrower or any ERISA Affiliate; (c) notify the Agent
immediately upon receipt by the Borrower of any notice of the institution of any
proceeding or other action which may result in the termination of any Plans or
Multiemployer Plans; and (d) immediately notify the Agent of the occurrence of a
"Termination Event" (as defined below). For purposes hereof, a "Termination
Event" shall mean (i) the occurrence of a Reportable Event or a Prohibited
Transaction, (ii) the complete or partial withdrawal (as defined in Sections
4203 and 4205 of ERISA) by the Borrower or any ERISA Affiliate from a
Multiemployer Plan, or the receipt by the Borrower or any ERISA Affiliate of a
demand from any Multiemployer Plan for withdrawal liability, (iii) the filing of
a notice of intent to terminate any Plan or the treatment of a plan amendment as
a termination of any such Plan under Section 4041 of ERISA, (iv) any action
causing termination under Section 4041A of ERISA of any Multiemployer Plan, (v)
the institution of proceedings to terminate any Plan or Multiemployer Plan by
the PBGC under Section 4042 of ERISA, or (vi) the occurrence of any other event
or condition which might constitute grounds under Sections 4041A or 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.
7.9 Notice of Suit or Adverse Change in Business. The Borrower
shall, as soon as possible, and in any event within five (5) days after an
officer of the Borrower located in Beloit, Wisconsin learns of the following,
give written notice to the Agent of (a) any proceedings, potentially material to
the business or financial condition of the Borrower or any of its Subsidiaries,
if any, including without limitation all proceedings where the amount in
controversy exceeds Two Hundred Fifty Thousand Dollars ($250,000), being
instituted or threatened to be instituted by or against the Borrower or any of
its Subsidiaries in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign) and (b)
any material adverse change in the business, assets or condition, financial or
otherwise, of the Borrower or any of its Subsidiaries, if any.
7.10 Supervening Illegality. If, at any time or times hereafter,
there shall become effective any amendment to, deletion from or revision,
modification or other change in any provision of any statute, or any rule,
regulation or interpretation thereunder or any similar law or regulation,
adversely affecting any Lender's extension of credit described in this Agreement
and/or the selling of participations therein, the Borrower shall, at any
Lender's option, either (a) pay to such Lender the then outstanding balance of
such Lender's Pro Rata Share of the Liabilities, indemnify and hold such Lender
harmless from and against any and all obligations, fees, liabilities, losses,
penalties, costs, expenses and damages, of every kind and nature, imposed upon
or incurred by the Borrower by reason of such Lender's failure or inability to
comply with the terms of this Agreement or any of the other Financing Agreements
or (b) indemnify and hold
40
such Lender harmless from and against any and all obligations, fees,
liabilities, losses, penalties, costs, expenses and damages, of every kind and
nature, imposed upon or incurred by such Lender by reason of such amendment,
deletion, revision, modification, or other change. In the event that any such
amendment to, deletion from or revision, modification or other change does not
materially adversely affect a Lender's extension of credit described in this
Agreement or the selling of participations therein, such Lender shall not elect
the provisions of clause (a) above.
7.11 Environmental Matters. The Borrower shall promptly notify and
furnish the Agent with a copy of any and all Environmental Notices which are
received by it or any of its Subsidiaries, if any. The Borrower shall and shall
cause its Subsidiaries, if any, to take prompt and appropriate action in
response to any and all such Environmental Notices and shall promptly furnish
the Agent with a description of such corporation's response thereto.
7.12 Use of Proceeds. The Borrower shall use the proceeds of the
disbursements of the Revolving Loans and the Letters of Credit for working
capital and other proper corporate purposes.
7.13 Notice of Business Interruption. The Borrower shall give the
Agent prompt notice if the Borrower or any of its Subsidiaries, if any, is
enjoined, restrained, or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business affairs.
7.14 Interest Rate Protection. Within sixty (60) days of any request
by the Agent, the Borrower shall execute and enter into an interest rate
protection agreement or other agreement for protection against the risk of
interest rate fluctuations, with a Person, and in form and substance,
satisfactory to the Agent (Borrower acknowledges in this regard that Borrower is
not required to enter into any such agreement with the Agent or any Lender, or
any Affiliate of the Agent or any Lender, as a condition for any of the benefits
to Borrower under this Agreement).
8. NEGATIVE COVENANTS.
The Borrower covenants and agrees that as long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) as long as
this Agreement remains in effect (unless the Agent shall give its prior written
consent thereto which consent, in the absence of Default or an Event of Default
shall not be unreasonably withheld in the case of acquisitions described in
Section 8.3):
8.1 Encumbrances. Except as set forth on Schedule 6.5 hereto,
neither the Borrower nor any of its Subsidiaries, if any, will create, incur,
assume or suffer to exist any security interest, mortgage, pledge, lien or other
encumbrance of any nature whatsoever on any of its assets, other than: (a) liens
securing the payment of taxes, either not yet due or the validity of which is
being contested in good faith by appropriate proceedings, and as to which the
Borrower or such Subsidiary, as applicable, shall, if appropriate under GAAP,
have set aside on its books and records adequate reserves; provided, however,
that such contest does not have a material adverse effect on the ability of such
corporation to pay any of the Liabilities, or the
41
priority or value of the Agent's security interest in the Collateral; (b)
deposits under worker's compensation, unemployment insurance, social security
and other similar laws, or to secure the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to secure
indemnity, performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business; (c)
security interests arising in connection with Equipment, Rolling Stock, real
estate and other capital expenditures as permitted by this Agreement; (d) liens
and security interests in favor of the Agent; and (e) liens securing
indebtedness to be repaid with the initial disbursement of the Revolving Loans.
8.2 Indebtedness. Except as set forth on Schedule 6.10 attached
hereto or as permitted under Section 8.8 or 8.12 hereof, neither the Borrower
nor any of its Subsidiaries, if any, shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except (a) the Liabilities, (b) trade payables and normal accruals
in the ordinary course of business or assumed by the Borrower in the purchase of
an Additional Store or Stores to the extent permitted in Section 8.3 not yet due
and payable, or with respect to which such corporation is contesting in good
faith the amount or Validity thereof by appropriate proceedings, and then only
to the extent that such corporation has set aside on its books adequate reserves
therefor, in accordance with GAAP, (c) other liabilities, assumed by the
Borrower in the purchase of an Additional Store or Stores to the extent
permitted in Section 8.3, and (d) indebtedness secured by Rolling Stock and/or
real estate and/or Equipment, (e) purchase money obligations incurred in
connection with the purchase of Additional Stores, to the extent permitted under
Section 8.3 and (f) indebtedness, not exceeding the aggregate principal amount
of One Hundred Million Dollars ($100,000,000.00), together with accrued interest
and other charges, if any, in each case incurred pursuant to the Senior
Subordinated Notes.
8.3 Consolidations, Mergers or Acquisitions. Neither the Borrower
nor any of its Subsidiaries, if any, shall recapitalize or consolidate with,
merge with, or otherwise acquire any shares or other equity interest in, or any
of the assets or properties of, any other Person, except for inventory, rolling
stock, equipment and real estate (provided, that in connection with all real
estate purchases made pursuant to this Section 8.3, the Borrower shall exercise
reasonable due diligence with respect to environmental risks involved in such
purchases, which due diligence shall include but not be limited to the review
of a timely phase I environmental audit) purchased in the ordinary course of
business, and except for assets (including accounts receivable and intangibles
but excluding shares or equity interests) purchased in connection with the
acquisition of any additional retail store or stores (an individual purchase of
any single store or group of stores is referred to herein as a purchase of an
"Additional Store"); provided, that assets of any Additional Store or Stores may
be purchased only if (a) within a reasonable time prior to such proposed
purchase the Borrower first provides the Agent and each Lender with notice of
such proposed purchase and promptly (and in any event within fifteen (15)
calendar days after Borrower's execution and delivery thereof) provides the
Agent and each Lender with a copy of the purchase agreement (including all
exhibits and schedules) relating thereto, and in addition, provides the Agent
and each Lender, promptly upon the request therefor (and in any event prior to
consummation of any such proposed purchase), with such other information,
documents, certificates or opinions relating to such proposed purchase as the
Agent or such Lender may request, (b) both immediately prior to and immediately
following any such purchase there shall
42
exist no Default or Event of Default, (c) the purchase price of such assets does
not exceed Forty Five Million Dollars ($45,000,000.00) in the aggregate during
any calendar year (for purposes of this clause (c), the "purchase price" in
respect of any such purchase means the aggregate amount of the purchase price
payable by the Borrower to the seller including, without limitation, cash
payments, assumptions of liability and purchase money obligations, but excluding
the portion, if any, of any such purchase money obligations which by their terms
are amortized and payable in excess of eighteen (18) months after the date of
incurrence) and (d) the aggregate unpaid balance of purchase money obligations
at any time existing in connection with all such purchases shall not exceed
Fifteen Million Dollars ($15,000,000.00). No Person shall acquire all or
substantially all of the stock or assets of the Borrower. Neither the Borrower
nor any of its Subsidiaries, if any, shall create any additional Subsidiaries.
8.4 Investments or Loans. Neither the Borrower nor any of its
Subsidiaries, if any, shall make or permit to exist investments or loans in or
to any other Person, except (a) investments in short-term direct obligations of
the United States Government, (b) investments in negotiable certificates of
deposit issued by any Lender or by any other bank satisfactory to the Agent,
payable to the order of the Borrower or to bearer, (c) investments in commercial
paper rated A1 or P1, (d) loans to and investments in Affiliates which in the
aggregate shall not exceed the Affiliates Investments Limit, reduced by the
aggregate amount, if any, paid by the Borrower on or with respect to any
guaranty referred to in clause (b) of Section 8.5 (but only to the extent that
such guaranty payments by the Borrower have not been reimbursed, and provided,
that any such loans and investments will be made solely to permit the
acquisition of assets which will inure to the benefit of the Borrower and
provided further, that during the continuance of a Default or an Event of
Default, the Borrower shall not increase the principal balance of, or make any
new loan to or investment in, any Affiliate, but the balance due under the
existing loans may increase as the result of the accrual of interest and similar
charges and the Borrower may renew such loans), (e) loans by the Borrower to
Subsidiaries that are wholly owned by the Borrower, in an aggregate amount
outstanding at any time not exceeding Five Million Dollars ($5,000,000.00),
provided that such loans are for the purpose of providing working capital to any
such Subsidiary for its use in the ordinary course of business and (f)
investments in the equity securities of any Person having an aggregate fair
market value (measured on the date each such investment was made and without
giving effect to subsequent changes in value), when taken together with all
other such investments or loans made pursuant to this clause (f) that are at the
time outstanding, not to exceed One Million Dollars ($1,000,000.00).
8.5 Guarantees. Neither the Borrower nor any of its Subsidiaries, if
any, shall guarantee, endorse or otherwise in any way become or be responsible
for obligations of any other Person, whether by agreement to purchase the
indebtedness of any other Person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging any indebtedness or obligation of such
other Person or otherwise, except (a) endorsements of negotiable instruments for
collection in the ordinary course of business and (b) guarantees of indebtedness
not to exceed Ten Million Dollars ($10,000,000) in the aggregate outstanding at
any one time and, except for those guaranties set forth on Schedule 8.5 attached
hereto, and (c) guarantees of indebtedness evidenced by the Senior Subordinated
Notes, provided that such guarantees are subordinated in right of payment and
claim in favor of the prior payment to the Agent and the Lenders of all
Liabilities, in form and substance satisfactory to the
43
Agent and the Lenders, and the guaranty agreements evidencing such guarantees
are otherwise in form and substance satisfactory to the Agent and the Lenders
and (d) guarantees in favor of the Agent, for the benefit of the Lenders, of the
Liabilities. All guaranties outstanding as of the date of this Agreement are
set forth on Schedule 8.5 attached hereto.
8.6 Inventory Covenants. Neither the Borrower nor any of its
Subsidiaries, if any, shall sell any Inventory on a xxxx-and-hold or consignment
basis.
8.7 Disposal of Property. Neither the Borrower nor any of its
Subsidiaries, if any, shall sell, lease, transfer or otherwise dispose of any of
its properties, assets and rights to any Person except (a) sales of Inventory in
the ordinary course of business, (b) sales of Equipment or Rolling Stock being
replaced in the ordinary course of business with other Equipment or Rolling
Stock with a fair market value equal to or greater than the Equipment or Rolling
Stock being replaced and (c) sales in any calendar year of other Equipment or
Rolling Stock with an aggregate appraised market value not in excess of Four
Hundred Thousand Dollars ($400,000). In the event any of the Equipment or other
assets of the Borrower or any of its Subsidiaries, if any, is sold, transferred
or otherwise disposed of as herein provided, and such sale, transfer or
disposition is effected without replacement of the property so sold, transferred
or disposed of or such property is replaced by property leased by the Borrower
or any of its Subsidiaries, if any, the Borrower shall and shall cause its
Subsidiaries, if any, to deliver all of the cash proceeds of any such sale,
transfer or disposition to the Agent, for the benefit of the Lenders, subject to
the prior rights of the Persons listed on Schedule 6.5 attached hereto and
Persons contemplated by subsection 8.1(c), which proceeds shall be applied to
the repayment of the Liabilities. If any of the Equipment is sold, transferred
or otherwise disposed of as herein provided and such sale, transfer or
disposition is made in connection with the purchase by the Borrower of
replacement Equipment, the Borrower shall use the proceeds of such sale,
transfer or disposition to finance the purchase by the Borrower of replacement
Equipment and shall deliver to the Agent, for the benefit of the Lenders,
written evidence of the use of the proceeds for such purchase. All such
replacement Equipment purchased by the Borrower shall be free and clear of all
liens, claims and encumbrances, except as expressly allowed elsewhere in this
Agreement or as provided on Schedule 6.5 attached hereto.
8.8 Capital Expenditure Limitations. The Borrower and its
Subsidiaries, if any, shall not purchase, invest in or otherwise acquire,
additional real estate, equipment, rolling stock or other fixed assets, which,
in the aggregate, cost the Borrower and its Subsidiaries, if any, more than
Twenty Six Million Five Hundred Thousand Dollars ($26,500,000.00) during the
calendar year ending December 31, 1997, Twenty Seven Million Dollars
($27,000,000.00) during the calendar year ending December 31, 1998, Thirty
Million Dollars ($30,000,000.00) during the calendar year ending December 31,
1999 and any calendar year thereafter. For purposes of the foregoing, there
shall be excluded therefrom capital expenditures made to finance Store
Acquisitions pursuant to Section 8.3.
8.9 Loans to Officers; Consulting and Management Fees. Except as
provided in Section 8.4 and for advances for travel and expenses to the
Borrower's officers, directors or employees in the ordinary course of business,
neither the Borrower nor any of its Subsidiaries, if any, shall make any
individual loans in excess of Twenty-Five Thousand Dollars ($25,000) or
aggregate loans in excess of Fifty Thousand Dollars ($50,000) to officers,
directors, employees
44
or stockholders of the Borrower or any of its Subsidiaries, if any, and neither
the Borrower nor any of its Subsidiaries, if any, shall pay any consulting or
similar fees to any officer, director, employee, stockholder, Affiliate or
Subsidiary, if any, of the Borrower or any of its Subsidiaries, if any, whether
for services rendered to such corporation or otherwise.
8.10 Dividends and Stock Redemptions. Neither the Borrower nor any
of its Subsidiaries, if any, shall directly or indirectly, (a) apply any of its
funds, property or assets to, or set apart any funds, property or assets for,
the purchase, redemption or retirement of, or make any distribution, by
reduction of capital or otherwise in respect of any of its shares of capital
stock or other securities, whether now or hereafter outstanding, or (b) declare
or pay, or set apart any funds for the payment of, any dividends in any calendar
year on any class or classes of stock, except for (i) dividends in an aggregate
amount not to exceed the amount of federal and state income taxes attributable
to any preceding calendar year (and estimated for the current year) from such
stockholders' ownership of stock of the Borrower and (ii) additional dividends
in an amount not to exceed fifty percent (50%) of the excess of the net income
of the Borrower and its Subsidiaries, if any, determined on a consolidated basis
in accordance with GAAP, for the preceding calendar year, over the dividends
declared, paid or set apart for payment pursuant to clause (i) above during the
calendar year for which the additional dividends in this clause (ii) are being
calculated, provided, that additional dividends pursuant to this clause (ii) may
be declared, paid or set apart only if (y) the Agent shall have received the
financial statements required by clause (b) of Section 7.1 as of the last day of
the calendar year for which such dividends are being calculated, together with
the officer's certificate required by Section 7.1 for such period demonstrating
and certifying that no Default or Event of Default has occurred and existed as
of the last day of such calendar year and (z) no Default or Event of Default
shall have occurred and be continuing at the time of any such declaration,
payment or setting apart, or shall result therefrom.
8.11 Amendment of Certificate of Incorporation or By-Laws. Absent
not less than five (5) days' prior written notice to the Agent, neither the
Borrower nor any of its Subsidiaries, if any, shall amend its Certificate or
Articles of Incorporation, as applicable, or By-Laws.
8.12 [INTENTIONALLY BLANK]
8.13 Fiscal Year End. The Borrower shall not change the end of the
fiscal year of it and its Subsidiaries, if any, from December 31 of each year.
8.14 Transactions with subsidiaries and Affiliates. Except as
provided in Section 8.4, neither the Borrower nor any of its Subsidiaries, if
any, will transfer any cash or property to any Affiliate or enter into any
transaction, including without limitation the purchase, lease, sale or exchange
of property or the rendering of any service to any Affiliate; provided, that the
Borrower and its Subsidiaries, if any, may transfer cash or property to
Affiliates and enter into transactions with Affiliates for fair value in the
ordinary course of business pursuant to terms that are no less favorable to the
Borrower and its Subsidiaries, if any, than the terms upon which such transfers
or transactions would have been made had such transfers or transactions been
made to or with a Person that is not an Affiliate.
45
8.15 Termination Events. The Borrower shall not permit to occur or
suffer to exist any Termination Event, if such Termination Event could have a
material adverse effect on the financial condition, results of operation or
business of the Borrower or any ERISA Affiliate.
8.16 Bonuses. Except as calculated pursuant to formulae illustrated
on Schedule 8.16 attached hereto, neither the Borrower nor any of its
Subsidiaries, if any, shall pay performance or similar bonuses to its directors,
officers or stockholders.
8.17 Minimum Tangible Net Worth. Tangible Net Worth, as determined
as of each date set forth below, shall not be less than the amount set forth
below opposite such date:
Date Amount
---- ------
December 31, 1997 $85,000,000.00
December 31, 1998 $75,000,000.00
Each fiscal year-end thereafter $75,000,000.00
8.18 Maximum Funded Debt to EBITDA. The ratio of Funded Debt to
EBITDA, determined as of the last day of each calendar quarter and measured for
the preceding period of four calendar quarters, shall not exceed the following
prescribed amounts, as applicable:
Date Ratio
---- -----
June 30, 1997 6.60 to 1.0
September 30, 1997 6.50 to 1.0
December 31, 1997 6.20 to 1.0
March 31, 1998 6.70 to 1.0
June 30, 1998 6.80 to 1.0
September 30, 1998 6.50 to 1.0
December 31, 1998 6.30 to 1.0
March 31, 1999 6.20 to 1.0
June 30, 1999 6.80 to 1.0
September 30, 1999 6.50 to 1.0
December 31, 1999 6.30 to 1.0
March 31, 2000 5.90 to 1.0
June 30, 2000 6.80 to 1.0
8.19 Minimum Fixed Charge Coverage Ratio. The ratio of (i) EBITDA to
(ii) the sum of interest expense plus the principal portion of current
maturities of long term indebtedness (determined on a consolidated basis for the
Borrower and its Subsidiaries), determined as of the last day of each calendar
quarter and measured for the preceding period of four calendar quarters, shall
not be less than the following prescribed amounts, as applicable:
Date Ratio
---- -----
June 30, 1997 1.45 to 1.0
September 30, 1997 1.35 to 1.0
46
December 31, 1997 1.25 to 1.0
March 31, 1998 1.10 to 1.0
June 30, 1998 1.15 to 1.0
September 30, 1998 1.25 to 1.0
December 31, 1998 1.35 to 1.0
March 31, 1999 1.20 to 1.0
June 30, 1999 1.25 to 1.0
September 30, 1999 1.35 to 1.0
December 31, 1999 1.40 to 1.0
March 31, 2000 1.80 to 1.0
June 30, 2000 1.85 to 1.0
8.20 Senior Subordinated Notes and Related Guaranties. Neither the
Borrower nor any of its Subsidiaries on its behalf shall (i) make any prepayment
or any other payment other than scheduled interest payments and payment at
stated final maturity on or (ii) redeem, repurchase or otherwise reacquire or
(iii) elect or exercise either of the options provided under Section 8.01
("Option to Elect Legal Defeasance or Covenant Defeasance") of the Indenture
with respect to, any of the Senior Subordinated Notes without the prior written
consent of the Agent. The Borrower will not agree to any amendment, change,
modification or restatement of the Senior Subordinated Notes or the Indenture
without the prior written consent of the Agent.
9. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.
9.1 Acceleration. Upon the occurrence of a Default described in
clause (g) of the definition of "Default," all of the Liabilities shall
immediately and automatically, without notice of any kind, be immediately due
and payable; and upon the occurrence of any other Default, any or all of the
Liabilities may, at the option of the Agent, and shall at the direction of the
Requisite Lenders (which direction shall be preceded by not less than thirty
(30) days' prior written notice to the Agent from such Requisite Lenders of
their intent to give such direction) and without presentment, demand, protest or
notice of any kind (all of which are hereby expressly waived), be declared, and
thereupon shall become, immediately due and payable. Upon the occurrence of any
Default the Agent or the Requisite Lenders may, at its or their option,
terminate the obligations of the Lenders to make additional Revolving Loans and
issue additional Letters of Credit. Without limitation of or by the foregoing,
upon the occurrence of a Default, the Agent may, at its option, declare the
portion of the Revolving Loans comprised by Eurodollar Loans to be immediately
due and payable and, without further notice, cause such Eurodollar Loans to be
refinanced by a Revolving Loan in an amount equal to the aggregate unpaid
principal balance of such Eurodollar Loans, in which event accrued interest on
such unpaid principal amount, plus applicable payments required by Section
2.11(c), if any, shall be immediately due and payable.
9.2 Rights and Remedies Generally. Upon the occurrence of a Default,
the Agent, on behalf of the Lenders, shall have, in addition to any other rights
and remedies contained in this Agreement or in any of the other Financing
Agreements, all of the rights and remedies of a secured party under the Code or
other applicable laws, all of which rights and remedies shall be cumulative, and
non-exclusive, to the extent permitted by law. In addition to all such rights
and remedies, the sale, lease or other disposition of the Collateral, or any
part thereof, by the
47
Agent after Default may be for cash, credit or any combination thereof, and the
Agent, on behalf of the Lenders, may purchase all or any part of the Collateral
at public or, if permitted by law, private sale, and in lieu of actual payment
of such purchase price, may set-off the amount of such purchase price against
the Liabilities then owing. Any sales of the Collateral may be adjourned from
time to time with or without notice. The Agent may, in its sole discretion,
cause the Collateral to remain on the Borrower's premises, at the Borrower's
expense, pending sale or other disposition of the Collateral. The Agent shall
have the right to conduct such sales on the Borrower's premises, at the
Borrower's expense, or elsewhere, on such occasion or occasions as the Agent may
see fit.
9.3 Entry Upon Premises and Access to Information. Upon the
occurrence of a Default, the Agent shall have the right to enter upon any
premises of the Borrower where the Collateral is located (or is believed to be
located) without any obligation to pay rent to the Borrower, or any other place
or places where the Collateral is believed to be located and kept, and remove
the Collateral therefrom to the premises of the Agent or any agent of the Agent,
for such time as the Agent may desire, in order effectively to collect or
liquidate the Collateral, and/or the Agent may require the Borrower to assemble
the Collateral and make it available to the Agent at a place or places to be
designated by the Agent. Upon the occurrence of a Default, the Agent shall have
the right to obtain access to the Borrower's data processing equipment, computer
hardware and software relating to the Collateral and to use all of the foregoing
and the information contained therein in any manner the Agent deems appropriate;
and the Agent shall have the right to notify post office authorities to change
the address for delivery of the Borrower's mail to an address designated by the
Agent and to receive, open and process all mail addressed to the Borrower.
9.4 Sale or Other Disposition of Collateral by the Agent. Any notice
required to be given by the Agent of a sale, lease or other disposition or other
intended action by the Agent with respect to any of the Collateral which is
deposited in the United States mails, postage prepaid and duly addressed to the
Borrower at the address specified in Section 10.13, at least ten (10) Business
Days prior to such proposed action shall constitute fair and reasonable notice
to the Borrower of any such action. The net proceeds realized by the Agent upon
any such sale or other disposition, after deduction for the expense of retaking,
holding, preparing for sale, selling or the like and the reasonable attorneys'
and paralegals' fees and legal expenses incurred by the Agent in connection
therewith, shall be applied as provided herein toward satisfaction of the
Liabilities including, without limitation the Liabilities described in Sections
7.5 and 10.2. The Agent shall account to the Borrower for any surplus realized
upon such sale or other disposition, and the Borrower shall remain liable for
any deficiency. The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency shall not affect the
Agent's security interest in the Collateral until the Liabilities are fully
paid. The Borrower agrees that neither the Agent nor any Lender has any
obligation to preserve rights to the Collateral against any other parties. The
Agent is hereby granted a license or other right to use, without charge, the
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, tradestyles, trademarks, service marks and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale and selling
48
any Collateral and the Borrower's rights under all licenses and all franchise
agreements shall inure to the Agent's benefit until the Liabilities are paid.
9.5 Waiver of Demand. Demand, presentment, protest, notice of
nonpayment, notice of intent to accelerate and notice of acceleration are hereby
waived by the Borrower. The Borrower also waives the benefit of all valuation,
appraisal and exemption laws.
9.6 Waiver of Notice. UPON THE OCCURRENCE OF A DEFAULT, THE BORROWER
HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE
BY THE LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS
OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR
HEARING, EXCEPT AS OTHERWISE EXPRESSLY REQUIRED HEREIN.
9.7 Advice of Counsel. The Borrower acknowledges that it has been
advised by its counsel with respect to this transaction and this Agreement,
including without limitation any waivers contained herein.
10. MISCELLANEOUS.
10.1 Waiver. The Agent's and the Lenders' failure, at any time or
times hereafter, to require strict performance by the Borrower of any provision
of this Agreement shall not waive, affect or diminish any right of the Agent or
any Lender thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by the Agent or any Lender of a Default by the Borrower
under this Agreement or a default under any of the other Financing Agreements
shall not suspend, waive or affect any other Default by the Borrower under this
Agreement or any other default under any of the other Financing Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character. None of the undertakings, agreements, warranties,
covenants and representations of the Borrower contained in this Agreement or any
of the other Financing Agreements and no Default by the Borrower under this
Agreement or default under any of the other Financing Agreements shall be deemed
to have been suspended or waived by the Agent or any Lender unless such
suspension or waiver is in writing signed by an officer of the Agent, and
directed to the Borrower specifying such suspension or waiver.
10.2 Costs and Attorneys' Fees. Without limiting the provisions of
Section 7.5, if at any time or times hereafter the Agent employs counsel in
connection with protecting or perfecting the Agent's security interest in the
Collateral or in connection with any matters contemplated by or arising out of
this Agreement or any of the other Financing Agreements, whether (a) to
commence, defend, or intervene in any litigation or to file a petition,
complaint, answer, motion or other pleadings, (b) to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise), (c) to consult
with officers of the Agent to advise the Agent, (d) to protect, collect, lease,
sell, take possession of, or liquidate any of the Collateral, (e) to attempt to
enforce or to enforce any security interest in any of the Collateral, or (f) to
attempt to enforce or to enforce any rights of the Agent or any Lender
hereunder, including without
49
limitation the right to collect any of the Liabilities, then in any of such
events, all of the reasonable attorneys, fees arising from such services, and
any expenses, costs and charges relating thereto, including without limitation
all reasonable fees of the paralegals and other staff employed by such
attorneys, shall be part of the Liabilities, payable on demand and secured by
the Collateral and shall, if not paid by the Borrower when due or demanded, bear
interest at the rate applicable to Floating Rate Loans.
10.3 Expenditures by the Agent. In the event the Borrower shall fail
to pay taxes, insurance, assessments, costs or expenses which the Borrower is,
under any of the terms hereof or of any of the other Financing Agreements,
required to pay, or fails to keep the Collateral free from other security
interests, liens or encumbrances, except as permitted herein, the Agent may, in
its sole discretion, make expenditures for any or all of such purposes, and the
amount so expended, shall be part of the Liabilities, payable on demand and
secured by the Collateral and shall, if not paid by the Borrower when due or
demanded, bear interest at the rate applicable to Floating Rate Loans.
10.4 Custody and Preservation of Collateral. The Agent and the
Lenders shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral in its possession if it takes such action
for that purpose as the Borrower shall request in writing, but failure by the
Agent or any Lender to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure by the Agent or any
Lender to preserve or protect any right with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Borrower, shall of itself be deemed a failure
to exercise reasonable care in the custody or preservation of such Collateral.
10.5 Reliance by the Agent and the Lenders. The Borrower
acknowledges that the Agent and each Lender, in entering into this Agreement and
agreeing, in its discretion, to make Revolving Loans and otherwise extend credit
to the Borrower hereunder, has relied upon the accuracy of the covenants,
agreements, representations and warranties made herein by the Borrower and the
information delivered by the Borrower to the Agent or any Lender in connection
herewith (including without limitation the Financials).
10.6 Successors and Assigns. Whenever in this Agreement there is
reference made to any of the parties hereto, such reference shall be deemed to
include, whenever applicable, a reference to the successors and assigns of the
Borrower and the successors and assigns of the Agent and each of the Lenders,
respectively. Notwithstanding anything herein to the contrary, the Borrower may
not transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and all Lenders. No Lender may transfer any
of its rights or obligations under this Agreement except as provided in Section
10.16.
10.7 Applicable Law; Severability. THIS AGREEMENT SHALL BE CONSTRUED
IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS AND
DECISIONS, AND NOT THE CONFLICT OF LAW PROVISIONS, OF THE STATE OF ILLINOIS.
Whenever possible, each provision of this Agreement shall be
50
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement.
10.8 Submission to Jurisdiction; Waiver of Bond. THE BORROWER, THE
AGENT AND EACH LENDER HEREBY CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE, OR
FEDERAL COURT LOCATED WITHIN XXXX COUNTY, ILLINOIS AND WAIVE ANY OBJECTION BASED
ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN
ANY SUCH COURT AND THE BORROWER CONSENTS THAT ALL SERVICE OF PROCESS UPON THE
BORROWER MAY BE MADE BY REGISTERED MAIL OR MESSENGER DIRECTED TO IT AT THE
ADDRESS SET FORTH IN SECTION 10.13 AND THAT SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO THE BORROWER'S ADDRESS BY THE BORROWER'S AGENT AS SET
FORTH BELOW. THE BORROWER HEREBY APPOINTS CT CORPORATION, 000 XXXXX XXXXXXX
XXXXXX, XXXXXXX, XXXXXXXX 00000, AS ITS AGENT FOR THE PURPOSE OF ACCEPTING THE
SERVICE OF ANY PROCESS WITHIN THE STATE OF ILLINOIS, WHICH APPOINTMENT MAY BE
REVOKED WITH THE AGENT'S PRIOR WRITTEN CONSENT. THE AGENT, EACH LENDER AND THE
BORROWER WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND THE BORROWER
WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF THE AGENT OR ANY LENDER. NOTHING CONTAINED IN THIS
SECTION 10.8 SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR
ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
10.9 Application of Payments. Notwithstanding any contrary provision
contained in this Agreement or in any of the other Financing Agreements, the
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by the Agent, for the account
of the Lenders, from the Borrower or with respect to any of the Col lateral, and
the Borrower does hereby irrevocably agree that the Agent shall have the
continuing exclusive right to apply and reapply any and all payments received at
any time or times hereafter, whether with respect to the Collateral or
otherwise, against the Liabilities in such manner as the Agent may deem
advisable, notwithstanding any entry by the Agent or any Lender upon any of its
books and records.
10.10 Marshalling; Payments Set Aside. Neither the Agent nor any
Lender shall be under any obligation to xxxxxxxx any assets in favor of the
Borrower or any other party or against or in payment of any or all of the
Liabilities. To the extent that the Borrower makes a payment or payments to the
Agent, for the account of the Lenders, or the Agent enforces its security
interests or the Agent or any Lender exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently
51
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
10.11 Section Titles. The section and subsection titles contained in
this Agreement shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties.
10.12 Continuing Effect. This Agreement, the Agent's security
interests in the Collateral, and all of the other Financing Agreements shall
continue in full force and effect so long as any Liabilities shall be owed to
any Lender, and (even if there shall be no Liabilities outstanding) so long as
this Agreement has not been terminated as provided in Section 2.8.
10.13 Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
upon the earlier of (a) personal delivery to the address set forth below and (b)
in the case of mailed notice, three (3) days after deposit in the United States
mails, with proper postage for certified mail, return receipt requested,
prepaid, or in the case of notice by Federal Express or other reputable
overnight courier service, one (1) Business Day after delivery to such courier
service, addressed the party to be notified as follows:
(i) If to the Agent at:
NationsBank of Texas, N.A.
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Business Credit/Regional Manager: URGENT"
(ii) If to any Lender, at the address set forth on the signature
pages hereto.
(iii) If to the Borrower at:
American Builders & Contractors Supply Co., Inc.
Xxx XXX Xxxxxxx
Xxxxxx, Xxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxx
with a copy to:
Xxx and Associates
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxx
52
or to such other address as each party designates to the other in the manner
herein prescribed; provided, that the foregoing methods of delivery are not
exclusive and written notice in any other manner (including without limitation
via telecopy transmission) which is actually delivered shall also be deemed
valid and effective.
10.14 Equitable Relief. The Borrower recognizes that, in the event
the Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to the Agent and the Lenders; therefore, the Borrower agrees that the
Agent and the Lenders, if the Agent so requests, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages.
10.15 Entire Agreement; Amendments. This Agreement, together with
the Financing Agreements executed in connection herewith, constitutes the entire
agreement among the parties with respect to the subject matter hereof, and
supersedes all prior written or oral understandings with respect thereto. No
amendment to this Agreement shall be effective unless it is in writing. The
written consent of the Agent and all Lenders shall be required for any agreement
which by its terms would agree to: (i) extend the Initial Term or postpone the
date on which any installment of principal or interest, or any payment of fees
provided by Section 2.6(b) or Section 2.6(c), is payable under this Agreement;
(ii) change any interest rate payable by Borrower under this Agreement, or the
amount of any payment of fees provided by Section 2.6(b), Section 2.6(c) or
Section 2.9; (iii) increase the Maximum Facility or any Lender's Pro Rata Share,
or the maximum aggregate undrawn face amount of Letters of Credit prescribed by
Section 2.2, or the maximum amount, or maximum number of occurrences, of
Overadvances which may be allowed under Section 11.9(b); (iv) increase the
maximum advance rate applicable to Eligible Accounts or Eligible Inventory in
respect of determination of the Loan Availability, (v) release from liability
any Person who is a guarantor of the Liabilities (other than in consideration
for full payment and performance of the obligations which are the object of any
such release), (vi) release any Collateral (provided however, that
notwithstanding the foregoing, the Agent may in its sole discretion and without
the consent of any Lender, agree to release or subordinate any security interest
in Equipment which was purchased by the Borrower using proceeds of capital
expenditures, as may be requested by the Borrower for the purpose of refinancing
the purchase price thereof; it being understood and agreed, in any event,
however, that the Agent shall have no obligation to agree to any such request by
the Borrower), or consent to allow the disposition (other than as expressly
allowed by the Financing Agreements) of any Collateral; (vii) release or
discharge Borrower from any obligation to make payments of principal or accrued
interest under the Financing Agreements (other than in consideration for full
payment and performance), (viii) change the definition of "Inventory Sublimit"
or "Requisite Lenders" or (ix) amend the provisions of this Section 10.15. The
written consent of Agent and Requisite Lenders shall be required as a condition
to the effectiveness of any amendment to this Agreement or waiver of any
provisions of this Agreement which would: (i) waive or modify any covenants
contained in Sections 7 or Section 8 of this Agreement or (ii) consent to allow
any security interests, liens or encumbrances (in addition to those expressly
allowed by the Financing Agreements) on any Collateral (it being understood that
consent by the Agent or any Lender shall be conditioned upon execution of a
subordination and standstill agreement by the Borrower, the Agent for the
benefit of the Lenders and the proposed grantee of any such security interest,
lien or encumbrance, in form satisfactory to the Agent and any such Lender) or
(iii) agree to any request for consent to any prepayment by the
53
Borrower on the Senior Subordinated Notes, or any redemption, repurchase or
reacquisition thereof, or agree to any request for consent to any amendment of
the provisions of the Senior Subordinated Notes or the Indenture which provide
for subordination of the Senior Subordinated Notes in favor of the Liabilities
or subordination of any guaranties thereof by any Subsidiary (including without
limitation Article 10 ("Subordination") or Section 11.06 ("Subordination of
Subsidiary Guaranties") of such Indenture). Otherwise, except as provided or
referenced above, the Agent may amend, modify or waive any of the terms of the
Financing Agreements, consent to any action or failure to act by Borrower, or
exercise or refrain from exercising any powers or rights which it may have under
the Financing Agreements or as a matter of law, without the requirement of prior
notice to or consent of Lenders. Any consent requested by the Agent from any
Lender, and any directive, consent or refusal of consent given to the Agent by
any Lender, shall be communicated as provided in Section 10.13. In the event
any consent requested by the Agent is not either granted or refused within ten
(10) Business Days after it is requested by the Agent, the same shall be deemed
to have been granted. With respect to any amendment, extension or waiver which
is to become effective at any time when any Default or Event of Default is in
existence, the Borrower agrees that, if required by the Agent in consideration
of and as a condition precedent to the effectiveness thereof, the Borrower shall
pay to the Agent, for the account of the Lenders, in addition to fees, costs and
expenses otherwise provided by this Agreement, an administration fee in an
amount determined by the Agent and the Borrower by mutual agreement.
10.16 Participations/Assignments. No Lender shall have the right,
without the prior written consent of the Agent, to sell participations in, or
assignments of, all or any portion of its interest under any or all of the
Financing Agreements, provided that if no Default or Event of Default is in
existence the identity of any Person purchasing any such participation or
assignment shall first be approved by Borrower as provided hereinbelow (it being
understood that no such approval shall be required if any Default or Event of
Default is in existence); and provided further that, in any event, any Lender
may assign (i) all or any portion of its interest under any or all of the
Financing Agreements to an Affiliate of such Lender or (ii) all of its interest
under all of the Financing Agreements to any Person in connection with the sale
of all or substantially all of the loan portfolio of such Lender to such other
Person, in each case without the consent of the Agent or approval of the
participant or assignee by Borrower. The Agent's consent to an assignment by a
Lender of all or a portion of its interest under the Financing Agreements may be
conditioned, among other criteria, upon the execution and delivery of an
assignment and acceptance agreement in form and substance acceptable to the
Agent, pursuant to which the assignee of such assignment shall become a party to
this Agreement as a Lender and agree to be bound by all of the terms and
provisions of the Financing Agreements, and confirmation to the Agent's
satisfaction, in form required by the Agent, that such assignee is organized
under the laws of the United States or a state thereof or, alternatively, is
exempt in a manner prescribed by applicable law from withholding requirements
relating to all amounts payable to such assignee with respect to the Revolving
Loans or otherwise under the Financing Agreements. In connection with the
foregoing and with respect to any request of the Borrower for its approval of a
participant or assignee, the Lender proposing to enter into any participation or
assignment with respect to which such approval is required as provided above (or
the Agent, at the request of such Lender) shall notify Borrower of the identity
of the proposed participant or assignee, and Borrower shall have until the third
Business Day following receipt of such notice to notify such Lender (or the
Agent, as the case may be) that it does or does not approve such Person as a
participant or assignee. If no such written notification is received from the
Borrower by such Lender
54
(or the Agent, as the case may be) within such time, the Borrower shall be
deemed to have irrevocably granted its approval to such request. Borrower agrees
that, in any event, any requested approval of a participant or assignee shall
not be unreasonably withheld.
10.17 Indemnity. Without limiting any other indemnity provisions
contained in this Agreement or any of the other Financing Agreements, the
Borrower agrees to defend, protect, indemnify and hold harmless the Agent, each
Lender and each and all of their respective affiliates, officers, directors,
employees, attorneys and agents ("Indemnified Parties") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including without limitation the fees and disbursements of counsel
for the Indemnified Parties in connection with any investigative, administrative
or judicial proceeding, whether or not the Indemnified Parties shall be
designated as a party thereto), which may be imposed on, incurred by, or
asserted against any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal or state laws or other statutory
regulations, including without limitation securities, environmental and
commercial laws and regulations, under common law or at equitable cause, or on
contract or otherwise) in any manner relating to or arising out of this
Agreement or the other Financing Agreements, or any act, event or transaction
related or attendant thereto, the making and the management of the Revolving
Loans and the issuance of the Letters of Credit hereunder (including without
limitation any liability under federal, state or local environmental laws or
regulations) or the use or intended use of the proceeds of the Revolving Loans
and the Letters of Credit hereunder; provided, that the Borrower shall not have
any obligation to any Indemnified Party hereunder with respect to matters caused
by or resulting from the willful misconduct or gross negligence of such
Indemnified Party or claims by one Indemnified Party against another. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all matters incurred by the Indemnified Parties. Any liability,
obligation, loss, damage, penalty, cost or expense incurred by the Indemnified
Parties shall be paid to the Indemnified Parties on demand, together with
interest thereon at the rate prescribed for the Floating Rate Loans pursuant to
Section 2.6 from the date incurred by the Indemnified Parties until paid by the
Borrower, and shall be added to the Liabilities, and be secured by the
Collateral. The provisions of and undertakings and indemnifications set out in
this Section 10.17 shall survive the satisfaction and payment of the Liabilities
and the termination of this Agreement.
10.18 Representations and Warranties. Notwithstanding anything to
the contrary contained herein, (a) each representation or warranty contained in
this Agreement or any of the other Financing Agreements shall survive the
execution and delivery of this Agreement and the other Financing Agreements and
the making of the Revolving Loans and the issuance of the Letters of Credit and
(b) each representation and warranty contained in this Agreement and each other
Financing Agreement that is not made only as of a specific date or time, shall
be remade on the date of each Revolving Loan made or Letter of Credit issued
hereunder.
10.19 Standard of Materiality. As a general rule, the Agent and
each Lender hereby acknowledges that any single business location of the
Borrower, with the exception of its
55
corporate headquarters in Beloit, Wisconsin, is not material to the operations
of the Borrower, such that the loss of assets at, or the closure of, any single
business location will not be deemed by the Agent or any Lender to constitute a
material adverse occurrence; provided, that the foregoing shall not be construed
as an acknowledgment by the Agent or any Lender that if a single business
location of the Borrower generates liabilities that are binding upon the
Borrower, as a whole, such liability will not be deemed by the Agent or any
Lender to constitute a material adverse occurrence.
10.20 Ratable Sharing. Each Lender agrees that if it shall, through
the exercise of any right of counterclaim, set-off, banker's lien or otherwise,
receive payment of a proportion of the Liabilities which is greater than the
proportion received by any other Lender, that Lender receiving such
proportionately greater payment shall purchase participations (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in the
claims of each of the other Lenders under this Agreement so that all such
recoveries with respect to the Liabilities shall be proportionate to their
respective Pro Rata Shares; provided, that if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender, those purchases shall be rescinded and the purchase
prices paid for such participation shall be returned to that Lender to the
extent of such recovery, but without interest.
11. THE AGENT.
11.1 Powers. Each Lender hereby irrevocably appoints and authorizes
NationsBank of Texas, N.A. to act as its Agent under this Agreement and the
other Financing Agreements. Each Lender hereby irrevocably appoints and
authorizes American National Bank and Trust Company of Chicago to act as Co-
Agent under this Agreement and the other Financing Agreements, provided, that
unless and until otherwise agreed in writing by the Agent, the Co-Agent and the
Lenders, the Co-Agent shall have no obligations or duties in its capacity as Co-
Agent. The Agent shall have and may exercise such powers under this Agreement
and the other Financing Agreements as are specifically delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the applicable Financing Agreements
and shall not by reason of this Agreement or any of the other Financing
Agreements have a fiduciary relationship with any Lender. The designated titles
of "Agent" and "Co-Agent" have been adopted solely for convenience of
identification, and it is expressly agreed that such terms shall not imply, or
be construed to create, any obligations or duties under principles of agency or
other applicable law.
11.2 Agent in its Capacity as a Lender. With respect to Revolving
Loans made by it, the Agent shall have the same rights and powers under this
Agreement and the other Financing Agreements as any Lender and may exercise the
same as though it were not Agent, and the terms "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Agent in its capacity as a
Lender hereunder. The Agent, any Lender and their respective affiliates may
accept deposits from, lend money to, and generally engage in any kind of banking
or trust business with the Borrower, or Affiliates of the Borrower, as if it
were not Agent or as if it or they were not a Lender and without any duty to
account therefor to the other parties to this Agreement.
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11.3 Independent Credit Analysis. Each Lender agrees that it has,
independently and without reliance upon the Agent, any other Lender, or the
directors, officers, agents, attorneys or employees of Agent or of any other
Lender, and instead in reliance upon information supplied to it by or on behalf
of the Borrower, and upon such other information as it has deemed appropriate,
made its own independent credit analysis and decision to enter into this
Agreement, and that it shall independently and without reliance upon the Agent,
any other Lender, or the directors, officers, agents, attorneys or employees of
the Agent or of any other Lender, continue to make its own independent credit
analysis and decisions, in acting or not acting under this Agreement and the
other Financing Agreements. The Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information (other than notices
received by the Agent pursuant to Sections 7.9 and 7.13, and other than such
other reports and notices (including those referred to in Section 3.1), together
with supporting data, as any Lender may request from time to time, all of which
the Agent agrees to provide to each Lender on a prompt basis) concerning the
affairs, financial condition, litigation, liabilities, or business of the
Borrower which may at any time come into the possession of the Agent (or any of
its Affiliates). In the event such information is furnished to any Lender by the
Agent, the Agent shall have no duty to confirm or verify its accuracy or
completeness and shall have no liability whatsoever with respect thereto.
11.4 General Immunity. Neither the Agent nor any of its directors,
officers, agents, attorneys or employees shall be liable to any Lender for any
action taken or omitted to be taken by it or them under this Agreement or any of
the other Financing Agreements or in connection therewith except for its or
their own willful misconduct or gross negligence. Without limitation on the
generality of the foregoing but subject to the last sentence of this Section
11.4, the Agent: (a) shall not be responsible to Lenders for any recitals,
statements, warranties or representations under this Agreement or any of the
other Financing Agreements or any agreement or document relative thereto or for
the financial condition of the Borrower, (b) shall not be responsible for the
authenticity, accuracy, completeness, value, validity, effectiveness, due
execution, legality, genuineness, enforceability or sufficiency of this
Agreement or any of the other Financing Agreements or any other agreements or
any assignments, certificates, requests, financial statements, projections,
notices, schedules or opinions of counsel executed and delivered pursuant
thereto, (c) shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or any
of the other Financing Agreements on the part of the Borrower or of any of the
terms of any such agreement by any party thereto and shall have no duty to
inspect the property (including the books and records) of the Borrower, (d)
shall incur no liability under or in respect of this Agreement or any of the
other Financing Agreements or any other document or collateral by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telegram, cable or telex) believed by the Agent to be genuine and signed or sent
by the proper party, and (e) may consult with legal counsel (including counsel
for the Borrower), independent public accountants and other experts selected by
the Agent and shall not be liable for any action taken or omitted to be taken in
good faith in accordance with the advice of such counsel, accountants or
experts. The Agent agrees to use the same degree of care, with respect to the
performance of its duties hereunder, as it uses with respect to credit
facilities in which it alone is interested.
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11.5 Right to Indemnity. Agent shall be fully justified in failing
or refusing to take any action under this Agreement and each of the other
Financing Agreements or in relation thereto unless it shall first be indemnified
(upon requesting such indemnification) to its satisfaction by Lenders against
any and all liability and expense which it may incur by reason of taking or
continuing to take any such action. Lenders further agree to indemnify the Agent
ratably in accordance with their Pro Rata Shares for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of this Agreement or any of the other Financing Agreements or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any other documents, provided no such liability, obligation, loss,
damage, penalty, action, judgment, suit, cost, expense or disbursement results
from Agent's gross negligence or willful misconduct. Each Lender agrees to
reimburse Agent in the amount of its Pro Rata Share of any out-of-pocket
expenses which the Agent is entitled to receive, but has not received,
reimbursement pursuant to this Agreement or any of the other Financing
Agreements.
11.6 Action by Agent.
(a) Actual Knowledge. The Agent may assume that no Event of Default
or Default has occurred and is continuing, unless Agent has actual knowledge of
the Event of Default or Default, has received notice from the Borrower or any of
their independent certified public accountants stating the nature of the Event
of Default or Default, or has received notice from a Lender stating the nature
of the Event of Default or Default and that Lender considers the Event of
Default or Default to have occurred and to be continuing.
(b) Agent's Obligations. The Agent has only those obligations under
this Agreement and the other Financing Agreements that are expressly set forth
therein as obligations. No duty to act, or refrain from acting, and no other
obligation whatsoever, shall be implied on the basis of or imputed in respect of
any right, power or authority granted to the Agent or shall become effective in
the event of any temporary or partial exercise of such rights, power or
authority.
(c) Discretion to Act. Except for any obligation expressly set forth
in this Agreement or any of the other Financing Agreements the Agent may, but
shall not be required to, exercise its discretion to act or not act, except
that, subject to the Agent's right to indemnity if requested by the Agent
pursuant to Section 11.5, the Agent shall be required to act or not act upon the
instructions of all of the Lenders and those instructions shall be binding upon
Agent, provided that Agent shall not be required to act or not act if to do so
would expose Agent to liability, would be inconsistent with the Agent's practice
in similar situations when acting solely for its own account, or would be
contrary to this Agreement, any of the other Financing Agreements or to
applicable law.
11.7 Proportionate Interest of Lenders under the Financing
Agreements. In the event any remedy may be exercised with respect to the
Financing Agreements or the Collateral, the Agent shall pursue remedies
designated by all of the Lenders subject to the proviso set forth
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in subsection 11.6(c). Each Lender agrees that no Lender shall have any right
individually to realize upon the security created by the Financing Agreements or
otherwise enforce any provision thereof, or make demand thereunder, it being
understood and agreed that such rights and remedies may be exercised by the
Agent for the ratable benefit of Lenders upon the terms of this Agreement and
the other Financing Agreements. All actions taken by the Agent under this
Agreement or any other Financing Agreement will be deemed taken by the Agent for
the ratable benefit of the Lenders. Nothing set forth in the previous sentence
shall confer any rights or benefit on Borrower or on any other Person except the
Lenders.
11.8 Agent's Resignation. The Agent may resign at any time by giving
at least thirty (30) days' prior written notice of its intention to do so to
each Lender and to Borrower, and upon any such notice, the Requisite Lenders
shall have the right to appoint a successor Agent; provided that if such
successor shall not be a signatory to this Agreement, such appointment shall be
subject to the consent of Borrower, which consent shall not be unreasonably
withheld. If no successor Agent shall have been so appointed and shall have
accepted such appointment within twenty (20) days after the Agent's giving of
such notice of resignation, then the resigning Agent may, with the consent of
Borrower, which consent shall not be unreasonably withheld, appoint a successor
Agent. After any resigning Agent's resignation hereunder as Agent, it shall be
discharged from its duties and obligations under this Agreement and the other
Financing Agreements but the provisions of this Section 11 shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent hereunder and thereunder. Upon appointment of a successor Agent,
the term "Agent" shall for all purposes of this Agreement thereafter mean such
successor.
11.9 Disbursement of Proceeds of Loans and Other Advances.
(a) Each Lender severally agrees that it shall, not later than 2:00
p.m. (Dallas, Texas time) on the date of each Revolving Loan, make available to
the Agent, in lawful money of the United States of America and in same day
funds, an amount equal to such Lender's Pro Rata Share of the Revolving Loan to
be made to the Borrower; provided that such Lender shall have received notice of
such Revolving Loan before 1:00 p.m. (Dallas, Texas time). The Agent shall make
such funds available to the Borrower, in same day funds in accordance with the
provisions of this Agreement. The proceeds of Revolving Loans requested by the
Borrower pursuant to subsection 2.1(a) of this Agreement, or otherwise disbursed
pursuant to the terms of this Agreement, shall be disbursed by the Agent on
behalf of each Lender. Each Lender's obligations under this Agreement are
several, and no Lender shall have any obligation, responsibility or liability
for any breach or default of any such obligations by any other Lender.
(b) The Agent may (and is hereby irrevocably so authorized by the
Lenders) at any time (whether or not any Event of Default or Default exists),
make Revolving Loans which result in an Overadvance, as the Agent may agree with
Borrower to allow in its sole discretion, provided that (i) the aggregate amount
of Overadvance existing upon funding any such Revolving Loan shall not in any
event exceed Five Million Dollars ($5,000,000.00), (ii) the Borrower shall agree
that any such Overadvance shall be eliminated within ten (10) Business Days
after the date of the occurrence thereof and (iii) the Agent and the Borrower
shall not agree to more than three (3) separate
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occurrences of any such Overadvance during any period of one (1) year; and
provided further, that it is agreed that the Agent shall not in any event be
obligated to allow any such Overadvance.
(c) The Agent's use of its own checks upon its funds or the Agent's
transfer of its own funds, by wire or otherwise, to an account of the Borrower
shall be deemed to be disbursements made by each Lender under this Agreement and
pursuant to the other Financing Agreements.
11.10 Participation in Letters of Credit. Immediately upon the
issuance by Agent of any Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Agent, without
recourse or warranty, an undivided interest and participation, to the extent of
such Lender's Pro Rata Share, in such Letter of Credit and any security
therefore and any guaranty pertaining thereto. Notwithstanding the foregoing,
by its purchase of such participation, no Lender shall be deemed to have assumed
any liability to the beneficiary of any Letter of Credit. The Agent shall
promptly upon receipt thereof, remit to the Lenders, in accordance with their
respective Pro Rata Shares, all Letter of Credit fees received by the Agent
under subsection 2.6(c). In the event Agent makes any payment to any Person
with respect to any Letter of Credit, Agent shall promptly notify the other
Lenders with a participating interest in such Letter of Credit specifying the
amount reimbursable by the Borrower thereunder. If such reimbursement is not
made by the Borrower on the day when due the amount of such reimbursement
obligation shall be deemed to be a Revolving Loan made pursuant to Section 2.1.
11.11 Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such payments
relate and payments of aggregate fees to Lenders (other than the Agent's fee
described in subsection 2.6(d)), shall be apportioned ratably among Lenders in
each case according to the payments remitted to the Agent and all their Pro Rata
Shares. All amounts received by the Agent shall be applied first to pay any
fees, expenses or indemnities then due the Agent, second to pay any fees then
due the Lenders, third to pay interest due on Revolving Loans, fourth to pay or
prepay principal of the Revolving Loans, and fifth to pay any other obligations
to any and all of the Lenders allocated, if sufficient funds are not available
to pay all such Liabilities, to the Lenders in proportion to their Pro Rata
Shares.
11.12 Agent Reports. The Agent shall, once every seven (7) days, or
sooner, at the option of the Agent, distribute to each Lender, at its primary
address set forth on the signature page hereof, such funds as it is entitled to
receive together with a statement ("Agent's Report") disclosing as of the
preceding Business Day, the aggregate principal balance of the Revolving Loans
outstanding as of such date, repayments and prepayments of principal received
from the Borrower with respect to the Revolving Loans since the immediately
preceding Agent's Report, additional Revolving Loans made to the Borrower since
date of the immediately preceding Agent's Report, interest and fees received
from the Borrower since the date of immediately preceding Agent's Report, the
aggregate amount of Eligible Accounts and Eligible Inventory and the Loan
Availability as of the Agent's most recent determination, the undrawn face
amount of all Letters of Credit issued by Agent for the account of Borrower, the
amount of any expenses of Agent paid by Agent since the immediately preceding
Agent's Report for which Agent has not been
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reimbursed by the Borrower and the amount received by the Agent from the
Borrower since the immediately preceding Agent's Report in payment of
outstanding expenses of Agent. Such Agent's Reports shall also disclose the net
amount due to or due from the Lenders. If the Agent's Report discloses a net
amount due from the Agent to the Lenders, the Agent shall, concurrently with the
delivery of the Agent's Report to the Lenders transfer, by wire or otherwise,
such amount to the Lenders in funds immediately available to the Lenders in
accordance with each Lender's instructions. If such report discloses a net
amount due to Agent from the Lenders, then the Lenders shall transfer by wire or
otherwise, such amount, in funds immediately available to the Agent as
instructed by the Agent. Such net amount due from a Lender to the Agent shall
be due on the same day such Lender receives such Agent's Report, if such Agent's
Report is received before 1:00 p.m. (Dallas, Texas time) and such net amount
shall be due on the Business Day following receipt of such Agent's Report, if
such Agent's Report is received after 1:00 p.m. (Dallas, Texas time). Any
amounts due hereunder to the Agent from the Lenders or vice versa which are not
paid when due shall bear interest from the date due until ten (10) days
thereafter at the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System only, arranged by
federal funds brokers as published as of such day by the Federal Reserve Bank of
New York and thereafter, until paid in full, at the rate applicable to the
Floating Rate Loans.
11.13 Designated Senior Debt. The Borrower hereby agrees that all
Liabilities now or hereafter existing, from time to time, are expressly deemed
and designated as being "Designated Senior Debt" within the meaning of the
certain Indenture, and is entitled to the benefits of subordination in favor of
such Designated Senior Debt as provided therein.
11.14 Consent and Agreement Regarding Viking Acquisition. Reference
hereby is made to paragraph 35 of the Ninth Amendment to Amended and Restated
Loan and Security Agreement dated as of May 7, 1997, previously executed by the
Borrower, the Agent, the Co-Agent and the Lenders, respecting consent and
agreement regarding the "Viking Acquisition" defined therein.
11.15 Exhibits and Schedules. Exhibits and Schedules to the Loan and
Security Agreement are omitted from this Compilation. Reference is made to the
Loan and Security Agreement for all such Exhibits and Schedules.
11.16 Compilation. This Compilation was prepared and is intended for
the purpose of ease of administration of the Loan and Security Agreement as the
substantive equivalent thereof. Nothing herein shall impair any rights or
obligations under the Loan and Security Agreement or be construed in any way in
limitation of any such rights or obligations. This Compilation is not itself a
legal agreement. Reference hereby is made to the Loan and Security Agreement as
the sole evidence of the actual definitive terms thereof.
END OF COMPILATION
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