1
EXHIBIT 10(x)
CREDIT AGREEMENT
DATED AS OF APRIL 14, 1999
BETWEEN
XXXX INDUSTRIES, INC.
AND
UNION BANK OF CALIFORNIA, N.A.
2
TABLE OF CONTENTS
Section 1. DEFINITIONS ................................................................. 1
1.1 Certain Defined Terms ............................................................ 1
Section 2. AMOUNT AND TERMS OF REVOLVING LOAN COMMITMENT ETC ........................... 22
2.1 Revolving Loan Commitment; Making of Revolving Loans; Revolving Note ............. 22
2.2 Interest on the Revolving Loans .................................................. 24
2.3 Commitment Fee ................................................................... 27
2.4 Prepayments and Reductions in Revolving Loan Commitment etc ...................... 27
2.5 Use of Proceeds .................................................................. 32
2.6 Special Provisions Governing LIBOR Rate Loans .................................... 32
2.7 Increased Costs; Taxes; Capital Adequacy ......................................... 34
2.8 Obligation of Bank to Mitigate ................................................... 37
Section 3. LETTERS OF CREDIT ........................................................... 37
3.1 Issuance of Letters of Credit .................................................... 37
3.2 Letter of Credit Fees ............................................................ 39
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit ............... 40
3.4 Obligations Absolute ............................................................. 42
3.5 Indemnification; Nature of Bank's Duties ......................................... 42
3.6 Increased Costs and Taxes Relating to Letters of Credit .......................... 44
3.7 Existing Letters of Credit ....................................................... 44
Section 4. CONDITIONS TO REVOLVING LOANS AND LETTERS OF CREDIT ......................... 45
4.1 Conditions to Initial Revolving Loan ............................................. 45
4.2 Conditions to All Revolving Loans ................................................ 48
4.3 Conditions to Letters of Credit .................................................. 49
Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES .................................... 49
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries .... 49
5.2 Authorization of Borrowing, etc .................................................. 51
5.3 Financial Condition .............................................................. 51
5.4 No Material Adverse Effect; No Restricted Junior Payments ........................ 52
5.5 Title to Properties; Liens; Leases ............................................... 52
5.6 Litigation; Adverse Facts ........................................................ 52
5.7 Payment of Taxes ................................................................. 53
5.8 Performance of Agreements; Materially Adverse Agreements etc ..................... 53
5.9 Governmental Regulation .......................................................... 54
5.10 Securities Activities ........................................................... 54
5.11 Employee Benefit Plans .......................................................... 54
5.12 Environmental Protection ........................................................ 54
5.13 Employee Matters ................................................................ 55
5.14 Solvency ........................................................................ 55
5.15 Matters Relating to Collateral .................................................. 55
5.16 Disclosure ...................................................................... 56
5.17 Existing Letters of Credit ...................................................... 57
Section 6. COMPANY'S AFFIRMATIVE COVENANTS ............................................. 57
6.1 Financial Statements and Other Reports ........................................... 57
i
3
6.2 Corporate Existence, etc ......................................................... 60
6.3 Payment of Taxes and Claims; Tax Consolidation ................................... 61
6.4 Maintenance of Properties; Insurance ............................................. 61
6.5 Inspection ....................................................................... 62
6.6 Compliance with Laws, etc ........................................................ 62
6.7 Environmental Review, Disclosure, Etc.; Company's Actions etc .................... 62
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by
Certain Subsidiaries and Future Subsidiaries ..................................... 64
6.9 UCC Termination Statements ....................................................... 65
Section 7. COMPANY'S NEGATIVE COVENANTS ................................................ 65
7.1 Indebtedness ..................................................................... 65
7.2 Liens and Related Matters ........................................................ 66
7.3 Investments; Joint Ventures ...................................................... 68
7.4 Contingent Obligations ........................................................... 68
7.5 Restricted Junior Payments ....................................................... 69
7.6 Financial Covenants .............................................................. 69
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions ................. 70
7.8 Consolidated Capital Expenditures ................................................ 71
7.9 Restriction on Leases ............................................................ 71
7.10 Sales and Lease-Backs ........................................................... 71
7.11 Sale or Discount of Receivables ................................................. 72
7.12 Transactions with Shareholders and Affiliates ................................... 72
7.13 Disposal of Subsidiary Stock .................................................... 72
7.14 Conduct of Business ............................................................. 72
7.15 Amendments of Documents Relating to Subordinated Indebtedness ................... 73
Section 8. EVENTS OF DEFAULT ........................................................... 73
8.1 Failure to Make Payments When Due ................................................ 73
8.2 Default in Other Agreements ...................................................... 73
8.3 Breach of Certain Covenants ...................................................... 74
8.4 Breach of Warranty ............................................................... 74
8.5 Other Defaults Under Loan Documents .............................................. 74
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc ............................. 74
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc ............................... 75
8.8 Judgments and Attachments ........................................................ 75
8.9 Dissolution ...................................................................... 76
8.10 Employee Benefit Plans .......................................................... 76
8.11 Change in Control ............................................................... 76
8.12 Invalidity of Subsidiary Guaranty; Failure of Security; Repudiation etc ......... 76
Section 9. MISCELLANEOUS ............................................................... 77
9.1 Assignments and Participations ................................................... 77
9.2 Expenses ......................................................................... 78
9.3 Indemnity ........................................................................ 79
9.4 Set-Off .......................................................................... 80
9.5 Amendments and Waivers ........................................................... 80
9.6 Independence of Covenants ........................................................ 81
9.7 Notices .......................................................................... 81
9.8 Survival of Representations, Warranties and Agreements ........................... 81
ii
4
9.9 Failure or Indulgence Not Waiver; Remedies Cumulative ............................. 81
9.10 Marshalling; Payments Set Aside .................................................. 82
9.11 Severability ..................................................................... 82
9.12 Headings ......................................................................... 82
9.13 Applicable Law ................................................................... 82
9.14 Successors and Assigns ........................................................... 83
9.15 Consent to Jurisdiction and Service of Process ................................... 83
9.16 Waiver of Jury Trial ............................................................. 84
9.17 Confidentiality .................................................................. 84
9.18 Counterparts; Effectiveness ...................................................... 85
iii
5
LIST OF EXHIBITS
EXHIBIT I NOTICE OF BORROWING
EXHIBIT II NOTICE OF CONVERSION/CONTINUATION
EXHIBIT III NOTICE OF ISSUANCE OF LETTER OF CREDIT
EXHIBIT IV REVOLVING NOTE
EXHIBIT V FINANCIAL STATEMENT AND COMPLIANCE CERTIFICATE
EXHIBIT VI BORROWING BASE CERTIFICATE
EXHIBIT VII COMPANY SECURITY AGREEMENT
EXHIBIT VIII COMPANY PLEDGE AGREEMENT
EXHIBIT IX SUBSIDIARY SECURITY AGREEMENT
EXHIBIT X SUBSIDIARY GUARANTY
LIST OF SCHEDULES
1.1 Real Estate Assets
5.1 Subsidiaries of Company; Capitalization
5.6 Litigation; Adverse Facts
5.8 Material Contracts
5.17 Existing Letters of Credit
iv
6
XXXX INDUSTRIES, INC.
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of April 14, 1999 and entered into by
and between XXXX INDUSTRIES, INC., a California corporation ("Company"), and
UNION BANK OF CALIFORNIA, N.A., a national banking association ("Bank").
RECITALS:
WHEREAS, Company desires that Bank extend a revolving credit facility to
Company to provide for: (i) the working capital requirements and general
corporate purposes of Company and its Subsidiaries; (ii) the issuance of Standby
Letters of Credit and Commercial Letters of Credit as described herein; and
(iii) the other purposes described herein;
WHEREAS, Company desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Bank (i) a First Priority Lien on
all Accounts and Inventory of Company and (ii) a pledge of all of the capital
stock of certain Subsidiaries of Company; and
WHEREAS, Subsidiary Guarantors have agreed to guarantee the Obligations
hereunder and under the other Loan Documents and to secure their guaranties by
granting to Bank a First Priority Lien on all their Accounts and Inventory;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company and Bank agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"Account" means (a) all of the present and future accounts, contract rights,
instruments, documents, chattel paper, general intangibles, and other forms of
obligations of, or owing to, Company or any of its Subsidiaries, which, in each
case, arise out of or in connection with the sale or lease of Inventory by
Company or any of its Subsidiaries or in respect of the rendering of services by
Company or any of its Subsidiaries, whether due or to become due, whether now
existing or hereafter arising and whether or not it has been earned by
performance, and (b) all present and future guaranties, credit insurance and
other security for such accounts, contract rights, instruments, documents,
chattel paper, general intangibles and other forms of obligations.
1
7
"ACCOUNT DEBTOR" means each Person obligated in any way on an Account.
"ACQUISITION AGREEMENT" means that certain Agreement of Purchase and Sale dated
as of October 1, 1998, by and between Company and Arrow, as at any time amended.
"ADJUSTED LIBOR RATE" means, for any Interest Rate Determination Date with
respect to an Interest Period for a LIBOR Rate Loan, the rate per annum obtained
by dividing (i) the offered quotation (rounded upward to the nearest 1116 of one
percent) to first class banks in the London interbank market by Bank for U.S.
dollar deposits of amounts in same day funds comparable to the principal amount
of the LIBOR Rate Loan of Bank for which the Adjusted LIBOR Rate is then being
determined (which principal amount shall be deemed to be $1,000,000 in the event
Bank is not making, converting to or continuing such a LIBOR Rate Loan) with
maturities comparable to such Interest Period as of approximately 11:00 a.m.
(Los Angeles time) on such Interest Rate Determination Date by (ii) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements
(including any marginal, emergency, supplemental, special or other reserves)
applicable on such Interest Rate Determination Date to any member bank of the
Federal Reserve System in respect of "Eurocurrency liabilities" as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"AFFILIATE", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" means this Credit Agreement dated as of April 14, 1999, as it may be
amended, supplemented or otherwise modified from time to time.
"APPLIED AMOUNT" has the meaning assigned to that term in subsection 2.4(iv)(b).
"ARROW" means Arrow Electronics, Inc., a New York corporation.
"ARROW SALE" means the sale by Company of certain assets of its Electronic
Distribution Group, a component of its Electronic Group segment, to Arrow
pursuant to the terms and conditions set forth in the Acquisition Agreement.
"ASSET SALE" means the sale by Company or any of its Subsidiaries to any Person
other than Company or any of its wholly-owned Subsidiaries of (i) any of the
stock of any of Company's Subsidiaries, (ii) substantially all of the assets of
any division or line of business of Company or any of its Subsidiaries, or (iii)
any other assets (whether tangible or intangible) of Company or any of its
Subsidiaries other than (a) Inventory sold in the ordinary course of business,
(b) the Real Estate Assets and (c) any such
2
8
other assets to the extent that the aggregate value of such assets sold in any
Fiscal Year does not exceed $2,500,000.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"BANKRUPTCY", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the per annum rate publicly announced by Bank
from time to time at its head office as its "reference rate." The "reference
rate" is determined by Bank from time to time as a means of pricing credit
extensions to some customers and is neither directly tied to any external rate
of interest or index nor necessarily the lowest rate of interest charged by Bank
at any given time for any particular class of customers or credit extensions.
"BASE RATE LOANS" means Revolving Loans bearing interest at the Base Rate.
"BORROWING BASE" means an amount equal to the sum of the following: (i) 85% of
Eligible Accounts plus (ii) 50% of Eligible Inventory less (iii) the aggregate
principal amount of all Indebtedness of Company and its Subsidiaries under any
Flooring Agreements.
"BORROWING BASE CERTIFICATE" means a certificate substantially in the form of
Exhibit VI annexed hereto delivered to Bank by Company pursuant to subsection
6.1(vi), with appropriate insertions, and all related reports and supporting
documentation as reasonably requested by Bank.
"BUSINESS DAY" means (i) for all purposes other than as covered by clause (ii)
below, any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of California or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings and payments in connection with the Adjusted LIBOR Rate
or any LIBOR Rate Loans, any day that is a Business Day described in clause (i)
above and that is also a day for trading by and between banks in Dollar deposits
in the London interbank market.
"CAPITAL LEASE", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"CASH" means money, currency or a credit balance in a deposit account.
"CASH EQUIVALENTS" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States of America the obligations of which are backed by the full faith
and credit of the United States of America, in each case maturing within one
year after such date; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof, in each case
3
9
maturing within one year after such date and having, at the time of the
acquisition thereof, the highest rating obtainable from Standard & Poor's
Ratings Group ("S&P"), Xxxxx'x Investors Service, Inc. ("MOODY'S") or another
nationally recognized rating agency; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by Bank or by any other
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; (v) shares of any money market mutual fund that (a) has
at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from S&P, Moody's or
another nationally recognized rating agency; (vi) shares of the Xxxxxxx Xxxxx
XXX Tax-Exempt California Portfolio or a similar fund as approved by Bank; and
(vii) commercial paper in one or more of the HighMark funds.
"CLOSING DATE" means April 14, 1999.
"CLOSING DATE LOAN DOCUMENTS" means, collectively, this Agreement, the Company
Security Agreement, the Company Pledge Agreement, the Subsidiary Security
Agreements, the Subsidiary Guaranty, and the Revolving Note, which are to be
executed and delivered on the Closing Date pursuant to subsection 4.1.
"COLLATERAL" means, collectively, all of the property (including capital stock)
in which Liens are purported to be granted pursuant to the Collateral Documents
as security for the Obligations.
"COLLATERAL DOCUMENTS" means, collectively, the Company Pledge Agreement, the
Company Security Agreement, the Subsidiary Security Agreements and all other
instruments or documents delivered by any Loan Party pursuant to this Agreement
or any of the other Loan Documents in order to grant to Bank a Lien on any
property of that Loan Party as security for the Obligations.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar instrument
issued for the purpose of providing the primary payment mechanism in connection
with the purchase of any materials, goods or services by Company or any of its
Subsidiaries in the ordinary course of business of Company or such Subsidiary.
"COMPANY" has the meaning assigned to that term in the introduction to this
Agreement.
"COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement executed and
delivered by Company on the Closing Date, substantially in the form of Exhibit
VIII annexed hereto, as such Company Pledge Agreement may thereafter be amended,
supplemented or otherwise modified from time to time.
4
10
"COMPANY SECURITY AGREEMENT" means the Company Security Agreement executed and
delivered by Company on the Closing Date, substantially in the form of Exhibit
VII annexed hereto, as such Company Security Agreement may thereafter be
amended, supplemented or otherwise modified from time to time.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
Exhibit V annexed hereto delivered to Bank by Company pursuant to subsection 6.1
(iii).
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum of the amounts for
such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense,
(iii) provisions for taxes based on income, (iv) total depreciation expense, (v)
total amortization expense, and (vi) other extraordinary or non-recurring
non-cash items reducing Consolidated Net Income, and less other extraordinary or
non-recurring noncash items increasing Consolidated Net Income, all of the
foregoing as determined on a consolidated basis for Company and its Subsidiaries
in conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether paid in cash or other consideration or accrued as a
liability and including that portion of Capital Leases which is capitalized on
the consolidated balance sheet of Company and its Subsidiaries) by Company and
its Subsidiaries during that period that, in conformity with GAAP, are included
in "additions to property, plant or equipment" or comparable items reflected in
the consolidated statement of cash flows of Company and its Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense
(including that portion attributable to Capital Leases in accordance with GAAP
and capitalized interest) of Company and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of Company and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
Notwithstanding the foregoing, the interest expense of Company and its
Subsidiaries during January, 1999 with respect to the outstanding Indebtedness
of Company under the Existing Credit Agreement shall not be included in any
calculation of Consolidated Interest Expense hereunder.
"CONSOLIDATED LEVERAGE RATIO" means, as of any date of determination, the ratio
of (i) Consolidated Total Debt on such date to (ii) Consolidated Adjusted EBITDA
for the immediately preceding four-Fiscal Quarter period ending prior to such
date.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or loss) of
Company and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined in conformity with GAAP; provided that there
shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the
5
11
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Company or is merged into or consolidated with Company or any of its
Subsidiaries or that Person's assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, and (iv) any
after-tax gains or losses attributable to Asset Sales or returned surplus assets
of any Pension Plan.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the net worth
of Company and its Subsidiaries on such date, determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the aggregate amount of
all rents paid or payable by Company and its Subsidiaries on a consolidated
basis during such period under all Operating Leases to which Company or any of
its Subsidiaries is a party as lessee.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the aggregate
stated balance sheet amount of all debt of Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of that Person (i) with respect to any
Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Hedge Agreements. Contingent Obligations shall include, without
limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (x) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclause
(x) or (y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
6
12
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any
Security issued by that Person or of any material indenture, mortgage, deed of
trust, contract, undertaking, agreement or other instrument to which that Person
is a party or by which it or any of its properties is bound or to which it or
any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement to which Company or any of its Subsidiaries is a party.
"DEUTSCHE" means Deutsche Financial Services Corporation.
"DOLLAR," "DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"DOMESTIC SUBSIDIARY" means, with respect to any Person, any Subsidiary of such
Person incorporated in a jurisdiction of the United States of America, Puerto
Rico or Canada.
"ELIGIBLE ACCOUNTS" means, at any date of determination, the Dollar amount of
all Accounts of Company and any of its wholly owned Domestic Subsidiaries other
than any Account:
(i) which does not represent a bona fide sale or lease and
delivery of goods by Company or any of its wholly-owned Domestic Subsidiaries in
the ordinary course of business, or which is not for a liquidated amount payable
by the Account Debtor thereon on the terms set forth in the invoice therefor;
(ii) which represents a sale on a xxxx-and-hold, guaranteed sale,
sale and return, sale on approval, consignment, repurchase or return basis;
(iii) which is evidenced by a promissory note or other instrument
or by chattel paper;
(iv) with respect to which more than 120 days have elapsed since
the date of the original invoice therefor;
(v) which is not evidenced by an invoice rendered to the Account
Debtor;
(vi) owed by an Account Debtor which is a
director, officer, employee or Affiliate of Company or any of its
Subsidiaries;
7
13
(vii) if the aggregate dollar amount of all Accounts owed by the
Account Debtor thereon exceeds 15% of the aggregate amount of all Accounts at
such time, but only to the extent of such excess;
(viii) which is owed by an Account Debtor if more than 25% of the
aggregate of all Accounts owing by such Account Debtor have, at the time of any
determination of Eligible Accounts, remained unpaid for more than 120 days since
the date of the original invoice therefor unless there is a bona fide dispute
with respect to such delinquent unpaid Accounts;
(ix) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: the filing by or
against the Account Debtor of a request or petition in a proceeding that is then
pending for liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief under the bankruptcy,
insolvency, or similar laws of the United States of America, any state or
territory thereof, or any foreign jurisdiction, now or hereafter in effect; the
making of any general assignment by the Account Debtor for the benefit of
creditors in a proceeding that is then pending; the appointment of a receiver or
trustee for the Account Debtor or for any of the assets of the Account Debtor,
including the appointment of or taking possession by a "custodian," as defined
in the Bankruptcy Code in a proceeding that is then pending; the institution by
or against the Account Debtor of any other type of insolvency proceeding (under
the bankruptcy laws of the United States of America or otherwise) or of any
formal or informal proceeding for the dissolution or liquidation of, settlement
of claims against, or winding up of affairs of, the Account Debtor in a
proceeding that is then pending; the nonpayment generally by the Account Debtor
of its debts as they become due; or the cessation of the business of the Account
Debtor as a going concern;
(x) if Bank believes in its reasonable judgment that the prospect
of collection of such Account is impaired or that the Account may not be paid by
reason of the Account Debtor's financial inability to pay;
(xi) on which Bank reasonably determines that it does not have a
First Priority Lien, free of Liens or other claims of all other Persons except
for Accounts on which there exists a Lien of the type described in Section
7.2A(v); and
(xii) which represents a rebilling to an Account Debtor for a
discount or other adjustment inappropriately applied to an Account by such
Account Debtor.
"ELIGIBLE INVENTORY" means, at any time, the Dollar value (valued at the lower
of either cost (determined on either a first in, first out or a weighted average
basis) or fair market value, all in conformity with GAAP) of all Inventory of
Company and its wholly-owned Domestic Subsidiaries, other than any Inventory:
8
14
(i) which is obsolete, not in good condition, not of merchantable quality or not
saleable in the ordinary course of Company's and its Subsidiaries' business, or
which is subject to defects that would affect market value;
(ii) which is not held for sale by Company and its Subsidiaries as Inventory in
the ordinary course of business as presently conducted by them;
(iii) which is Inventory in the possession of any Person other than Company or
one of its wholly-owned Subsidiaries other than (x) Inventory which is located
in "in-plant stores" on the premises of another Person and is segregated from
the Inventory of such Person and subject to the control of Company or its
Subsidiaries and (y) Inventory in the possession of another Person (which
Inventory is segregated from all other goods held by such Person) that has
entered into a contract with Company or its Subsidiaries to assemble, process or
package such Inventory (or perform any such other "outside processing" task)
prior to sale by Company or its Subsidiaries; provided, that no goods other than
such Inventory shall be subject to such assembly, processing or packaging;
(iv) on which Bank reasonably determines that it does not have a First Priority
Lien, free of Liens or other claims of all other Persons except for Liens of the
type described in Section 7.2A(v);
(v) which is Inventory labeled with, or intended to be sold under, a customer's
name, or manufactured or configured to a particular Person's specifications
unless such Inventory is the subject of a binding contract to purchase between
Company or any of its Subsidiaries and such Person in form and substance
reasonably satisfactory to Bank;
(vi) which is not located within the United States of America (excluding its
territories or possessions), Puerto Rico or Canada;
(vii) which is Inventory that Bank reasonably determines to be unacceptable due
to age, type, category, quality or quantity; and
(viii) which consists of supplies or packaging or shipping materials.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined by Section
3(3) of ERISA which is or was maintained or contributed to by Company, any of
its Subsidiaries or any of their respective ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation,
claim, action, suit, proceeding, demand, abatement order or other order or
directive (conditional or otherwise), by any governmental authority or any other
Person, arising (i) pursuant to or in connection with any actual or alleged
violation of any Environmental Law, (ii) in connection with any Hazardous
Materials or any actual or alleged Hazardous Materials Activity, or (iii) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.
9
15
"ENVIRONMENTAL LAWS" means any and all current or future statutes, ordinances,
orders, rules, regulations, guidance documents, judgments, Governmental
Authorizations, or any other requirements of governmental authorities relating
to (i) environmental matters, including those relating to any Hazardous
Materials Activity, (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials, or (iii) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or animal health
or welfare, in any manner applicable to Company or any of its Subsidiaries or
any Facility, including the Comprehensive Environmental Response, Compensation,
and Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section
651 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 et
seq.), each as amended or supplemented, any analogous present or future state or
local statutes or laws, and any regulations promulgated pursuant to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation which is
a member of a controlled group of corporations within the meaning of Section
414(b) of the Internal Revenue Code of which that Person is a member; (ii) any
trade or business (whether or not incorporated) which is a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal Revenue Code of which that Person is a member; and (iii) any
member of an affiliated service group within the meaning of Section 414(m) or
(o) of the Internal Revenue Code of which that Person, any corporation described
in clause (i) above or any trade or business described in clause (ii) above is a
member. Any former ERISA Affiliate of Company or any of its Subsidiaries shall
continue to be considered an ERISA Affiliate of Company or such Subsidiary
within the meaning of this definition with respect to the period such entity was
an ERISA Affiliate of Company or such Subsidiary and with respect to liabilities
arising after such period for which Company or such Subsidiary could be liable
under the Internal Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043
of ERISA arid the regulations issued thereunder with respect to any Pension Plan
(excluding those for which the provision for 30-day notice to the PBGC has been
waived by regulation); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Internal Revenue
Code) or the failure to make by its due date a required installment under
Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or
the failure to make any required contribution to a Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress
10
16
termination described in Section 4041 (c) of ERISA; (iv) the withdrawal by
Company, any of its Subsidiaries or any of their respective ERISA Affiliates
from any Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064
of ERISA; (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which might constitute
grounds under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on Company, any
of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of Section
4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or
any of their respective ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if there is any potential liability therefor, or the receipt by Company,
any of its Subsidiaries or any of their respective ERISA Affiliates of notice
from any Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act
or omission which could reasonably be expected to give rise to the imposition on
Company, any of its Subsidiaries or any of their respective ERISA Affiliates of
fines, penalties, taxes or related charges under Chapter 43 of the Internal
Revenue Code or under Section 409, Section 502(c), (i) or (I), or Section 4071
of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a
material claim (other than routine claims for benefits) against any Employee
Benefit Plan other than a Multiemployer Plan or the assets thereof, or against
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
connection with any Employee Benefit Plan; (x) a determination by the Internal
Revenue Service or a judgment of a court that any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) fails to qualify under Section 401(a) of the Internal
Revenue Code, if such determination or judgment becomes final and
non-appealable, (xi) the failure of any trust forming part of any Pension Plan
to qualify for exemption from taxation under Section 501 (a) of the Internal
Revenue Code; or (xii) the imposition of a Lien pursuant to Section 401(a)(29)
or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.
"EVENT OF DEFAULT" means each of the events set forth in Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time
to time, and any successor statute.
"EXCHANGE ASSETS" has the meaning assigned to that term in subsection
2.4A(iii)(a).
"EXCHANGE RATE" means, on any date when an amount expressed in a currency other
than Dollars is to be determined with respect to any Letter of Credit, the
nominal rate of exchange of Bank in the New York foreign exchange market for the
purchase by Bank (by cable transfer) of such currency in exchange for Dollars at
12:00 Noon (New York time) one Business Day prior to such date, expressed as a
number of units of such currency per one Dollar.
11
17
"EXISTING CREDIT AGREEMENT" means that certain Credit Agreement dated as of
January 7, 1997, by and among Company, Xxxx Ontario Holding, Inc., the financial
institutions listed on the signature pages thereof, and Bank, in its capacity as
agent for such financial institutions, including all amendments thereto.
"EXISTING LETTERS OF CREDIT" means those certain letters of credit issued for
the benefit of Company or any of its Subsidiaries under the Existing Credit
Agreement and outstanding as of the Closing Date.
"FACILITIES" means any and all real property (including, without limitation, all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries
or any of their respective predecessors or Affiliates.
"FINANCIAL PLAN" has the meaning assigned to that term in subsection 6.1(xii).
"FIRST PRIORITY" means, with respect to any Lien purported to be created in any
Collateral pursuant to any Collateral Document, that such Lien is entitled to
first priority over all other Liens (other than Liens referred to in clauses (i)
and (ii) of the definition of "Permitted Encumbrances") to which such Collateral
is subject. "Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on
December 31 of each calendar year. For purposes of this Agreement, any
particular Fiscal Year shall be designated by reference to the calendar year in
which such Fiscal Year ends.
"FLOORING AGREEMENTS" means those certain agreements between Company or any of
its Subsidiaries and Flooring Lenders, in form and substance satisfactory to
Bank, with respect to purchase money financing arrangements covering Inventory
held for resale by Company or such Subsidiaries.
"FLOORING LENDERS" means IBM Credit Corporation, ITT Commercial Finance Corp.,
MicroAge Computer Centers, Inc., Deutsche and such other flooring lenders as may
be approved by Bank from time to time after the Closing Date.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Bank located at 0000 Xxxxxx
Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000 or (ii) such other office of Bank
as may from time to time hereafter be designated as such in a written notice
delivered by Bank to Company.
"FUNDING DATE" means the date of the funding of a Revolving Loan.
"GAAP" means, subject to the limitations on the application thereof set forth in
subsection 1.2, generally accepted accounting principles set forth in opinions
and pronouncements of the Accounting Principles Board of the American Institute
of
12
18
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, in each
case as the same are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL ACTS" has the meaning assigned to that term in subsection 3.5A.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization, plan,
directive, consent order or consent decree of or from any federal, state or
local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance at any time
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous waste", acutely hazardous
waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic
pollutant", "contaminant", "restricted hazardous waste", "infectious waste",
"toxic substances", or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or the
indoor or outdoor environment (including harmful properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) any asbestos-containing
materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment
which contains any oil or dielectric fluid containing polychlorinated biphenyls;
(ix) pesticides; and (x) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority or which
may or could pose a hazard to the health and safety of the owners, occupants or
any Persons in the vicinity of any Facility or to the indoor or outdoor
environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Hazardous Materials, and any corrective action or
response action with respect to any of the foregoing.
"HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency Agreement
designed to hedge against fluctuations in interest rates or currency values,
respectively.
"INDEBTEDNESS", as applied to any Person. means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the
13
19
deferred purchase price of property or services (excluding any such obligations
incurred under ERISA and other employee benefit, retirement and compensation
arrangements), which purchase price is (a) due more than six months from the
date of incurrence of the obligation in respect thereof or (b) evidenced by a
note or similar written instrument, and (v) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person. Unmatured Obligations under Interest
Rate Agreements and Currency Agreements constitute (x) in the case of Hedge
Agreements, Contingent Obligations, and (y) in all other cases, Investments, and
in neither case constitute Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in subsection
9.3.
"INDEMNITEES" has the meaning assigned to that term in subsection 9.3.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of the
business of Company and its Subsidiaries as currently conducted that are
material to the condition (financial or otherwise), business or operations of
Company and its Subsidiaries, taken as a whole.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan, March 31,
June 30, September 30 and December 31 of each year, commencing on June 30, 1999,
and (ii) with respect to any LIBOR Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each Interest
Period of longer than three months, "Interest Payment Date" shall also include
each date that is three months, or an integral multiple thereof, after the
commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in subsection 2.213.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement or other similar agreement or
arrangement entered into between Company and Bank.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period,
the second Business Day prior to the first day of such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter, and any successor statute.
"INVENTORY" means, with respect to any Person as of any date of determination,
all of such Person's present and future inventory wherever located (including,
without limitation, all present and future goods, merchandise and other personal
property of such Person held for sale or lease), raw materials, work in process,
finished goods and materials and supplies of any kind, nature or description
(including, without limitation, packaging and shipping materials) which are or
might be used or consumed in such Person's business or used in selling or
finishing of such inventory, and all documents of
14
20
title or other similar documents representing the same. The foregoing inventory
and other property shall be included in this definition whether in the actual,
constructive or exclusive possession of such Person or in transit to such Person
or in the possession of carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents, finishers, converters or other similar third parties.
"INVESTMENT" means (i) any direct or indirect purchase or other acquisition by
Company or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person (including any Subsidiary of Company), (ii) any
direct or indirect redemption, retirement, purchase or other acquisition for
value, by any Subsidiary of Company from any Person other than Company or any of
its Subsidiaries, of any equity Securities of such Subsidiary, (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Company or any of
its Subsidiaries to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business, or (iv)
Interest Rate Agreements or Currency Agreements not constituting Hedge
Agreements. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or writeups, write-downs or write-offs with
respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar arrangement,
whether in corporate, partnership or other legal form; provided that in no event
shall any corporate Subsidiary of any Person be considered to be a Joint Venture
to which such Person is a party.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of Credit and
Standby Letters of Credit issued or to be issued by Bank for the account of
Company pursuant to subsection 3.1.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i)
the maximum aggregate amount which is or at any time thereafter may become
available for drawing under all Letters of Credit then outstanding plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by Bank and not
theretofore reimbursed by Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.313). For purposes of this
definition, any amount described in clause (i) or (ii) of the preceding sentence
which is denominated in a currency other than Dollars shall be valued based on
the applicable Exchange Rate for such currency as of the applicable date of
determination.
"LIBOR RATE LOANS" means Revolving Loans bearing interest at rates determined by
reference to the Adjusted LIBOR Rate as provided in subsection 2.2A.
"LIEN" means any lien, mortgage, pledge, assignment, security interest, charge
or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security
15
21
interest) and any option, trust or other preferential arrangement having the
practical effect of any of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Revolving Note, the Letters of Credit
(and any applications for, or reimbursement agreements or other documents or
certificates executed by Company in favor of Bank relating to, the Letters of
Credit), the Collateral Documents and the Subsidiary Guaranty.
"LOAN PARTY" means each of Company and any of Company's Subsidiaries from time
to time executing a Loan Document, and "Loan Parties" means all such Persons,
collectively.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of Company and its Subsidiaries, taken as a whole.
"MATERIAL CONTRACT" means any contract or other arrangement to which Company or
any of its Subsidiaries is a party (other than the Loan Documents) for which
breach, nonperformance, cancellation or failure to renew could reasonably be
expected to have a Material Adverse Effect.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer
plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of any bona fide direct costs
incurred in connection with such Asset Sale, including, without limitation, (i)
income taxes reasonably estimated to be actually payable within two years of the
date of such Asset Sale as a result of any gain recognized in connection with
such Asset Sale, (ii) payment of the outstanding principal amount of, premium or
penalty, if any, and interest on any Indebtedness (other than the Revolving
Loans) that is secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset Sale and
(iii) with respect to the sale of a business unit by Company or any of its
Subsidiaries, any payables or other accrued balance sheet liabilities of such
business unit retained by Company or any of its Subsidiaries after the
consummation of such sale.
"NET PROCEEDS AMOUNT" has the meaning assigned to that term in subsection
2.4A(iii)(c).
"NET SECURITIES PROCEEDS" has the meaning assigned to that term in subsection
2.4A(iii)(b).
16
22
"NOTICE OF BORROWING" means a notice substantially in the form of Exhibit I
annexed hereto delivered by Company to Bank pursuant to subsection 2.113 with
respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in the form of
Exhibit II annexed hereto delivered by Company to Bank pursuant to subsection
2.2D with respect to a proposed conversion or continuation of the applicable
basis for determining the interest rate with respect to the Revolving Loans
specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice substantially in the
form of Exhibit III annexed hereto delivered by Company to Bank pursuant to
subsection 3.1 B(i) with respect to the proposed issuance of a Letter of Credit.
"OBLIGATIONS" means all obligations of every nature of each Loan Party from time
to time owed to Bank under the Loan Documents, whether for principal, interest,
reimbursement of amounts drawn under Letters of Credit, fees, expenses,
indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer, its treasurer or its secretary.
"OPERATING LEASE" means, as applied to any Person, any lease (including, without
limitation, leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to Section 412 of the Internal Revenue Code or Section 302 of
ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens (excluding any such
Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue
Code or by ERISA and any such Lien relating to or imposed in connection with any
Environmental Claim):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in each case
incurred in the ordinary course of business (a) for amounts not yet overdue or
(b) for amounts that are overdue and that (in the case of any such amounts
overdue for a period in excess of 5 days) are being contested in good faith by
appropriate proceedings, so long as (x)
17
23
such reserves or other appropriate provisions, if any, as shall be required by
GAAP shall have been made for any such contested amounts, and (y) in the case of
a Lien with respect to any portion of the Collateral, such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral on
account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds, netting
arrangements in connection with cash management services provided to Company and
its Subsidiaries, and other similar obligations (exclusive of obligations for
the payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the Collateral on
account thereof;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) any (a) interest or title of a lessor or sublessor under any
lease, (b) restriction or encumbrance that the interest or title of such lessor
or sublessor may be subject to, or (c) subordination of the interest of the
lessee or sublessee under such lease to any restriction or encumbrance referred
to in the preceding clause (b), so long as the holder of such restriction or
encumbrance agrees to recognize the rights of such lessee or sublessee under
such lease;
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement; and
(vii) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods.
"PERSON" means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability
partnerships, joint stock companies, Joint Ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"PLEDGED COLLATERAL" means, collectively, the "Pledged Collateral" as defined in
the Company Pledge Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or
lapse of time or both, would constitute an Event of Default.
"PROCEEDINGS" has the meaning assigned to that term in subsection 6.1(ix).
18
24
"REAL ESTATE ASSETS" means the real property and improvements of Company
described on Schedule 1.1 annexed hereto.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in subsection 3.313.
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials),
including the movement of any Hazardous Materials through the air, soil, surface
water or groundwater.
"RESTRICTED JUNIOR PAYMENT" means, with respect to any Person, (i) any dividend
or other distribution, direct or indirect, on account of any shares of any class
of stock of such Person now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of such Person now or hereafter outstanding, (iii) any payment made to retire,
or to obtain the surrender of, any outstanding warrants, options or other rights
to acquire shares of any class of stock of such Person now or hereafter
outstanding, and (iv) any payment or prepayment of principal of, premium, if
any, or interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, any Subordinated Indebtedness of such Person.
"REVOLVING LOAN COMMITMENT" has the meaning assigned to that term in subsection
2.1A.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means December 31, 2000.
"REVOLVING LOAN EXPOSURE" means, with respect to Bank as of any date of
determination (i) prior to the termination of the Revolving Loan Commitment,
Bank's Revolving Loan Commitment and (ii) after the termination of the Revolving
Loan Commitment, the sum of (a) the aggregate outstanding principal amount of
the Revolving Loans plus (b) the aggregate Letter of Credit Usage in respect of
all Letters of Credit.
"REVOLVING LOANS" means the loans made by Bank to Company pursuant to subsection
2.1A.
"REVOLVING NOTE" means the promissory note issued by Company pursuant to
subsection 2.1 D, substantially in the form of Exhibit IV annexed hereto, as
such promissory note may be amended, supplemented or otherwise modified from
time to time.
19
25
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time,
and any successor statute.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (i) (a) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (c) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"STANDBY LETTER OF CREDIT" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) Indebtedness of Company or
any of its Subsidiaries in respect of industrial revenue or development bonds or
financings, (ii) workers' compensation liabilities of Company or any of its
Subsidiaries, (iii) the obligations of third party insurers of Company or any of
its Subsidiaries arising by virtue of the laws of any jurisdiction requiring
third party insurers, (iv) obligations with respect to Capital Leases or
Operating Leases of Company or any of its Subsidiaries, and (v) performance,
payment, deposit or surety obligations of Company or any of its Subsidiaries, in
any case if required by law or governmental rule or regulation or in accordance
with custom and practice in the industry; provided that Standby Letters of
Credit may not be issued for the purpose of supporting (a) trade payables or (b)
any Indebtedness constituting "antecedent debt" (as that term is used in Section
547 of the Bankruptcy Code) if the result is to create a preference under
Section 547 of the Bankruptcy Code.
"SUBORDINATED INDEBTEDNESS" means, with respect to any Person, any Indebtedness
of such Person subordinated in right of payment to the Obligations pursuant to
documentation containing maturities, amortization schedules, covenants,
defaults,
20
26
remedies, subordination provisions and other material terms in form and
substance satisfactory to Bank.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"SUBSIDIARY GUARANTOR" means any Domestic Subsidiary of Company that executes
and delivers a counterpart of the Subsidiary Guaranty on the Closing Date or
from time to time thereafter pursuant to subsection 6.8.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and delivered by
(i) existing Domestic Subsidiaries of Company on the Closing Date and (ii)
additional Domestic Subsidiaries of Company from time to time in accordance with
subsection 6.8, substantially in the form of Exhibit X annexed hereto, as such
Subsidiary Guaranty may thereafter be amended, supplemented or otherwise
modified from time to time.
"SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by any additional Subsidiary Guarantor from time to
time thereafter in accordance with subsection 6.8A, in each case substantially
in the form of Exhibit IX annexed hereto, as each such Subsidiary Security
Agreement may be thereafter amended, supplemented or otherwise modified from
time to time, and "Subsidiary Security Agreements" means all such Subsidiary
Security Agreements, collectively.
"TAX" OR "TAXES" means any present or future tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature and whatever called, by whomsoever,
on whomsoever and wherever imposed, levied, collected, withheld or assessed;
provided that "Tax on the overall income" of a Person shall be construed as a
reference to a tax imposed by the jurisdiction in which that Person is organized
or in which that Person's principal office (and/or, in the case of Bank, its
lending office) is located or in which that Person (and/or, in the case of Bank,
its lending office) is deemed to be doing business on all or part of the net
income, profits or gains (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise) of that Person (and/or, in the case of Bank, its
lending office).
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENT" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of reimbursing
Bank for any amount drawn under any Letter of Credit but not yet so applied)
plus (ii) the Letter of Credit Usage.
21
27
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
1.2 ACCOUNTING TERMS: UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Bank pursuant to clauses (i) and (ii) of subsection 6.1
shall be prepared in accordance with GAAP as in effect at the time of such
preparation. Calculations in connection with the definitions, covenants and
other provisions of this Agreement shall be made in accordance with accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3.
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use herein of the word "include" or "including", when following
any general statement, term or matter, shall not be construed to limit such
statement, term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not nonlimiting
language (such as "without limitation" or "but not limited to" or words of
similar import) is used with reference thereto, but rather shall be deemed to
refer to all other items or matters that fall within the broadest possible scope
of such general statement, term or matter.
SECTION 2. AMOUNT AND TERMS OF REVOLVING LOAN COMMITMENT AND REVOLVING LOANS
2.1 REVOLVING LOAN COMMITMENT; MAKING OF REVOLVING LOANS: REVOLVING NOTE.
A. REVOLVING LOAN COMMITMENT. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company
herein set forth, Bank hereby agrees, subject to the limitations set forth below
with respect to the maximum amount of Revolving Loans permitted to be
outstanding from time to time, to make Revolving Loans to Company from time to
time during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date in an aggregate principal amount at any one time
outstanding not exceeding $20,000,000 (the "Revolving Loan Commitment"), to be
used for the purposes identified in
22
28
subsection 2.5A; provided that the amount of the Revolving Loan Commitment shall
be reduced from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4A(ii) and 2.4A(iii). The Revolving Loan Commitment
shall expire on the Revolving Loan Commitment Termination Date and all Revolving
Loans and all other amounts owed hereunder with respect to the Revolving Loans
and the Revolving Loan Commitment shall be paid in full no later than that date.
Amounts borrowed under this subsection 2.1A may be repaid and reborrowed to but
excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary notwithstanding,
the Revolving Loans and the Revolving Loan Commitment shall be subject to the
limitation that in no event shall the Total Utilization of Revolving Loan
Commitment at any time exceed the lesser of (x) the Revolving Loan Commitment
then in effect and (y) the Borrowing Base then in effect.
B. BORROWINGS MECHANICS. Each Revolving Loan made on any Funding Date
(other than Revolving Loans made pursuant to subsection 3.313 for the purpose of
reimbursing Bank for the amount of a drawing under a Letter of Credit issued by
it, but including any Revolving Loan made on any Funding Date as a LIBOR Rate
Loan) shall be in a minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount. Whenever Company desires that Bank make a
Revolving Loan, it shall deliver to Bank a Notice of Borrowing no later than
11:00 A.M. (Los Angeles time) at least three Business Days in advance of the
proposed Funding Date (in the case of a LIBOR Rate Loan) or on the proposed
Funding Date (in the case of a Base Rate Loan). The Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount and type of the Revolving Loan requested, (iii) whether such Revolving
Loan shall be a Base Rate Loan or a LIBOR Rate Loan, and (iv) in the case of any
Revolving Loan requested to be made as a LIBOR Rate Loan, the initial Interest
Period requested therefor. Revolving Loans may be continued as or converted into
Base Rate Loans and LIBOR Rate Loans in the manner provided in subsection 2.2D.
In lieu of delivering the above-described Notice of Borrowing, Company may give
Bank telephonic notice by the required time of any proposed borrowing under this
subsection 2.1 B; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Bank on or before the applicable
Funding Date.
Bank shall not incur any liability to Company in acting upon any
telephonic notice referred to above that Bank believes in good faith to have
been given by a duly authorized officer or other person authorized to borrow on
behalf of Company or for otherwise acting in good faith under this subsection
2.113, and upon funding of any Revolving Loan by Bank in accordance with this
Agreement pursuant to any such telephonic notice, Company shall have effected a
Revolving Loan hereunder.
Company shall notify Bank prior to the funding of any Revolving Loan in
the event that any of the matters to which Company is required to certify in the
applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Revolving Loan shall constitute a
23
29
recertification by Company, as of the applicable Funding Date, as to the matters
to which Company is required to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.613, 2.6C and 2.6G, a
Notice of Borrowing for a LIBOR Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. DISBURSEMENT OF FUNDS. Except as provided in subsection 3.313 with
respect to Revolving Loans used to reimburse Bank for the amount of a drawing
under a Letter of Credit issued by it, upon satisfaction or waiver of the
conditions precedent specified in subsection 4.1, Bank shall make the proceeds
of such Revolving Loans available to Company on the applicable Funding Date by
causing an amount of same day funds in Dollars equal to the proceeds of all such
Revolving Loans to be credited to the account of Company at the Funding and
Payment Office.
D. REVOLVING NOTE. On the Closing Date, Company shall execute and
deliver to Bank a Revolving Note substantially in the form of Exhibit IV annexed
hereto to evidence the Revolving Loans, in the principal amount of the Revolving
Loan Commitment and with other appropriate insertions.
2.2 INTEREST ON THE REVOLVING LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Revolving Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate or the Adjusted
LIBOR Rate. The applicable basis for determining the rate of interest with
respect to any Revolving Loan shall be selected by Company initially at the time
a Notice of Borrowing is given with respect to such Revolving Loan pursuant to
subsection 2.1 B, and the basis for determining the interest rate with respect
to any Revolving Loan may be changed from time to time pursuant to subsection
2.2D. If on any day a Revolving Loan is outstanding with respect to which notice
has not been delivered to Bank in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Revolving Loan shall bear interest determined by reference to the
Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Revolving
Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the Base Rate; or
(b) if a LIBOR Rate Loan, then at the sum of the Adjusted
LIBOR Rate plus 1.375% per annum.
B. INTEREST PERIODS. In connection with each LIBOR Rate Loan, Company
may, pursuant to the applicable Notice of Borrowing or Notice of
24
30
Conversion/Continuation, as the case may be, select an interest period (each, an
"Interest Period") to be applicable to such LIBOR Rate Loan, which Interest
Period shall be, at Company's option, either a one, two, three or six month
period; provided that:
(i) the initial Interest Period for any LIBOR Rate Loan shall
commence on the Funding Date in respect of such LIBOR Rate Loan, in the case of
a Revolving Loan initially made as a LIBOR Rate Loan, or on the date specified
in the applicable Notice of Conversion/Continuation, in the case of a Revolving
Loan converted to a LIBOR Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a LIBOR Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on the
day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided that if any Interest Period would otherwise expire on a
day that is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
clause (v) of this subsection 2.213, end on the last Business Day of a calendar
month;
(v) no Interest Period with respect to any portion of the
Revolving Loans shall extend beyond the Revolving Loan Commitment Termination
Date;
(vi) there shall be no more than five Interest Periods
outstanding at any time; and
(vii) in the event Company fails to specify an Interest Period
for any LIBOR Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Company shall be deemed to have selected an Interest
Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Revolving Loan shall be payable in arrears on and to each
Interest Payment Date applicable to that Revolving Loan, upon any prepayment of
that Revolving Loan (to the extent accrued on the amount being prepaid) and at
maturity (including final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding LIBOR Rate Loans in an amount equal to $500,000 and integral
multiples
25
31
of $250,000 in excess of that amount to Base Rate Loans so long as any LIBOR
Rate Loans not so converted having an Interest Period which ends on the date of
such conversion shall be in an amount not less than $500,000, (ii) to convert at
any time all or any part of its outstanding Base Rate Loans equal to $500,000
and integral multiples of $250,000 in excess of that amount to LIBOR Rate Loans
or (iii) upon the expiration of any Interest Period applicable to a LIBOR Rate
Loan, to continue all or any portion of such LIBOR Rate Loan equal to $500,000
and integral multiples of $250,000 in excess of that amount as a LIBOR Rate
Loan; provided, however, that a LIBOR Rate Loan may only be converted into a
Base Rate Loan on the expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to Bank no
later than 11:00 A.M. (Los Angeles time) on the proposed conversion date (in the
case of a conversion to a Base Rate Loan) and at least three Business Days in
advance of the proposed conversion/continuation date (in the case of a
conversion to, or a continuation of, a LIBOR Rate Loan). A Notice of
Conversion/Continuation shall specify (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount and type of the Revolving
Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a LIBOR Rate Loan, the requested Interest Period, and (v) in the case of a
conversion to, or a continuation of, a LIBOR Rate Loan, that no Potential Event
of Default or Event of Default has occurred and is continuing. In lieu of
delivering the above-described Notice of Conversion/Continuation, Company may
give Bank telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Bank on or before the proposed
conversion/continuation date.
Bank shall not incur any liability to Company in acting upon any
telephonic notice referred to above that Bank believes in good faith to have
been given by a duly authorized officer or other person authorized to act on
behalf of Company or for otherwise acting in good faith under this subsection
2.2D, and upon conversion or continuation of the applicable basis for
determining the interest rate with respect to any Revolving Loans in accordance
with this Agreement pursuant to any such telephonic notice, Company shall have
effected a conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.613, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a LIBOR
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Revolving Loans and,
to the extent permitted by applicable law, any interest payments thereon not
paid when due and any fees and other amounts then due and payable hereunder,
shall thereafter bear
26
32
interest (including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a
rate that is 2% per annum in excess of the interest rate otherwise payable under
this Agreement for Base Rate Loans; provided that, in the case of LIBOR Rate
Loans, upon the expiration of the Interest Period in effect at the time any such
increase in interest rate is effective such LIBOR Rate Loans shall thereupon
become Base Rate Loans and shall thereafter bear interest payable upon demand at
a rate which is 2% per annum in excess of the interest rate otherwise payable
under this Agreement for Base Rate Loans. Payment or acceptance of the increased
rates of interest provided for in this subsection 2.2E is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.
F. COMPUTATION OF INTEREST. Interest on the Revolving Loans shall be
computed (i) in the case of Base Rate Loans, on the basis of a 365-day or
366-day year, as the case may be, and (ii) in the case of LIBOR Rate Loans, on
the basis of a 360-day year, in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Revolving
Loan, the date of the making of such Revolving Loan or the first day of an
Interest Period applicable to such Revolving Loan or, with respect to a Base
Rate Loan being converted from a LIBOR Rate Loan, the date of conversion of such
LIBOR Rate Loan to such Base Rate Loan, as the case may be, shall be included,
and the date of payment of such Revolving Loan or the expiration date of an
Interest Period applicable to such Revolving Loan or, with respect to a Base
Rate Loan being converted to a LIBOR Rate Loan, the date of conversion of such
Base Rate Loan to such LIBOR Rate Loan, as the case may be, shall be excluded;
provided that if a Revolving Loan is repaid on the same day on which it is made,
one day's interest shall be paid on that Revolving Loan.
2.3 COMMITMENT FEE.
Company agrees to pay to Bank a commitment fee for the period from and
including the Closing Date to and excluding the Revolving Loan Commitment
Termination Date equal to the product of (i) 0.375% per annum times (ii) the
average of the daily excess of the Revolving Loan Commitment over the sum of (a)
the aggregate principal amount of outstanding Revolving Loans plus (b) the
Letter of Credit Usage, such commitment fee to be calculated on the basis of a
360-day year and the actual number of days elapsed and to be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Closing xxxx, and on the
Revolving Loan Commitment Termination Date.
2.4 PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENT; GENERAL PROVISIONS
REGARDING PAYMENTS: APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER
SUBSIDIARY GUARANTY.
27
33
A. PREPAYMENTS and UNSCHEDULED REDUCTIONS in REVOLVING LOAN COMMITMENT.
(i) Voluntary Prepayments. Company may, upon not less than (a)
three Business Days' prior written or telephonic notice, in the case of LIBOR
Rate Loans, and (b) by notice given on the date of the proposed prepayment, in
the case of Base Rate Loans, given to Bank by 11:00 A.M. (Los Angeles time) on
the date required and, if given by telephone, promptly confirmed in writing to
Bank, at any time and from time to time, subject to subsection 2.6D, prepay the
outstanding Revolving Loans on any Business Day in whole or in part in an
aggregate minimum amount of $500,000 and integral multiples of $250,000 in
excess of that amount; provided that a LIBOR Rate Loan may only be prepaid on
the expiration of the Interest Period applicable thereto. Notice of prepayment
having been given as aforesaid, the principal amount of the Revolving Loans
specified in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied to prepay the
Revolving Loans as specified in subsection 2.4A(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Company
may, upon not less than one Business Day's prior written or telephonic notice
confirmed in writing to Bank, at any time and from time to time terminate in
whole or permanently reduce in part, without premium or penalty, the Revolving
Loan Commitment in an amount up to the amount by which (a) the Revolving Loan
Commitment exceeds the Total Utilization of the Revolving Loan Commitment at the
time of such proposed termination or reduction; provided that any such partial
reduction of the Revolving Loan Commitment shall be in an aggregate minimum
amount of $500,000 and integral multiples of $250,000 in excess of that amount.
Company's notice to Bank shall designate the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial reduction,
and such termination or reduction of the Revolving Loan Commitment shall be
effective on the date specified in Company's notice.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving
Loan Commitments. The Revolving Loans shall be prepaid and/or the Revolving Loan
Commitment shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments and/or reductions to be
applied as set forth below or as more specifically provided in subsection
2.4A(iv):
(a) Prepayments and Reductions From Net Asset Sale
Proceeds. No later than the third Business Day following the date of receipt by
Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of
any Asset Sale, Company shall prepay the Revolving Loans and/or the Revolving
Loan Commitment shall be permanently reduced in an aggregate amount equal to
such Net Asset Sale Proceeds; provided, that if Company notifies Bank in writing
no later than the day following the date of receipt by Company or any of its
Subsidiaries of any Net Asset Sale Proceeds in respect of any capital assets
sold by Company or any of its Subsidiaries that Company or such Subsidiary
intends to replace such assets sold with assets that are comparable in type and
equal or superior in quality (such comparable
28
34
assets being the "Exchange Assets"), Company shall prepay the Revolving Loans
and/or the Revolving Loan Commitment shall be permanently reduced in an
aggregate amount equal to the excess of (1) the aggregate amount of such Net
Asset Sale Proceeds over (2) an amount equal to the amount of cash expected to
be expended by Company and its Subsidiaries to acquire such Exchange Assets
during the 180-day period following the date of receipt by Company or any of its
Subsidiaries of such Net Asset Sale Proceeds. Any amounts not expended by
Company and its Subsidiaries within such 180-day period shall be prepaid
pursuant to clause (iv)(b) below. Nothing contained in this clause (a) shall be
construed to permit any sale of assets prohibited by subsection 7.7.
(b) Prepayments and Reductions Due to Issuance of Debt or
Equity Securities. No later than the third Business Day following the date of
receipt by Company or any of its Subsidiaries of the Cash proceeds (any such
proceeds, net of underwriting discounts and commissions and other reasonable
costs and expenses associated therewith, including, without limitation,
reasonable legal fees and expenses, being "Net Securities Proceeds") from the
issuance of any debt (other than Indebtedness permitted pursuant to subsection
7.1) or equity Securities of Company or any of its Subsidiaries (other than (w)
proceeds received pursuant to the exercise of employee stock options, (x) Cash
of any Person acquired by Company or any of its Subsidiaries in exchange for
equity Securities of Company or any of its Subsidiaries, or (y) proceeds
received from the sale of capital stock of Company pursuant to stock purchase
plans after the Closing Date), Company shall prepay the Revolving Loans and/or
the Revolving Loan Commitment shall be permanently reduced in an aggregate
amount equal to (1) 75% of such Net Securities Proceeds received from such
issuance of equity Securities and (2) 100% of such Net Securities Proceeds
received from such issuance of debt Securities.
(c) Calculations of Net Proceeds Amounts: Additional
Prepayments and Reductions Based on Subsequent Calculations. Concurrently with
any prepayment of the Revolving Loans and/or reduction of the Revolving Loan
Commitment pursuant to subsections 2.4A(iii)(a) and 2.4A(iii)(b), Company shall
deliver to Bank an Officers' Certificate demonstrating the calculation of the
amount (the "Net Proceeds Amount") of the applicable Net Asset Sale Proceeds or
Net Securities Proceeds, as the case may be, that gave rise to such prepayment
and/or reduction. In the event that Company shall subsequently determine that
the actual Net Proceeds Amount was greater than the amount set forth in such
Officers' Certificate, Company shall promptly make an additional prepayment of
the Revolving Loans (and/or, if applicable; the Revolving Loan Commitment shall
be permanently reduced) in an amount equal to the actual amount of such excess,
and Company shall concurrently therewith deliver to Bank an Officers'
Certificate demonstrating the derivation of the additional Net Proceeds Amount
resulting in such excess.
(d) Prepayments Due to Reductions or Restrictions of
Revolving Loan Commitment. During the period from and including the Closing Date
to and excluding the Revolving Loan Commitment Termination Date, Company shall
prepay the Revolving Loans to the extent necessary so that the Total Utilization
of the
29
35
Revolving Loan Commitment does not at any time exceed the lesser of (x) the
Revolving Loan Commitment then in effect and (y) the Borrowing Base then in
effect.
(iv) Application of Prepayments and Unscheduled Reductions of
Revolving Loan Commitment.
(a) Application of Voluntary Prepayments. Any voluntary
prepayments pursuant to subsection 2.4A(i) shall be applied to the Revolving
Loans as specified by Company in the applicable notice of prepayment.
(b) Application of Mandatory Prepayments. Any amount (the
"Applied Amount") required to be applied as a mandatory prepayment of the
Revolving Loans and/or a reduction of the Revolving Loan Commitment pursuant to
subsections 2.4A(iii)(a)-(d) shall be applied to permanently reduce the
Revolving Loan Commitment by the amount thereof, and if the Total Utilization of
the Revolving Loan Commitment would exceed the Revolving Loan Commitment as so
reduced, to repay outstanding Revolving Loans to the full extent of such excess
and thereafter to cash collateralize the Letters of Credit.
(c) Application of Prepayments to Base Rate Loans and
LIBOR Rate Loans. Any prepayment of any Revolving Loan shall be applied first to
Base Rate Loans to the full extent thereof before application to LIBOR Rate
Loans, in each case in a manner which minimizes the amount of any payments
required to be made by Company pursuant to subsection 2.6D.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Revolving Note shall be made in Dollars in same day funds, without defense,
setoff or counterclaim, free of any restriction or condition, and delivered to
Bank not later than 11:00 A.M. (Los Angeles time) on the date due at the Funding
and Payment Office for the account of Bank. Funds received by Bank after that
time on such due date shall be deemed to have been paid by Company on the next
succeeding Business Day. Company hereby authorizes Bank to charge its accounts
with Bank in order to cause timely payment to be made to Bank of all principal,
interest, fees and expenses due hereunder (subject to sufficient funds being
available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Revolving Loan shall include
payment of accrued interest on the principal amount being repaid or prepaid, and
all such payments (and, in any event, any payments in respect of any Revolving
Loan on a date when interest is due and payable with respect to such Revolving
Loan) shall be applied to the payment of interest before application to
principal.
(iii) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, such
30
36
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder
or of the commitment fees hereunder, as the case may be.
(iv) Notation of Payment. Bank shall make notations on the
Revolving Note or in its books and records of all Revolving Loans evidenced by
the Revolving Note and all principal payments previously made thereon and of the
date to which interest thereon has been paid; provided that the failure to make
(or any error in the making of) a notation of any Revolving Loan made under the
Revolving Note shall not limit or otherwise affect the obligations of Company
hereunder or under the Revolving Note with respect to any Revolving Loan or any
payments of principal or interest on the Revolving Note.
C. APPLICATION of PROCEEDS OF COLLATERAL and PAYMENTS UNDER SUBSIDIARY
GUARANTY.
(i) Application of Proceeds of Collateral. Except as provided in
subsection 2.4A(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, all proceeds received by Bank in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral under any
Collateral Document may, in the discretion of Bank, be held by Bank as
Collateral for, and/or (then or at any time thereafter) applied in full or in
part by Bank against, the applicable Secured Obligations (as defined in such
Collateral Document) in the following order of priority:
(a) To the payment of all reasonable costs and expenses of
such sale, collection or other realization, including reasonable compensation to
Bank and its counsel, and all other expenses, liabilities and advances made or
incurred by Bank in connection therewith, and all amounts for which Bank is
entitled to indemnification under such Collateral Document and all advances made
by Bank thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Bank in connection with
the exercise of any right or remedy under such Collateral Document, all in
accordance with the terms of this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess of such
proceeds, to the payment of all other such Secured Obligations in a manner
determined by Bank; and
(c) thereafter, to the extent of any excess of such
proceeds, to the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Subsidiary Guaranty. All
payments received by Bank under the Subsidiary Guaranty shall be applied
promptly from time to time by Bank in the following order of priority:
31
37
(a) To the payment of the reasonable costs and expenses of
any collection or other realization under the Subsidiary Guaranty, including
reasonable compensation to Bank and its counsel, and all expenses, liabilities
and advances made or incurred by Bank in connection therewith, all in accordance
with the terms of this Agreement and the Subsidiary Guaranty;
(b) thereafter, to the extent of any excess of such
payments, to the payment of all other Guarantied Obligations (as defined in the
Subsidiary Guaranty); and
(c) thereafter, to the extent of any excess of such
payments, to the payment to Company or the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
2.5 USE OF PROCEEDS.
A. REVOLVING LOANS. The proceeds of the Revolving Loans shall be applied
by Company for working capital requirements and general corporate purposes of
Company and its Subsidiaries.
B. MARGIN REGULATIONS. No portion of the proceeds of any Revolving Loan
under this Agreement shall be used by Company or any of its Subsidiaries in any
manner that might cause such Revolving Loan or the application of such proceeds
to violate Regulation G, Regulation U, Regulation T or Regulation X of the Board
of Governors of the Federal Reserve System or any other regulation of such Board
or to violate the Exchange Act, in each case as in effect on the date or dates
of such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING LIBOR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to LIBOR Rate Loans as to the
matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 11:00 A.M. (Los Angeles time) on each Interest Rate Determination Date,
Bank shall determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties) the interest rate that shall
apply to the LIBOR Rate Loans for which an interest rate is then being
determined for the applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to Company.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Bank shall have determined (which determination shall be final and conclusive
and binding upon all parties hereto), on any Interest Rate Determination Date
with respect to any
32
38
LIBOR Rate Loans, that by reason of circumstances affecting the London interbank
market adequate and fair means do not exist for ascertaining the interest rate
applicable to such LIBOR Rate Loans on the basis provided for in the definition
of Adjusted LIBOR Rate, Bank shall on such date give notice (by telefacsimile or
by telephone confirmed in writing) to Company of such determination, whereupon
(i) no Revolving Loans may be made as, or converted to, LIBOR Rate Loans until
such time as Bank notifies Company that the circumstances giving rise to such
notice no longer exist and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Revolving Loans in
respect of which such determination was made shall be deemed to be rescinded by
Company.
C. ILLEGALITY OR IMPRACTICABILITY OF LIBOR RATE LOANS. In the event that
on any date Bank shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto but shall be made only after
consultation with Company) that the making, maintaining or continuation of LIBOR
Rate Loans (i) has become unlawful as a result of compliance by Bank in good
faith with any law, treaty, governmental rule, regulation, guideline or order
(or would conflict with any such treaty, governmental rule, regulation,
guideline or order not having the force of law even though the failure to comply
therewith would not be unlawful) or (ii) has become impracticable, or would
cause Bank material hardship, as a result of contingencies occurring after the
date of this Agreement which materially and adversely affect the London
interbank market or the position of Bank in that market, then, and in any such
event, Bank shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Company of such determination. Thereafter (a) the
obligation of Bank to make Revolving Loans as, or to convert Revolving Loans to,
LIBOR Rate Loans shall be suspended until such notice shall be withdrawn by
Bank, (b) to the extent such determination by Bank relates to a LIBOR Rate Loan
then being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Bank shall make such Revolving Loan as (or convert such
Revolving Loan to, as the case may be) a Base Rate Loan, (c) Bank's obligation
to maintain outstanding LIBOR Rate Loans (the "Affected LIBOR Rate Loans") shall
be terminated at the earlier to occur of the expiration of the Interest Period
then in effect with respect to the Affected LIBOR Rate Loans or when required by
law, and (d) the Affected LIBOR Rate Loans shall automatically convert into Base
Rate Loans on the date of such termination. Notwithstanding the foregoing, to
the extent a determination by Bank as described above relates to a LIBOR Rate
Loan then being requested by Company pursuant to a Notice of Borrowing or a
Notice of Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation by giving notice (by telefacsimile or by telephone
confirmed in writing) to Bank of such rescission on the date on which Bank gives
notice of its determination as described. Except as provided in the immediately
preceding sentence, nothing in this subsection 2.6C shall affect the obligation
of Bank to make or maintain Revolving Loans as, or to convert Revolving Loans
to, LIBOR Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate Bank, upon written request by Bank (which
33
39
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by Bank to lenders of funds borrowed by it to make or carry LIBOR
Rate Loans and any loss, expense or liability sustained by Bank in connection
with the liquidation or reemployment of such funds) which Bank may sustain: (i)
if for any reason (other than a default by Bank) a borrowing of any LIBOR Rate
Loan does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, or a conversion to or continuation of any
LIBOR Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment (including, without limitation, any prepayment pursuant
to subsection 2.4A(i)) or other principal payment or any conversion of any LIBOR
Rate Loan occurs on a date prior to the last day of an Interest Period
applicable to that LIBOR Rate Loan, (iii) if any prepayment of any LIBOR Rate
Loan is not made on any date specified in a notice of prepayment given by
Company, or (iv) as a consequence of any other default by Company in the
repayment of any LIBOR Rate Loan when required by the terms of this Agreement.
E. BOOKING OF LIBOR RATE LOANS. Bank may make, carry or transfer LIBOR
Rate Loans at, to, or for the account of any of its branch offices or the office
of any of its Affiliates.
F. ASSUMPTIONS CONCERNING FUNDING OF LIBOR RATE LOANS. Calculation of
all amounts payable to Bank under this subsection 2.6 and under subsection 2.7A
shall be made as though Bank had actually funded each relevant LIBOR Rate Loan
through the purchase of a LIBOR deposit bearing interest at the rate obtained
pursuant to clause (i) of the definition of Adjusted LIBOR Rate in an amount
equal to the amount of such LIBOR Rate Loan and having a maturity comparable to
the relevant Interest Period and through the transfer of such LIBOR deposit from
an offshore office of Bank to a domestic office of Bank in the United States of
America; provided, however, that Bank may fund each LIBOR Rate Loan in any
manner it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this subsection 2.6 and under
subsection 2.7A.
G. LIBOR RATE LOANS AFTER DEFAULT. After the occurrence of and during
the continuation of a Potential Event of Default or an Event of Default, (i)
Company may not elect to have a Revolving Loan be made or maintained as, or
converted to, a LIBOR Rate Loan after the expiration of any Interest Period then
in effect for that Revolving Loan and (ii) subject to the provisions of
subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation
given by Company with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.
2.7. INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.713 (which shall be controlling with respect to the matters
34
40
covered thereby), in the event that Bank shall determine (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by Bank
with any guideline, request or directive issued or made after the date hereof by
any central bank or other governmental or quasi-governmental authority (whether
or not having the force of law):
(i) subjects Bank (or its applicable lending office) to any
additional Tax (other than any franchise Tax or Tax on the overall income of
Bank) with respect to this Agreement or any of its obligations hereunder or any
payments to Bank (or its applicable lending office) of principal, interest, fees
or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of Bank (other than any such reserve
or other requirements with respect to LIBOR Rate Loans that are reflected in the
definition of Adjusted LIBOR Rate); or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting Bank (or its applicable lending office) or its
obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to Bank of
agreeing to make, making or maintaining LIBOR Rate Loans hereunder or to reduce
any amount received or receivable by Bank (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to
Bank, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as Bank in its sole
discretion shall determine) as may be necessary to compensate Bank for any such
increased cost or reduction in amounts received or receivable hereunder. Bank
shall deliver to Company a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to Bank under this
subsection 2.7A, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall income of
Bank)
35
41
imposed, levied, collected, withheld or assessed by or within the United States
of America or any political subdivision in or of the United States of America or
any other jurisdiction from or to which a payment is made by or on behalf of
Company or by any federation or organization of which the United States of
America or any such jurisdiction is a member at the time of payment.
(ii) Grossing-Up of Payments. If Company or any other Person is
required by law to make any deduction or withholding on account of any such Tax
from any sum paid or payable by Company to Bank under any of the Loan Documents:
(a) Company shall notify Bank of any such requirement or
any change in any such requirement as soon as Company becomes aware of it;
(b) Company shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the liability to pay
is imposed on Company) for its own account or (if that liability is imposed on
Bank) on behalf of and in the name of Bank;
(c) the sum payable by Company in respect of which the
relevant deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction, withholding
or payment, Bank receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment been required or made;
and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30 days after
the due date of payment of any Tax which it is required by clause (b) above to
pay, Company shall deliver to Bank evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the remittance thereof
to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to Bank
under clause (c) above except to the extent that any change after the date
hereof in any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such deduction,
withholding or payment from that in effect at the date of this Agreement in
respect of payments to Bank.
C. CAPITAL ADEQUACY ADJUSTMENT. If Bank shall have determined that the
adoption, effectiveness, phase-in or applicability after the date hereof of any
law, rule or regulation (or any provision thereof) regarding capital adequacy,
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of Bank or any corporation
controlling Bank as a consequence of, or with reference to, Bank's Revolving
Loans or
36
42
the Revolving Loan Commitment or Letters of Credit or other obligations
hereunder with respect to the Revolving Loans or the Letters of Credit to a
level below that which Bank or such controlling corporation could have achieved
but for such adoption, effectiveness, phase-in, applicability, change or
compliance (taking into consideration the policies of Bank or such controlling
corporation with regard to capital adequacy), then from time to time, within
five Business Days after receipt by Company from Bank of the statement referred
to in the next sentence, Company shall pay to Bank such additional amount or
amounts as will compensate Bank or such controlling corporation on an after-tax
basis for such reduction. Bank shall deliver to Company a written statement,
setting forth in reasonable detail the basis of the calculation of such
additional amounts, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
2.8 OBLIGATION OF BANK TO MITIGATE.
Bank agrees that, as promptly as practicable after the officer of Bank
responsible for administering the Revolving Loans or Letters of Credit becomes
aware of the occurrence of an event or the existence of a condition that entitle
Bank to receive payments under subsection 2.7 or subsection 3.6, it will, to the
extent not inconsistent with the internal policies of Bank and any applicable
legal or regulatory restrictions, use reasonable efforts (i) to make, issue,
fund or maintain the Revolving Loan Commitment or the affected Revolving Loans
or Letters of Credit through another lending or letter of credit office of Bank,
or (ii) take such other measures as Bank may deem reasonable, if as a result
thereof the additional amounts which would otherwise be required to be paid to
Bank pursuant to subsection 2.7 or subsection 3.6 would be materially reduced
and if, as determined by Bank in its sole discretion, the making, issuing,
funding or maintaining of such Revolving Loan Commitment or Revolving Loans or
Letters of Credit through such other lending or letter of credit office or in
accordance with such other measures, as the case may be, would not otherwise
materially and adversely affect such Revolving Loan Commitment or Revolving
Loans or Letters of Credit or the interests of Bank; provided that Bank will not
be obligated to utilize such other lending or letter of credit office pursuant
to this subsection 2.8 unless Company agrees to pay all incremental expenses
incurred by Bank as a result of utilizing such other lending or letter of credit
office as described in clause (i) above. A certificate as to the amount of any
such expenses payable by Company pursuant to this subsection 2.8 (setting forth
in reasonable detail the basis for requesting such amount) submitted by Bank to
Company shall be conclusive absent manifest error.
SECTION 3. LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT.
A. LETTERS OF CREDIT. In addition to Company requesting that Bank make
Revolving Loans pursuant to subsection 2.1A, Company may request, in accordance
37
43
with the provisions of this subsection 3.1, from time to time during the period
from the Closing Date to but excluding the Revolving Loan Commitment Termination
Date, that Bank issue Letters of Credit for the account of Company for the
purposes specified in the definitions of Commercial Letters of Credit and
Standby Letters of Credit. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Company herein set
forth, Bank shall issue such Letters of Credit in accordance with the provisions
of this subsection 3.1; provided that Company shall not request that Bank issue:
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of the Revolving Loan Commitment would exceed
the lesser of (x) the Revolving Loan Commitment then in effect and (y) the
Borrowing Base then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $5,000,000;
(iii) any Standby Letter of Credit having an expiration date
later than the earlier of (a) the Revolving Loan Commitment Termination Date and
(b) the date which is one year from the date of issuance of such Standby Letter
of Credit; provided that, notwithstanding the immediately preceding clause (b),
upon Company's request therefor, so long as no Event of Default has occurred and
is continuing (or has been waived in accordance with subsection 9.5), Bank shall
issue Standby Letters of Credit, each of which will automatically be extended
for one or more successive periods not to exceed one year each, unless Bank
elects not to extend for any such additional period; or
(iv) any Commercial Letter of Credit having an expiration date
later than the earlier of (a) the date which is 30 days prior to the Revolving
Loan Commitment Termination Date and (b) the date which is 180 days from the
date of issuance of such Commercial Letter of Credit.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance of
a Letter of Credit, it shall deliver to Bank a Notice of Issuance of Letter of
Credit substantially in the form of Exhibit III annexed hereto (including Part A
of Bank's standard application for a letter of credit and the signature page to
such Part A, it being understood that Part B of such application shall not be
applicable) no later than 11:00 A.M., Los Angeles time) at least three Business
Days (in the case of Standby Letters of Credit) or three Business Days (in the
case of Commercial Letters of Credit), or in each case such shorter period as
may be agreed to by Bank in any particular instance, in advance of the proposed
date of issuance. The Notice of Issuance of Letter of Credit shall specify (a)
the proposed date of issuance (which shall be a Business Day), (b) whether the
Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter of
Credit, (c) the face amount of the Letter of Credit, (d) in the case of a Letter
of Credit which Company requests to be denominated in a currency other than
Dollars, the
38
44
currency in which Company requests such Letter of Credit to be issued, (e) the
expiration date of the Letter of Credit, (f) the name and address of the
beneficiary, and (g) either the verbatim text of the proposed Letter of Credit
or the proposed terms and conditions thereof, including a precise description of
any documents to be presented by the beneficiary which, if presented by the
beneficiary prior to the expiration date of the Letter of Credit, would require
Bank to make payment under the Letter of Credit; provided that Bank, in its
reasonable discretion, may require changes in the text of the proposed Letter of
Credit or any such documents.
No Standby Letter of Credit shall require payment against
a conforming draft to be made thereunder on a date earlier than (x) one Business
Day after the date on which such draft is presented if such presentation is made
before 11:00 A.M. (in the time zone of Bank), or (y) two Business Days after the
date on which such draft is presented if such presentation is made after 11:00
A.M. (in the time zone of Bank). No Commercial Letter of Credit shall require
payment against a conforming draft to be made thereunder on a date earlier than
(x) three Business Days after the date on which such draft is presented if such
presentation is made before 11:00 A.M. (in the time zone of Bank), or (y) four
Business Days after the date on which such draft is presented if such
presentation is made after 11:00 A.M. (in the time zone of Bank). Company shall
notify Bank prior to the issuance of any Letter of Credit in the event that any
of the matters to which Company is required to certify in the applicable Notice
of Issuance of Letter of Credit is no longer true and correct as of the proposed
date of issuance of such Letter of Credit, and upon the issuance of any Letter
of Credit, Company shall be deemed to have re-certified, as of the date of such
issuance, as to the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver
(in accordance with subsection 9.5) of the conditions set forth in subsection
4.3, Bank shall issue the requested Letter of Credit in accordance with Bank's
standard operating procedures.
3.2 LETTER OF CREDIT FEES.
Company agrees to pay the following amounts with respect to Letters of
Credit issued hereunder or in replacement of any Existing Letters of Credit (it
being understood that the fees payable by Company in respect of Existing Letters
of Credit not replaced by Letters of Credit issued hereunder will remain as set
forth in the terms pursuant to which such Existing Letters of Credit were
originally issued):
(i) with respect to each Standby Letter of Credit, (a) a fronting
fee, payable directly to Bank for its own account, equal to 0.25% per annum of
the daily amount available to be drawn under such Standby Letter of Credit and
(b) a letter of credit fee, payable to Bank, equal to 1.375% per annum of the
daily amount available to be drawn under such Standby Letter of Credit, each
such fronting fee or letter of credit
39
45
fee to be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing on the first such date to occur after the
Closing Date and on the Revolving Loan Commitment Termination Date, and computed
on the basis of a 360-day year for the actual number of days;
(ii) with respect to each Commercial Letter of Credit, (a) an
issuance fee in an amount equal to one-eighth of one percent (118 of 1 %) of the
face amount of such Commercial Letter of Credit, with the minimum issuance fee
being an amount in accordance with Bank's standard schedule for such charges in
effect at the time of such issuance, payable to Bank upon the issuance of such
Commercial Letter of Credit, (b) in the case of a sight draft presented to Bank,
a negotiation commission in an amount equal to one-quarter of one percent (1/4
of 1%) of the face amount of such draft, with the minimum such commission being
an amount in accordance with Bank's standard schedule for such charges in effect
at the time of such presentation, payable to Bank upon the giving of notice by
Bank to Company that Bank has paid such draft, and (c) in the case of any
amendment requested by Company with respect to an outstanding Commercial Letter
of Credit (other than an amendment that increases the face amount of such
outstanding Commercial Letter of Credit, the fee with respect to which shall be
computed in the same manner as an issuance fee under clause (a) above with
respect to such incremental amount, with the minimum fee being an amount in
accordance with Bank's standard schedule for such charges in effect at the time
of such amendment), an amendment fee in an amount in accordance with Bank's
standard schedule for such charges in effect at the time of such amendment,
payable to Bank upon the issuance of such amendment;
(iii) with respect to the issuance, cancellation, amendment or
transfer of each Letter of Credit and each payment of a drawing made thereunder
(without duplication of the fees payable under clause (i) or (ii) above),
documentary and processing charges and any other out-of-pocket costs and
expenses incurred in connection therewith, payable to Bank in accordance with
Bank's standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clause (i) or (ii) of this
subsection 3.2, any amount which is denominated in a currency other than Dollars
shall be valued based on the applicable Exchange Rate for such currency as of
the applicable date of determination.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF BANK WITH RESPECT TO DRAWINGS. In determining
whether to honor any drawing under any Letter of Credit by the beneficiary
thereof, Bank shall be responsible only to examine the documents delivered under
such Letter of Credit with reasonable care so as to ascertain whether they
appear on their face to be in accordance with the terms and conditions of such
Letter of Credit.
40
46
B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In
the event Bank has determined to honor a drawing under a Letter of Credit issued
by it, Bank shall immediately notify Company, and Company shall reimburse Bank
on or before the Business Day immediately following the date on which such
drawing is honored (the "Reimbursement Date") in an amount in Dollars (which
amount, in the case of a drawing under a Letter of Credit which is denominated
in a currency other than Dollars, shall be calculated by reference to the
applicable Exchange Rate) and in same day funds equal to the amount of such
honored drawing; provided that, anything contained in this Agreement to the
contrary notwithstanding, (i) unless Company shall have notified Bank on the
date such drawing is honored that Company intends to reimburse Bank for the
amount of such honored drawing with funds other than the proceeds of Revolving
Loans, Company shall be deemed to have given a timely Notice of Borrowing to
Bank requesting Bank to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars (which amount, in the case of a
drawing under a Letter of Credit which is denominated in a currency other than
Dollars, shall be calculated by reference to the applicable Exchange Rate) equal
to the amount of such honored drawing and (ii) subject to satisfaction or waiver
of the conditions specified in subsection 4.213, Bank shall, on the
Reimbursement Date, make a Revolving Loan that is a Base Rate Loan in the amount
of such honored drawing, the proceeds of which shall be applied directly by Bank
to reimburse itself for the amount of such honored drawing; and provided,
further that if for any reason proceeds of Revolving Loans are not received by
Bank on the Reimbursement Date in an amount equal to the amount of such honored
drawing, Company shall reimburse Bank, on demand, in an amount in same day funds
equal to the excess of the amount of such honored drawing over the aggregate
amount of such Revolving Loans, if any, which are so received. Nothing in this
subsection 3.313 shall be deemed to relieve Bank from its obligation to make
Revolving Loans on the terms and conditions set forth in this Agreement, and
Company shall retain any and all rights it may have against Bank resulting from
the failure of Bank to make such Revolving Loans under this subsection 3.313.
C. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT. Company agrees to
pay to Bank, with respect to drawings honored under any Letters of Credit issued
by it, interest on the amount paid by Bank in respect of each such honored
drawing from the date such drawing is honored to but excluding the date such
amount is reimbursed by Company (including` any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.313) at a rate equal to (a)
for the period from the date such drawing is honored to but excluding the
Reimbursement Date, the rate then in effect under this Agreement with respect to
Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which is 2%
per annum in excess of the rate of interest otherwise payable under this
Agreement with respect to Revolving Loans that are Base Rate Loans. Interest
payable pursuant to this subsection 3.3C shall be computed on the basis of a
360-day year for the actual number of days elapsed in the period during which it
accrues and shall be payable on demand or, if no demand is made, on the date on
which the related drawing under a Letter of Credit is reimbursed in full.
41
47
3.4 OBLIGATIONS ABSOLUTE.
The obligation of Company to reimburse Bank for drawings honored under
the Letters of Credit issued by it and to repay any Revolving Loans made by Bank
pursuant to subsection 3.3B shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company may have at any time against a beneficiary or any transferee of
any Letter of Credit (or any Persons for whom any such transferee may be
acting), Bank or any other Person, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction (including any
underlying transaction between Company or one of its Subsidiaries and the
beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(iv) payment by Bank under any Letter of Credit against
presentation of a draft or other document which does not substantially comply
with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any of its
Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by Bank under the applicable Letter of
Credit shall not have constituted gross negligence or willful misconduct of Bank
under the circumstances in question (as determined by a final judgment of a
court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF BANK'S DUTIES.
42
48
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless Bank from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel and allocated costs of internal counsel)
which Bank may incur or be subject to as a consequence, direct or indirect, of
(i) the issuance of any Letter of Credit, other than as a result of (a) the
gross negligence or willful misconduct of Bank as determined by a final judgment
of a court of competent jurisdiction or (b) subject to the following clause
(ii), the wrongful dishonor by Bank of a proper demand for payment made under
any Letter of Credit issued by it or (ii) the failure of Bank to honor a drawing
under any such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called "Governmental
Acts").
B. NATURE OF BANK'S DUTIES. As between Company and Bank, Company assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit
issued by Bank by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, Bank shall not be
responsible for: (i) 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 any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter 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; (iii) the
failure of the beneficiary of any such Letter of Credit to comply fully with any
conditions required in order to draw upon such Letter of Credit; (iv) 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;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Bank, including without limitation any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.513, any action
taken or omitted by Bank under or in connection with the Letters of Credit
issued by it or any documents and certificates delivered thereunder, if taken or
omitted in good faith, shall not put Bank under any resulting liability to
Company.
Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall retain any and all rights it may have against Bank for any
liability arising out of the gross negligence or willful misconduct of Bank, as
determined by a final judgment of a court of competent jurisdiction.
43
49
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
Subject to the provisions of subsection 2.713 (which shall be
controlling with respect to the matters covered thereby), in the event that Bank
shall determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any law, treaty or
governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by Bank with any
guideline, request or directive issued or made after the date hereof by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law):
(i) subjects Bank (or its applicable lending or letter of credit
office) to any additional Tax (other than any Tax on the overall income of Bank)
with respect to the issuing or maintaining of any Letter of Credit or any other
obligations under this Section 3, whether directly or by such being imposed on
or suffered by Bank;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letter of Credit issued by Bank; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting Bank (or its applicable lending or letter of credit
office) regarding this Section 3 or any Letter of Credit;
and the result of any of the foregoing is to increase the cost to Bank of
agreeing to issue, issuing or maintaining any Letter of Credit or to reduce any
amount received or receivable by Bank (or its applicable lending or letter of
credit office) with respect thereto; then, in any case, Company shall promptly
pay Bank, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate Bank for any such
increased cost or reduction in amounts received or receivable hereunder. Bank
shall deliver to Company a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to Bank under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
3.7 EXISTING LETTERS OF CREDIT.
Notwithstanding anything to the contrary herein, as of the Closing Date,
all Existing Letters of Credit shall be deemed in all respects to be Letters of
Credit issued by Bank hereunder and shall be subject to all of the terms and
provisions of this Agreement, including all terms and provisions applicable to
Letters of Credit under this Agreement; provided, that the fees described in
subsection 3.2 with respect to Letters of Credit shall only apply to Existing
Letters of Credit to the extent that Letters of Credit are
44
50
actually issued hereunder in replacement of such Existing Letters of Credit.
Bank agrees that its obligations with respect to Letters of Credit pursuant to
subsection 3.4 shall, as of the Closing Date, include the Existing Letters of
Credit.
SECTION 4. CONDITIONS TO REVOLVING LOANS AND LETTERS OF CREDIT
The obligations of Bank to make Revolving Loans and issue Letters of
Credit hereunder are subject to the satisfaction of the following conditions:
4.1 CONDITIONS TO INITIAL REVOLVING LOAN.
The obligation of Bank to make the initial Revolving Loan and to deem
Existing Letters of Credit to be Letters of Credit issued hereunder pursuant to
subsection 3.7 hereof are, in addition to the conditions precedent specified in
subsection 4.2, subject to prior or concurrent satisfaction of the following
conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall,
and shall cause each Subsidiary Guarantor to, deliver to Bank the following with
respect to Company or such Subsidiary Guarantor, as the case may be, each,
unless otherwise noted, dated the Closing Date:
(i) Certified copies of the Certificate or Articles of
Incorporation of such Person, together with a good standing certificate from the
Secretary of State of its jurisdiction of incorporation and each other state in
which such Person is qualified as a foreign corporation to do business and, to
the extent generally available, a certificate or other evidence of good standing
as to payment of any applicable franchise or similar taxes from the appropriate
taxing authority of each of such jurisdictions, each dated a recent date prior
to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of the Closing
Date Loan Documents to which it is a party, certified as of the Closing Date by
the corporate secretary or an assistant secretary of such Person as being in
full force and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers of
such Person executing the Closing Date Loan Documents to which it is a party;
(v) Executed originals of the Closing Date Loan Documents to
which such Person is a party; and
(vi) Such other documents as Bank may reasonably request.
45
51
B. ACQUISITION AGREEMENT. Bank shall have received a copy of the
executed Acquisition Agreement, and such Acquisition Agreement shall be in form
and substance reasonably satisfactory to Bank and its counsel.
C. EXISTING INDEBTEDNESS OF COMPANY AND ITS SUBSIDIARIES. There shall be
no existing Indebtedness of Company or its Subsidiaries outstanding on the
Closing Date, other than Indebtedness permitted under subsection 7.1.
D. SECURITY INTERESTS IN PROPERTY CONSTITUTING COLLATERAL. Bank shall
have received evidence satisfactory to it that Company and Subsidiary Guarantors
shall have taken or caused to be taken all such actions, executed and delivered
or caused to be executed and delivered all such agreements, documents and
instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (iii) and (iv)
below) that may be necessary or, in the opinion of Bank, desirable in order to
create in favor of Bank a valid and (upon such filing and recording) perfected
First Priority security interest in all the property of Company and such
Subsidiary Guarantors constituting Collateral; provided, however, that Bank's
security interest in all of the Inventory and other personal property of Company
or any of its Subsidiaries subject to the security interests in favor of
Flooring Lenders under the Flooring Agreements shall be a second priority
security interest, until such time as such security interests in favor of
Flooring Lenders (other than Deutsche and IBM Credit Corporation) are terminated
in accordance with clause (iii) of this subsection 4.1 D, after which time Bank
shall have a First Priority security interest in such Inventory and other
personal property. Such actions shall include, without limitation, the
following:
(i) Schedules to Collateral Documents. Delivery to Bank of
accurate and complete schedules to all of the applicable Collateral Documents;
(ii) Stock Certificates. Delivery to Bank of certificates (which
certificates shall be accompanied by irrevocable undated stock powers, duly
endorsed in blank and otherwise satisfactory in form and substance to Bank)
representing all capital stock of Subsidiary Guarantors pledged by Company
pursuant to the Company Pledge Agreement;
(iii) Lien Searches and UCC Termination Statements. Delivery to
Bank of (a) the results of a recent search, by a Person satisfactory to Bank, of
all effective UCC financing statements and fixture filings and all judgment and
tax lien filings which may have been made with respect to any personal or mixed
property of Company and Subsidiary Guarantors, together with copies of all such
filings disclosed by such search, and (b) UCC termination statements duly
executed by the Flooring Lenders as of the Closing Date (other than Deutsche and
IBM Credit Corporation), for filing in all applicable jurisdictions as may be
necessary to terminate any effective UCC financing statements listing such
Flooring Lenders as the secured party; provided that such UCC termination
statements may be delivered after the Closing Date in accordance with subsection
6.9 hereof; and
46
52
(iv) UCC Financing Statements. Delivery to Bank of UCC financing
statements duly executed by Company and Subsidiary Guarantors with respect to
any property of such Persons constituting Collateral, for filing in all
jurisdictions as may be necessary or, in the opinion of Bank, desirable to
perfect the security interests created in such Collateral pursuant to the
Collateral Documents.
E. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC. Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the transactions contemplated by the
Loan Documents, and each of the foregoing shall be in full force and effect, in
each case other than those the failure to obtain or maintain which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. No action, request for stay, petition for review or
rehearing, reconsideration or appeal with respect to any of the foregoing shall
be pending, and the time for any applicable agency to take action to set aside
its consent on its own motion shall have expired.
F. PRO FORMA CONSOLIDATED BALANCE SHEET. On or before the Closing Date,
Bank shall have received from Company a pro forma consolidated balance sheet of
Company and its Subsidiaries as at December 31, 1998, utilizing the historical
cost basis of accounting as adjusted for the pro forma effects of the Arrow
Sale.
G. NO MATERIAL ADVERSE EFFECT. Since September 30, 1998 there shall have
occurred no material adverse effect upon the business, operations, properties,
assets, liabilities, condition (financial or otherwise) or prospects of Company
and its Subsidiaries taken as a whole.
H. BORROWING BASE CERTIFICATE. Company shall have delivered a Borrowing
Base Certificate as of the end of the most recent month prior to the Closing
Date and the Total Utilization of Revolving Loan Commitment, after giving effect
to Revolving Loans to be made on the Closing Date and Letters of Credit that are
outstanding or to be issued on the Closing Date, shall be less than or equal to
the Borrowing Base then in effect.
I. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company
shall have delivered to Bank an Officers' Certificate, in form and substance
reasonably satisfactory to Bank, to the effect that the representations and
warranties in Section 5 hereof are true, correct and complete in all material
respects on and as of the Closing Date to the same extent as though made on and
as of that date (or, to the extent such representations and warranties
specifically relate to an earlier date, that such representations and warranties
were true, correct and complete in all material respects on and as of such
earlier date) and that Company shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall be
performed or satisfied by it on or before the Closing Date except as otherwise
disclosed to and agreed to in writing by Bank.
47
53
J. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Bank and its
counsel shall be satisfactory in form and substance to Bank and such counsel,
and Bank and such counsel shall have received all such counterpart originals or
certified copies of such documents as Bank may reasonably request.
4.2 CONDITIONS TO ALL REVOLVING LOANS.
The obligations of Bank to make Revolving Loans on each Funding Date are
subject to the following further conditions precedent:
A. Bank shall have received before that Funding Date, in accordance with
the provisions of subsection 2.1 B, an originally executed Notice of Borrowing,
in each case signed by the chief executive officer, the chief financial officer
or the treasurer of Company or by any executive officer of Company designated by
any of the above described officers on behalf of Company in a writing delivered
to Bank.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties shall have been true, correct and complete in all material respects
on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this Agreement
provides shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain Bank from making the
Revolving Loan on that Funding Date;
(v) The making of the Revolving Loan requested on such Funding
Date shall not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
48
54
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed by
Company in writing pursuant to subsection 5.6 or 6.1(ix) prior to the making of
the last preceding Revolving Loan (or, in the case of the initial Revolving
Loan, prior to the execution of this Agreement), and there shall have occurred
no development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either event,
in the opinion of Bank, would be expected to have a Material Adverse Effect; and
no injunction or other restraining order shall have been issued and no hearing
to cause an injunction or other restraining order to be issued shall be pending
or noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement or the
making of Revolving Loans hereunder.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder is subject to the
following conditions precedent:
A. On or before the date of issuance of such Letter of Credit, Bank
shall have received, in accordance with the provisions of subsection 3.1 B(i),
an originally executed Notice of Issuance of Letter of Credit, in each case
signed by the chief executive officer, the chief financial officer or the
treasurer of Company or by any executive officer of Company designated by any of
the above-described officers on behalf of Company in a writing delivered to
Bank, together with all other information specified in subsection 3.1 B(i) and
such other documents or information as the Bank may reasonably require in
connection with the issuance of such Letter of Credit.
B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.213 shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Revolving Loan and
the date of issuance of such Letter of Credit were a Funding Date.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Agreement and to make the
Revolving Loans, and to induce Bank to issue Letters of Credit, Company
represents and warrants to Bank, on the date of this Agreement, on each Funding
Date and on the date of issuance of each Letter of Credit, that the following
statements are true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
49
55
A. ORGANIZATION AND POWERS. Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each Loan Party has all requisite corporate power and authority
to own and operate its properties, to carry on its business as now conducted and
as proposed to be conducted, to enter into the Loan Documents to which it is a
party and to carry out the transactions contemplated thereby.
B. QUALIFICATION AND GOOD STANDING. Company is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.14.
D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in
Schedule 5.1 annexed hereto, as such Schedule 5.1 may be supplemented from time
to time pursuant to the provisions of subsection 6.1(xv). The capital stock of
each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto
(as so supplemented) is duly authorized, validly issued, fully paid and
nonassessable and none of such capital stock constitutes Margin Stock. Each of
the Subsidiaries of Company identified in Schedule 5.1 annexed hereto (as so
supplemented) is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect.
E. CAPITALIZATION. As of the Closing Date, Schedule 5.1 annexed hereto
correctly sets forth the ownership interest of Company and each of its
Subsidiaries in each of the Subsidiaries of Company identified therein. Schedule
5.1 correctly sets forth, as of the Closing Date, the authorized classes of
capital stock of Company and each of its Subsidiaries, the par value of each
share of such class, the number of authorized shares of each such class, and the
number of outstanding shares of each such class. As of the Closing Date, no
other class of capital stock of Company or its Subsidiaries is outstanding. The
capital stock of Company and its Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable.
F. REPURCHASE OBLIGATIONS, ETC.. Neither Company nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock.
50
56
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary corporate
action on the part of each of Company and its Subsidiaries that is a party
thereto.
B. NO CONFLICT. The execution, delivery and performance by the Loan
Parties of the Loan Documents to which they are parties and the consummation of
the transactions contemplated by the Loan Documents do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on Company
or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Bank), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Company or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date and disclosed in
writing to Bank.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by the
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents do not and
will not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body except for any filing in connection with the Arrow Sale,
which filing has been made and is effective.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed
and delivered by each Loan Party that is a party thereto and is the legally
valid and binding obligation of such Loan Party, enforceable against such Loan
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
5.3 FINANCIAL CONDITION.
Company has heretofore delivered to Bank, at Bank's request, the
following financial statements and information: (i) the audited consolidated
balance sheet of Company and its Subsidiaries as at December 31, 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
of Company and its Subsidiaries for the Fiscal Year then ended; and (ii) the
unaudited consolidated balance sheet of Company and its Subsidiaries as at
September 30, 1998 and the related unaudited consolidated statements of income,
stockholders' equity and cash flows of
51
57
Company and its Subsidiaries for the Fiscal Quarter then ended. All such
statements were prepared in conformity with GAAP and fairly present, in all
material respects, the financial position (on a consolidated basis) of the
entities described in such financial statements as at the respective dates
thereof and the results of operations and cash flows (on a consolidated basis)
of the entities described therein for each of the periods then ended, subject,
in the case of any such unaudited financial statements, to changes resulting
from audit and normal year-end adjustments. As of the relevant dates of such
financial statements, Company and its Subsidiaries did not have any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the foregoing
financial statements or the notes thereto and which in any such case is material
in relation to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company or any of its Subsidiaries.
5.4 NO MATERIAL ADVERSE EFFECT; NO RESTRICTED JUNIOR PAYMENTS.
Since September 30, 1998, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Neither Company nor any of its Subsidiaries has directly or indirectly
declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Junior Payment or agreed to do so.
5.5 TITLE TO PROPERTIES: LIENS; LEASES.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i)
good, sufficient and legal title to (in the case of fee interests in real
property), (ii) valid leasehold interests in (in the case of leasehold interests
in real or personal property), or (iii) good title to (in the case of all other
personal property), all of their respective properties and assets reflected in
the financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, in each case except
for assets disposed of since the date of such financial statements in the
ordinary course of business or as otherwise permitted under subsection 7.7.
Except as permitted by this Agreement, all such properties and assets are free
and clear of Liens.
B. LEASES. Each lease of real property under which Company is a lessee
is accounted for as an Operating Lease in conformity with GAAP.
5.6 LITIGATION; ADVERSE FACTS.
Except as set forth on Schedule 5.6 annexed hereto, there are no
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Company or any of its Subsidiaries) at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (including any Environmental Claims) that
52
58
are pending or, to the knowledge of Company, threatened against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries and that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither Company nor any of its
Subsidiaries (i) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, or (ii) is subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes shown on such tax returns to be due and payable
and all assessments, fees and other governmental charges upon Company and its
Subsidiaries and upon their respective properties, assets, income, businesses
and franchises which are due and payable have been paid when due and payable.
Company knows of no proposed tax assessment against Company or any of its
Subsidiaries which is not being actively contested by Company or such Subsidiary
in good faith and by appropriate proceedings; provided that such reserves or
other appropriate provisions, if any, as shall be required in conformity with
GAAP shall have been made or provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL
CONTRACTS.
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of all the
Material Contracts in effect on the Closing Date. Except as described on
Schedule 5.8, all such Material Contracts are in full force and effect and no
material defaults currently exist thereunder.
53
59
5.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 SECURITIES ACTIVITIES.
Neither Company nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
5.11 EMPLOYEE BENEFIT PLANS.
A. No ERISA Event has occurred or is reasonably expected to occur.
B. Except to the extent required under Section 4980B of the Internal
Revenue Code, no Employee Benefit Plan provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employee of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates.
C. As of the most recent valuation date for any Pension Plan, the amount
of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA),
individually or in the aggregate for all Pension Plans (excluding for purposes
of such computation any Pension Plans with respect to which assets exceed
benefit liabilities), does not exceed $50,000.
D. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Company, its
Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer Plans, based on information available pursuant to Section 4221 (e)
of ERISA, does not exceed $50,000.
5.12 ENVIRONMENTAL PROTECTION.
(i) Neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to (a)
any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous
Materials Activity that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect;
54
60
(ii) Neither Company nor any of its Subsidiaries has received any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604)
or any comparable state law;
(iii) There are and, to Company's knowledge, have been no
conditions, occurrences, or Hazardous Materials Activities which could
reasonably be expected to form the basis of an Environmental Claim against
Company or any of its Subsidiaries that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect; and
(iv) Compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws will not, individually or
in the aggregate, have a reasonable possibility of giving rise to a Material
Adverse Effect.
Notwithstanding anything in this subsection 5.12 to the contrary, no
event or condition has occurred or is occurring with respect to Company or any
of its Subsidiaries relating to any Environmental Law, any Release of Hazardous
Materials, or any Hazardous Materials Activity which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
5.13 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened involving
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
5.14 SOLVENCY.
Each Loan Party is and, upon the incurrence of any Obligations by such
Loan Party on any date on which this representation is made, will be, Solvent.
5.15 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and
delivery of the Collateral Documents by the Loan Parties, together with the
delivery to Bank of any Pledged Collateral not delivered to Bank at the time of
execution and delivery of the applicable Collateral Document (all of which
Pledged Collateral has been so delivered) are effective to create in favor of
Bank, as security for the respective Secured Obligations (as defined in the
applicable Collateral Document in respect of any Collateral), a valid and
perfected first priority Lien subject to Liens permitted in Section 7.2A on all
of the Collateral, and all filings and other actions necessary or desirable to
perfect and maintain the perfection and first priority status of such Liens have
been duly
55
61
made or taken and remain in full force and effect, other than the filing of any
UCC financing statements delivered to Bank for filing (but not yet filed) and
the periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Bank.
B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Bank pursuant to any of the
Collateral Documents, (ii) the conditional assignment pursuant to any of the
Collateral Documents or (iii) the exercise by Bank of any rights or remedies in
respect of any Collateral (whether specifically granted or created pursuant to
any of the Collateral Documents or created or provided for by applicable law),
except for filings or recordings contemplated by subsection 5.15A and except as
may be required, in connection with the disposition of any Pledged Collateral,
by laws generally affecting the offering and sale of securities.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in
favor of Bank as contemplated by subsection 5.15A or in connection with Liens
permitted by this Agreement, no effective UCC financing statement, fixture
filing or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office.
D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
E. INFORMATION REGARDING COLLATERAL. All information supplied to Bank by
or on behalf of any Loan Party with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
5.16 DISCLOSURE.
No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or in any other document, certificate or written
statement furnished to Bank by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact (known to Company, in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Bank that such projections
as to future events are not to be viewed as facts and that actual results during
the period or periods covered by any such projections may differ from the
projected results. As of the date hereof, there are no facts known (or which
should upon the reasonable exercise of
56
62
diligence be known) to Company (other than matters of a general economic nature)
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect and that have not been disclosed herein or in such
other documents, certificates and statements furnished to Bank for use in
connection with the transactions contemplated hereby.
5.17 EXISTING LETTERS OF CREDIT.
All Existing Letters of Credit are described on Schedule 5.17 annexed
hereto.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as the Revolving Loan
Commitment hereunder shall remain in effect and until payment in full of all of
the Revolving Loans and other Obligations and the cancellation or expiration of
all Letters of Credit, unless Bank shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Bank:
(i) Quarterly Reports on Form 10-Q. As soon as available and in
any event within 45 days after the end of each Fiscal Quarter, Company's
Quarterly Report on Form 10-Q;
(ii) Annual Report on Form 10-K. As soon as available and in any
event within 90 days after the end of each Fiscal Year, (a) Company's Annual
Report on Form 10-K; and (b) in the case of the consolidated financial
statements included an such Form 10-K, a report thereon of independent certified
public accountants of recognized national standing selected by Company and
reasonably satisfactory to Bank, which report shall express no doubts about the
ability of Company and its Subsidiaries to continue as a going concern, and
shall state without qualification that such consolidated financial statements
fairly present, in all material respects, the consolidated financial position of
Company and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards;
57
63
(iii) Financial Statement and Compliance Certificates. Together
with each delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (i) and (ii) above, a certificate of the chief
financial officer of Company substantially in the form of Exhibit V annexed
hereto;
(iv) Accountants' Certification. Together with each delivery of
consolidated financial statements of Company and its Subsidiaries pursuant to
subdivision (ii) above, a written statement by the independent certified public
accountants giving the report thereon (a) stating that their audit examination
has included a review of the terms of this Agreement and the other Loan
Documents as they relate to accounting matters, (b) stating whether, in
connection with their audit examination, any condition or event that constitutes
an Event of Default or Potential Event of Default has come to their attention
and, if such a condition or event has come to their attention, specifying the
nature and period of existence thereof; provided that such accountants shall not
be liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in the course
of their audit examination, and (c) stating that based on their audit
examination, nothing has come to their attention that causes them to believe
either or both that the information contained in the certificates delivered
therewith pursuant to subdivision (iii) above is not correct or that the matters
set forth in the Compliance Certificates delivered therewith pursuant to clause
(b) of subdivision (iii) above for the applicable Fiscal Year are not stated in
accordance with the terms of this Agreement;
(v) Accountants' Reports. Promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in connection
with each annual, interim or special audit of the financial statements of
Company and its Subsidiaries made by such accountants, including, without
limitation, any management letter submitted by such accountants to management in
connection with their annual audit;
(vi) Borrowing Base Certificate. Within 25 days after the end of
each month, a completed Borrowing Base Certificate for that month;
(vii) SEC Filings and Press Releases. Promptly upon their
becoming available; copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its security
holders or by any Subsidiary of Company to its security holders other than
Company or another Subsidiary of Company, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by Company or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press releases and
other statements made available generally by Company or any of its Subsidiaries
to the public concerning material developments in the business of Company or any
of its Subsidiaries;
58
64
(viii) Events of Default, etc. Promptly upon any officer of
Company obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that Bank has
given any notice or taken any other action with respect to a claimed Event of
Default or Potential Event of Default, (b) that any Person has given any notice
to Company or any of its Subsidiaries or taken any other action with respect to
a claimed default or event or condition of the type referred to in subsection
8.2, (c) of any condition or event that would be required to be disclosed in a
current report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof)
if Company were required to file such reports under the Exchange Act, or (d) of
the occurrence of any event or change that has caused or evidences, either in
any case or in the aggregate, a Material Adverse Effect, an Officers'
Certificate specifying the nature and period of existence of such condition,
event or change, or specifying the notice given or action taken by any such
Person and the nature of such claimed Event of Default, Potential Event of
Default, default, event or condition, and what action Company has taken, is
taking and proposes to take with respect thereto;
(ix) Litigation or Other Proceedings. Promptly upon any officer
of Company obtaining knowledge of (a) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries (collectively, "Proceedings") not previously disclosed in writing
by Company to Bank or (b) any material development in any Proceeding that, in
any case:
(1) if adversely determined, has a reasonable possibility
of giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, the transactions
contemplated hereby;
written notice thereof together with such other information as may be reasonably
available to Company to enable Bank and its counsel to evaluate such matters;
(x) ERISA Events. Promptly upon becoming aware of the occurrence
of or forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action Company, any of its Subsidiaries or any of their
respective ERISA Affiliates has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto;
(xi) ERISA Notices. With reasonable promptness, copies of (a)
each Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan;
(b) all notices received by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates from a
59
65
Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of such
other documents or governmental reports or filings relating to any Employee
Benefit Plan as Bank shall reasonably request;
(xii) Financial Plans. As soon as practicable and in any event no
later than (a) March 31, 1999, for the Fiscal Year ending December 31, 1999, and
(b) 30 days after the beginning of each Fiscal Year thereafter, a consolidated
plan and financial forecast for such Fiscal Year (the "Financial Plan" for such
Fiscal Year), including, without limitation, (i) forecasted consolidated balance
sheets and forecasted consolidated statements of income and cash flows of
Company and its Subsidiaries for such Fiscal Year, together with pro forma
compliance calculations for such Fiscal Year and an explanation of the
assumptions on which such forecasts are based, and (ii) forecasted consolidated
statements of income and cash flows of Company and its Subsidiaries for each
quarter of such Fiscal Year, together with an explanation of the assumptions on
which such forecasts are based;
(xiii) Environmental Audits and Reports. As soon as practicable
following receipt thereof by Company, copies of all environmental audits and
reports, whether prepared by personnel of Company or any of its Subsidiaries or
by independent consultants, with respect to an Environmental Claim or any matter
governed by or arising under applicable Environmental Laws which, in either
case, could reasonably be expected to result in a Material Adverse Effect;
(xiv) UCC Search Report: As promptly as practicable after the
date of delivery to Bank of any UCC financing statement executed by any Loan
Party pursuant to subsection 4.1 D(iv) or 6.8A, copies of completed UCC searches
evidencing the proper filing, recording and indexing of all such UCC financing
statements and listing all other effective financing statements that name such
Loan Party as debtor, together with copies of all such other financing
statements not previously delivered to Bank by or on behalf of Company or such
Loan Party;
(xv) New Subsidiaries. Promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company and (b)
all of the data required to be set forth in Schedule 5.1 annexed hereto with
respect to all Subsidiaries of Company (it being understood that such written
notice shall be deemed to supplement Schedule 5.1 annexed hereto for all
purposes of this Agreement); and
(xvi) Other Information. With reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries as from
time to time may be reasonably requested by Bank.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate
60
66
existence and all rights and franchises material to its business; provided,
however, that neither Company nor any of its Subsidiaries shall be required to
preserve any such right or franchise if the Board of Directors of Company or
such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of Company or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any material
respect to Company, such Subsidiary or Bank.
6.3 PAYMENT OF TAXES AND CLAIMS: TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
need be paid if it is being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, so long as (i) such reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor and (ii) in the case of a charge or claim
which has or may become a Lien against any of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such charge or claim.
B. Company will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company or any of its Subsidiaries).
6.4 MAINTENANCE OF PROPERTIES: INSURANCE.
A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Company and its Subsidiaries (including,
without limitation, all Intellectual Property) and from time to time will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
B. INSURANCE. Company will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Company and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry.
61
67
Without limiting the generality of the foregoing, Company will maintain or cause
to be maintained replacement value casualty insurance on the Collateral under
such policies of insurance, with such insurance companies, in such amounts, with
such deductibles, and covering such risks as are at all times satisfactory to
Bank in its commercially reasonable judgment. Each such policy of insurance
shall (a) name Bank as an additional insured thereunder as its interests may
appear and (b) in the case of each business interruption and casualty insurance
policy, contain a loss payable clause or endorsement, satisfactory in form and
substance to Bank, that names Bank as the loss payee thereunder for any covered
loss in excess of $5,000,000 and provides for at least ten days prior written
notice to Bank of any material modification or cancellation of such policy.
6.5 INSPECTION RIGHTS: AUDITS OF INVENTORY AND ACCOUNTS RECEIVABLE.
A. INSPECTION RIGHTS. Company shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by Bank to
visit and inspect any of the properties of Company or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Company may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may reasonably be requested.
B. AUDITS OF INVENTORY AND ACCOUNTS RECEIVABLE. Company shall, and shall
cause each of its Subsidiaries to, permit any authorized representatives
designated by Bank to conduct audits from time to time at Company's expense of
all Inventory and Accounts of the Loan Parties after the Closing Date, all upon
reasonable notice and at such reasonable times during normal business hours as
may reasonably be requested. So long as no Event of Default has occurred and is
continuing, Bank shall conduct such audits no more frequently than annually.
6.6 COMPLIANCE WITH LAWS, ETC.
Company shall comply, and shall cause each of its Subsidiaries to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all Environmental Laws),
noncompliance with which could reasonably be expected to cause, individually or
in the aggregate, a Material Adverse Effect.
6.7 ENVIRONMENTAL REVIEW, DISCLOSURE, ETC.; COMPANY'S ACTIONS REGARDING
HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF
ENVIRONMENTAL LAWS.
A. ENVIRONMENTAL REVIEW. Company agrees that Bank may, from time to time
and in its reasonable discretion, retain, at Company's expense, an independent
62
68
professional consultant to review any environmental audits, investigations,
analyses and reports relating to Hazardous Materials prepared by or for Company.
B. ENVIRONMENTAL DISCLOSURE. Company will deliver to Bank:
(i) Environmental Audits and Reports. As soon as practicable
following receipt thereof, copies of all environmental audits, investigations,
analyses and reports of any kind or character, whether prepared by personnel of
Company or any of its Subsidiaries or by independent consultants, governmental
authorities or any other Persons, with respect to significant environmental
matters at any Facility which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect or with respect to
any Environmental Claims which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect;
(ii) Notice of Certain Releases, Remedial Actions. Etc. Promptly
upon the occurrence thereof, written notice describing in reasonable detail (a)
any Release required to be reported to any federal, state or local governmental
or regulatory agency under any applicable Environmental Laws, (b) any remedial
action taken by Company or any other Person in response to (x) any Hazardous
Materials Activities the existence of which has a reasonable possibility of
resulting in one or more Environmental Claims having, individually or in the
aggregate, a Material Adverse Effect, or (y) any Environmental Claims that,
individually or in the aggregate, have a reasonable possibility of resulting in
a Material Adverse Effect, and (c) Company's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of any Facility that
could cause such Facility or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use thereof under
any Environmental Laws;
(iii) Written Communications Regarding Environmental Claims,
Releases. Etc. As soon as practicable following the sending or receipt thereof
by Company or any of its Subsidiaries, a copy of any and all written
communications with respect to (a) any Environmental Claims that, individually
or in the aggregate, have a reasonable possibility of giving rise to a Material
Adverse Effect, (b) any Release required to be reported to any federal, state or
local governmental or regulatory agency, and (c) any request for information
from any governmental agency that suggests such agency is investigating whether
Company or any of its Subsidiaries may be potentially responsible for any
Hazardous Materials Activity which could reasonably be expected to have a
Material Adverse Effect;
(iv) Notice of Certain Proposed Actions Having Environmental
Impact. Prompt written notice describing in reasonable detail (a) any proposed
acquisition of stock, assets, or property by Company or any of its Subsidiaries
that could reasonably be expected to (x) expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(y) affect the ability of Company or any of its Subsidiaries to maintain in full
force and effect all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (b) any
63
69
proposed action to be taken by Company or any of its Subsidiaries to modify
current operations in a manner that could reasonably be expected to subject
Company or any of its Subsidiaries to any additional obligations or requirements
under any Environmental Laws that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; and
(v) Other Information. With reasonable promptness, such other
documents and information as from time to time may be reasonably requested by
Bank in relation to any matters disclosed pursuant to this subsection 6.7.
C. COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES,
ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. Company shall
promptly take, and shall cause each of its Subsidiaries promptly to take, (i)
any and all abatement, cleanup, removal, remediation or other response actions
necessary to remove, remediate, clean up or xxxxx any Hazardous Materials
Activity on, under or about any Facility that is in violation of any
Environmental Laws or that presents a material risk of giving rise to an
Environmental Claim where failure to do so could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and (ii) any and all
actions necessary to (y) cure any violation of applicable Environmental Laws by
Company or its Subsidiaries that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and (z) make an
appropriate response to any Environmental Claim against Company or any of its
Subsidiaries and discharge any obligations it may have to any Person thereunder
where failure to do so could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
6.8 EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PRO A COLLATERAL DOCUMENTS BY
CERTAIN SUBSIDIARIES AND FUTURE SUBSIDIARIES.
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Domestic Subsidiary of Company
after the date hereof, Company will promptly notify Bank of that fact and, at
the request of Bank, cause such Subsidiary to execute and deliver to Bank a
counterpart of the Subsidiary Guaranty and a Subsidiary Security Agreement and
to take all such further actions and execute all such further documents and
instruments (including, without limitation, actions, documents and instruments
comparable to those described in subsection 4.1 D) as may be necessary or, in
the opinion of Bank, desirable to create in favor of Bank a valid and perfected
First Priority Lien on all of the property assets of such Subsidiary described
in the applicable forms of Collateral Documents.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Company shall
deliver to Bank, together with such Loan Documents, (i) certified copies of such
Subsidiary's Certificate or Articles of Incorporation, together with a good
standing certificate from the Secretary of State of the jurisdiction of its
incorporation and each other state in which such Person is qualified as a
foreign corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as
64
70
to payment of any applicable franchise or similar taxes from the appropriate
taxing authority of each of such jurisdictions, each to be dated a recent date
prior to their delivery to Bank, (ii) a copy of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant secretary as of a recent
date prior to their delivery to Bank, (iii) a certificate executed by the
secretary or an assistant secretary of such Subsidiary as to (a) the fact that
the attached resolutions of the Board of Directors of such Subsidiary approving
and authorizing the execution, delivery and performance of such Loan Documents
are in full force and effect and have not been modified or amended and (b) the
incumbency and signatures of the officers of such Subsidiary executing such Loan
Documents, and (iv) if reasonably requested by Bank, a favorable opinion of
counsel to such Subsidiary, in form and substance satisfactory to Bank and its.
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of such
Loan Documents, (c) the enforceability of such Loan Documents against such
Subsidiary, (d) such other matters (including, without limitation, matters
relating to the creation and perfection of Liens in any Collateral pursuant to
such Loan Documents) as Bank may reasonably request, all of the foregoing to be
satisfactory in form and substance to Bank and its counsel.
6.9 UCC TERMINATION STATEMENTS.
No later than 60 days after the Closing Date, Company shall deliver to
Bank all UCC termination statements referenced in Section 4.1 D(iii), duly
executed by Flooring Lenders (except Deutsche and IBM Credit Corporation).
SECTION 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as the Revolving Loan
Commitment hereunder shall remain in effect and until payment in full of all of
the Revolving Loans and other Obligations and the cancellation or expiration of
all Letters of Credit, unless Bank shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by subsection 7.4 and, upon any
65
71
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Operating Leases permitted by
subsection 7.9;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned
Subsidiary of Company may become and remain liable with respect to Indebtedness
to Company or any other wholly-owned Subsidiary of Company; provided that (a)
all such intercompany Indebtedness shall be evidenced by promissory notes, (b)
all such intercompany Indebtedness owed by Company to any of its Subsidiaries
shall be subordinated in right of payment to the payment in full of the
Obligations pursuant to the terms of the applicable promissory notes or an
intercompany subordination agreement, and (c) any payment by any Subsidiary of
Company under any guaranty of the Obligations shall result in a pro tanto
reduction of the amount of any intercompany Indebtedness owed by such Subsidiary
to Company or to any of its Subsidiaries for whose benefit such payment is made;
(v) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness secured by Liens permitted under Section 7.2A(iii);
(vi) Company and its Subsidiaries may become and remain liable
with respect to existing Indebtedness of a Person (or a division or line of
business of such Person) acquired in compliance with subsection 7.7(v) so long
as such Indebtedness was not incurred in contemplation of such acquisition;
(vii) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness secured by Liens permitted under Section 7.2A(v);
and
(viii) Company may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed $2,500,000 at any
time outstanding.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset,
66
72
income or profits under the Uniform Commercial Code of any State or under any
similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Other Liens securing Indebtedness in respect of the
purchase price of property acquired by Company or any of its Subsidiaries in an
aggregate amount not to exceed $5,000,000 at any time outstanding; provided,
that the principal amount of Indebtedness secured by any such Lien shall at no
time exceed an amount equal to 100% of the purchase price of such property so
acquired;
(iv) Liens existing on the Closing Date and securing Indebtedness
of Company or its Subsidiaries described in the unaudited consolidated balance
sheet of Company and its Subsidiaries for the Fiscal Quarter ended September 30,
1998;
(v) subject to termination as provided for in subsection 4.1
D(iii), First Priority Liens in favor of Flooring Lenders created pursuant to
the Flooring Agreements and securing Indebtedness in an aggregate amount not
exceeding $25,000,000; and
(vi) Liens securing Indebtedness of Company or its Subsidiaries
permitted under Section 7.1(vi).
B. EQUITABLE LIEN IN FAVOR OF BANK. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Bank to the creation or
assumption of any such Lien not permitted by the provisions of subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific property
encumbered to secure payment of particular Indebtedness (including Capital
Leases) or to be sold pursuant to an executed agreement with respect to an Asset
Sale, neither Company nor any of its Subsidiaries shall enter into any agreement
(other than an agreement prohibiting only the creation of Liens securing
Subordinated Indebtedness) prohibiting the creation or assumption of any Lien
upon any of its properties or assets, whether now owned or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein, Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any
67
73
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to (i) pay dividends or make any other distributions on any of such
Subsidiary's capital stock owned by Company or any other Subsidiary of Company,
(ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any
other Subsidiary of Company, (iii) make loans or advances to Company or any
other Subsidiary of Company, or (iv) transfer any of its property or assets to
Company or any other Subsidiary of Company.
7.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may make intercompany loans to
the extent permitted under subsection 7.1(iv);
(iii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted by subsection 7.8;
(iv) Company may make acquisitions permitted by subsection
7.7(v);
(v) Company and its Subsidiaries may make Investments in split
dollar life insurance policies in an aggregate amount not exceeding $5,000,000;
and
(vi) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $2,500,000.
7.4 CONTINGENT OBLIGATIONS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of the Subsidiary Guaranty;
(ii) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit;
68
74
(iii) Company may become and remain liable with respect to
Contingent Obligations under Hedge Agreements;
(iv) Company may become and remain liable with respect to
Contingent Obligations in respect of any Indebtedness of Company or any of its
Subsidiaries permitted by subsection 7.1; and
(v) Company and its Subsidiaries may become arid remain liable
with respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its Subsidiaries in
respect of all such Contingent Obligations shall at no time exceed $2,500,000.
7.5 RESTRICTED JUNIOR PAYMENTS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided, however, that following the consummation of
the Arrow Sale, so long as no Event of Default or Potential Event of Default has
occurred and is then continuing, Company may make one or more redemptions of its
common stock and/or one or more Cash distributions to its shareholders using the
net proceeds received by it from the Arrow Sale and the net Cash proceeds
received by it from the sale or sales of the Real Estate Assets, in an aggregate
amount not to exceed $70,000,000.
7.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio
of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for
any four-Fiscal Quarter period ending on or after the Closing Date to be less
than 3.25:1.00, commencing with the Fiscal Quarter ending March 31, 1999;
provided that for purposes of clauses (i) and (ii) above, Consolidated Adjusted
EBITDA and Consolidated Interest Expense shall be calculated as follows: (i) for
the four-Fiscal Quarter period ending March 31, 1999, such amount for the Fiscal
Quarter ending on such date times four, (ii) for the four-Fiscal Quarter period
ending June 30, 1999, such amount for the two-Fiscal Quarter period ending on
such date times two, (iii) for the four-Fiscal Quarter period ending September
30, 1999, such amount for the three-Fiscal Quarter period ending on such
date-times 1-113, and (iv) for the four-Fiscal Quarter period ending December
31, 1999 and any time thereafter, such amount for such four-Fiscal Quarter
period.
B. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit the
Consolidated Net Worth of Company and its Subsidiaries at any time to be less
than the sum of (i) the lesser of (x) $22,000,000 and (y) 85% of the
Consolidated Net Worth of Company and its Subsidiaries as of March 31, 1999
(after giving effect on a pro forma basis to (1) the Arrow Sale and (2) the
redemptions of common stock of Company and/or the Cash distributions to
shareholders of Company using the net proceeds received by Company from the
Arrow Sale (but in no event shall the amount in this
69
75
clause (y) be less than $22,000,000)), plus (ii) 75% of the positive
Consolidated Net Income of Company and its Subsidiaries earned after June 30,
1999.
C. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not permit the
ratio of (i) Consolidated Total Debt to (ii) Consolidated Adjusted EBITDA for
any four-Fiscal Quarter period ending on or after the Closing Date to be less
than 2.50:1.00, commencing with the Fiscal Quarter ending March 31, 1999;
provided, that for the purposes of clause (ii) above, Consolidated Adjusted
EBITDA shall be calculated as follows: (i) for the four-Fiscal Quarter period
ending March 31, 1999, such amount for the Fiscal Quarter ending on such date
times four, (ii) for the four-Fiscal Quarter period ending June 30, 1999, such
amount for the two-Fiscal Quarter period ending on such date times two, (iii)
for the four-Fiscal Quarter period ending September 30, 1999, such amount for
the three-Fiscal Quarter period ending on such date times 1-113, and (iv) for
the four-Fiscal Quarter period ending December 31, 1999 and any time thereafter,
such amount for such four-Fiscal Quarter period.
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
Company shall not, and shall not permit any of its Subsidiaries to,
alter the corporate, capital or legal structure of Company or any of its
Subsidiaries, or enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease or sublease (as lessor or sublessor),
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or
substantially all the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any Person or any division or line of
business of any Person, except:
(i) Any Subsidiary of Company may be merged with or into Company or any
wholly-owned Subsidiary Guarantor, or be liquidated, wound up or dissolved, or
all or any part of its business, property or assets may be conveyed, sold,
leased, transferred or otherwise disposed of, in one transaction or a series of
transactions, to Company or any wholly-owned Subsidiary Guarantor; provided
that, in the case of such a merger, Company or such wholly-owned Subsidiary
Guarantor shall be the continuing or surviving corporation;
(ii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8;
(iii) Company and its Subsidiaries may dispose of obsolete, worn out or
surplus property in the ordinary course of business;
(iv) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions constituting Asset Sales; provided that the aggregate
amount of cash and noncash consideration received in connection with such Asset
Sales shall not exceed $2,500,000 in any Fiscal Year;
70
76
(v) Company and its Subsidiaries may acquire the business, property or
fixed assets of, or stock or other evidence of beneficial ownership of, any
Person or any division or line of business of any Person; provided that (a) the
aggregate amount of cash and noncash consideration (including any Indebtedness
assumed by Company or its Subsidiaries but excluding any equity Securities
issued by Company in connection with such transaction) paid by Company and its
Subsidiaries shall not exceed $7,500,000 for any single such acquisition or
related series of acquisitions or $10,000,000 for all such acquisitions in any
Fiscal Year, (b) after giving effect to each such acquisition, Company shall be
in compliance with all provisions of subsection 7.6 on a pro forma basis, and
(c) any business acquired in any such acquisition shall not be materially
different from the lines of business engaged in by Company or its Subsidiaries
as of the Closing Date; and
(vi) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales.
7.8 CONSOLIDATED CAPITAL EXPENDITURES.
Company shall not, and shall not permit its Subsidiaries to, make or
incur Consolidated Capital Expenditures in an aggregate amount in excess of
$2,500,000 in any Fiscal Year.
7.9 RESTRICTION ON LEASES.
Company shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a guarantor or
other surety, for the obligations of the lessee under any Operating Lease (other
than intercompany leases between Company and its wholly-owned Subsidiaries),
unless, immediately after giving effect to the incurrence of liability with
respect to such Operating Lease, the Consolidated Rental Payments at the time in
effect during the then current Fiscal Year or any future period of 12
consecutive calendar months shall not exceed $4,000,000.
7.10 SALES AND LEASE-BACKS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) (other than an assignment of lease or sublease of such
property in the ordinary course of business) or (ii) which Company or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Company or any of
71
77
its Subsidiaries to any Person (other than Company or any of its Subsidiaries)
in connection with such lease. Nothing in this subsection 7.10 shall be deemed
to prohibit or limit in any respect any sale and lease-back transaction entered
into by Company with respect to any of the Real Estate Assets.
7.11 SALE OR DISCOUNT OF RECEIVABLES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell Accounts with recourse, or sell Accounts at a
discount or otherwise sell for less than the face value thereof, any of its
notes or Accounts.
7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to compensation, incentive and option plans for directors,
officers and employees as may be approved from time to time by Company's Board
of Directors.
7.13 DISPOSAL OF SUBSIDIARY STOCK.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber or
dispose of any shares of capital stock or other equity Securities of any of its
Subsidiaries, except (a) 100% of the capital stock or other equity Securities of
any Subsidiary of Company in accordance with subsection 7.7(v) and (b) to
qualify directors if required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital stock
or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Company, another Subsidiary of Company, or to qualify
directors if required by applicable law.
7.14 CONDUCT OF BUSINESS.
72
78
From and after the Closing Date, Company shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than (i) the businesses
engaged in by Company and its Subsidiaries on the Closing Date and similar
businesses and (ii) such other lines of business as may be consented to by Bank.
7.15 AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to,
amend or otherwise change the terms of any Subordinated Indebtedness, or make
any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any covenants, change
any event of default or condition to an event of default with respect thereto
(other than to eliminate any such event of default or increase any grace period
related thereto), change the redemption, prepayment or defeasance provisions
thereof, change the subordination provisions thereof (or of any guaranty
thereof), or change any collateral therefor (other than to release such
collateral), or if the effect of such amendment or change, together with all
other amendments or changes made, is to increase materially the obligations of
the obligor thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their behalf)
which would be adverse to Company or Bank.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of or interest on
any Revolving Loan when due, whether at stated maturity, by acceleration, by
notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by
Company to pay when due any amount payable to Bank in reimbursement of any
drawing under a Letter of Credit; or failure by Company to pay any interest on
any Revolving Loan or any fee or any other amount due under this Agreement
within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay when due
any principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than the Indebtedness referred to in
subsection 8.1) or Contingent Obligations in either an individual or aggregate
principal amount of
73
79
$2,500,000 or more, in each case beyond the end of any grace period provided
therefor; or
(ii) breach or default by Company or any of its Subsidiaries with
respect to any other material term of (a) one or more items of Indebtedness or
Contingent Obligations in the individual or aggregate principal amounts referred
to in clause (i) above or (b) any loan agreement, mortgage, indenture or other
agreement relating to such item(s) of Indebtedness or Contingent Obligation(s),
if the effect of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may be
(upon the giving or receiving of notice, lapse of time, both, or otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of Company to perform or comply with any term or condition
contained in subsection 2.5, 6.1(viii) (other than clause (c) thereof), or 6.2
or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or compliance with
any term contained in this Agreement or any of the other Loan Documents, other
than any such term referred to in any other subsection of this Section 8, and
such default shall not have been remedied or waived within 30 days after the
earlier of (i) an officer of Company or such Load Party becoming aware of such
default or (ii) receipt by Company and such Loan Party of notice from Bank of
such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC..
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Company or any of its Subsidiaries in
an involuntary case
74
80
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is not stayed;
or any other similar relief shall be granted under any applicable federal or
state law; or
(ii) an involuntary case shall be commenced against Company or
any of its Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or
order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Company or any of its Subsidiaries, or over all or a
substantial part of its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver, trustee or other
custodian of Company or any of its Subsidiaries for all or a substantial part of
its property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Company or any
of its Subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Company or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or
(ii) Company or any of its Subsidiaries shall be unable, or shall
fail generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Company or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $2,500,000 or (ii)
in the aggregate at any time an amount in excess of $2,500,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Company or any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or
in any event later than five days prior to the date of any proposed sale
thereunder); or
75
81
8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any of
its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or 8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in the
aggregate results in or might reasonably be expected to result in liability of
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
excess of $5,000,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $5,000,000; or
8.11 CHANGE IN CONTROL.
Any Person or any two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Company (or other Securities convertible into such
Securities) representing 30% or more of the combined voting power of all
Securities of Company entitled to vote in the election of directors, other than
Securities having such power only by reason of the happening of a contingency;
or
8.12 INVALIDITY OF SUBSIDIARY GUARANTY; FAILURE OF SECURITY; REPUDIATION OF
OBLIGATIONS.
At any time after the execution and delivery thereof, (i) the Subsidiary
Guaranty for any reason, other than the satisfaction in full of all Obligations,
shall cease to be in full force and effect (other than in accordance with its
terms) or shall be declared to be null and void, (ii) any Collateral Document
shall cease to be in full force and effect (other than by reason of a release of
Collateral thereunder in accordance with the terms hereof or thereof, the
satisfaction in full of the Obligations or any other termination of such
Collateral Document in accordance with the terms hereof or thereof) or shall be
declared null and void, or Bank shall not have or shall cease to have a valid
and perfected first priority Lien in any Collateral purported to be covered
thereby having a fair market value, individually or in the aggregate, exceeding
$1,000,000, in each case for any reason other than the failure of Bank to take
any action within its control, or (iii) any Loan Party shall contest the
validity or enforceability of any Loan Document in
76
82
writing or deny in writing that it has any further liability, including without
limitation with respect to future advances by Bank, under any Loan Document to
which it is a party;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Revolving Loans, (b) an amount equal to the maximum amount that may at any time
be drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by Company, and the obligation of Bank to make any Revolving
Loan and issue any Letter of Credit hereunder shall thereupon terminate, and
(ii) upon the occurrence and during the continuation of any other Event of
Default, Bank may, in its discretion, by written notice to Company, declare all
or any portion of the amounts described in clauses (a) through (c) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of Bank to make any Revolving Loan and the obligation of Bank to
issue any Letter of Credit hereunder shall thereupon terminate. In the event
amounts under this Agreement become due and payable as set forth above, Company
shall pay immediately to Bank all amounts owing or payable by Company and its
Subsidiaries under this Agreement and the other Loan Documents and Company
hereby acknowledges that it shall then have the obligation to pay to Bank all
such amounts. Such payment by Company to Bank shall be deemed to have been made
in discharge of Company's Obligations hereunder (to the extent of amounts
received) and Bank shall distribute such proceeds as provided herein.
SECTION 9. MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS.
A. ASSIGNMENTS. Bank may assign to one or more banks or other financial
institutions all or a portion of its rights (including voting rights) and
obligations under this Agreement and the other Loan Documents with the consent
of Company, which shall not be unreasonably withheld or delayed. In the event of
any such assignment by Bank pursuant to this subsection 9.1 A, Bank's
obligations under this Agreement and the other Loan Documents arising after the
effective date of such assignment shall be released and concurrently therewith,
transferred to and assumed by Bank's assignee to the extent provided for in the
assignment agreement evidencing such assignment.
B. PARTICIPATIONS. Bank may at any time sell to one or more banks or
other financial institutions (each, a "Participant") participating interests in
the Revolving Loan Commitment, the Revolving Loans, and in any other interest in
Bank hereunder and under the other Loan Documents. In the event of any such sale
by Bank of a participating interest to a Participant, Bank's obligations under
this Agreement shall
77
83
remain unchanged, Bank shall remain solely responsible for the performance
thereof, and Company shall continue to deal solely and directly with Bank in
connection with Bank's rights and obligations under this Agreement. Company
agrees that no Participant shall be entitled to require Bank to take or omit to
take any action hereunder except action directly affecting (i) the extension of
the scheduled final maturity date of any Revolving Loan allocated to such
participation or (ii) a reduction of the principal amount of or the rate of
interest payable on any Revolving Loan allocated to such participation, and all
amounts payable by Company hereunder (including, without limitation, amounts
payable to Bank pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined
as if Bank had not sold such participation. Company and Bank hereby acknowledge
and agree that, solely for purposes of subsection 9.4, any participation will
give rise to a direct obligation of Company to the participant.
C. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
9.1, Bank may assign and pledge all or any portion of its Revolving Loans, the
other Obligations owed to Bank, and its Revolving Note to any Federal Reserve
Bank as collateral security pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any operating circular issued by such Federal
Reserve Bank; provided that (i) as between Company and Bank, Bank shall not be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be entitled to
require Bank to take or omit to take any action hereunder.
D. INFORMATION. Bank may furnish any information concerning Company and
its Subsidiaries in the possession of Bank from time to time to assignees and
participants (including prospective assignees and participants), subject to
subsection 9.17.
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and any consents,
amendments, waivers or other modifications thereto; (ii) all the costs of
furnishing any opinions by counsel for Company and of Company's performance of
and compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents. including,
without limitation, with respect to confirming compliance with environmental,
insurance and solvency requirements; (iii) the reasonable fees, expenses and
disbursements of internal counsel to Bank in connection with the negotiation,
preparation, execution and administration of the Loan Documents and any
consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by Company; (iv) all the reasonable costs and
expenses of creating and perfecting Liens in favor of Bank pursuant to any
Collateral Document, including, without limitation, filing and recording fees,
expenses and taxes, stamp or documentary taxes, search fees, title insurance
premiums, and reasonable
78
84
fees, expenses and disbursements of counsel to Bank; (v) all the actual costs
and reasonable expenses (including, without limitation, the reasonable fees,
expenses and disbursements of any auditors, accountants or appraisers and any
environmental or other consultants, advisors and agents employed or retained by
Bank or its counsel) of obtaining and reviewing any environmental audits; (vi)
the custody or preservation of any of the Collateral; (vii) all other actual and
reasonable costs and expenses incurred by Bank in connection with the
negotiation, preparation and execution of the Loan Documents and any consents,
amendments, waivers or other modifications thereto and the transactions
contemplated thereby; and (viii) after the occurrence of an Event of Default,
all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel) and costs of settlement, incurred by Bank
in enforcing any Obligations of or in collecting any payments due from any Loan
Party hereunder or under the other Loan Documents by reason of such Event of
Default (including, without limitation, in connection with the sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of the Subsidiary Guaranty) or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings.
9.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Bank, and the officers, directors, employees,
agents and Affiliates of Bank (collectively called the "Indemnitees"), from and
against any and all Indemnified Liabilities (as hereinafter defined); provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise from the gross negligence or willful misconduct of that
Indemnitee as determined by a final judgment of a court of competent
jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively, any and
all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action
necessary to remove, remediate, clean up or xxxxx any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any
79
85
manner relating to or arising out of (i) this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby (including Bank's
agreement to make the Revolving Loans hereunder or the use or intended use of
the proceeds thereof or the issuance of Letters of Credit hereunder or the use
or intended use of any thereof), or any enforcement of any of the Loan Documents
(including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the Subsidiary Guaranty), (ii) the statements
contained in the commitment letter delivered by Bank to Company with respect
thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of Company or any of its
Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 9.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
9.4 SET-OFF.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any
Event of Default, Bank is hereby authorized by Company at any time or from time
to time, without notice to Company or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other Indebtedness at any time held or owing
by Bank to or for the credit or the account of Company against and on account of
the obligations and liabilities of Company to Bank under this Agreement, the
Letters of Credit and the other Loan Documents, including, but not limited to,
all claims of any nature or description arising out of or connected with this
Agreement, the Letters of Credit or any other Loan Document, irrespective of
whether or not (i) Bank shall have made any demand hereunder or (ii) the
principal of or the interest on the Revolving Loans or any amounts in respect of
the Letters of Credit or any other amounts due hereunder shall have become due
and payable pursuant to Section 8 and although said obligations and liabilities,
or any of them, may be contingent or unmatured. Notwithstanding the foregoing,
Bank agrees to give notice to Company promptly after any exercise by it of any
such set off right, provided that the failure to give any such notice shall not
affect any of Bank's rights hereunder or otherwise.
9.5 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Revolving Note, and no consent to any departure by
Company therefrom, shall in any event be effective without the written
concurrence of Bank. Any waiver or consent shall be effective only in the
specific instance and for the specific
80
86
purpose for which it was given. No notice to or demand on Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances.
9.6 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
9.7 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served or sent by telefacsimile or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Bank shall not be effective until received.
For the purposes hereof, the address of each party hereto shall be as set forth
under such party's name on the signature page hereof or as shall be designated
by such party in a written notice delivered to the other party hereto.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the
Revolving Loans and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 9.2, 9.3 and 9.4 shall survive the payment of the Revolving Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
9.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Bank in the exercise of any power,
right or privilege hereunder or under any other Loan Document shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or
81
87
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
9.10 MARSHALLING; PAYMENTS SET ASIDE.
Bank shall not be under any obligation to marshal any assets in favor of
Company or any other party or against or in payment of any or all of the
Obligations. To the extent that Company makes a payment or payments to Bank, or
Bank enforces any security interests or exercise its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently 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, any other state or federal law, common law or any
equitable cause, then, to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be revived and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
setoff had not occurred.
9.11 SEVERABILITY.
In case any provision in or obligation under this Agreement or the
Revolving Note shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
9.12 HEADINGS.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.13 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (INCLUDING, WITHOUT LIMITATION,
SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
82
88
9.14 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Bank (it being understood that Bank's
rights of assignment are subject to subjection 9.1). Neither Company's rights or
obligations hereunder nor any interest therein may be assigned or delegated by
Company without the prior written consent of Bank.
9.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF CALIFORNIA, COUNTY AND CITY OF LOS ANGELES. BY
EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY:
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION
AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 9.7;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT
TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BANK RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.15 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 410.40 OR
OTHERWISE.
83
89
9.16 WAIVER OF JURY TRIAL.
COMPANY AND BANK EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS FINANCING ARRANGEMENT OR THE
BANK/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
9.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE REVOLVING LOANS MADE HEREUNDER. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
9.17 CONFIDENTIALITY.
Bank shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with Bank's customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, it being understood and agreed by Company that in any event Bank may
make disclosures to its Affiliates or disclosures reasonably required by any
bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by Bank of any Revolving Loans or any
participations therein or disclosures required or requested by any governmental
agency or _representative thereof or pursuant to legal process; provided that,
unless specifically prohibited by applicable law or court order, Bank shall
notify Company of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of Bank by such governmental agency) for disclosure of any
such non-public information prior to disclosure of such information; and
provided, further that in no event shall Bank be obligated or required to return
any materials furnished by Company or any of its Subsidiaries.
84
90
9.18 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and Bank
of written or telephonic notification of such execution and authorization of
delivery thereof.
85
91
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
"Company"
XXXX INDUSTRIES, INC.
By: /s/ XXXXX X. XXXXXXX
-----------------------------------------
Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Notice Address:
Xxxx Industries, Inc.
0000 Xxxx Xx Xxxxxxx Xxxxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Telecopier No.: (000) 000-0000
"Bank"
UNION BANK OF CALIFORNIA, N.A.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxxxx
Regional Vice President
Notice Address:
Union Bank of California, N.A.
Commercial Banking Group
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Regional Vice President
Telecopier No.: (000) 000-0000
86