REVOLVING CREDIT, EQUIPMENT LOAN
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
MCMS, INC.
(BORROWER)
February 26, 1999
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TABLE OF CONTENTS
I. DEFINITIONS 1
1.1. Accounting Terms 1
1.2. General Terms 1
1.3. Uniform Commercial Code Terms 19
1.4. Certain Matters of Construction 19
II. ADVANCES, PAYMENTS 19
2.1. (a) Revolving Advances 19
(b) Discretionary Rights 20
2.2. Procedure for Revolving Advances Borrowing 20
2.3. Disbursement of Advance Proceeds 22
2.4. Equipment Loans 22
2.5. Maximum Advances 23
2.6. Repayment of Advances 23
2.7. Repayment of Excess Advances 24
2.8. Statement of Account 24
2.9. Additional Payments 24
2.10. Manner of Borrowing and Payment 25
2.11. Mandatory Prepayments 26
2.12. Use of Proceeds 27
2.13. Defaulting Lender 27
III. INTEREST AND FEES 29
3.1. Interest 29
3.2. Fee Letter 29
3.3. Facility Fee 29
3.4. Intentionally Omitted 30
3.5. Computation of Interest and Fees 30
3.6. Maximum Charges 30
3.7. Increased Costs 30
3.8. Basis For Determining Interest Rate
Inadequate or Unfair 32
3.9. Capital Adequacy 32
3.10. Limitation on Additional Amounts, etc. 33
IV. COLLATERAL: GENERAL TERMS 34
4.1. Security Interest in the Collateral 34
4.2. Perfection of Security Interest 34
4.3. Disposition of Collateral 34
4.4. Preservation of Collateral 35
4.5. Ownership of Collateral 36
4.6. Defense of Agent's and Lenders' Interests 36
4.7. Books and Records 37
4.8. Financial Disclosure 37
4.9. Compliance with Laws 37
4.10. Inspection of Premises 38
4.11. Insurance 38
4.12. Failure to Pay Insurance 39
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4.13. Payment of Taxes 39
4.14. Payment of Leasehold Obligations 40
4.15. Receivables 40
(a) Nature of Receivables 40
(b) Solvency of Customers 40
(c) Locations of Borrower 40
(d) Collection of Receivables 41
(e) Notification of Assignment of
Receivables 41
(f) Power of Agent to Act on Borrower's
Behalf 41
(g) No Liability 42
(h) Establishment of a Dominion Account 42
(i) Adjustments 42
4.16. Inventory 43
4.17. Maintenance of Equipment 43
4.18. Exculpation of Liability 43
4.19. Environmental Matters 43
4.20. Financing Statements 46
V. REPRESENTATIONS AND WARRANTIES 46
5.1. Authority 46
5.2. Formation and Qualification 46
5.3. Survival of Representations and Warranties 47
5.4. Tax Returns 47
5.5. Financial Statements 47
5.6. Corporate Name 48
5.7. O.S.H.A. and Environmental Compliance 48
5.8. Solvency; No Litigation, Violation,
Indebtedness or Default 49
5.9. Patents, Trademarks, Copyrights and
Licenses 50
5.10. Licenses and Permits 51
5.11. Default of Indebtedness 51
5.12. No Default 51
5.13. No Burdensome Restrictions 51
5.14. No Labor Disputes 51
5.15. Margin Regulations 51
5.16. Investment Company Act 51
5.17. Disclosure 51
5.18. Delivery of Recapitalization Documentation
and Subordinated Note Documentation 52
5.19. Swaps 52
5.20. Conflicting Agreements 52
5.21. Application of Certain Laws and Regulations 52
5.22. Business and Property of Borrower 52
5.23. Year 2000 53
5.24. Section 20 Subsidiaries 53
VI. AFFIRMATIVE COVENANTS 53
6.1. Payment of Fees 53
6.2. Conduct of Business and Maintenance of
Existence and Assets 53
6.3. Violations 54
6.4. Government Receivables 54
6.5. Fixed Charge Coverage Ratio 54
6.6. Execution of Supplemental Instruments 54
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6.7. Payment of Indebtedness 54
6.8. Standards of Financial Statements 55
6.9. Appraisals 55
6.10. Mortgage 55
VII. NEGATIVE COVENANTS 55
7.1. Merger, Consolidation, Acquisition and Sale
of Assets 55
7.2. Creation of Liens 56
7.3. Guarantees 56
7.4. Investments 56
7.5. Loans 58
7.6. Capital Expenditures 58
7.7. Dividends 58
7.8. Indebtedness 59
7.9. Nature of Business 60
7.10. Transactions with Affiliates 60
7.11. Subsidiaries 60
7.12. Fiscal Year and Accounting Changes 61
7.13. Pledge of Credit 61
7.14. Amendment of Articles of Incorporation,
By-Laws 61
7.15. Compliance with ERISA 61
7.16. Prepayment of Indebtedness 61
7.17. Subordinated Notes 62
7.18. Other Agreements 62
VIII. CONDITIONS PRECEDENT. 62
8.1. Conditions to Initial Advances 62
(a) Note 62
(b) Filings, Registrations and Recordings 62
(c) Corporate Proceedings of Borrower 62
(d) Proceedings of Guarantor 63
(e) Incumbency Certificates of Guarantor 63
(f) Incumbency Certificates of Borrower 63
(g) Certificates 63
(h) Good Standing Certificates 63
(i) Legal Opinion 64
(j) No Litigation 64
(k) Financial Condition Certificates 64
(l) Collateral Examination 64
(m) Fees 64
(n) Pro Forma Financial Statements 64
(o) Recapitalization Documentation 64
(p) Insurance 64
(q) Payment Instructions 65
(r) Blocked Accounts 65
(s) Consents 65
(t) No Adverse Material Change 65
(u) Leasehold Agreements 65
(v) Guaranty and Other Documents 65
(w) Subordinated Note Documentation 65
(x) Contract Review 65
(y) Closing Certificate 65
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(z) Borrowing Base Certificate 66
(aa) Other 66
8.2. Conditions to Each Advance 66
(a) Representations and Warranties 66
(b) No Material Change 66
(c) No Default 66
(d) Maximum Advances 66
8.3. Conditions to Each Equipment Loan 67
IX. INFORMATION AS TO BORROWER 67
9.1. Disclosure of Material Matters 67
9.2. Schedules 67
9.3. Environmental Reports 68
9.4. Litigation 68
9.5. Material Occurrences 68
9.6. Government Receivables 68
9.7. Annual Financial Statements 69
9.8. Quarterly Financial Statements 69
9.9. Monthly Financial Statements 69
9.10. Other Reports 70
9.11. Additional Information 70
9.12. Projected Operating Budget 70
9.13. Variances From Operating Budget 70
9.14. Notice of Suits, Adverse Events 70
9.15. ERISA Notices and Requests 71
9.16. Additional Documents 71
X. EVENTS OF DEFAULT 72
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT 74
11.1. Rights and Remedies 74
11.2. Agent's Discretion 75
11.3. Setoff 75
11.4. Rights and Remedies not Exclusive 76
XII. WAIVERS AND JUDICIAL PROCEEDINGS 76
12.1. Waiver of Notice 76
12.2. Delay 76
12.3. Jury Waiver 76
XIII. EFFECTIVE DATE AND TERMINATION 76
13.1. Term 76
13.2. Termination 77
XIV. REGARDING AGENT 77
14.1. Appointment 77
14.2. Nature of Duties 78
14.3. Lack of Reliance on Agent and Resignation 78
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14.4. Certain Rights of Agent 79
14.5. Reliance 79
14.6. Notice of Default 79
14.7. Indemnification 79
14.8. Agent in its Individual Capacity 79
14.9. Delivery of Documents 80
14.10. Borrower's Undertaking to Agent 80
XVI. MISCELLANEOUS 80
15.1 Governing Law 80
15.2. Entire Understanding 81
15.3. Successors and Assigns; Participations;
New Lenders 82
15.4. Application of Payments 84
15.5. Indemnity 84
15.6. Notice 85
15.7. Survival 86
15.8. Severability 86
15.9. Expenses 86
15.10. Injunctive Relief 87
15.11. Consequential Damages 87
15.12. Captions 87
15.13. Counterparts; Telecopied Signatures 87
15.14. Construction 87
15.15. Confidentiality; Sharing Information 87
15.16. Publicity 88
26
REVOLVING CREDIT, EQUIPMENT LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Equipment Loan and Security Agreement
dated as of February 26, 1999 among MCMS, INC., a corporation
organized under the laws of the State of Idaho ("Borrower"), the
financial institutions which are now or which hereafter become a
party hereto (collectively, the "Lenders" and individually a
"Lender") and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as agent
for Lenders (PNC, in such capacity, the "Agent").
BACKGROUND
Borrower entered into a Credit Agreement on February 26,
1998 with various financial institutions named therein and
Bankers Trust Company as an agent thereunder (as amended,
modified, restated and supplemented as of the date hereof, the
"Existing Credit Agreement"). This Agreement is being entered
into for the purpose of, among other things, refinancing
Borrower's indebtedness under the Existing Credit Agreement.
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrower, Lenders and Agent hereby agree as
follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note,
or any certificate, report or other document made or delivered
pursuant to this Agreement, accounting terms not defined in
Section 1.2 or elsewhere in this Agreement and accounting terms
partly defined in Section 1.2 to the extent not defined, shall
have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes
of determining compliance with financial covenants in this
Agreement, such accounting terms shall be defined in accordance
with GAAP as applied in preparation of the audited financial
statements of Borrower for the fiscal year ended September 3,
1998.
1.2. General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"Accountants" shall have the meaning set forth in
Section 9.7 hereof.
"Advances" shall mean and include the Revolving
Advances and the Equipment Loans.
"Advance Rates" shall have the meaning set forth in
Section 2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person
which, directly or indirectly, is in control of, is controlled
by, or is under common control with such Person, or (b) any
Person who is a director or officer (i) of such Person, (ii) of
any Subsidiary of such Person or (iii) of any Person described in
clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (x) to vote 10%
or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause
the direction of the management and policies of such Person
whether by contract or otherwise.
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"Agent" shall have the meaning set forth in the
preamble to this Agreement and shall include its successors and
assigns.
"Alternate Base Rate" shall mean, for any day, a rate
per annum equal to the higher of (i) the Base Rate in effect on
such day and (ii) the Federal Funds Rate in effect on such day
plus 1/2 of 1%.
"Authority" shall have the meaning set forth in Section
4.19(d).
"Baan Project" shall mean the implementation by
Borrower of a resource planning system.
"Base Rate" shall mean the base commercial lending rate
of PNC as publicly announced to be in effect from time to time,
such rate to be adjusted automatically, without notice, on the
effective date of any change in such rate. This rate of interest
is determined from time to time by PNC as a means of pricing some
loans to its customers and is neither tied to any external rate
of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by PNC to any particular class
or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in
Section 4.15(h).
"Borrower" shall have the meaning set forth in the
preamble to this Agreement and shall extend to all permitted
successors and assigns of such Person.
"Borrower's Account" shall have the meaning set forth
in Section 2.8.
"Borrowing Base Certificate" shall mean a certificate
duly executed by an officer of Borrower appropriately completed
and in substantially the form of Exhibit A hereto.
"Business Day" shall mean any day other than Saturday
or Sunday or a legal holiday on which commercial banks are
authorized or required by law to be closed for business in East
Brunswick, New Jersey and, if the applicable Business Day relates
to any Eurodollar Rate Loans, such day must also be a day on
which dealings are carried on in the London interbank market.
"CEI" shall mean Cornerstone Equity Investors IV, L.P.,
a Delaware limited partnership.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. 9601 et seq.
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"Change of Control" shall mean (a) the occurrence of
any event (whether in one or more transactions) which results in
a transfer of control of Borrower to a Person who is not an
Original Owner, (b) any merger or consolidation of or with
Borrower which results in a transfer of control of Borrower to a
Person who is not an Original Owner or a sale of all or
substantially all of the property or assets of Borrower or (c)
the board of directors of Borrower shall cease to consist of a
majority of Continuing Directors. For purposes of this
definition, "control of Borrower" shall mean the power, direct or
indirect to vote 50% or more of the securities having ordinary
voting power for the election of directors of Borrower.
"Charges" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and
property taxes, custom duties, fees, assessments, liens, claims
and charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts,
imposed by any taxing or other authority, domestic or foreign
(including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the
Collateral or Borrower.
"Closing Date" shall mean February 26, 1999 or such
other date as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated
thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Subsidiary Stock (not to exceed 65% of
the stock of any foreign Subsidiary);
(f) all Investment Property;
(g) all of Borrower's right, title and interest
in and to (i) its goods and other property including, but not
limited to, all merchandise returned or rejected by Customers,
relating to or securing any of the Receivables; (ii) all of
Borrower's rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase;
(iii) all additional amounts due to Borrower from any Customer
relating to the Receivables; (iv) other property, including
warranty claims, relating to any goods securing this Agreement;
(v) all of Borrower's contract rights (to the extent such
contract rights are assignable or a security interest may be
granted in such contract rights; provided, however, that the
foregoing limitation shall not affect the security interest of
Agent in any proceeds of the underlying contract giving rise to
such contract rights), rights of payment which have been earned
under a contract right, instruments, documents, chattel paper,
warehouse receipts, deposit accounts and money; (vi) if and when
obtained by Borrower, all real and personal property of third
parties in which Borrower has been granted a lien or security
interest as security for the payment or enforcement of
Receivables; and (vii) any other goods, personal property or real
property now owned or hereafter acquired in which Borrower has
expressly granted a security interest or may in the future grant
a security interest to Agent hereunder, or in any amendment or
supplement hereto or thereto, or under any other agreement
between Agent and Borrower;
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(h) all of Borrower's ledger sheets, ledger
cards, files, correspondence, records, books of account, business
papers, computers, computer software (owned by Borrower or in
which it has an interest), computer programs, tapes, disks and
documents, each to the extent relating to (a), (b), (c), (d),
(e), (f), or (g) of this Paragraph; and
(i) all proceeds and products of (a), (b), (c),
(d), (e), (f), (g) and (h) in whatever form, including, but not
limited to: cash, deposit accounts (whether or not comprised
solely of proceeds), certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money,
chattel paper, security agreements, documents, eminent domain
proceeds, condemnation proceeds and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature
page hereof as same may be adjusted upon any assignment by a
Lender pursuant to Section 15.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document
in the form of Exhibit 15.3 hereto, properly completed and
otherwise in form and substance satisfactory to Agent by which
the Purchasing Lender purchases and assumes a portion of the
obligation of Lenders to make Advances under this Agreement.
"Consents" shall mean all filings and all licenses,
permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and other third parties,
domestic or foreign, necessary to carry on Borrower's business,
including, without limitation, any Consents required under all
applicable federal, state or other applicable law.
"Continuing Directors" shall mean (a) the directors of
Borrower as of the Closing Date and each other director if such
director's nomination for election to the board of directors of
Borrower was approved by the affirmative vote of a majority of
the Continuing Directors who were members of the board of
directors at the time of such nomination or election or (b) any
director of Borrower who is a designee of CEI or was nominated by
CEI or any designee of CEI on the Board of Directors.
30
"Contract Rate" shall mean, as applicable, the
Revolving Interest Rate or the Equipment Loan Rate.
"Controlled Group" shall mean all members of a
controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which,
together with Borrower, are treated as a single employer under
Section 414 of the Code.
"Customer" shall mean and include the account debtor
with respect to any Receivable and/or the prospective purchaser
of goods, services or both with respect to any contract or
contract right, and/or any party who enters into any contract or
other arrangement with Borrower, pursuant to which Borrower is to
deliver any personal property or perform any services.
"Default" shall mean an event which, with the giving of
notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in
Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth in
Section 2.13 hereof.
"Depository Accounts" shall have the meaning set forth
in Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in Section
8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of
the United States of America.
"Domestic Rate Loan" shall mean any Advance that bears
interest based upon the Alternate Base Rate.
"Early Termination Date" shall have the meaning set
forth in Section 13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for any
period the sum of (i) net income (or loss) of Borrower on a
consolidated basis for such period (excluding extraordinary,
unusual or nonrecurring gains and charges and losses including
any unrealized losses and gains for such period resulting from
marking to market of hedging or swap agreements and foreign
currency transaction gains or losses in respect of intercompany
payments to or from a foreign Subsidiary of Borrower), plus (ii)
all interest expense of Borrower on a consolidated basis for such
period, plus (iii) all charges against income of Borrower on a
consolidated basis for such period for federal, state and local
taxes actually paid.
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"EBITDA" shall mean for any period the sum of (i)
Earnings Before Interest and Taxes for such period plus (ii)
depreciation expenses for such period, plus (iii) amortization
expenses for such period plus (iv) other non-cash charges
(including, without limitation, non-cash charges in connection
with the granting of options, warrants or other equity interests
and any write-off of deferred financing costs existing as of the
Closing Date but excluding write-offs of Inventory to the extent
such write-offs are deemed to be non-cash charges or Inventory
reserves, plus (v) transaction costs incurred by Borrower in
connection with acquisitions and investments entered into by
Borrower after the Closing Date which are permitted under Section
7.4 hereof not to exceed the aggregate amount of $5,000,000 in
any fiscal year. In addition EBITDA shall be calculated without
giving effect to (x) non-cash purchase accounting adjustments
required or permitted by Account Principles Board Opinion Nos. 16
(including non-cash write-ups and non-cash charges), in each case
arising in connection with any acquisition entered into by
Borrower after the Closing Date which is permitted by Section 7.4
hereof) and 17 (including non-cash charges relating to
intangibles and good will arising in connection with any such
permitted acquisition), and (y) any non-cash gains or losses
recognized in determining consolidated net income (or net loss)
for such period in respect of post-retirement benefits as a
result of the application of FASB 106.
"Eligible Inventory" shall mean and include Inventory
valued at the lower of average cost or market value, determined
on a first-in-first-out basis, which is not, in Agent's
reasonable opinion, obsolete, slow moving or unmerchantable and
which Agent, in its reasonable discretion, shall not deem
ineligible Inventory, based on such considerations as Agent may
from time to time deem appropriate including, without limitation,
whether the Inventory is subject to a perfected, first priority
security interest in favor of Agent and no other Lien (other than
Permitted Encumbrances) and whether the Inventory conforms to all
standards imposed by any governmental agency, division or
department thereof which has regulatory authority over such goods
or the use or sale thereof.
"Eligible Receivables" shall mean and include with
respect to Borrower, each Receivable of Borrower arising in the
ordinary course of Borrower's business and which Agent, in its
reasonable credit judgment, shall deem to be an Eligible
Receivable, based on such considerations as Agent may from time
to time deem appropriate. A Receivable shall not be deemed
eligible unless such Receivable is subject to Agent's first
priority perfected security interest and no other Lien (other
than Permitted Encumbrances), and is evidenced by an invoice or
other documentary evidence satisfactory to Agent. In addition,
no Receivable shall be an Eligible Receivable if:
(a) other than sales on an arms-length basis to
MTI and MEI, it arises out of a sale made by Borrower to an
Affiliate of Borrower or to a Person controlled by an Affiliate
of Borrower;
(b) it is due or unpaid more than (i) sixty (60)
days after the original due date or (ii) more than one hundred
twenty (120) days after the original invoice date;
(c) fifty percent (50%) or more of the
Receivables from such Customer are not deemed Eligible
Receivables hereunder;
(d) any covenant, representation or warranty
contained in this Agreement with respect to such Receivable has
been breached in any material respect;
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(e) the Customer shall (i) apply for, suffer, or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or
a substantial part of its property or call a meeting of its
creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any
state or federal bankruptcy laws (as now or hereafter in effect),
(v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed,
any petition which is filed against it in any involuntary case
under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
(f) the sale is to a Customer not domiciled in
the United States of America (other than sales to a foreign
subsidiary of Cisco Systems, Inc. Fore Systems, Inc. and MTI),
unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its reasonable
discretion;
(g) the sale to the Customer is on a xxxx-and-
hold (other than sales as to which Borrower (i) retains
possession of the goods but title has passed to the Customer,
(ii) at the request of Agent, provides acceptable evidence that
title has so passed, and (iii) recognizes revenue in accordance
with GAAP), guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is
evidenced by chattel paper;
(h) the Customer is the United States of America,
any state or any department, agency or instrumentality of any of
them, unless Borrower assigns its right to payment of such
Receivable to Agent pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41
U.S.C. Sub-Section 15 et seq.) or has otherwise complied with
other applicable statutes or ordinances;
(i) the goods giving rise to such Receivable have
not been shipped to the Customer (other than sales in which
Borrower retains possession of the goods but title has passed to
the Customer and Borrower recognizes revenue in accordance with
GAAP) or the services giving rise to such Receivable have not
been performed by Borrower or the Receivable otherwise does not
represent a final sale;
(j) (i) the Customer is Cisco Systems, Inc. and
Receivables from such Customer exceed 66% of all Eligible
Receivables, solely to the extent such Receivables exceed such
percentage of Eligible Receivables; (ii) the Customer is Fore
Systems, Inc. and Receivables from such Customer exceed 50% of
all Eligible Receivables, solely to the extent such Receivables
exceed such percentage of Eligible Receivables and (iii) the
Receivables of any other Customer exceed 25% of all Eligible
Receivables, solely to the extent such Receivables exceed such
percentage of Eligible Receivables.
(k) the Receivable is subject to any offset,
deduction, defense, dispute, or counterclaim, the Customer is
also a creditor or supplier of Borrower or the Receivable is
contingent in any respect or for any reason, in each case solely
to the extent of any such offset, deduction, defense, dispute or
counterclaim;
33
(l) Borrower has made any agreement with any
Customer for any deduction therefrom, except for discounts or
allowances made in the ordinary course of business for prompt
payment, all of which discounts or allowances are reflected in
the calculation of the face value of each respective invoice
related thereto;
(m) any return, rejection or repossession of the
merchandise has occurred or the rendition of services has been
disputed but only to the extent of the portion of the Receivable
relating to the returned, rejected or repossessed merchandise or
the dispute;
(n) such Receivable is not payable to Borrower;
or
(o) such Receivable is not otherwise satisfactory
to Agent as determined in good faith by Agent in the exercise of
its discretion in a reasonable manner.
"Environmental Complaint" shall have the meaning set
forth in Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and
local laws, statutes, ordinances and codes relating to the
protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances and the rules,
regulations, and to the extent specifically relating to the type
of business conducted by Borrower or the facilities of Borrower
and having the effect of law, policies, guidelines,
interpretations, decisions, orders and directives of federal,
state and local governmental agencies and authorities with
respect thereto.
"Equipment" shall mean and include all of Borrower's
goods (other than Inventory) whether now owned or hereafter
acquired and wherever located including, without limitation, all
equipment, machinery, apparatus, motor vehicles, fittings,
furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.
"Equipment Loan Rate" shall mean an interest rate per
annum equal to (a) the sum of the Alternate Base Rate plus one
quarter of one percent (0.25%) with respect to Domestic Rate
Loans or (b) the sum of the Eurodollar Rate plus two and one half
(2.50%) percent with respect to Eurodollar Loans.
"Equipment Loans" shall have the meaning set forth in
Section 2.4 hereof.
"Equipment Note" shall mean, collectively, the
promissory notes referred to in Section 2.4 hereof.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules
and regulations promulgated thereunder.
"Eurodollar Rate Loan" shall mean an Advance at any
time that bears interest based on the Eurodollar Rate.
34
"Eurodollar Rate" shall mean for any Eurodollar Rate
Loan for the then current Interest Period relating thereto the
interest rate per annum determined by PNC by dividing (the
resulting quotient rounded upwards, if necessary, to the nearest
1/100th of 1% per annum) (i) the rate of interest determined by
PNC in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the average of
the London interbank offered rates for U.S. Dollars quoted by the
British Bankers' Association as set forth on Dow Xxxxx Markets
Service (formerly known as Telrate) (or appropriate successor or,
if British Banker's Association or its successor ceases to
provide such quotes, a comparable replacement determined by PNC)
display page 3750 (or such other display page on the Dow Xxxxx
Markets Service system as may replace display page 3750) two (2)
Business Days prior to the first day of such Interest Period for
an amount comparable to such Eurodollar Rate Loan and having a
borrowing date and a maturity comparable to such Interest Period
by (ii) a number equal to 1.00 minus the Reserve Percentage. The
Eurodollar Rate may also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA as shown on
Eurodollar Rate=Dow Xxxxx Markets Service display page 3750 or
appropriate successor
1.00 - Reserve Percentage
"Event of Default" shall mean the occurrence of any of
the events set forth in Article X hereof.
"Exchange Debentures" shall mean the 12-1/2% of
subordinated exchange debentures due 2010, as amended or
supplemented from time to time to the extent permitted by this
Agreement and which shall be issued pursuant to the Exchange
Indenture.
"Exchange Indenture" shall mean that certain Indenture
dated as of February 26, 1998 between Borrower and Trustee
relating to the Exchange Debentures as amended, modified,
restated or supplemented from time to time to the extent not
prohibited by Section 7.18 hereof.
"Existing Credit Agreement" shall have the meaning set
forth in the Background section hereof.
"Extraordinary Receipts" shall mean the net proceeds
received by Borrower in connection with (a) the sale of capital
stock of Borrower, (b) a public offering of securities issued by
Borrower or (c) a cash equity contribution to Borrower.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or if such
day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not
so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by PNC from
three Federal funds brokers of recognized standing selected by
PNC.
"Fee Letter" shall mean the fee letter dated February
26, 1999 between Borrower and PNC.
35
"Fixed Charge Coverage Ratio" shall mean and include
for Borrower on a consolidated basis, with respect to any fiscal
period, the ratio of (a) the sum of (i) EBITDA for such period
plus (ii) capitalized lease payments during such period, minus
the sum of (x) non-financed capitalized expenditures made during
such period plus (y) permitted cash dividends paid on the
Preferred Stock during such period plus (z) cash taxes during
such period paid during such period to (b) the sum of (i) all
Senior Debt Payments made during such period plus (ii) all
Subordinated Debt Payments made during such period. For purposes
of this definition, (a) capital expenditures made in connection
with the Baan Project not to exceed $12,000,000 to the extent
that such capital expenditures are not made with the proceeds of
an Equipment Loan or (b) capital expenditures made solely out of
the proceeds of the disposition of assets (other than Equipment
purchased with the proceeds of an Equipment Loan), insurance
losses (other than losses received with respect to Equipment
which was purchased with the proceeds of an Equipment Loan) or
Extraordinary Receipts, shall not be included in the calculation
of clause (a)(ii)(x) of the definition hereof. The foregoing
shall not be deemed implied consent to any such sale otherwise
prohibited by the terms and conditions hereof or a waiver of the
requirement that any such asset sale or insurance proceeds be
applied as a mandatory prepayment of the outstanding Obligations
under Section 2.11 or 4.11 hereof.
"Fixed Rate Notes" shall mean, collectively, the 9-3/4%
senior subordinated term securities due 2008, as amended or
supplemented from time to time to the extent permitted by this
Agreement, in the aggregate original principal amount not to
exceed $145,000,000 issued by Borrower pursuant to the Indenture.
"Floating Rate Notes" shall mean, collectively, the
floating interest rate subordinated term securities, as amended
or supplemented from time to time to the extent permitted by this
Agreement, in the aggregate original principal amount not to
exceed $30,000,000 issued by Borrower pursuant to the Indenture.
"Formula Amount" shall have the meaning set forth in
Section 2.1(a).
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to
time.
"General Intangibles" shall mean and include all of
Borrower's general intangibles, whether now owned or hereafter
acquired including, without limitation, all choses in action,
causes of action, corporate or other business records,
inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control
procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises,
customer lists, tax refunds, tax refund claims, computer
programs, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment
of any of the Receivables by a Customer all rights of
indemnification and all other intangible property of every kind
and nature (other than Receivables).
36
"Governmental Body" shall mean any nation or
government, any state or other political subdivision thereof or
any entity exercising the legislative, judicial, regulatory or
administrative functions of or pertaining to a government.
"Guarantor" shall mean MCMS Customer Services, Inc., an
Idaho corporation, MCMS Holdings LLC, an Idaho limited liability
company, and any other Person who may hereafter guarantee payment
or performance of the whole or any part of the Obligations and
"Guarantors" means collectively, all such Persons.
"Guaranty" shall mean any guaranty of the obligations
of Borrower executed by a Guarantor in favor of Agent for its
benefit and for the ratable benefit of Lenders.
"Hazardous Discharge" shall have the meaning set forth
in Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation,
any flammable explosives, radon, radioactive materials, asbestos,
polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or
toxic substances as defined in CERCLA, the Hazardous Materials
Transportation Act, TSCA as amended (49 U.S.C. Sections 1801, et
seq.), RCRA, or any other applicable Environmental Law.
"Hazardous Wastes" shall mean all waste materials
subject to regulation under RCRA or any other applicable Federal
and state laws now in force or hereafter enacted relating to
hazardous waste management and disposal.
"Indebtedness" of a Person at a particular date shall
mean all obligations for money borrowed of such Person which in
accordance with GAAP would be classified upon a balance sheet as
liabilities for money borrowed (except capital stock and surplus
earned or otherwise) and in any event, without limitation by
reason of enumeration, shall include all indebtedness, debt and
other similar monetary obligations of such Person whether direct
or guaranteed, and all premiums, if any, due at the required
prepayment dates of such indebtedness, and all indebtedness
secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or
incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets
subject to any Lien shall be deemed, for the purposes hereof, to
be the equivalent of the creation, assumption and incurring of
the indebtedness secured thereby, whether or not actually so
created, assumed or incurred.
"Indenture" shall mean that certain Indenture dated as
of February 26, 1998 between Borrower and Trustee relating to the
Subordinated Notes as amended, modified, restated or supplemented
from time to time to the extent not prohibited by Section 7.18
hereof.
"Ineligible Security" shall mean any security which may
not be underwritten or dealt in by member banks of the Federal
Reserve System under Section 16 of the Banking Act of 1933 (12
U.S.C. Section 24, Seventh), as amended.
37
"Interest Period" shall mean the period provided for
any Eurodollar Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include all of Borrower's
now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any
contract of service or held for sale or lease, all raw materials,
work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing
such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"Inventory Advance Rate" shall have the meaning set
forth in Section 2.1(a)(y)(ii) hereof.
"Investment Property" shall mean and include all of
Borrower's now owned or hereafter acquired securities (whether
certificated or uncertificated), securities entitlements,
securities accounts, commodities contracts and commodities
accounts.
"Lender" and "Lenders" shall have the meaning ascribed
to such term in the preamble to this Agreement and shall include
each Person which becomes a transferee, successor or assign of
any Lender.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether
statutory or otherwise), Charge, claim or encumbrance, or
preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind
or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease
having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of
any jurisdiction.
"Loan Year" shall mean each period of twelve (12)
consecutive months commencing on the Closing Date and on each
anniversary thereof.
"Management Services Agreement" shall mean that certain
Management Services Agreement dated February 26, 1998 between CEI
and Borrower, as amended, modified, restated or supplemented from
time to time to the extent not prohibited by Section 7.18 hereof.
"Material Adverse Effect" shall mean a material adverse
effect on (a) the condition, operations, assets or business of
Borrower, (b) Borrower's ability to pay the Obligations in
accordance with the terms thereof, (c) the value of the
Collateral, or Agent's Liens on the Collateral or the priority of
any such Lien (subject to Liens which are Permitted Encumbrances
under clauses (c), (g), (l), (m), (n), (o) or (r) of the
definition thereof) or (d) the practical realization of the
benefits of Agent's and each Lender's rights and remedies under
this Agreement and the Other Documents taken as a whole.
"Maximum Equipment Loan Amount" shall mean $10,000,000
less repayments of the Equipment Loans.
"Maximum Loan Amount" shall mean $60,000,000 less
repayments of the Equipment Loans.
38
"Maximum Revolving Advance Amount" shall mean
$50,000,000.
"MEI" shall mean Micron Electronics, Inc., a Minnesota
corporation.
"MTI" shall mean Micron Technology, Inc., a Delaware
corporation.
"Multiemployer Plan" shall mean a "multiemployer plan"
as defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Negative Pledge Agreement" shall mean the negative
pledge agreement on the Real Property located in Nampa, Idaho
executed by Borrower in favor of Agent, together with all
extensions, renewals, amendments, supplements, modifications and
replacements thereto and thereof.
"Note" shall mean collectively, the Equipment Note and
the Revolving Credit Note.
"Obligations" shall mean and include any and all loans,
advances, debts, liabilities, obligations, covenants and duties
owing by Borrower to Lenders or Agent of any kind or nature,
present or future (including, without limitation, any interest
accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to Borrower, whether
or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether or not evidenced by any
note, guaranty or other instrument, arising under this Agreement
and the Other Documents whether or not for the payment of money,
whether arising by reason of an extension of credit, opening of a
letter of credit, loan, equipment lease or guarantee, under any
interest or currency swap, future, option or other similar
agreement, or in any other manner, whether arising out of
overdrafts or deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or
otherwise) or out of the Agent's or any Lenders non-receipt of or
inability to collect funds or otherwise not being made whole in
connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those
acquired by assignment or participation), absolute or contingent,
joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated,
regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument, including, but not
limited to, any and all of Borrower's Indebtedness and/or
liabilities under this Agreement or the Other Documents and any
amendments, extensions, renewals or increases and all costs and
expenses of Agent and any Lender incurred in the documentation,
negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including but not
limited to reasonable attorneys' fees and expenses and all
obligations of Borrower to Agent or Lenders to perform acts or
refrain from taking any action. The obligations shall constitute
"Designated Senior Debt" under and as defined in the Indenture
and the Exchange Indenture.
39
"Original Owners" shall mean, collectively, CEI and the
shareholders listed on Schedule A hereto.
"Other Documents" shall mean the Negative Pledge
Agreement, the Pledge Agreement, the Note, the Questionnaire, the
Guaranty, and any and all other agreements, instruments and
documents, including, without limitation, guaranties, pledges,
powers of attorney, consents, and all other writings heretofore,
now or hereafter executed by Borrower or any Guarantor and/or
delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or
other entity owning, directly or indirectly at least 50% of the
shares of stock or other ownership interests having ordinary
voting power to elect a majority of the directors of the Person,
or other Persons performing similar functions for any such
Person.
"Participant" shall mean each Person who shall be
granted the right by any Lender to participate in any of the
Advances and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000; thereafter, such
other office of Agent, if any, which it may designate by notice
to Borrower and to each Lender to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Pension Benefit Plan" shall mean an employee pension
benefit plan subject to Title IV of ERISA.
"Permitted Encumbrances" shall mean (a) Liens in favor
of Agent for the benefit of Agent and Lenders; (b) Liens for
taxes, assessments or other Charges not delinquent or being
contested in good faith and by appropriate proceedings and with
respect to which proper reserves have been taken by Borrower;
provided, that, the Lien shall have no effect on the priority of
the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien
shall be in effect; (c) Liens disclosed in the financial
statements referred to in Section 5.5, the existence of which
Agent has consented to in writing; (d) deposits or pledges to
secure obligations under worker's compensation, social security
or similar laws, or under unemployment insurance; (e) deposits or
pledges to secure bids, tenders, contracts (other than contracts
for the payment of borrowed money), leases, statutory
obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of Borrower's
business; (f) judgment Liens that have been stayed or bonded or
otherwise would not result in an Event of Default and mechanics',
workers', landlord's, materialmen's, warehousemen's, carriers' or
other like Liens arising in the ordinary course of Borrower's
business with respect to obligations which are not due or which
are being contested in good faith by Borrower and by appropriate
proceedings and with respect to which proper reserves have been
taken by Borrower; (g) Liens placed upon fixed assets hereafter
40
acquired to secure a portion of the purchase price thereof
(including under capitalized leases which are permitted under
Section 7.6 hereof), provided that (x) any such lien shall not
encumber any other property of Borrower and (y) the aggregate
amount of Indebtedness secured by such Liens incurred as a result
of such purchases during any fiscal year shall not exceed the
amount provided for in Section 7.6; (h) Liens disclosed on
Schedule 1.2; (i) zoning and municipal ordinances, easements,
rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the
ordinary conduct of business of Borrower or such other matters
affecting Real Property as Agent may consent to in writing; (j)
Liens arising from precautionary UCC financing statements
regarding operating leases or consignments; (k) Liens securing
hedge agreements entered into by Borrower to the extent such
agreements are permitted by Section 7.8 hereof; (l) Liens on
property or assets acquired pursuant to an acquisition or
investment permitted under Section 7.4 hereof, provided that (x)
such Liens are not incurred in connection with or in anticipation
of such permitted acquisition or permitted investment, (y) do not
attach to any other asset of the Borrower, and (z) the aggregate
amount of Indebtedness secured by such Liens incurred as a result
of such permitted investment or permitted acquisition during any
fiscal year shall not exceed the amount provided for in Section
7.4 hereof; (m) Liens consisting of rights of set-off of a
customary nature or bankers' liens on amounts on deposit (other
than the Blocked Account) arising by operation of law or
contract, incurred in the ordinary course of business; (n) Liens
encumbering customary initial deposits and margin deposits and
similar Liens attaching to commodity trading accounts or other
brokerage accounts incurred in the ordinary course of business to
the extent such Liens secure investments which are permitted
under Section 7.4 hereof; (o) Liens solely on any xxxx xxxxxxx
money deposits made by Borrower in connection with any letter of
intent or purchase agreement entered into by it in compliance
with acquisitions or investments permitted by Section 7.4 hereof;
(p) any interest or title of a licensor under any license
permitted by this Agreement provided that such interest shall not
extend to the proceeds of such license and provided, further,
that to the extent such license imposes restrictions that would
prevent the disposition by Agent of Inventory which is the
subject of such license or grants the licensor a Lien upon the
Inventory which is subject to such license, such Inventory shall
not be deemed "Eligible Inventory" hereunder; (q) the ownership
interest and title of a lessor or sublessor under any operating
lease which is permitted by this Agreement; and (r) Liens
incurred by Borrower with respect to liabilities and obligations
of Borrower to any Person (other than for Indebtedness for money
borrowed) which do not exceed $500,000 in the aggregate at any
time, provided that Borrower shall promptly notify Agent of the
existence of such Liens and there is sufficient availability to
establish reserves against borrowing availability under Section
2.1 hereof in an amount equal to the obligations secured by such
Liens.
"Person" shall mean any individual, sole
proprietorship, partnership, corporation, business trust, joint
stock company, trust, unincorporated organization, association,
limited liability company, institution, public benefit
corporation, joint venture, entity or government (whether
Federal, state, county, city, municipal or otherwise, including
any instrumentality, division, agency, body or department
thereof).
"Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA other than a Multiemployer Plan,
maintained for employees of Borrower or any member of the
Controlled Group or any such Plan to which Borrower or any member
of the Controlled Group is required to contribute on behalf of
any of its employees.
41
"Pledge Agreement" shall mean, collectively, the Pledge
Agreement dated as of the Closing Date between Agent and Borrower
and the Pledge and Security Agreement (Membership Interests)
dated as of the Closing Date pursuant to which Borrower shall
grant to Agent for its benefit and for the benefit of Lenders a
security interest in the issued and outstanding capital stock or
membership interests, as applicable, of its Subsidiaries listed
therein, as same may be amended, modified, restated or
supplemented from time to time.
"Preferred Stock" shall mean, collectively, the 12-1/2%
senior exchangeable preferred stock of Borrower, of which 274,632
shares are issued and outstanding as of the Closing Date.
"Pro Forma Balance Sheet" shall have the meaning set
forth in Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning
set forth in Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in
Section 5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth in
Section 15.3 hereof.
"Questionnaire" shall mean the Documentation
Information Questionnaire and the responses thereto provided by
Borrower and delivered to Agent.
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., as same may be amended
from time to time.
"Real Property" shall mean all of Borrower's right,
title and interest in and to the owned and leased premises
identified on Schedule 4.19 hereto.
"Recapitalization Agreement" shall mean the Amended and
Restated Recapitalization Agreement including all schedules and
exhibits thereto dated as of February 1, 1998 by and among MEI,
MEI California, Inc., CEI and Borrower as amended, modified,
restated or supplemented from time to time to the extent not
prohibited by Section 7.18 hereof.
"Recapitalization Documentation" shall mean,
collectively, the Recapitalization Agreement and all other
agreements, instruments and documents executed in connection
therewith but excluding the Subordinated Note Documentation, this
Agreement and the Other Documents.
"Receivables" shall mean and include all of Borrower's
accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrower by its Affiliates),
documents, chattel paper, general intangibles relating to
accounts, drafts and acceptances, and all other forms of
obligations owing to Borrower arising out of or in connection
with the sale or lease of Inventory or the rendition of services,
all guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not
specifically sold or assigned to Agent hereunder.
42
"Receivables Advance Rate" shall have the meaning set
forth in Section 2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event
described in Section 4043(b) of ERISA or the regulations
promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least
fifty-one percent (51%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding at least fifty-one
percent (51%) of the Commitment Percentages.
"Reserve Percentage" shall mean the maximum effective
percentage in effect on any day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding.
"Revolving Advances" shall mean Advances made other
than Equipment Loans.
"Revolving Credit Note" shall mean, collectively, the
promissory notes referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate
per annum equal to (a) the Alternate Base Rate with respect to
Domestic Rate Loans or (b) the sum of the Eurodollar Rate plus
two and one quarter percent (2.25%) with respect to Eurodollar
Rate Loans.
"Section 20 Subsidiary" shall mean the Subsidiary of
the bank holding company controlling PNC, which Subsidiary has
been granted authority by the Federal Reserve Board to underwrite
and deal in certain Ineligible Securities.
"Senior Debt Payments" shall mean and include all cash
actually expended by Borrower to make (a) interest payments on
any Advances hereunder, plus, (b) scheduled principal payments on
the Equipment Loans, plus (c) payments for all fees, commissions
and charges set forth herein and with respect to any Advances
other than any such fees incurred as of the Closing Date in
connection with the consummation of the Transactions not to
exceed the aggregate amount of $1,000,000, plus (d) capitalized
lease payments, plus (e) payments with respect to any other
Indebtedness for borrowed money other than with respect to the
Subordinated Notes.
"Settlement Date" shall mean the Closing Date and
thereafter Wednesday of each week unless such day is not a
Business Day in which case it shall be the next succeeding
Business Day.
43
"Subordinated Debt Payments" shall mean and include all
cash actually expended to make payments of principal and interest
on the Subordinated Notes.
"Subordinated Loan" shall mean the loan evidenced by
the Subordinated Notes.
"Subordinated Notes" shall mean, collectively, the
Fixed Rate Notes and the Floating Rate Notes.
"Subordinated Note Documentation" shall mean,
collectively, the Subordinated Notes, the Exchange Debentures,
the Indenture and the Exchange Indenture.
"Subordination Agreement" shall mean the provisions of
Article 10 of each of the Indenture and the Exchange Indenture.
"Subsidiary" of any Person shall mean a corporation or
other entity of whose shares of stock or other ownership
interests having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar
functions for such entity, are owned, directly or indirectly, by
such Person.
"Subsidiary Stock" shall mean all of the issued and
outstanding shares of stock or membership interests owned by
Borrower of its direct Subsidiaries listed on Schedule 5.2(b).
"Term" shall have the meaning set forth in Section 13.1
hereof.
"Termination Event" shall mean (i) a Reportable Event
with respect to any Plan or Multiemployer Plan; (ii) the
withdrawal of Borrower or any member of the Controlled Group from
a Plan or Multiemployer Plan during a plan year in which such
entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section
4041(c) of ERISA; (iv) the institution by the PBGC of proceedings
to terminate a Plan or Multiemployer Plan; (v) any event or
condition (a) which would constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan or Multiemployer Plan, or (b) that
results in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA,
of Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Transactions" shall have the meaning set forth in
Section 5.5 hereof.
"Transferee" shall have the meaning set forth in
Section 15.3(b) hereof.
"Trustee" shall mean the United States Trust Company of
New York and shall include its successors and assigns.
"Undrawn Availability" at a particular date shall mean
an amount equal to (a) the lesser of (i) the Formula Amount or
(ii) the Maximum Revolving Advance Amount, minus (b) the sum of
(i) the outstanding amount of Revolving Advances plus (ii) all
amounts due and owing to Borrower's trade creditors which are
outstanding more than sixty (60) days beyond the due date thereof
plus (iii) fees and expenses for which Borrower is liable
hereunder which are due and payable but which have not been paid
or charged to Borrower's Account.
44
"Week" shall mean the time period commencing with the
opening of business on a Wednesday and ending on the end of
business the following Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein
and defined in the Uniform Commercial Code as adopted in the
State of New York shall have the meaning given therein unless
otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to
cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and
regulations. Unless otherwise provided, all references to any
instruments or agreements to which Agent is a party, including,
without limitation, references to any of the Other Documents,
shall include any and all modifications or amendments thereto and
any and all extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement including, without
limitation, Section 2.1(b), each Lender, severally and not
jointly, will make Revolving Advances to Borrower in aggregate
amounts outstanding at any time equal to such Lender's Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance
Amount or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of
Section 2.1(b) hereof ("Receivables Advance Rate"), of
Eligible Receivables, plus
(ii) up to the lesser of (A) (i) 20%, subject to
the provisions of Section 2.1(b) hereof ("Raw Material
Inventory Advance Rate"), of the value of Eligible
Inventory consisting of raw materials plus (ii) 60%,
subject to the provisions of Section 2.1(b) hereof
("Combined Inventory Advance Rate"), of the value of
Eligible Inventory consisting of work-in-process and
finished goods (the Receivables Advance Rate, the Raw
Material Inventory Advance Rate and the Combined
Inventory Advance Rate shall be referred to
collectively, as the "Advance Rates") or (B) the lesser
of (i) $10,000,000 (the "Inventory Cap") or (ii) 50% of
the amount derived from the sum of Sections
2.1(a)(y)(i) and (ii)(A) or (B)(i), in the aggregate at
any one time, minus
45
(iii) such reserves as Agent may reasonably
deem proper and necessary from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i)
and (ii) minus (y) Section 2.1 (a)(y)(iii) at any time and from
time to time shall be referred to as the "Formula Amount". The
Revolving Advances shall be evidenced by one or more secured
promissory notes (collectively, the "Revolving Credit Note")
substantially in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be
increased or decreased by Agent at any time and from time to time
in the good faith exercise of its reasonable discretion.
Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or imposing or
increasing reserves may limit or restrict Advances requested by
Borrower.
2.2. Procedure for Borrowing Advances.
(a) Borrower may notify Agent prior to 1:30 P.M. New
York Time on a Business Day of Borrower's request to incur, on
that day, a Revolving Advance hereunder. Subject to the
satisfaction of the conditions set forth in Section 8.3 hereof,
in the event Borrower desires an Equipment Loan, it shall give
Agent at least three (3) Business Days' prior written notice.
Should any amount required to be paid as principal or interest
hereunder, or as fees or other charges under this Agreement or
any Other Document, or with respect to any other Obligation,
become due, same shall be deemed a request for a Revolving
Advance as of the date such payment is due, in the amount
required to pay in full such principal, interest, fee, charge or
Obligation under this Agreement or any other agreement with Agent
or Lenders, and such request shall be irrevocable and such
amounts shall be charged to Borrower's Account as Revolving
Advances constituting Domestic Rate Loans.
(b) Notwithstanding the provisions of subsection (a)
above, in the event Borrower desires to obtain a Eurodollar Rate
Loan, Borrower shall give Agent at least three (3) Business Days'
prior written notice, specifying (i) the date of the proposed
borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be
borrowed, which amount shall be in a minimum amount of $250,000
and an integral multiples of $50,000 thereafter, and (iii) the
duration of the first Interest Period therefor. Interest Periods
for Eurodollar Rate Loans shall be for one, two or three months;
provided, if an Interest Period would end on a day that is not a
Business Day, it shall end on the next succeeding Business Day
unless such day falls in the next succeeding calendar month in
which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to
Borrower during the continuance of a Default or an Event of
Default.
(c) Each Interest Period of a Eurodollar Rate Loan
shall commence on the date such Eurodollar Rate Loan is made and
shall end on such date as Borrower may elect as set forth in
subsection (b)(iii) above provided that the exact length of each
Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and
no Interest Period shall end after the last day of the Term.
46
Borrower shall elect the initial Interest Period applicable
to a Eurodollar Rate Loan by its notice of borrowing given to
Agent pursuant to Section 2.2(b) or by its notice of conversion
given to Agent pursuant to Section 2.2(d), as the case may be.
Borrower shall elect the duration of each succeeding Interest
Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last
day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If Agent does not receive timely notice
of the Interest Period elected by Borrower, Borrower shall be
deemed to have elected to convert to a Domestic Rate Loan subject
to Section 2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have
occurred and be continuing, Borrower may, subject to payment by
Borrower of any amounts due to Agent or any Lender under Section
2.2(f) hereof, convert any such loan into a loan of another type
in the same aggregate principal amount. If Borrower desires to
convert a loan, Borrower shall give Agent not less than three (3)
Business Days' prior written notice to convert from a Domestic
Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's
prior written notice to convert from a Eurodollar Rate Loan to a
Domestic Rate Loan, specifying the date of such conversion, the
loans to be converted and if the conversion is from a Domestic
Rate Loan to any other type of loan, the duration of the first
Interest Period therefor. After giving effect to each such
conversion, there shall not be outstanding more than six (6)
Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business Days'
prior written notice, Borrower may prepay the Eurodollar Rate
Loans in whole at any time or in part from time to time, without
premium or penalty, but with accrued interest on the principal
being prepaid to the date of such prepayment. Borrower shall
specify the date of prepayment of Advances which are Eurodollar
Rate Loans and the amount of such prepayment. In the event that
any prepayment of a Eurodollar Rate Loan is required or permitted
on a date other than the last Business Day of the then current
Interest Period with respect thereto, Borrower shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f)
hereof.
(f) Borrower shall indemnify Agent and Lenders and
hold Agent and Lenders harmless from and against any and all
losses (other than losses of anticipated profits) or expenses
that Agent and Lenders may sustain or incur as a consequence of
any prepayment, conversion of or any default by Borrower in the
payment of the principal of or interest on any Eurodollar Rate
Loan on any day other than the last day of an Interest Period or
failure by Borrower to complete a borrowing of, a prepayment of
or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given on any day other than the last day of an
Interest Period, including, but not limited to, any interest
payable by Agent or Lenders to lenders of funds obtained by it in
order to make or maintain its Eurodollar Rate Loans hereunder. A
certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent or any Lender to Borrower
shall be conclusive absent manifest error and shall be in
reasonable detail and with calculations and explanations of
claimed amounts and circumstances giving rise to such events.
(g) Notwithstanding any other provision hereof, if
after the date hereof, the adoption of any applicable law,
treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for
47
any Lender (for purposes of this subsection (g), the term
"Lender" shall include any Lender and the office or branch where
any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of such Lender to make
Eurodollar Rate Loans hereunder shall forthwith be cancelled and
Borrower shall, if any affected Eurodollar Rate Loans are then
outstanding, promptly upon request from Agent if then required by
law, either pay all such affected Eurodollar Rate Loans or
convert such affected Eurodollar Rate Loans into loans of another
type. If any such payment or conversion of any Eurodollar Rate
Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrower shall
pay Agent, upon Agent's request, such amount or amounts as may be
necessary to compensate Lenders for any loss (excluding any loss
of anticipated profits) or expense sustained or incurred by such
Lender in respect of such Eurodollar Rate Loan as a result of
such payment or conversion, including (but not limited to) any
interest or other amounts payable by Lenders to lenders of funds
obtained by Lenders in order to make or maintain such Eurodollar
Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to
Borrower shall be conclusive absent manifest error and shall be
in reasonable detail and with calculations and explanations of
claimed amounts and circumstances giving rise to such events. If
Agent or any Lender claims that it is unlawful to make or
maintain its Eurodollar Loans, then Agent or such Lender shall
use reasonable efforts (consistent with internal policy and legal
and regulatory restrictions) to change the jurisdiction of its
lending office if it will permit Agent or such Lender (as the
case may be) to make or maintain such Eurodollar Rate Loans and
would not, in the reasonable judgment of Agent or such Lender (as
the case may be), be otherwise disadvantageous to Agent or such
Lender (as the case may be).
2.3. Disbursement of Advance Proceeds. All Advances shall
be disbursed from whichever office or other place Agent may
designate from time to time and, together with any and all other
Obligations of Borrower to Agent or Lenders, shall be charged to
Borrower's Account on Agent's books. During the Term, Borrower
may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions
hereof. The proceeds of each Revolving Advance requested by
Borrower or deemed to have been requested by Borrower under
Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances, be
made available to Borrower on the day so requested by way of
credit to Borrower's operating account at PNC, or such other bank
as Borrower may designate following notification to Agent, in
immediately available federal funds or other immediately
available funds or, with respect to Revolving Advances deemed to
have been requested by Borrower, be disbursed to Agent to be
applied to the outstanding Obligations giving rise to such deemed
request.
2.4. Equipment Loans. (i) Subject to the terms and
conditions of this Agreement, each Lender, severally and not
jointly, shall, from time to time, make available Advances to
Borrower (each, an "Equipment Loan" and collectively, the
"Equipment Loans") to finance Borrower's purchase of Equipment
for use in Borrower's business during the first three Loan Years.
All such Equipment Loans shall be in such amounts as are
requested by Borrower, but in no event shall any Equipment Loan
exceed eighty-five percent (85%) of the net invoice cost
(excluding taxes, shipping, delivery, handling, installation,
overhead and other so called "soft" costs) of the Equipment then
to be purchased by Borrower and the total amount of all Equipment
Loans outstanding hereunder shall not exceed, in the aggregate,
the sum of Ten Million Dollars ($10,000,000). Once repaid
Equipment Loans may not be reborrowed.
48
(ii) Advances constituting Equipment Loans shall
be accumulated during each twelve month period (each a "Borrowing
Period") during the first three Loan Years. The first Borrowing
Period shall commence on the Closing Date and end on February 25,
2000 (the "Initial Borrowing Period"). Each subsequent Borrowing
Period shall consist of twelve month periods commencing on
February 26 of each year. At the end of each Borrowing Period,
the sum of all Equipment Loans made during the Borrowing Period
shall amortize on the basis of an eighty-four (84) month schedule
(such amount as determined with respect to any Borrowing Period,
the "Amortization Amount"). Monthly principal payments will be
initially determined for the Equipment Loans made during the
Initial Borrowing Period and the amount of such monthly principal
payments shall be increased upon the completion of each such
subsequent Borrowing Period by the Amortization Amount for each
such subsequent Borrowing Period. The Equipment Loans shall be,
with respect to principal, payable in equal monthly installments
based upon the amortization schedule set forth above, commencing
on March 1, 2000 and on the first day of each month thereafter
with the balance payable upon the expiration of the Term, subject
to acceleration upon the occurrence of an Event of Default under
this Agreement or termination of this Agreement, and shall be
evidenced by one or more secured promissory notes (collectively,
the "Equipment Note"), executed by Borrower in substantially the
form annexed hereto as Exhibit 2.4.
2.5. Maximum Advances. The aggregate balance of Revolving
Advances outstanding at any time shall not exceed the lesser of
(a) the Maximum Revolving Advance Amount or (b) the Formula
Amount except with respect to overadvances which are knowingly
made by Agent and permitted pursuant to Section 15(b) hereof.
2.6. Repayment of Advances.
(a) The Revolving Advances shall be due and payable in
full on the last day of the Term subject to earlier prepayment as
herein provided. The Equipment Loans shall be due and payable as
provided in Section 2.4 hereof and in the Equipment Note.
(b) Borrower recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to
and/or proceeds of Collateral may not be collectible by Agent on
the date received. In consideration of Agent's agreement to
conditionally credit Borrower's Account as of the Business Day on
which Agent receives those items of payment, Borrower agrees
that, in computing the charges under this Agreement, all items of
payment shall be deemed applied by Agent on account of the
Obligations one (1) Business Day after the Business Day Agent
receives such payments via wire transfer or electronic depository
check. Agent is not, however, required to credit Borrower's
Account for the amount of any item of payment which is
unsatisfactory to Agent in its reasonable and good faith business
judgment and Agent may charge Borrower's Account for the amount
of any item of payment which is returned to Agent unpaid.
49
(c) All payments of principal, interest and other
amounts payable hereunder, or under any of the Other Documents
shall be made to Agent at the Payment Office not later than 2:00
P.M. (New York time) on the due date therefor in lawful money of
the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing
hereunder by charging Borrower's Account or by making Advances as
provided in Section 2.2 hereof.
(d) Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any related agreement,
without any deduction whatsoever, including, but not limited to,
any deduction for any setoff or counterclaim, provided, however,
that with respect to amounts due to Agent or any Lender under
Section 3.7 hereof, Agent or such Lender shall only be entitled
to the payment of such amounts to the extent it complies with
Section 3.7(b) hereof.
2.7. Repayment of Excess Advances. The aggregate balance of
Advances outstanding at any time in excess of the maximum amount
of Advances permitted hereunder shall be immediately due and
payable without the necessity of any demand, at the Payment
Office, whether or not a Default or Event of Default has occurred
except with respect to overadvances which are knowingly made by
Agent and permitted pursuant to Section 15(b) hereof which shall
be due and payable at the sole and absolute discretion of Agent.
2.8. Statement of Account. Agent shall maintain, in
accordance with its customary procedures, a loan account
("Borrower's Account") in the name of Borrower in which shall be
recorded the date and amount of each Advance made by Agent and
the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of
any Advance shall not adversely affect Agent or any Lender. Each
month, Agent shall send to Borrower a statement showing the
accounting for the Advances made, payments made or credited in
respect thereof, and other transactions between Agent and
Borrower, during such month. The monthly statements shall be
deemed correct and binding upon Borrower in the absence of
manifest error and shall constitute an account stated between
Lenders and Borrower unless Agent receives a written statement of
Borrower's specific exceptions thereto within forty-five (45)
days after such statement is received by Borrower. The records
of Agent with respect to the loan account shall be conclusive
evidence absent manifest error of the amounts of Advances and
other charges thereto and of payments applicable thereto.
2.9. Additional Payments. Any sums expended by Agent or any
Lender due to Borrower's failure to perform or comply with its
obligations under this Agreement or any Other Document after all
applicable grace periods have expired including, without
limitation, Borrower's obligations under Sections 4.2, 4.4, 4.12,
4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.
2.10. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be
advanced according to the applicable Commitment Percentages of
Lenders. Each borrowing of Equipment Loans shall be advanced
according to the applicable Commitment Percentages of Lenders.
50
(b) Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the
Revolving Advances, shall be applied to the Revolving Advances
pro rata according to the applicable Commitment Percentages of
Lenders. Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Equipment Note,
shall be applied to that portion of the Equipment Loan evidenced
by the Equipment Note pro rata according to the Commitment
Percentages of Lenders. Except as expressly provided herein, all
payments (including prepayments) to be made by Borrower on
account of principal, interest and fees shall be made without set
off or counterclaim except as provided herein and shall be made
to Agent on behalf of the Lenders to the Payment Office, in each
case on or prior to 2:00 P.M., New York time, in Dollars and in
immediately available funds.
(c) (i) Notwithstanding anything to the contrary
contained in Sections 2.10(a) and (b) hereof, commencing with the
first Business Day following the Closing Date, each borrowing of
Revolving Advances shall be advanced by Agent and each payment by
Borrower on account of Revolving Advances shall be applied first
to those Revolving Advances advanced by Agent. On or before 2:00
P.M., New York time, on each Settlement Date commencing with the
first Settlement Date following the Closing Date, Agent and
Lenders shall make certain payments as follows: (I) if the
aggregate amount of new Revolving Advances made by Agent during
the preceding Week (if any) exceeds the aggregate amount of
repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds
in an amount equal to its applicable Commitment Percentage of the
difference between (w) such Revolving Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied
to outstanding Revolving Advances during such Week exceeds the
aggregate amount of new Revolving Advances made during such Week,
then Agent shall provide each Lender with funds in an amount
equal to its applicable Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances
which it has funded.
(iii) Promptly following each Settlement Date,
Agent shall submit to each Lender a certificate with respect to
payments received and Advances made during the Week immediately
preceding such Settlement Date. Such certificate of Agent shall
be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted
Lender") shall at any time receive any payment of all or part of
its Advances, or interest thereon, or receive any Collateral in
respect thereof (whether voluntarily or involuntarily or by set-
off) in a greater proportion than any such payment to and
Collateral received by any other Lender, if any, in respect of
such other Lender's Advances, or interest thereon, and such
greater proportionate payment or receipt of Collateral is not
expressly permitted hereunder, such benefitted Lender shall
purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide
such other Lender with the benefits of any such Collateral, or
the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders;
provided, however, that if all or any portion of such excess
51
payment or benefits is thereafter recovered from such benefitted
Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but
without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such
portion.
(e) Unless Agent shall have been notified by
telephone, confirmed in writing, by any Lender that such Lender
will not make the amount which would constitute its applicable
Commitment Percentage of the Advances available to Agent, Agent
may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to Borrower
a corresponding amount. Agent will promptly notify Borrower of
its receipt of any such notice from a Lender. If such amount is
made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to
the product of (i) the daily average Federal Funds Rate (computed
on the basis of a year of 360 days) during such period as quoted
by Agent, times (ii) such amount, times (iii) the number of days
from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of
Agent submitted to any Lender with respect to any amounts owing
under this paragraph (e) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to
Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an
amount, with interest thereon at the rate per annum then
applicable to such Revolving Advances hereunder, on demand from
Borrower; provided, however, that Agent's right to such recovery
shall not prejudice or otherwise adversely affect Borrower's
rights (if any) against such Lender.
2.11. Mandatory Prepayments. Subject to Section 4.3
hereof, when Borrower sells or otherwise disposes of any
Equipment which was financed by the proceeds of an Equipment
Loan, Borrower shall repay the Advances in an amount equal to the
net proceeds of such sale (i.e., gross proceeds less the
reasonable costs of such sales or other dispositions), such
repayments to be made promptly but in no event more than one (1)
Business Day following receipt of such net proceeds, and until
the date of payment, such proceeds shall be held in trust for
Agent. The foregoing shall not be deemed to be implied consent
to any such sale otherwise prohibited by the terms and conditions
hereof. Such repayments shall be applied (x) first, to the
outstanding principal installments of the Equipment Loans in the
inverse order of the maturities thereof and (y) second, to the
remaining Advances in such order as Agent may determine, subject
to Borrower's ability to reborrow Revolving Advances in
accordance with the terms hereof.
2.12. Use of Proceeds. Borrower shall apply the
proceeds of Advances to (i) repay existing indebtedness owed
under the Existing Credit Agreement, (ii) pay fees and expenses
relating to this transaction, and (iii) to provide for its
working capital needs and general corporate purposes, including,
without limitation, to make capital expenditures permitted by
Section 7.6 hereof, to make investments and acquisitions
permitted by Section 7.4 hereof, to make loans and advances to
other Persons permitted by Section 7.5 hereof and to make
payments on account of Subordinated Notes to the extent such
payments are permitted by Section 7.18 hereof.
52
2.13. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained
herein, in the event any Lender (x) has refused (which refusal
constitutes a breach by such Lender of its obligations under this
Agreement) to make available its portion of any Advance or (y)
notifies either Agent or Borrower that it does not intend to make
available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this
Agreement) (each, a "Lender Default"), all rights and obligations
hereunder of such Lender (a "Defaulting Lender") as to which a
Lender Default is in effect and of the other parties hereto shall
be modified to the extent of the express provisions of this
Section 2.13 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders
(the "Non-Defaulting Lenders") which are not Defaulting Lenders
based on their respective Commitment Percentages, and no
Commitment Percentage of any Lender or any pro rata share of any
Advances required to be advanced by any Lender shall be increased
as a result of such Lender Default. Amounts received in respect
of principal of any type of Advances shall be applied to reduce
the applicable Advances of each Lender pro rata based on the
aggregate of the outstanding Advances of that type of all Lenders
at the time of such application; provided, that, such amount
shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of
Advances of any Non-Defaulting Lender exceeds such Non-Defaulting
Lender's Commitment Percentage of all Advances then outstanding.
Upon the occurrence and during the continuance of a Lender
Default, a Defaulting Lender shall not be entitled to receive its
pro rata portion of any fees due hereunder, provided, however,
that the foregoing limitation shall not affect the right of any
Non-Defaulting Lender to receive its pro rata portion of any fees
due hereunder.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or
vote on any matters relating to this Agreement and the Other
Documents. All amendments, waivers and other modifications of
this Agreement and the Other Documents may be made without regard
to a Defaulting Lender and, for purposes of the definition of
"Required Lenders", a Defaulting Lender shall be deemed not to be
a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section
2.13, the rights and obligations of a Defaulting Lender
(including the obligation to indemnify Agent) and the other
parties hereto shall remain unchanged. Nothing in this Section
2.13 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall
alter such obligations, shall operate as a waiver of any default
by such Defaulting Lender hereunder, or shall prejudice any
rights which Borrower, Agent or any Lender may have against any
Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively
cures to the satisfaction of Agent the breach which caused a
Lender to become a Defaulting Lender, such Defaulting Lender
shall no longer be a Defaulting Lender and shall be treated as a
Lender under this Agreement.
53
(f) In the event a Defaulting Lender fails to
retroactively cure, to the satisfaction of Agent and Borrower,
the breach which caused a Lender to become a Defaulting Lender
within five (5) days of the occurrence of such default (the "Cure
Period"), then Agent may, but shall not be obligated to, require
such Defaulting Lender to assign its interest in the Advances to
PNC or to another financial institution designated by Agent which
is consented to by Borrower (in accordance with, and to the
extent required by, Section 15.3(c) hereof) (the "Designated
Lender") for a purchase price equal to the outstanding principal
amount of all Advances made by such Defaulting Lender plus
accrued and unpaid interest and fees (other than any unused
facility fees due during the continuance of such Lender Default)
due to such Defaulting Lender, which interest and fees shall be
paid to the Defaulting Lender when collected from Borrower. In
the event Agent so elects to require any Defaulting Lender to
assign its interest to PNC or to the Designated Lender, as
applicable, PNC will notify such Defaulting Lender at any time
after the expiration of the Cure Period, and such Defaulting
Lender shall assign its interest to PNC or the Designated Lender,
as applicable, no later than five (5) days following receipt of
such notice pursuant to a Commitment Transfer Supplement executed
by such Defaulting Lender, PNC or the Designated Lender, as
applicable, and Agent. Upon (i) the execution of the Commitment
Transfer Supplement, (ii) payment of the purchase price set forth
above, (iii) recordation of the assignment in the Register by
Agent pursuant to Section 15.3(d), and (iv) if so requested by
PNC or the Designated Lender (as applicable), receipt by such
Person of replacement Notes, PNC or the Designated Lender (as
applicable) shall increase its Commitment Percentage hereunder or
shall become a Lender hereunder, respectively, and the Defaulting
Lender shall cease to be a Lender hereunder except with respect
to indemnification provisions set forth herein.
(g) In addition to the provisions set forth in clause
(f) above, so long as no Default or Event of Default shall have
occurred and be continuing, in the event that (i) any Lender
becomes a Defaulting Lender and Agent does not elect to require
such Defaulting Lender to assign its interest to PNC or to a
Designated Lender, (ii) upon the occurrence of an event giving
rise to the operation of Section 3.7 which results in any Lender
charging Borrower increased costs in excess of those generally
charged by the other Lenders or Section 3.8 which results in
Eurodollar Rate Loans being unavailable to Borrower or (iii)
Agent requests the consent of a Lender pursuant to Section 15.2
and such Lender refuses to give its consent and the Required
Lenders have consented to such request, then Borrower shall have
the right to replace such Lender ("Replaced Lender") with a
financial institution ("New Lender") selected by Borrower and
consented and agreed to by Agent (which consent shall not be
unreasonably withheld). The New Lender shall acquire the
Replaced Lender's interest in the Loans at a purchase price equal
to outstanding principal amount of all Advances made by such
Replaced Lender plus accrued and unpaid interest and fees due
hereunder including such Replaced Lender's pro rata portion of
the early termination fee set forth in Section 13.1 hereof and
any unused facility fees so long as such Replaced Lender was not
a Defaulting Lender at the time of such replacement. In the
event that Borrower elects to replace a Lender hereunder,
Borrower will notify Agent and such Replaced Lender within five
(5) days of the occurrence of any event specified in clause (i),
(ii) or (iii) above, and such Replaced Lender will assign its
interest to the New Lender within five (5) days following receipt
of such notice from Borrower pursuant to a Commitment Transfer
Supplement executed by such Replaced Lender, the New Lender and
Agent. Upon (i) the execution of the Commitment Transfer
Supplement, (ii) payment of the purchase price set forth above,
(iii) recordation of the assignment in the Register by Agent
pursuant to Section 15.3(d), and (iv) if so requested by the New
Lender, receipt by such New Lender of replacement Notes, such New
Lender shall become a Lender hereunder and the Replaced Lender
shall cease to be a Lender hereunder except with respect to
indemnification provisions set forth herein.
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III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in
arrears on the first day of each month with respect to Domestic
Rate Loans and, with respect to Eurodollar Rate Loans, at the end
of each Interest Period. Interest charges shall be computed on
the actual principal amount of Advances outstanding during the
month at a rate per annum equal to (i) with respect to Revolving
Advances, the applicable Revolving Interest Rate and (ii) with
respect to the Equipment Loans, the applicable Equipment Loan
Rate (as applicable, the "Contract Rate"). Whenever, subsequent
to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the applicable Contract Rate for Domestic
Rate Loans shall be similarly changed without notice or demand of
any kind by an amount equal to the amount of such change in the
Alternate Base Rate during the time such change or changes remain
in effect. The Eurodollar Rate shall be adjusted with respect to
Eurodollar Rate Loans without notice or demand of any kind on the
effective date of any change in the Reserve Percentage as of such
effective date. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, (i) the Obligations
shall bear interest at the applicable Contract Rate plus two
percent (2%) per annum (the "Default Rate").
3.2. Fee Letter. Borrower shall pay the fees set forth in
the Fee Letter in accordance with the provisions thereof.
3.3. Facility Fee. If, for any month during the Term, the
average daily unpaid balance of the Revolving Advances and
Equipment Loans for each day of such month does not equal the
Maximum Loan Amount, then Borrower shall pay to Agent for the
ratable benefit of Lenders a fee at a rate equal to three-eighths
of one percent (.375%) per annum on the amount by which the
Maximum Loan Amount exceeds such average daily unpaid balance.
Such fee shall be payable to Agent in arrears on the last day of
each fiscal quarter.
3.4. Intentionally Omitted.
3.5. Computation of Interest and Fees. Interest and fees
hereunder shall be computed on the basis of a year of 360 days
and for the actual number of days elapsed. If any payment to be
made hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next
succeeding Business Day or, solely with respect to Eurodollar
Rate Loans, the due date thereof shall be on the immediately
preceding Business Day if the end of the Interest Period relating
thereto falls in the next succeeding calendar month and interest
thereon shall be payable at the applicable Contract Rate for
Domestic Rate Loans during such extension.
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3.6. Maximum Charges. In no event whatsoever shall interest
and other charges charged hereunder exceed the highest rate
permissible under law. In the event interest and other charges as
computed hereunder would otherwise exceed the highest rate
permitted under law, such excess amount shall be first applied to
any unpaid principal balance owed by Borrower, and if the then
remaining excess amount is greater than the previously unpaid
principal balance, Lenders shall promptly refund such excess
amount to Borrower and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.7. Increased Costs. (a) Subject to the provisions of
Section 3.7(b), in the event that after the date hereof the
adoption of any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of
this Section 3.7, the term "Lender" shall include Agent or any
Lender and any corporation or bank controlling Agent or any
Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other
authority, shall:
(i) subject Agent or any Lender to any tax of any
kind whatsoever with respect to this Agreement or any Other
Document or change the basis of taxation of payments to Agent or
any Lender of principal, fees, interest or any other amount
payable hereunder or under any Other Documents (except for tax on
or measured by the overall net income or profits of Agent or any
Lender by the jurisdiction in which it is organized or
incorporated, maintains its principal office or its applicable
lending office subject to Section 3.7(c) below);
(ii) impose, modify or hold applicable any
reserve, special deposit, assessment or similar requirement
against assets held by, or deposits in or for the account of,
Eurodollar Rate Loans by the applicable lending office of Agent
or any Lender (including, without limitation pursuant to
Regulation D of the Board of Governors of the Federal Reserve
System); or
(iii) impose on Agent or any Lender or the
London interbank Eurodollar market any other condition relating
to Eurodollar Rate Loans in general;
and the result of any of the foregoing is to increase the cost to
Agent or any Lender of making, renewing or maintaining its
Advances hereunder by an amount that Agent or such Lender deems
to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be
material, then, in any case Borrower shall promptly pay Agent or
such Lender, after its demand, such additional amount as will
compensate Agent or such Lender for such additional cost or such
reduction, as the case may be, provided that the foregoing shall
not apply to increased costs which are reflected in the
Eurodollar Rate, as the case may be. Agent or such Lender shall
certify the amount of such additional cost or reduced amount to
Borrower, and such certification shall be conclusive absent
manifest error and shall be in reasonable detail and with
calculations and explanations of claimed amounts and
circumstances giving rise to such events.
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(b) A Lender shall be entitled to payment under
Section 3.7(a)(i) only if it has complied with this Section
3.7(b). Each Lender that is not incorporated under the laws of
the United States of America or a state thereof agrees that it
will deliver to Borrower and Agent (i) two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, establishing that payments of interest
hereunder are either not subject to or totally exempt from United
States Federal withholding tax and (ii) a duly completed Internal
Revenue Service Form W-8 or W-9 or successor applicable form.
Each such Lender also agrees to deliver to Borrower and Agent two
further copies of the said Form 1001 or 4224 and Form W-8 or W-9,
or successor applicable forms or other manner of certification,
as the case may be, on or before the date that any such form
expires or becomes obsolete (provided that a request has been
made by Borrower) or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to
Borrower, and such extensions or renewals thereof as may
reasonably be requested by Borrower or Agent, unless in any such
case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders
any such forms inapplicable or which would prevent such Lender
from duly completing and delivering any such form with respect to
it and such Lender so advises each of Borrower and Agent. Each
Lender shall promptly notify Borrower at any time if it
determines that it is no longer in a position to provide any
previously delivered certificates to Borrower (or any other form
of certification adopted by the United States taxing authorities
for such purpose). Each such Lender shall certify (i) in the
case of Form 1001, that it is entitled to receive payments under
this Agreement without deduction or withholding of any United
States federal income taxes, (ii) in the case of a Form 4224,
that the interest paid hereunder is effectively connected with
the conduct of such Lender's trade or business in the United
States, and (iii) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States backup withholding
tax. Borrower's obligation under paragraph (a) of this Section
3.7 shall be in effect with respect to a Lender only during the
period(s) in which such Lender establishes that it is exempt from
withholding of all United States federal income taxes with
respect to such payments in accordance with the foregoing
procedures or such other procedures as may be promulgated by the
United States Treasury Department or Internal Revenue Service.
Each Lender shall, to the extent it is legally required to do so,
deliver to Borrower or Agent (as the case may be) such other
forms or similar documentation as may be required from time to
time by any applicable law, treaty, rule or regulation in order
to establish such Lender's complete or partial exemption from
withholding on all payments under this Agreement or the Notes.
(c) If Agent or any Lender claims any additional
amounts payable pursuant to this Section 3.7, then Agent or such
Lender shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the
jurisdiction of its lending office if the making of such a change
would avoid the need for, or reduce the amount of, any such
additional amounts which may thereafter accrue and would not, in
the reasonable judgment of Agent or such Lender (as the case may
be), be otherwise disadvantageous to Agent or such Lender (as the
case may be).
3.8. Basis For Determining Interest Rate Inadequate or
Unfair. In the event that Agent shall have determined that:
57
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.2 hereof for any
Interest Period; or
(b) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank
Eurodollar market, with respect to an outstanding Eurodollar Rate
Loan, a proposed Eurodollar Rate Loan, or a proposed conversion
of a Domestic Rate Loan into a Eurodollar Rate Loan;
then Agent shall give Borrower prompt written, telephonic or
telegraphic notice of such determination. If such notice is
given, (i) any such requested Eurodollar Rate Loan shall be made
as a Domestic Rate Loan, unless Borrower shall notify Agent no
later than 10:00 a.m. (New York City time) two (2) Business Days
prior to the date of such proposed borrowing, that its request
for such borrowing shall be cancelled or made as an unaffected
type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or
Eurodollar Rate Loan which was to have been converted to an
affected type of Eurodollar Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrower shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the proposed conversion, shall be
maintained as an unaffected type of Eurodollar Rate Loan, and
(iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrower shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan,
shall be converted into an unaffected type of Eurodollar Rate
Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such
notice has been withdrawn, Lenders shall have no obligation to
make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and Borrower shall not
have the right to convert a Domestic Rate Loan or an unaffected
type of Eurodollar Rate Loan into an affected type of Eurodollar
Rate Loan.
3.9. Capital Adequacy.
(a) In the event that Agent or any Lender shall have
determined that after the date hereof the adoption of any
applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change 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 Agent
or any Lender (for purposes of this Section 3.9, the term
"Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any
Eurodollar Rate Loans with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Agent or any
Lender's capital as a consequence of its obligations hereunder to
a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to
be material, then, from time to time, Borrower shall promptly pay
after demand to Agent or such Lender such additional amount or
amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such
Lender may use any reasonable averaging or attribution methods.
The protection of this Section 3.9 shall be available to Agent
and each Lender regardless of any possible contention of
invalidity or inapplicability with respect to the applicable law,
regulation or condition.
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(b) A certificate of Agent or such Lender setting
forth such amount or amounts as shall be necessary to compensate
Agent or such Lender with respect to Section 3.9(a) hereof when
delivered to Borrower shall be conclusive absent manifest error
and shall be in reasonable detail and with calculations and
explanations of claimed amounts and circumstances giving rise to
such events.
3.10. Limitation on Additional Amounts, etc.
Notwithstanding anything to the contrary contained in this
Agreement, unless a Lender gives notice to Borrower that it is
obligated to pay to such Lender any amounts due under Sections
2.2(f), 3.7, 3.8 or 3.9 within 90 days after the date Lender
incurs the respective increased costs, taxes, loss, expense or
liability, reduction in amounts received or to be received or
reduction in return on capital, then such Lender shall only be
entitled to be compensated for such amount by Borrower pursuant
to such Section to the extent the costs, taxes, loss, expense or
liability, reduction in amounts received or to be received or
reduction in return on capital are incurred or suffered on or
after the date which occurs 90 days prior to such Lender giving
notice to Borrower that it is obligated to pay the respective
amounts pursuant to such Section. Each Lender, in determining
additional amounts owing under Sections 2.2(f), 3.7, 3.8 or 3.9,
will act reasonably and in good faith and to the extent the
increased costs or reductions in amounts received or reduction in
return on capital relate to such Lender's loans or commitments in
general and not specifically attributable to the Advances or
commitments hereunder, will use reasonable averaging and
attribution methods which cover all advances similar to the
Advances made, issued or participated in by such Lender whether
or not the documentation for such other advances permit such
Lender to receive amounts of the type described in such Sections.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the
prompt payment and performance to Agent and each Lender of the
Obligations, Borrower hereby collaterally assigns, pledges and
grants to Agent for its benefit and for the ratable benefit of
each Lender a continuing security interest in and to all of its
Collateral, whether now owned or existing or hereafter acquired
or arising and wheresoever located. Borrower shall xxxx its
books and records as may be necessary or appropriate to evidence,
protect and perfect Agent's security interest and shall cause its
financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Borrower shall take
all action that may be necessary, or that Agent may reasonably
request, so as at all times to maintain the validity, perfection,
enforceability and priority (subject to clauses (c), (g), (l),
(m), (n), (o), or (r) of the definition of Permitted
Encumbrances) of Agent's security interest in the Collateral or
to enable Agent to protect, exercise or enforce its rights
hereunder and in the Collateral, including, but not limited to,
(i) immediately discharging all Liens other than Permitted
59
Encumbrances, (ii) using commercially reasonable efforts to
obtain landlords' or mortgagees' lien waivers, provided, however,
that in the event Borrower fails to obtain such waivers in form
and substance satisfactory to Agent, Agent shall have the right
to establish reserves against borrowing availability under
Section 2.1 hereof, (iii) delivering to Agent, endorsed or
accompanied by such instruments of assignment as Agent may
specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of
credits and advices thereof and documents evidencing or forming a
part of the Collateral (other than checks and other instruments
for deposit unless required to do so under Section 4.15(d)
hereof), (iv) entering into warehousing and other custodial
arrangements satisfactory to Agent, and (v) executing and
delivering financing statements, instruments of pledge,
mortgages, notices and assignments, in each case in form and
substance satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent's
security interest under the Uniform Commercial Code or other
applicable law. Agent is hereby authorized to file financing
statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of the Uniform Commercial Code as adopted in the
State of New York. All charges, expenses and fees Agent may
incur in doing any of the foregoing, and any local taxes relating
thereto, shall be charged to Borrower's Account as a Revolving
Advance of a Domestic Rate Loan and added to the Obligations, or,
at Agent's option, shall be paid to Agent for the ratable benefit
of Lenders immediately upon demand.
4.3. Disposition of Collateral. Borrower will safeguard and
protect all Collateral for Agent's general account and make no
disposition thereof whether by sale, lease or otherwise except
(a) the sale of Inventory in the ordinary course of business, (b)
the disposition or transfer of Equipment which was purchased with
the proceeds of an Equipment Loan in the ordinary course of
business only to the extent that (i) the proceeds of such sale
are remitted to Agent to be applied pursuant to Section 2.11 and
(ii) the aggregate amount of such net proceeds received by
Borrower in connection with such sale equals or exceeds the
outstanding balance of the Equipment Loan used to purchase such
Equipment, (c) the disposition or transfer of Equipment other
than Equipment which was purchased with the proceeds of an
Equipment Loan in the ordinary course of business during any
fiscal year having an aggregate fair market value of not more
than $5,000,000 and only to the extent that the proceeds of any
such disposition are used to acquire assets (and such acquisition
occurs within 180 days of such disposition or transfer) which are
subject to Agent's security interest which shall have first
priority to the extent Agent had a first priority security
interest in the assets which were disposed of, or transferred,
(d) the grant of licenses with respect to the General Intangibles
in the ordinary course of Borrower's business provided that Agent
shall have a first priority security interest in the proceeds of
such licenses; (e) the sale of obsolete or worn out Collateral
other than Equipment which was purchased by the proceeds of an
Equipment Loan; (f) lease as lessor or lessee or the grant or
receipt of licenses as licensor or licensee of real or personal
property (including intellectual property) in the ordinary course
of business so long as Agent retains a security interest in the
proceeds of any such lease or license and provided, that, to the
extent such licensor imposes restrictions that would prevent the
disposition by Agent of Inventory which is the subject of such
license, such Inventory shall not be deemed "Eligible Inventory"
hereunder until written consent is received from such licensor in
form and substance satisfactory to Agent; (g) the sale or other
transfer to any Subsidiary of Equipment which was not purchased
by the proceeds of an Equipment Loan in the ordinary course of
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business during any fiscal year having an aggregate fair market
value of not more than $5,000,000 net of the fair market value of
all assets sold or transferred by such Subsidiary to Borrower;
(h) transactions which are permitted under Sections 7.1 and 7.4
hereof; (i) the sale of non-core assets acquired in connection
with acquisitions and investments permitted under Section 7.4
hereof; (j) sale or discount of Receivables in connection with
the collection or compromise thereof, provided that such
Receivables shall not constitute "Eligible Receivables" hereunder
and Agent shall have a first priority security interest in the
proceeds of such Receivables; and (k) sales, transfers or other
dispositions of Equipment, Inventory and other property to a
Subsidiary of Borrower which property was purchased by Borrower
in its capacity as purchasing agent for such Subsidiary, and
provided, that (i) the purchase price for such property paid by
such Subsidiary is not less than the purchase price Borrower paid
for such property, (ii) Borrower segregates such property from
the Collateral and (iii) such property shall not be deemed
"Eligible Receivables" or "Eligible Inventory" hereunder. To the
extent Lenders waive the provisions of this Section with respect
to the sale or other disposition of any Collateral, or any
Collateral is sold or disposed of as permitted by this Section,
such Collateral in each case shall be sold, or otherwise disposed
of, free and clear of the Liens created by this Agreement and the
Other Documents and Agent shall take such actions as are
reasonably appropriate in connection therewith; provided,
however, that the Liens created by this Agreement or the Other
Documents shall attach to the proceeds arising from such sale or
disposition.
4.4. Preservation of Collateral. During the continuance of
an Event of Default in addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) may at any time take
such steps as Agent deems necessary to protect Agent's interest
in and to preserve the Collateral, including the hiring of such
security guards or the placing of other security protection
measures as Agent may deem appropriate; (b) may employ and
maintain at any of Borrower's premises a custodian who shall have
full authority to do all acts necessary to protect Agent's
interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may
use Borrower's owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral;
and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may
proceed over and through any of Borrower's owned or leased
property. Borrower shall cooperate fully with all of Agent's
efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's
reasonable expenses of preserving the Collateral, including any
expenses relating to the bonding of a custodian, shall be charged
to Borrower's Account as a Revolving Advance of a Domestic Rate
Loan and added to the Obligations.
4.5. Ownership of Collateral. With respect to the
Collateral, at the time the Collateral becomes subject to Agent's
security interest: (a) Borrower shall be the sole owner of and
fully authorized and able to sell, transfer, pledge and/or grant
a first priority security interest (subject to Liens which are
Permitted Encumbrances under clauses (c), (g), (l), (m), (n), (o)
or (r) of the definition thereof) in each and every item of the
its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens
and encumbrances whatsoever; (b) all signatures and endorsements
of Borrower that appear on such documents and agreements shall be
genuine and Borrower shall have full capacity to execute same;
and (c) Borrower's Equipment and Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except
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with respect to (i) the sale of Inventory in the ordinary course
of business and Equipment to the extent permitted in Section 4.3
hereof, (ii) Equipment which is located at any location other
than as set forth on Schedule 4.5 for repairs, refurbishment or
processing, provided, however, in the event that Borrower
anticipates that such Equipment is kept at such location for a
period of ninety (90) days or more, Borrower shall execute all
UCC-1 financing statements necessary in order for Agent to
maintain a first priority perfected security interest therein and
provided that such Inventory shall not be deemed "Eligible
Inventory" unless Agent receives a waiver letter from such
processor pursuant to which such processor waives all Liens it
may have in such Inventory or Equipment, (iii) motor vehicles
owned by Borrower, and (iv) Inventory sold on consignment or held
by a third party for display or demonstration not to exceed the
fair market value of $500,000 in the aggregate in any fiscal year
provided that Borrower shall indicate on the applicable Borrowing
Base Certificate the aggregate amount of such Inventory as of the
date such Borrowing Base Certificate was prepared and such
Inventory shall not be deemed "Eligible Inventory" hereunder.
4.6. Defense of Agent's and Lenders' Interests. Until (a)
payment and performance in full of all of the Obligations (other
than indemnity obligations with respect to which no claim has
been made) and (b) termination of this Agreement, Agent's
interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's
prior written consent, pledge, sell (except Inventory in the
ordinary course of business and other Collateral to the extent
permitted in Section 4.3 hereof), assign, transfer ownership,
create or suffer to exist a Lien upon or encumber or allow or
suffer to be encumbered in any way except for Permitted
Encumbrances, any part of the Collateral. Borrower shall defend
Agent's interests in the Collateral against any and all Persons
whatsoever. At any time during the continuance of an Event of
Default and demand by Agent for payment of all Obligations, Agent
shall have the right to take possession of the indicia of the
Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Agent
exercises this right to take possession of the Collateral,
Borrower shall, upon demand, assemble it in the best manner
possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all
Collateral, Agent and Lenders shall be entitled to all of the
rights and remedies set forth herein and further provided by the
Uniform Commercial Code or other applicable law. During the
continuance of an Event of Default, Borrower shall, at Agent's
request, and Agent may, at its option, instruct all suppliers,
carriers, forwarders, warehousers or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent
holds a security interest to deliver same to Agent and/or subject
to Agent's order and if they shall come into Borrower's
possession, they, and each of them, shall be held by Borrower in
trust as Agent's trustee, and Borrower will immediately deliver
them to Agent in their original form together with any necessary
endorsement.
4.7. Books and Records. Borrower shall (a) keep proper
books of record and account in which full, true and correct
entries will be made of all dealings or transactions of or in
relation to its business and affairs; (b) set up on its books
accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its
books, from its earnings, allowances against doubtful
Receivables, advances and investments and all other proper
accruals (including without limitation by reason of enumeration,
accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of
properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required
by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrower.
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4.8. Financial Disclosure. Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by
Borrower at any time during the Term to exhibit and deliver to
Agent and each Lender copies of any of Borrower's financial
statements and trial balances and to disclose to Agent and each
Lender any information such accountants may have concerning
Borrower's financial status and business operations. Borrower
hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or
examinations relating to Borrower, whether made by Borrower or
otherwise; however, Agent and each Lender will attempt to obtain
such information or materials directly from Borrower prior to
obtaining such information or materials from such accountants or
such authorities.
4.9. Compliance with Laws. Borrower shall comply in all
material respects with all acts, rules, regulations and orders of
any legislative, administrative or judicial body or official
applicable to the Collateral or any part thereof or to the
operation of Borrower's business the non-compliance with which
could reasonably be expected to have a Material Adverse Effect on
Borrower. Borrower may, however, contest or dispute any acts,
rules, regulations, orders and directions of those bodies or
officials in any reasonable manner, provided that any related
Lien is inchoate or stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect
Agent's Lien on or security interest in the Collateral. The
assets of Borrower at all times shall be maintained in accordance
with the requirements of all insurance carriers which provide
insurance with respect to the assets of Borrower so that such
insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times
during regular business hours (and after the occurrence of an
Event of Default at any time) Agent and each Lender shall have
full access to and the right to audit, check, inspect and make
abstracts and copies from Borrower's books, records, audits,
correspondence and all other papers relating to the Collateral
and the operation of Borrower's business, provided, however, that
Agent shall use its best efforts to ensure that the other Lenders
make their visits at the same time as Agent visits Borrower's
premises. Agent, any Lender and their agents may enter upon any
of Borrower's premises at any time during business hours and at
any other reasonable time, and from time to time (and after the
occurrence of a Default or Event of Default at any time), for the
purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of Borrower's business.
4.11. Insurance. (a) Borrower shall bear the full risk
of any loss of any nature whatsoever with respect to the
Collateral. At Borrower's own cost and expense in amounts and
with carriers acceptable to Agent, Borrower shall (i) keep all
its insurable properties and properties in which Borrower has an
interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and
such other hazards, and for such amounts, as is customary in the
case of companies engaged in businesses similar to Borrower's
including, without limitation, business interruption insurance;
(ii) maintain insurance in such amounts as is customary in the
case of companies engaged in businesses similar to Borrower
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insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to
the assets or funds of Borrower either directly or through
authority to draw upon such funds or to direct generally the
disposition of such assets; (iii) maintain public and product
liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such
worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which Borrower is
engaged in business; (v) furnish Agent with (1) copies of all
policies within thirty (30) days of the Closing Date and evidence
of the maintenance of such policies by the renewal thereof at
least thirty (30) days before any expiration date, and (2)
appropriate loss payable endorsements in form and substance
satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance
coverage referred to in clauses (i) and (iii) above, and
providing (A) that all proceeds thereunder shall be payable to
Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not
be cancelled, amended or terminated unless at least thirty (30)
days' prior written notice is given to Agent. In the event of
any loss thereunder, the carriers named therein hereby are
directed by Agent and Borrower to make payment for such loss to
Agent and not to Borrower and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to
Borrower and Agent jointly, Agent may endorse Borrower's name
thereon and do such other things as Agent may deem advisable to
reduce the same to cash. During an Event of Default, Agent is
hereby authorized to adjust and compromise claims under insurance
coverage referred to in clauses (i) and (iii) above. Subject to
clause (b) below, all loss recoveries received by Agent upon any
such insurance shall be applied to the Obligations (x) if the
insurance proceeds are received with respect to Equipment which
was financed through the proceeds of an Equipment Loan, first to
the outstanding principal installments of the Equipment Loans in
the inverse order of the maturities thereof and second, to the
outstanding Revolving Advances in such order as Agent may
determine, subject to Borrower's ability to reborrow Revolving
Advances in accordance with the terms hereof and (ii) if the
insurance proceeds received are with respect to any other
Collateral to the outstanding Revolving Advances, subject to
Borrower's ability to reborrow Revolving Advances in accordance
with the terms hereof. Any surplus shall be paid by Agent to
Borrower or applied as may be otherwise required by law.
(b) Anything hereinabove to the contrary
notwithstanding, and subject to the fulfillment of the conditions
set forth below, Agent shall remit to Borrower insurance proceeds
received by Agent during any calendar year under insurance
policies procured and maintained by Borrower which insure
Borrower's insurable properties (other than insurance proceeds
received with respect to Equipment which was financed by an
Equipment Loan) to the extent such insurance proceeds do not
exceed $10,000,000 in the aggregate during such calendar year or
$5,000,000 per occurrence. The agreement of Agent to remit
insurance proceeds in the manner above provided shall be subject
in each instance to satisfaction of each of the following
conditions: (x) no Event of Default or Default shall then have
occurred, (y) Borrower shall use such insurance proceeds to
repair, replace or restore the insurable property which was the
subject of the insurable loss and for no other purpose and (z) at
the time of receipt by Agent of such insurance proceeds, Borrower
has Undrawn Availability of at least $5,000,000 during the ninety
(90) days following the Closing Date and $10,000,000 thereafter.
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4.12. Failure to Pay Insurance. If Borrower fails to
obtain insurance as hereinabove provided, or to keep the same in
force, Agent, if Agent so elects, may obtain such insurance and
pay the premium therefor on behalf of Borrower, and charge
Borrower's Account therefor as a Revolving Advance of a Domestic
Rate Loan and such expenses so paid shall be part of the
Obligations.
4.13. Payment of Taxes. Borrower will pay, when due,
all taxes, assessments and other Charges lawfully levied or
assessed upon Borrower or any of the Collateral including,
without limitation, real and personal property taxes, assessments
and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes unless Borrower
shall be contesting or disputing such taxes, assessments or
Charges in good faith, by expeditious protest, administrative or
judicial appeal or similar proceedings and, provided, further,
that (i) (a) any related tax Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the
assets in which Agent has a Lien, (b) a stay of enforcement of
any such tax Lien is in effect and (c) sufficient reserves are
established by Borrower to the reasonable satisfaction of Agent
or (ii) any related Tax lien shall fall within the basket
permitted by clause (r) of the definition of Permitted
Encumbrances. If any tax by any governmental authority is or may
be imposed on or as a result of any transaction between Borrower
and Agent or any Lender which Agent or any Lender may be required
to withhold or pay (other than (x) income taxes or (y)
withholding taxes incurred by a Lender which is not incorporated
under the laws of the United States of America or a state
thereof) or if any taxes, assessments, or other Charges remain
unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent's or any Lender's opinion, may
possibly create a valid Lien on the Collateral, Agent may without
notice to Borrower pay the taxes, assessments or other Charges
and Borrower hereby indemnifies and holds Agent and each Lender
harmless in respect thereof. Agent will not pay any taxes,
assessments or Charges to the extent that Borrower has contested
or disputed those taxes, assessments or Charges in good faith, by
expeditious protest, administrative or judicial appeal or similar
proceeding provided that any related tax lien is stayed and
sufficient reserves are established to the reasonable
satisfaction of Agent to protect Agent's security interest in or
Lien on the Collateral. The amount of any payment by Agent under
this Section 4.13 shall be charged to Borrower's Account as a
Revolving Advance of a Domestic Rate Loan and added to the
Obligations and, until Borrower shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to
Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to
Borrower's credit and Agent shall retain its security interest in
any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Borrower shall
at all times pay, when and as due after giving effect to all
applicable grace periods, its rental obligations under all leases
under which it is a tenant, unless Borrower shall be contesting
or disputing the payment of such rental obligations in good faith
by expeditious protest and has established sufficient reserves to
the reasonable satisfaction of Agent and any related Lien which
may arise falls within the basket permitted by clause (r) of the
definition of Permitted Encumbrances, and shall otherwise comply,
in all material respects, with all other terms of such leases
and, at Agent's request, will provide evidence of having done so.
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4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables
shall be a bona fide and valid account representing a bona fide
indebtedness incurred by the Customer therein named, for a fixed
sum as set forth in the invoice relating thereto (provided
immaterial or unintentional invoice errors shall not be deemed to
be a breach hereof) with respect to an absolute sale or lease and
delivery of goods upon stated terms of Borrower, or work, labor
or services theretofore rendered by Borrower as of the date each
Receivable is created. Same shall be due and owing in accordance
with Borrower's standard terms of sale or other applicable
agreements without dispute, setoff or counterclaim except as may
be stated on the accounts receivable schedules delivered by
Borrower to Agent.
(b) Solvency of Customers. Each Customer, to the best
of Borrower's knowledge, as of the date each Receivable is
created, is and will be solvent and able to pay all Receivables
on which the Customer is obligated in full when due or with
respect to such Customers of Borrower who are not solvent
Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
(c) Locations of Borrower. Borrower's chief executive
office is located at 00000 Xxxxxxxx Xxxx, Xxxxx, Xxxxx 00000.
Until written notice is given to Agent by Borrower of any other
office at which Borrower keeps its records pertaining to
Receivables, all such records shall be kept at such executive
office.
(d) Collection of Receivables. Until Borrower's
authority to do so is terminated by Agent (which notice Agent may
give at any time during the continuance of an Event of Default),
Borrower will, at Borrower's sole cost and expense, but on
Agent's behalf and for Agent's account, collect as Agent's
property and in trust for Agent all amounts received on
Receivables, and shall not commingle such collections with
Borrower's funds or use the same except to pay Obligations.
Borrower shall deposit in the Blocked Account, or upon the
continuance of an Event of Default upon Agent's request deliver
to Agent, in original form and on the date of receipt thereof,
all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any
time during the occurrence of an Event of Default, Agent shall
have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables to any and all Customers or
any third party holding or otherwise concerned with any of the
Collateral. Thereafter, Agent shall have the sole right to
collect the Receivables, take possession of the Collateral, or
both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph,
secretarial and clerical expenses and the salaries of any
collection personnel used for collection, may be charged to
Borrower's Account and added to the Obligations.
(f) Power of Agent to Act on Borrower's Behalf. Agent
shall have the right to receive, endorse, assign and/or deliver
in the name of Agent or Borrower any and all checks, drafts and
other instruments for the payment of money relating to the
Receivables, and Borrower hereby waives notice of presentment,
protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Agent or Agent's designee as Borrower's
attorney with power (i) to endorse Borrower's name upon any
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notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) to sign Borrower's name
on any invoice or xxxx of lading relating to any of the
Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of
Receivables to any Customer, provided, however that absent the
occurrence and continuation of a Default or Event of Default,
Agent shall send no more than one such verification in any
calendar quarter; (iv) to sign Borrower's name on all financing
statements or any other documents or instruments deemed necessary
or appropriate by Agent to preserve, protect, or perfect Agent's
interest in the Collateral and to file same; (v) to demand
payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise
all of Borrower's rights and remedies with respect to the
collection of the Receivables and any other Collateral; (viii) to
settle, adjust, compromise, extend or renew the Receivables; (ix)
to settle, adjust or compromise any legal proceedings brought to
collect Receivables; (x) to prepare, file and sign Borrower's
name on a proof of claim in bankruptcy or similar document
against any Customer; (xi) to prepare, file and sign Borrower's
name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables; and (xii) to
do all other acts and things Agent deems are necessary in its
reasonable business judgment to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for
any acts of omission or commission nor for any error of judgment
or mistake of fact or of law, unless done maliciously or with
gross (not mere) negligence; this power being coupled with an
interest is irrevocable while any of the Obligations remain
unpaid. Agent shall not exercise its power with respect to
clauses (i), (ii), (v), (vi), (vii), (viii), (ix), (x) or (xi)
unless an Event of Default shall have occurred and be continuing.
Agent shall have the right at any time during the continuation of
an Event of Default, to change the address for delivery of mail
addressed to Borrower to such address as Agent may designate and
to receive, open and dispose of all mail addressed to Borrower.
(g) No Liability. Neither Agent nor any Lender shall,
under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof (other
than amounts actually received by Agent), or for any damage
resulting therefrom (other than damages from the gross (not mere)
negligence or willful misconduct of Agent or such Lender).
Following the occurrence and during the continuation of an Event
of Default Agent may, without notice or consent from Borrower,
xxx upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of
the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. Agent is
authorized and empowered to accept on behalf of Borrower
following the occurrence and during the continuation of an Event
of Default the return of the goods represented by any of the
Receivables, without notice to or consent by Borrower, all
without discharging or in any way affecting Borrower's liability
hereunder.
(h) Establishment of a Dominion Account. All proceeds
of Collateral shall be deposited by Borrower into a dominion
account or such other "blocked account" ("Blocked Accounts") as
Agent may require pursuant to an arrangement with such bank as
may be selected by Borrower and be acceptable to Agent. Borrower
shall issue to any such bank, an irrevocable letter of
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instruction directing said bank to transfer such funds so
deposited to Agent, either to any account maintained by Agent at
said bank or by wire transfer to appropriate account(s) of Agent.
All funds deposited in such Blocked Accounts shall immediately
become the property of Agent and Borrower shall obtain the
agreement by such bank to waive any offset rights against the
funds so deposited except with respect to fees or returned or
unpaid items and then only to the extent that such bank charges
such amounts to an operating account of Borrower maintained at
such bank prior to offsetting the Blocked Account. Neither Agent
nor any Lender assumes any responsibility for such Blocked
Accounts arrangement, including without limitation, any claim of
accord and satisfaction or release with respect to deposits
accepted by any bank thereunder. Alternatively, Agent may
establish depository accounts ("Depository Accounts") in the name
of Agent at a bank or banks for the deposit of such funds and
Borrower shall deposit all proceeds of Collateral or cause same
to be deposited, in kind, in such Depository Accounts of Agent in
lieu of depositing same to the Blocked Accounts.
(i) Adjustments. Borrower will not, without Agent's
consent, compromise or adjust any material amount of the
Receivables (or extend the time for payment thereof) or accept
any material returns of merchandise or grant any material
additional discounts, allowances or credits thereon except for
those compromises, adjustments, returns, discounts, credits and
allowances as have been heretofore customary in the business of
Borrower.
4.16. Inventory. To the extent Inventory held for sale
or lease has been produced by Borrower, it has been and will be
produced by Borrower in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and
orders thereunder.
4.17. Maintenance of Equipment. All necessary and
useful Equipment and all Equipment which was financed through the
proceeds of an Equipment Loan shall be maintained in good
operating condition and repair (reasonable wear and tear excepted
and casualty damage excepted to the extent such damages are
covered by insurance) and all necessary replacements of and
repairs thereto shall be made so that the value and operating
efficiency of such Equipment shall be maintained and preserved.
Borrower shall use and operate the Equipment in compliance with
all laws, statutes, ordinances, codes, rules or regulations where
the failure to comply could reasonably be expected to have a
Material Adverse Effect. Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein
contained shall be construed to constitute Agent or any Lender as
Borrower's agent for any purpose whatsoever, nor shall Agent or
any Lender be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the
cause thereof so long as Agent has acted in a commercially
reasonable manner. Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assume any of
Borrower's obligations under any contract or agreement assigned
to Agent or such Lender, and neither Agent nor any Lender shall
be responsible in any way for the performance by Borrower of any
of the terms and conditions thereof.
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4.19. Environmental Matters. (a) Borrower shall ensure
that the Real Property remains in compliance with all
Environmental Laws and it shall not place or permit to be placed
any Hazardous Substances on any Real Property unless the
placement of such Hazardous Materials is not prohibited by any
Environmental Law where any failure to comply with the foregoing
could reasonably be expected to result in a Material Adverse
Effect.
(b) Borrower shall establish and maintain a system to
reasonably assure and monitor continued compliance with all
applicable Environmental Laws which system shall include periodic
reviews of such compliance.
(c) Borrower shall (i) employ in connection with the
use of the Real Property such appropriate technology which in
good faith judgment of Borrower is necessary to maintain
compliance with any applicable Environmental Laws, (ii) dispose
of any and all Hazardous Waste generated at the Real Property in
quantities beyond those that would impose upon Borrower an
immaterial liability only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable
Environmental Law (to the extent such Hazardous Waste is not
treated by Borrower itself in accordance with applicable law) and
(iii) use commercially reasonable efforts to obtain certificates
of disposal, such as hazardous waste manifest receipts, from all
treatment, transport, storage or disposal facilities or operators
employed by Borrower in connection with the transport or disposal
of any Hazardous Waste generated at the Real Property, unless the
failure to do any of the foregoing could not reasonably be
expected to result in a Material Adverse Effect.
(d) In the event Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable
quantity of any Hazardous Substances at the Real Property (any
such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of violation, request for
information or notification as to whether it is potentially
responsible for investigation or cleanup of environmental
conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any
Hazardous Discharge or violation of Environmental Laws affecting
the Real Property or Borrower's interest therein (any of the
foregoing is referred to herein as an "Environmental Complaint")
from any state or local agency responsible in whole or in part
for environmental matters in the jurisdiction in which the Real
Property is located or the United States Environmental Protection
Agency (any such agency hereinafter the "Authority") and the
adverse consequences associated with any such Hazardous Discharge
or Environmental Complaint could reasonably be expected to result
in a Material Adverse Effect, then Borrower shall, within ten
(10) Business Days, give written notice of same to Agent
reasonably setting forth facts and circumstances of which
Borrower is aware giving rise to the Hazardous Discharge or
Environmental Complaint. Such information is to be provided to
allow Agent to protect its security interest in the Real
Property, if any, and the Collateral and is not intended to
create nor shall it create any obligation upon Agent or any
Lender with respect thereto.
(e) With respect to any Environmental Complaint
covered by clause (d) above which could reasonably be expected to
result in a Material Adverse Effect, Borrower shall promptly
forward to Agent copies of any notification of potential
liability or demand letter from the Authority relating to
potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated
or used by Borrower to dispose of Hazardous Substances and shall
continue to forward copies of material correspondence between
Borrower and the Authority regarding such Environmental Complaint
69
to Agent until the Environmental Complaint is settled. Borrower
shall promptly forward to Agent copies of all material documents
and reports concerning a Hazardous Discharge at the Real Property
that Borrower is required to file with an Authority under any
Environmental Laws. Such information is to be provided solely to
allow Agent to protect Agent's security interest in the Real
Property, if any, and the Collateral.
(f) Borrower shall respond promptly to any Hazardous
Discharge or Environmental Complaint where the failure to comply
with the Environmental Laws relating to such Hazardous Discharge
or Environmental Complaint could reasonably be expected to result
in a Material Adverse Effect, and in connection with such
response, take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or
Real Property to any Lien (other than Permitted Encumbrances).
If Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or Borrower shall fail to
comply with any of the requirements of any Environmental Laws
(where such failure could reasonably be expected to result in a
Material Adverse Effect), then Agent on behalf of Lenders may,
but without the obligation to do so, for the sole purpose of
protecting Agent's interest in the Collateral: (A) give such
notices or (B) enter onto the Real Property (or authorize third
parties to enter onto the Real Property) and take such actions as
Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to appropriately remediate any
such Hazardous Discharge or the violations or non-compliance
specified in such Environmental Complaint. All reasonable costs
and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums
paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with
interest thereon from the date expended at the Default Rate for
Domestic Rate Loans constituting Revolving Advances shall be paid
upon demand by Borrower, and until paid shall be added to and
become a part of the Obligations secured by the Liens created by
the terms of this Agreement or any other agreement between Agent,
any Lender and Borrower.
(g) Promptly upon the written request of Agent from
time to time (which request shall only be given by Agent (after
the occurrence and during the continuation of an Event of Default
and any non-compliance with any Environmental Law which could
reasonably be expected to result in a Material Adverse Effect),
Borrower shall provide Agent, at Borrower's expense, with an
environmental site assessment or environmental audit report
prepared by an environmental engineering firm acceptable in the
reasonable opinion of Agent, to assess with a reasonable degree
of certainty the subject matter of the alleged breach and the
potential costs in connection with abatement, cleanup and removal
of any Hazardous Substances found on, under, at or within the
Real Property relating to such breach. Any report or
investigation of such Hazardous Discharge proposed and acceptable
to an appropriate Authority that is charged to oversee the clean-
up of such Hazardous Discharge shall be acceptable to Agent. If
such environmental site assessment or audit report indicates,
individually or in the aggregate, that the cost of remediation
would exceed $2,500,000, then Agent shall establish a reserve
against borrowing availability under Section 2.1(a) hereof for
the amount of such costs, and if Undrawn Availability is less
than $2,500,000 at such time, then Agent shall have the right to
require Borrower to post a bond, letter of credit or other
security reasonably satisfactory to Agent to secure payment of
these costs and expenses.
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(h) Borrower shall defend and indemnify Agent and
Lenders and hold Agent, Lenders and their respective employees,
agents, directors and officers harmless from and against all
loss, liability, damage and expense, claims, costs, fines and
penalties, including reasonable attorney's fees, suffered or
incurred by Agent or Lenders under or on account of any
Environmental Laws, including, without limitation, the assertion
of any Lien thereunder, with respect to any Hazardous Discharge,
the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or emerges from the
Real Property or any contiguous real estate, except to the extent
such loss, liability, damage and expense is attributable to any
Hazardous Discharge resulting from actions on the part of Agent
or any Lender or the gross (not mere) negligence or willful
misconduct of Agent or such Lender. Borrower's obligations under
this Section 4.19 shall arise upon the discovery of the presence
of any Hazardous Substances at the Real Property, whether or not
any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any
Hazardous Substances. Borrower's obligation and the
indemnifications hereunder shall survive the termination of this
Agreement.
(i) For purposes of Section 4.19 and 5.7, all
references to Real Property shall be deemed to include all of
Borrower's right, title and interest in and to its owned and
leased premises.
4.20. Financing Statements. Except as respects the
financing statements filed by Agent and the financing statements
described on Schedule 1.2, no financing statement covering any of
the Collateral or any proceeds thereof is on file in any public
office other than under clauses (g), (j), (l) or (n) of the
definition of Permitted Encumbrances.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and
legal right to enter into this Agreement and the Other Documents
and to perform all its Obligations hereunder and thereunder.
This Agreement and the Other Documents constitute the legal,
valid and binding obligation of Borrower enforceable in
accordance with their terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, moratorium or
similar laws affecting creditors' rights generally. The
execution, delivery and performance of this Agreement and of the
Other Documents (a) are within Borrower's corporate powers, have
been duly authorized, are not in contravention of law or the
terms of Borrower's by-laws, certificate of incorporation or
other applicable documents relating to Borrower's formation or to
the conduct of Borrower's business or of any material agreement
or undertaking to which Borrower is a party or by which Borrower
is bound, and (b) will not conflict with nor result in any breach
in any of the provisions of or constitute a default under or
result in the creation of any Lien except Permitted Encumbrances
upon any asset of Borrower under the provisions of any agreement,
charter document, instrument, by-law, or other instrument to
which Borrower is a party or by which it or its property may be
bound.
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5.2. Formation and Qualification. (a) Borrower is duly
incorporated and in good standing under the laws of the state of
Idaho and is qualified to do business and is in good standing in
the states listed on Schedule 5.2(a) which constitute all states
in which qualification and good standing are necessary for
Borrower to conduct its business and own its property and where
the failure to so qualify could reasonably be expected to have a
Material Adverse Effect on Borrower. Borrower has delivered to
Agent true and complete copies of its certificate of incorpora
tion and by-laws and will promptly notify Agent of any amendment
or changes thereto.
(b) The only Subsidiaries of Borrower are listed on
Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this
Agreement and the Other Documents shall be true at the time of
Borrower's execution of this Agreement and the Other Documents,
and shall survive the execution, delivery and acceptance thereof
by the parties thereto and the closing of the transactions
described therein or related thereto but shall not survive the
termination of this Agreement.
5.4. Tax Returns. Borrower's federal tax identification
number is 00-0000000. Borrower has filed all federal, state and
local tax returns and other material reports it is required by
law to file and has paid all taxes, assessments, fees and other
governmental charges that are due and payable except to the
extent that Borrower shall be contesting or disputing such taxes,
assessments, fees and other governmental charges in good faith,
by expeditious protest, administrative or judicial appeal or
similar proceedings and, provided, further, that (i) (a) any
related tax Lien shall have no effect on the priority of the
Liens in favor of Agent or the value of the assets in which Agent
has a Lien, (b) a stay of enforcement of any such tax Lien is in
effect and (c) sufficient reserves are established by Borrower to
the reasonable satisfaction of agent or (ii) any related Tax lien
falls within the basket permitted by clause (r) of the definition
of Permitted Encumbrances. Federal, state and local income tax
returns of Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and
satisfied for all fiscal years prior to and including the fiscal
year ending August 31, 1993. The provision for taxes on the
books of Borrower is adequate for all years not closed by
applicable statutes, and for its current fiscal year, and
Borrower has no knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The pro forma balance sheet of Borrower (the "Pro
Forma Balance Sheet") furnished to Agent on the Closing Date
reflects the consummation of the transactions contemplated under
this Agreement (the "Transactions") and is, in Borrower's good
faith judgment, accurate, complete and correct and fairly
reflects in all material respects the financial condition of
Borrower as of the Closing Date after giving effect to the
Transactions. The Pro Forma Balance Sheet has been certified as
accurate, complete and correct in all material respects by the
Chief Financial Officer of Borrower.
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(b) The twelve-month cash flow projections of Borrower
and its projected balance sheets as of the Closing Date, copies
of which are annexed hereto as Exhibit 5.5(b) (the "Projections")
were prepared by the Chief Financial Officer of Borrower, are
based in Borrower's good faith judgment on underlying assumptions
which provide a reasonable basis for the projections contained
therein which are based on circumstances existing at the time
made. The cash flow Projections together with the Pro Forma
Balance Sheet, are referred to as the "Pro Forma Financial
Statements".
(c) The consolidated and consolidating balance sheets
of Borrower, its Subsidiaries and such other Persons described
therein (including the accounts of all Subsidiaries for the
respective periods during which a subsidiary relationship
existed) as of September 3, 1998, and the related statements of
income, changes in stockholder's equity, and changes in cash flow
for the period ended on such date, all accompanied by reports
thereon containing opinions without qualification by independent
certified public accountants, copies of which have been delivered
to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which
such accountants concur and present fairly in all material
respects the financial position of Borrower and its Subsidiaries
at such date and the results of their operations for such period.
Except as set forth on Schedule 5.5(c), since December 3, 1998
there has been no change in the condition, financial or
otherwise, of Borrower and its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the
aggregate value of machinery, equipment and Real Property owned
by Borrower and its Subsidiaries, except changes in the ordinary
course of business, none of which individually or in the
aggregate has been materially adverse.
5.6. Corporate Name. Except as set forth on Schedule 5.6,
Borrower has not been known by any other corporate name in the
past five years and does not sell Inventory under any other name,
nor has Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets
of any Person during the preceding five (5) years.
5.7. O.S.H.A. and Environmental Compliance.
(a) Borrower has duly complied with, and its
facilities, business, assets, property, leaseholds and Equipment
are in compliance in all material respects with, the provisions
of the Federal Occupational Safety and Health Act, the
Environmental Protection Act, RCRA and all other Environmental
Laws except as set forth on Schedule 5.7 hereto or where the
failure to so comply could not reasonably be expected to result
in a Material Adverse Effect; there are no outstanding citations,
notices or orders of non-compliance issued to Borrower or
relating to its business, assets, property, leaseholds or
Equipment under any such laws, rules or regulations which could
reasonably be expected to result in a Material Adverse Effect.
(b) Borrower has been issued all required federal,
state and local licenses, certificates or permits relating to all
applicable Environmental Laws except where failure to have such
licenses, certificates or permits could not reasonably be
expected to result in a Material Adverse Effect.
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(c) Except as set forth on Schedule 5.7(c) or where
the presence of any Hazardous Substances could not reasonably be
expected to result in a Material Adverse Effect, (i) there are no
visible signs of releases, spills, discharges, leaks or disposal
(collectively referred to as "Releases") of Hazardous Substances
at, upon, under or within any Real Property or any premises
leased by Borrower; (ii) there are no underground storage tanks
or polychlorinated biphenyls on the Real Property or any premises
leased by Borrower; (iii) to the best of Borrower's knowledge
following diligent inquiry, neither the Real Property nor any
premises leased by Borrower has ever been used as a treatment,
storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present on the Real Property or any
premises leased by Borrower, excepting such quantities as are
handled in accordance with all applicable manufacturer's
instructions and governmental regulations and in proper storage
containers and as are necessary for the operation of the
commercial business of Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or
Default.
(a) After giving effect to the Transactions, Borrower
will be solvent, able to pay its debts as they mature, have
capital sufficient to carry on its business and all businesses in
which it is about to engage, and (i) as of the Closing Date, the
fair present saleable value of its assets, calculated on a going
concern basis, is in excess of the amount of its liabilities and
(ii) subsequent to the Closing Date, the fair saleable value of
its assets (calculated on a going concern basis) will be in
excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower
has no (i) pending or threatened litigation, arbitration, actions
or proceedings which are reasonably likely to have a Material
Adverse Effect on Borrower, and (ii) indebtedness for borrowed
money other than the Obligations or as permitted by Section 7.8
hereof.
(c) Borrower is not in violation of any applicable
statute, regulation or ordinance in any respect which could
reasonably be expected to have a Material Adverse Effect, nor is
Borrower in violation of any order of any court, governmental
authority or arbitration board or tribunal which could reasonably
be expected to have a Material Adverse Effect.
(d) Borrower does not maintain or contribute to any
Multiemployer Plan or any Pension Benefit Plan other than those
listed on Schedule 5.8(d) hereto. Except as set forth in
Schedule 5.8(d) or as could not reasonably be expected to result
in a Material Adverse Effect, (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived,
and Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of
ERISA in respect of each Plan, (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue
Service to be qualified under Section 401(a) of the Code (or a
request for determination has been made within the applicable
remedial period) and the trust related thereto is exempt from
federal income tax under Section 501(a) of the Code, (iii)
Borrower has not incurred any liability to the PBGC which could
reasonably be expected to result in a Material Adverse Effect
other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan
that is subject to Title IV of ERISA has been terminated by the
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plan administrator thereof nor by the PBGC, and there is no
occurrence which would reasonably be expected to cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any
such Plan, (v) the current value of the assets of each Plan that
is subject to Title IV of ERISA equals or exceeds the present
value of the accrued benefits and other liabilities of such Plan
and neither Borrower nor to the best of Borrower's knowledge, any
member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such
assets and accrued benefits and other liabilities, (vi) neither
Borrower nor to the best of Borrower's knowledge, any member of
the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any
Plan, (vii) neither Borrower nor to the best of Borrower's
knowledge, any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B
of the Code, and to the best of Borrower's knowledge no fact
exists which would give rise to any such liability, (viii)
neither Borrower nor to the best of Borrower's knowledge, any
member of the Controlled Group nor any fiduciary of, nor any
trustee to, any Plan, has engaged in a "prohibited transaction"
described in Section 406 of the ERISA or Section 4975 of the Code
nor taken any action which could reasonably be expected to
constitute or result in a Termination Event with respect to any
such Plan which is subject to ERISA, (ix) Borrower has made all
contributions due and payable with respect to each Plan which is
subject to Title IV of ERISA, (x) there exists no event described
in Section 4043(b) of ERISA, for which the thirty (30) day notice
period contained in 29 CFR 2615.3 has not been waived, (xi)
neither Borrower nor any member of the Controlled Group has any
fiduciary responsibility for investments with respect to any plan
existing for the benefit of persons other than employees or
former employees of Borrower and any member of the Controlled
Group, and (xii) neither Borrower nor any member of the
Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan which would impose liability upon Borrower
under the Multiemployer Pension Plan Amendments Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. All
patents, patent applications, trademarks, trademark applications,
service marks, service xxxx applications, copyrights, copyright
applications, design rights and assumed names which are
registered with any state or federal agency and which are owned
or utilized by Borrower and all licenses (except for licenses of
commercially available software) and tradenames owned or held by
Borrower are set forth on Schedule 5.9, are valid and have been
duly registered or filed with all appropriate governmental
authorities, if applicable, except to the extent that the failure
of any such intellectual property rights, either singly or in the
aggregate, to be valid or registered could not reasonably be
expected to result in a Material Adverse Effect and together with
all trade secrets owned or utilized by Borrower constitute all of
the intellectual property rights which are necessary for the
operation of its business except to the extent the failure to so
possess any such intellectual property rights could not
reasonably be expected to result in a Material Adverse Effect;
there is no objection to or pending challenge to the validity of
any such patent, trademark, copyright, design right, tradename,
trade secret or license. Each patent, patent application, patent
license, trademark, trademark application, trademark license,
service xxxx, service xxxx application, service xxxx license,
design right, copyright, copyright application and copyright
license owned or held by Borrower and all trade secrets used by
Borrower consist of original material or property developed by
Borrower or was lawfully acquired by Borrower from the proper and
lawful owner thereof unless failure to do so could not reasonably
be expected to result in a Material Adverse Effect. Each of such
items has been maintained so as to preserve the value thereof
from the date of creation or acquisition thereof. Except as set
forth on Schedule 5.9 hereto, with respect to all software used
by Borrower where the failure to possess any source and object
codes or hold any license agreement from the software owner to
use such software could reasonably be expected to result in a
Material Adverse Effect, Borrower is in possession of all such
source and object codes related to each piece of such software or
is the beneficiary of a source code escrow agreement or holds a
license agreement from the software owner to use such software,
including all source and object codes related thereto.
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5.10. Licenses and Permits. Except as set forth in
Schedule 5.10, Borrower is in compliance with and has procured
and is now in possession of, all material licenses or permits
required by any applicable federal, state or local law or
regulation for the operation of its business in each jurisdiction
wherein it is now conducting or proposes to conduct business and
where the failure to be in compliance or procure such licenses or
permits could reasonably be expected to have a Material Adverse
Effect on Borrower.
5.11. Default of Indebtedness. As of the Closing Date,
Borrower is not in default in the payment of the principal of or
interest on any Indebtedness or under any instrument or agreement
under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving
of notice, or both, constitutes or would constitute an event of
default thereunder.
5.12. No Default. Borrower is not in default in the
performance of any of its contractual obligations which could
reasonably be expected to result in a Material Adverse Effect and
no Default has occurred.
5.13. No Burdensome Restrictions. Borrower is not party
to any contract or agreement the performance of which could
reasonably be expected to have a Material Adverse Effect on
Borrower. Borrower has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or
otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
5.14. No Labor Disputes. Borrower is not involved in
any labor dispute; there are no strikes or walkouts or union
organization of Borrower's employees threatened or in existence
and no labor contract is scheduled to expire during the Term, in
each case other than as set forth on Schedule 5.14 hereto or as
could not reasonably be expected to result in a Material Adverse
Effect.
5.15. Margin Regulations. Borrower is not engaged, nor
will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation
U of the Board of Governors of the Federal Reserve System as now
and from time to time hereafter in effect. No part of the
proceeds of any Advance will be used for "purchasing" or
"carrying" "margin stock" as defined in Regulation U of such
Board of Governors.
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