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REVOLVING CREDIT
AND
SECURITY AGREEMENT
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PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
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WITH
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AIR METHODS CORPORATION,
ROCKY MOUNTAIN HOLDINGS, L.L.C.,
MERCY AIR SERVICE, INC.
AND
ARCH AIR MEDICAL SERVICE, INC.
(BORROWERS)
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October 16, 2002
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REVOLVING CREDIT
AND
SECURITY AGREEMENT
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Revolving Credit and Security Agreement dated October 16, 2002 among AIR
METHODS CORPORATION, a corporation organized under the laws of the State of
Delaware ("AMC"), ROCKY MOUNTAIN HOLDINGS, LLC, a limited liability company
formed under the laws of the State of Delaware ("RMH"), MERCY AIR SERVICE, INC.,
a corporation organized under the laws of the State of California ("Mercy"),
ARCH AIR MEDICAL SERVICE, INC., a corporation formed under the laws of the State
of Missouri ("Arch Air") (AMC, RMH, Mercy and Arch Air, each a "Borrower" and
collectively "Borrowers"), 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").
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
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1.1. Accounting Terms. As used in this Agreement, the Note, or any
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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,
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however, whenever such accounting terms are used for the purposes of determining
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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 AMC for the fiscal year ended December 31, 2001
or upon any amendment of such financial covenants, GAAP as in effect on the date
of the last such amendment.
1.2. General Terms. For purposes of this Agreement the following terms
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shall have the following meanings:
"Acceptances" shall mean any existing and future drafts which involve
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any Borrower or beneficiary under a Letter of Credit as drawer that are
processed and accepted for payment by Agent or other accepting bank in its
absolute discretion.
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
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"Acquisition Agreement" shall mean the Membership Interest Purchase
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Agreement including all exhibits and schedules thereto dated June 6, 2002 among
RMH, Sellers and AMC, as buyer.
"Advances" shall mean and include the Revolving Advances and the
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Letters of Credit.
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
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hereof.
"Affiliate" of any Person shall mean (a) any Person which, directly or
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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 20% 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.
"Agent" shall have the meaning set forth in the preamble to this
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Agreement and shall include its successors and assigns.
"Aircraft" shall mean (i) an engine-driven fixed-wing aircraft heavier
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than air, that is supported in flight by the dynamic reaction of the air against
its wings or (ii) a rotorcraft that, for its horizontal motion, depends
principally on its engine-driven rotors. Aircraft shall include any item which
is incorporated in, attached to or specifically acquired by any Borrower to be
used only in connection with a specific Aircraft.
"Aircraft Indebtedness" shall mean Indebtedness incurred to finance
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the purchase, lease or maintenance of Aircraft.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal
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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%.
"Applicable Margin" shall mean initially, (x) with respect to
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Eurodollar Loans 2.25% and (y) with respect to Domestic Rate Loans 0%.
Commencing with the fiscal quarters which follow the receipt and review by Agent
of Borrowers' year end audited financial statements pursuant to Section 9.7
hereof for the fiscal year ending December 31, 2002 and upon receipt and review
by Agent of Borrower's unaudited quarterly financial statements at the end of
each fiscal quarter thereafter with two consecutive quarters of compliance
required, the Applicable Margin shall be adjusted effective five (5) Business
Days following receipt of such statements to the percentages set forth below
based upon the ratio of Senior Debt to EBITDA at the end of two consecutive
fiscal quarters calculated with respect to each of the respective four (4)
fiscal quarters then ended as follows:
Senior Debt to EBITDA Ratio Eurodollar Loans Domestic Rate Loans
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Less than 2.00 :1.00 1.75% 0%
Greater than or equal to 2.00 but
less than 2.50:1.00 2.00% 0%
Greater than or equal to 2.50 but
less than or equal to 3.50:1.00 2.25% 0%
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Greater than 3.50 but less than or
equal to 4.00:1.00 2.50% 0.25%
Greater than 4.00:1.00 3.00% 0.75%
If any financial statements referred to above are not delivered within
the required time periods then, until so delivered, the Senior Debt to EBITDA
Ratio as at the end of the fiscal period that would have been covered thereby
shall, for the purpose of this definition, be deemed to be greater than 4.00 to
1.0 and the Applicable Margin based upon such Senior Debt to EBITDA Ratio shall
become effective as of the due date of such delinquent financial statements. No
reduction in the Applicable Margin shall occur if an Event of Default has
occurred and is continuing at the time such reduction is scheduled to occur.
Such ratio with respect to the operating results of RMH shall be calculated on a
pro forma basis as if the transactions contemplated by the Acquisition Agreement
were consummated January 1, 2002.
"Authority" shall have the meaning set forth in Section 4.19(d).
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"Base Rate" shall mean the base commercial lending rate of PNC as
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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
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4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in the
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preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrowing Base Certificate" shall mean a certificate duly executed by
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an officer of Borrowing Agent appropriately completed and in substantially the
form of Exhibit A hereto.
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"Borrowers on a consolidated basis" shall mean the consolidation in
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accordance with GAAP of the accounts or other items of AMC and its Subsidiaries.
"Borrowers' Account" shall have the meaning set forth in Section 2.7.
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"Borrowing Agent" shall mean AMC.
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"Business Day" shall mean any day other than Saturday or Sunday or a
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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.
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"Capital Lease" of any Person shall mean any lease of any property
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(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to be, accounted for as a capital lease on the
balance sheet of that Person, together with any renewals of such leases (or
entry into new leases) on substantially similar terms.
"Capitalized Lease Obligations" of any Person shall mean all
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obligations under Capital Leases of such Person or any of its Subsidiaries in
each case taken at the amount thereof recorded as a liability on the balance
sheet in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
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Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec.Sec.9601 et
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seq.
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"Change of Control" shall mean the occurrence of an event, or series
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of events, which has led to (i) any "person" or "group" (as such terms are used
in sections 13(d) and 14(d) of the Exchange Act) becoming the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of capital stock of AMC representing 40% or more, on a fully diluted
basis, of the economic or voting interest of the then outstanding capital stock
of AMC, (ii) during any period commencing on or after October 16, 2002,
individuals who at the beginning of such period were directors of AMC, together
with such directors as have been duly approved by individuals who were directors
at the beginning of such period (or by directors duly approved by them), ceasing
for any reason to constitute a majority of the board of directors of AMC, (iii)
any "Change in Control" (as such term is defined in the Securities Purchase
Agreement), (iv) any Person or Persons who are not "citizens" of the United
States (as such term is defined in 14 Code of Federal Regulations Section 204.2,
as the same may be amended) owning or controlling 20% or more, in the aggregate,
of the voting capital stock of AMC or (v) AMC or any of its Affiliates that
holds any air carrier certificate(s) issued by the U.S. Department of
Transportation ceasing to be a "citizen" of the United States (as such term is
defined in 14 Code of Federal Regulations Section 204.2, as the same may be
amended).
"Charges" shall mean all taxes, charges, fees, imposts, levies or
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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, any Borrower or
any of its Affiliates.
"Closing Date" shall mean October 16, 2002 or such other date as may
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be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
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time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
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(a) all Receivables;
(b) all Equipment (other than Aircraft);
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all of each Borrower's right, title and interest in and
to (i) its respective 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 each 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 any Borrower from any Customer relating to
the Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of each Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments
(including promissory notes), documents, chattel paper (including electronic
chattel paper), warehouse receipts, deposit accounts, letters of credit, and
money; (vi) all commercial tort claims (whether now existing or hereafter
arising); (vii) if and when obtained by any Borrower, all real and personal
property of third parties in which such Borrower has been granted a lien or
security interest as security for the payment or enforcement of Receivables; and
(viii) any other goods, personal property or real property now owned or
hereafter acquired in which any 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 any Borrower;
(g) all of each Borrower's ledger sheets, ledger cards,
files, correspondence, records, books of account, business papers, computers,
computer software (owned by any Borrower or in which it has an interest),
computer programs, tapes, disks and documents relating to (a), (b), (c), (d),
(e) or (f) of this Paragraph; and
(h) all proceeds and products of (a), (b), (c), (d), (e), (f)
and (g) 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.
provided, however, the Collateral shall not include any rights or interests of
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Borrowers under any licenses, leases or other contracts if and to the extent
that (a) the terms of the agreement or agreements creating or evidencing such
rights or interests prohibit such grant and (b) the term prohibiting such grant
is effective as a matter of law and has not been waived or the consent of the
necessary party to the grant to Agent has not been obtained; provided, further,
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(i) if any such
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prohibition is subsequently lifted, terminated or is otherwise no longer
effective as a matter of law or is waived or the consent of the necessary party
is obtained, a security interest therein in favor of Agent shall automatically
arise hereunder without any further action on the part of Borrowers or Agent and
(ii) nothing contained herein shall be deemed to limit, impair or otherwise
affect Agent's security interest in any rights or interests of Borrowers in or
to monies due or to become due under any such agreement.
"Commitment Percentage" of any Lender shall mean the percentage set
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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 16.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
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Exhibit 16.3 hereto, properly completed and otherwise in form and substance
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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,
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approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on any
Borrower's business, including, without limitation, any Consents required under
all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a controlled group of
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corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect to
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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 or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Default" shall mean an event which, with the giving of notice or
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passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
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"Defaulting Lender" shall have the meaning set forth in Section
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2.13(a) hereof.
"Depository Accounts" shall have the meaning set forth in Section
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4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
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"Dollar" and the sign "$" shall mean lawful money of the United States
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of America.
"Domestic Rate Loan" shall mean any Advance that bears interest based
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upon the Alternate Base Rate.
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"Drawing Date" shall have the meaning set forth in Section 2.8.4(b).
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"Early Termination Date" shall have the meaning set forth in Section
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13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for any period the sum
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of (i) net income (or loss) of Borrowers on a consolidated basis for such period
(excluding extraordinary gains and losses), plus (ii) all interest expense of
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Borrowers on a consolidated basis for such period, plus (iii) all charges
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against income of Borrowers on a consolidated basis for such period for federal,
state and local income taxes.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
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Interest and Taxes for such period plus (ii) depreciation expenses for such
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period, plus (iii) amortization expenses for such period.
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"Eligible Inventory" shall mean and include Inventory consisting of
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Rotable Inventory, with respect to each Borrower determined on a
first-in-first-out basis, which is not, in Agent's opinion, obsolete, slow
moving or unmerchantable and which Agent, in its sole 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
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 each
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Borrower, each Receivable (other than Third Party Receivables) of such Borrower
arising in the ordinary course of such Borrower's business and which Agent, in
its sole 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) it arises out of a sale made by any Borrower to an
Affiliate of any Borrower or to a Person controlled by an Affiliate of any
Borrower;
(b) it is due or unpaid more than ninety (90) days after the
original due date or one hundred and 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. Such percentage may, in
Agent's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in
this Agreement with respect to such Receivable has been breached;
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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 outside the continental United
States of America, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(h) Agent believes, in its sole judgment, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state
or any department, agency or instrumentality of any of them, unless the
applicable 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;
(j) the goods giving rise to such Receivable have not been
shipped to the Customer or the services giving rise to such Receivable have not
been performed by the applicable Borrower or the Receivable otherwise does not
represent a final sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in its sole discretion, to the extent such Receivable
exceeds such limit;
(l) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim, the Customer is also a creditor or supplier
of a Borrower or the Receivable is contingent in any respect or for any reason;
(m) the applicable Borrower has made any agreement with any
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
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(n) any return, rejection or repossession of the merchandise
has occurred or the rendition of services has been disputed;
(o) such Receivable is not payable to a Borrower;
(p) such Receivable is due directly from the patient who
benefited from the services provided by a Borrower in respect of which such
Receivable was created; or
(q) 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.
"Eligible Third Party Receivables" shall mean and include with respect
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to each Borrower, those Third Party Receivables of such Borrower which qualify
as Eligible Receivables, provided, however that no Receivable shall be an
Eligible Third Party Receivable if it is due or unpaid more than one hundred and
eighty (180) days after the original invoice date.
"Eligible Traditional Receivables" shall mean and include with respect
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to each Borrower, all Eligible Receivables other than Eligible Third Party
Receivables.
"Environmental Complaint" shall have the meaning set forth in Section
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4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
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environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include as to each Borrower all of such
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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, "appliances" as defined in Section 40102 (a)(11) of Title 49 of the
United States Code and "spare parts" as defined in Section 40102(a)(38) of Title
49 of the United States Code, which appliances and spare parts are being
maintained by the Borrowers at the locations described on Schedule 4.5 and all
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replacements and substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
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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
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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
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successor
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1.00 - Reserve Percentage
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
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interest based on the Eurodollar Rate.
"Event of Default" shall mean the occurrence of any of the events set
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forth in Article X hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of
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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 October 16, 2002 among
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Borrowers and PNC.
"Financed Capital Expenditures" shall mean capital expenditures
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(including Capital Leases) made with (i) the proceeds of Aircraft Indebtedness
or (ii) Indebtedness (other than Indebtedness to Lenders under this Agreement)
secured by Permitted Encumbrances provided for in clause (g) of the definition
of Permitted Encumbrances.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to
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any fiscal period, the ratio of (a) EBITDA minus Unfinanced Capitalized
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Expenditures made during such period minus cash taxes paid during such period to
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(b) all Senior Debt Payments plus all Subordinated Debt Payments during such
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period.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
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"GAAP" shall mean generally accepted accounting principles in the
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United States of America in effect from time to time.
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"General Intangibles" shall mean and include as to each Borrower all
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of such Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all payment intangibles, 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, software, computer information, source codes, codes,
records and dates, 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 such Borrower to
secure payment of any of the Receivables by a Customer (other than to the extent
covered by Receivables) all rights of indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state or
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other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" shall mean any Person who may hereafter guarantee payment
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or performance of the whole or any part of the Obligations and "Guarantors"
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means collectively all such Persons.
"Guarantor Security Agreement" shall mean any Security Agreement
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executed by any Guarantor in favor of Agent securing the Guaranty of such
Guarantor.
"Guaranty" shall mean any guaranty of the obligations of Borrowers
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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
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4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
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explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
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the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
----------------
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Implicit Discount Rate" shall mean the discount rate which when
----------------------
applied to (i) all scheduled periodic lease payments through the final possible
early buy out option and (ii) the final buy out option payment, shall discount
such cash flows to a value equal to the original cost of the equipment being
leased.
11
"Indebtedness" shall mean, with respect to any Person, without
------------
duplication (i) indebtedness for borrowed money (or evidenced by notes payable,
borrowings under revolving credit facilities, interest that has accrued and
become payable and the payment of which has been satisfied by non-cash
consideration, and drafts accepted representing extensions of credit) payable
within one year of the date of creation (other than ordinary-course trade
payables), (ii) any obligation payable more than one year from the date of
creation thereof which in accordance with GAAP should be shown on a balance
sheet as a liability (including Capitalized Lease Obligations, borrowings under
revolving credit facilities, interest that has accrued and become payable and
the payment of which has been satisfied by non-cash consideration, but excluding
reserves for deferred compensation, deferred income taxes and post-retirement
benefit liabilities in accordance with Financial Accounting Standards Board
Statement No. 106), (iii) indebtedness which is secured by any Lien on property
owned by such Person, whether or not the obligation secured thereby shall have
been assumed, (iv) the face amount of letters of credit, bankers' acceptances
and other extensions of credit whether or not representing obligations for
borrowed money, (v) the net amount of all obligations with respect to Swaps,
(vi) redemption or repurchase obligations with respect to mandatorily redeemable
or repurchasable capital stock (or other equity interests) which is subject to
repurchase at the option of the holder thereof, (vii) all obligations for the
deferred purchase price of property or services (other than trade or other
accounts payable in the ordinary course of business), (viii) any unamortized
discount associated with the issuance of any Indebtedness, and (ix) all
obligations with respect to which such Person has become liable by way of a
guaranty.
"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.
"Interest Period" shall mean the period provided for any Eurodollar
---------------
Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include as to each Borrower all of such
---------
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any consignment arrangement,
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 such 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 as to each Borrower, all
-------------------
of such Borrower's now owned or hereafter acquired securities (whether
certificated or uncertificated), securities entitlements, securities accounts,
commodities contracts and commodities accounts.
"Issuer" shall mean Agent.
------
12
"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.
"Letters of Credit" shall have the meaning set forth in Section 2.8.1.
-----------------
"Letter of Credit Application" shall have the meaning set forth in
----------------------------
Section 2.8.2(a).
"Letter of Credit Borrowing" shall have the meaning set forth in
--------------------------
Section 2.8.4(d).
"Letter of Credit Fees" shall have the meaning set forth in Section
---------------------
3.2.
"Letters of Credit" shall have the meaning set forth in Section 2.9.
-----------------
"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.
"Life Net" shall mean Life Net Services, Inc., a Delaware corporation.
--------
"Material Adverse Effect" shall mean a material adverse effect (a) the
-----------------------
condition, operations, assets, business or prospects of Borrowers and their
Subsidiaries taken as a whole, (b) the Borrowers' 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 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.
"Maximum Revolving Advance Amount" shall mean $35,000,000.
--------------------------------
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Sections 3(37) and 4001(a)(3) of ERISA.
"Multiparty Guaranty" shall have the meaning set forth in the
-------------------
Securities Purchase Agreement.
"Net Worth" at a particular date, shall mean shareholders' equity of
---------
Borrowers on a consolidated basis.
"Note" shall mean collectively, the Revolving Credit Notes.
----
"Obligations" shall mean and include any and all loans, advances,
-----------
debts,
13
liabilities, obligations, covenants and duties owing by Borrowers to Lenders or
Agent or to any other direct or indirect subsidiary or affiliate of Agent or any
Lender 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 any 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, whether arising under any
agreement, instrument or document, (including, without limitation, 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 Lender's 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 any Borrower's Indebtedness and/or liabilities under this Agreement, the
Other Documents or under any other agreement between Agent or Lenders and any
Borrower 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 any Borrower to Agent or Lenders to perform acts or
refrain from taking any action.
"Other Documents" shall mean the Note, the Questionnaire, any
---------------
Guaranty, any Guarantor Security Agreement 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 any 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.
"Participation Advance" shall have the meaning set forth in Section
---------------------
2.8.4(d).
"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
14
designate by notice to Borrowing Agent and to each Lender to be the Payment
Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"PCP" shall mean Prudential Capital Partners, L.P.
---
"PCPMF" shall mean Prudential Capital Partners Management Fund, L.P.
-----
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
----------------------
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; 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; (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 money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of any
Borrower's business; (f) judgment Liens that have been stayed or bonded and
mechanics', workers', materialmen's or other like Liens arising in the ordinary
course of any Borrower's business with respect to obligations which are not due
or which are being contested in good faith by the applicable Borrower; (g) Liens
placed upon fixed assets hereafter acquired to secure a portion of the purchase
price thereof, provided that (x) any such Lien shall not encumber any other
property of the Borrowers 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 7.8; (h) Liens disclosed on
Schedule 1.2; (i) Liens on Aircraft securing Aircraft Indebtedness; (j) Liens on
------------
assets acquired in a transaction permitted by Section 7.1(a); (k) statutory
landlord's Liens to secure payment of rent so long as such Liens are
subordinated to the Liens in favor of Agent on terms reasonably acceptable to
Agent and (l) mortgages on Borrowers' facilities in Provo, Utah, St. Louis,
Missouri and Sparta, Illinois provided that such mortgages do not encumber any
more property than is covered by the mortgages that are being released on the
Closing Date with respect to such facilities and provided further that the
Indebtedness secured by such mortgages does not subject any Borrower or their
Subsidiaries to any financial covenants.
"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, maintained for employees of Borrowers or any member of
the Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
15
"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(a)hereof.
"Projections" shall have the meaning set forth in Section 5.5(a)
-----------
hereof.
"Purchasers" shall mean both individually and collectively, PCP and
----------
PCPMF and shall include their successors and assigns.
"Purchasing Lender" shall have the meaning set forth in Section 16.3
-----------------
hereof.
"Questionnaire" shall mean the Documentation Information Questionnaire
-------------
and the responses thereto provided by Borrowers and delivered to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
----
U.S.C. Sec.Sec. 6901 et seq., as same may be amended from time to time.
------
"Real Property" shall mean all of each Borrower's right, title and
-------------
interest in and to the owned and leased premises identified on Schedule 5.24
-------------
hereto.
"Receivables" shall mean and include, as to each Borrower, all of such
-----------
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to Borrowers by their Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables, and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all supporting obligations,
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.
"Receivables Advance Rate" shall have the meaning set forth in Section
------------------------
2.1(a)(y)(i) hereof.
"Reimbursement Obligation" shall have the meaning set forth in Section
------------------------
2.8.4(b).
"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 sixty-six and
----------------
two-thirds percent (66 2/3%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding sixty-six and two-thirds percent (66
2/3%) of the Commitment Percentages, provided, however, at such times that there
-------- -------
are only two (2) Lenders hereunder, "Required Lenders" shall mean all Lenders.
----------------
16
"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 Letters of
------------------
Credit.
"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 sum of the Alternate Base Rate plus the Applicable Margin with
respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus the
Applicable Margin with respect to Eurodollar Rate Loans.
"Rotable Inventory" shall mean all spare engines and propellers and
-----------------
all spare parts, accessories, appliances, assemblies, equipment, engines, goods
and other items, in each case, which are appropriate for installation or use on,
in or with any aircraft of any type now owned or hereafter acquired by any
Borrower, including any replacements, substitutions or renewals therefor and
accessions thereto and including but not limited to: any engines, propellers,
fans, valves, sensors, communications, navigation and radar spare parts,
interior components, landing gear, brakes, wheels, flight control items, avionic
parts, avionic spare parts, computers, panel assemblies, amplifiers, circuits,
transformers, seats, windows, storage bins, bulkhead assemblies, passenger
service units, generators, evacuation slides and covers, fire detectors, circuit
cards, fire extinguishers, drum assemblies, transmitters, jackshaft assemblies,
locks, start assemblies, doors and door assemblies, light assemblies,
alternators, compasses, antennas, ducts, joints, gauges, fans, windshields,
nozzles, ignitions, engine nose cones, cable assemblies, secondary equipment,
PCU rudders, engine indication and gas panels, MLG trucks, landing gears,
transceivers, mounts, turbine wheels, rudders, crank and shaft assemblies,
motors, transmissions and transmission assemblies, instrumentation, gearboxes,
gear assemblies, stick assemblies, pumps, clocks, flight data recorders,
regulators, transducers, toilets and lavatory spare parts, spare rotable parts
and other equipment, screws, washers, seals, filters, bolts, gaskets, bushings,
switches, nuts, and drill bits; provided, that the term "Rotable Inventory"
shall not include any item which is incorporated in, attached to or specifically
acquired by any Borrower to be used only in connection with a specific aircraft
of any Borrower.
"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.
"Securities Purchase Agreement" shall mean the Securities Purchase
-----------------------------
Agreement dated October 16, 2002 among Borrowers and the Purchasers.
"Sellers" shall mean Rocky Mountain Holdings, Inc., a Delaware
-------
corporation and AMC Helicopters Inc., a Delaware corporation.
17
"Senior Debt Payments" shall mean and include all cash actually
--------------------
expended by Borrowers to make (a) interest payments on any Advances hereunder,
plus, (b) payments for all fees, expenses, commissions and charges set forth
----
herein and with respect to any Advances, plus (c) capitalized lease payments,
----
plus (d) payments with respect to any other Indebtedness for borrowed money.
----
Senior Debt Payments shall exclude all fees and expenses paid to Agent and
Lenders on or prior to the Closing Date in connection with the closing of the
Transactions.
"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.
"Stockholders' Agreement" shall have the meaning set forth in the
-----------------------
Securities Purchase Agreement.
"Subordinated Debt Documentation" shall mean, collectively, the
-------------------------------
Securities Purchase Agreement, the Subordinated Note, the Warrants, the
Multiparty Guaranty, the Stockholders' Agreement and any and all other
agreements, documents, certificates and instruments from time to time executed
and delivered by or on behalf of Borrowers related thereto.
"Subordinated Debt Payments" shall mean and include all cash actually
--------------------------
expended to make payments of principal, interest, fees, expenses, commissions
and charges on the Subordinated Note and other amounts payable in connection
with the Warrants issued in connection with the Securities Purchase Agreement.
Subordinated Debt Payments shall exclude all fees and expenses paid to
Purchasers on or prior to the Closing Date in connection with the closing of the
Transactions.
"Subordinated Loan" shall mean the loan evidenced by the Subordinated
-----------------
Note.
"Subordinated Note" shall mean, collectively, the subordinated
-----------------
promissory notes issued by Borrowers in favor of Purchasers dated October 16,
2002 in the aggregate principal sum of $23,000,000.
"Subsidiary" 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.
"Swaps" shall mean, with respect to any Person, payment obligations
-----
with respect to interest or currency swaps, caps or similar arrangements
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making
18
such determination, if any agreement relating to such Swap provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
"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 any 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 might 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 may result 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 any Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Third Party Receivable" shall mean those Receivables due from
----------------------
Medicare, Medicaid, insurance companies, community based payors and other third
party providers acceptable to Agent in the exercise of its reasonable
discretion.
"Toxic Substance" shall mean and include any material present on the
---------------
Real Property which has been shown to have significant adverse effect on human
health or which is subject to regulation under the Toxic Substances Control Act
(TSCA), 15 U.S.C. Sec.Sec. 2601 et seq., applicable state law, or any other
------
applicable Federal or state laws now in force or hereafter enacted relating to
toxic substances. "Toxic Substance" includes but is not limited to asbestos,
polychlorinated biphenyls (PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in Section 5.5 hereof.
------------
"Transferee" shall have the meaning set forth in Section 16.3(b)
----------
hereof.
"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 Advances plus
----- ----
(ii) all amounts due and owing to Borrowers' trade creditors which are
outstanding beyond normal trade terms, plus (iii) fees and expenses for which
----
Borrowers are liable but which have not been paid or charged to Borrowers'
Account.
"Unfinanced Capital Expenditures" shall mean all capital expenditures
-------------------------------
that are not Financed Capital Expenditures.
"Warrants" shall mean the Warrants issued under and as defined in the
--------
Securities Purchase Agreement.
19
"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 from time to
time shall have the meaning given therein unless otherwise defined herein. To
the extent the definition of any category or type of Collateral is expanded by
any amendment, modification or revision to the Uniform Commercial Code, such
expanded definition will apply automatically as of the date of such amendment,
modification or revision.
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 Borrowers in
aggregate amounts outstanding at any time equal to such Lender's Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the
aggregate amount of outstanding Letters of Credit or (y) an amount equal to the
sum of:
(i) up to the sum of (a) 85%, subject to the
provisions of Section 2.1(b) hereof of Eligible Traditional
Receivables and (b) up to 75%, subject to the provision of
Section 2.1(b) hereof of Eligible Third Party Receivables (after
applying a net reimbursement rate as calculated during Agent's
collateral monitoring) (the rates set forth in (a) and (b),
collectively, referred to as the "Receivables Advance Rate"),
------------------------
plus
----
(ii) up to the lesser of (a) 60%, subject to the
provisions of Section 2.1(b) hereof of the lower of cost or
market value of the Eligible Inventory, (b) 85%, subject to the
provisions of Section 2.1(b) hereof, of the net orderly
liquidation value (based upon Agent's most recent appraisal) of
the Eligible Inventory (the rates set forth in (a) and (b),
collectively, referred to as the "Inventory Advance Rate") (the
----------------------
Receivables Advance Rate and the Inventory Advance Rate shall be
referred to collectively, as the "Advance Rates") or (c)
-------------
$15,000,000 in the
20
aggregate at any one time, minus
(iii) the aggregate amount of outstanding Letters of
Credit, minus
-----
(iv) 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) (iv) 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 exercise of its
reasonable discretion. Each Borrower consents to any such increases or
decreases and acknowledges that decreasing the Advance Rates or increasing the
reserves may limit or restrict Advances requested by Borrowing Agent. Agent
shall give Borrowing Agent five (5) Business Days prior written notice of its
intention to decrease the Advance Rates.
2.2. Procedure for Borrowing Advances.
--------------------------------
(a) Borrowing Agent on behalf of any Borrower may notify Agent
prior to 1:00 p.m. New York time on a Business Day of a Borrower's request to
incur, on that day, a Revolving Advance hereunder. Should any amount required
to be paid as interest hereunder, or as fees or other charges under this
Agreement or any other agreement with Agent or Lenders, 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 interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event any
Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent 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 $1,000,000 and in integral multiples of
$500,000 in addition thereto, and (iii) the duration of the first Interest
Period therefor. Interest Periods for Eurodollar Rate Loans shall be for one,
two, three or six 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
21
date such Eurodollar Rate Loan is made and shall end on such date as Borrowing
Agent 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.
Borrowing Agent 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. Borrowing Agent 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 Borrowing Agent, Borrowers 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, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
a Borrower desires to convert a loan, Borrowing Agent 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 five (5) Eurodollar Rate
Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior written
notice, any Borrower may prepay any 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 repayment. Such
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, Borrowers
shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f)
hereof.
(f) Each Borrower shall indemnify Agent and Lenders and hold Agent
and Lenders harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment, conversion
of or any default by any Borrower in the payment of the principal of or interest
on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing
of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, 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. For purposes of this Section, it shall be
assumed that Agent or
22
Lenders had obtained funds from such lenders of funds in order to make or
maintain its Eurodollar Rate Loans hereunder, for a corresponding amount and
term. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent or any Lender to Borrowing Agent shall be
conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for 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 Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrowers shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from
Agent, 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, Borrowers
shall pay Agent, upon Agent's request, such amount or amounts as may be
necessary to compensate Lenders for any loss or expense sustained or incurred by
Lenders 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 Borrowing Agent shall
be conclusive absent manifest error.
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 Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. During the Term,
Borrowers 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 Borrowers or deemed to have been
requested by Borrowers 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 the applicable Borrower on the day so requested by way of
credit to such Borrower's operating account at PNC, or such other bank as
Borrowing Agent 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 any Borrower, be disbursed
to Agent to be applied to the outstanding Obligations giving rise to such deemed
request.
2.4. Maximum Advances. The aggregate balance of Revolving Advances
----------------
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount less the aggregate undrawn amount of outstanding Letters of
Credit or (b) the Formula Amount less the aggregate undrawn amount of
outstanding Letters of Credit.
2.5. 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.
23
(b) Each 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 Borrowers' Account as
of the Business Day on which Agent receives those items of payment, each
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 Borrowers' Account for the amount of any item of payment which is
unsatisfactory to Agent and Agent may charge Borrowers' Account for the amount
of any item of payment which is returned to Agent unpaid.
(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 1:00 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
Borrowers' Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrowers 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.
2.6. 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.
2.7. Statement of Account. Agent shall maintain, in accordance with
--------------------
its customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers 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
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. 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.
2.8. Letters of Credit.
-----------------
24
2.8.1. Letter of Credit Facility. Subject to the terms and
-------------------------
conditions hereof, Agent shall (a) issue or cause the issuance of Letters of
Credit ("Letters of Credit") on behalf of any Borrower; provided, however, that
-------- -------
Agent will not be required to issue or cause to be issued any Letters of Credit
to the extent that the face amount of such Letters of Credit would then cause
the sum of (i) the outstanding Revolving Advances plus (ii) outstanding Letters
----
of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or
(y) the Formula Amount. The maximum amount of outstanding Letters of Credit
shall not exceed $2,500,000 in the aggregate at any time. All disbursements or
payments related to Letters of Credit shall be deemed to be Domestic Rate Loans
consisting of Revolving Advances and shall bear interest at the applicable
Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that have not
been drawn upon shall not bear interest.
2.8.2. Issuance of Letters of Credit.
-----------------------------
(a) Borrowing Agent, on behalf of Borrowers, may request Agent to
issue or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, Agent's form of Letter of Credit Application (the "Letter of
Credit Application") completed to the satisfaction of Agent at least three (3)
Business Days, or such shorter period as may be agreed to by Agent, in advance
of the proposed date of issuance; and, such other certificates, documents and
other papers and information as Agent may reasonably request. Borrowing Agent,
on behalf of Borrowers, also has the right to give instructions and make
agreements with respect to any application, any applicable letter of credit and
security agreement, any applicable letter of credit reimbursement agreement
and/or any other applicable agreement, any letter of credit and the disposition
of documents, disposition of any unutilized funds, and to agree with Agent upon
any amendment, extension or renewal of any Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide
for the payment of sight drafts or acceptances of usance drafts when presented
for honor thereunder in accordance with the terms thereof and when accompanied
by the documents described therein and (ii) have an expiry date not later than
six (6) months after such Letter of Credit's date of issuance and in no event
later than the last day of the Term. Each Letter of Credit shall be subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or
revision thereof adhered to by the Issuer and, to the extent not inconsistent
therewith, the laws of the State of New York. All standby Letters of Credit
shall be subject to the laws or rules designated in such standby Letter of
Credit, or if no laws or rules are designated, the International Standby
Practices (ISP98 - International Chamber of Commerce Publication Number 590)
(the "ISP98 Rules") and, as to matters not governed by the ISP98 Rules, the laws
-----------
of the State of New York.
(c) Agent shall use its reasonable efforts to notify Lenders of
the request by Borrowing Agent for a Letter of Credit hereunder.
2.8.3. Requirements For Issuance of Letters of Credit; Indemnity.
---------------------------------------------------------
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Agent, each Lender and each Issuer
harmless from any loss, cost,
25
expense or liability, including, without limitation, payments made by Agent, any
Lender or any Issuer and expenses and reasonable attorneys' fees incurred by
Agent, any Lender or Issuer arising out of, or in connection with, any Letter of
Credit to be issued or created for any Borrower. Borrowers shall be bound by
Agent's or any Issuer's regulations and good faith interpretations of any Letter
of Credit issued or created for Borrowers' Account, although this interpretation
may be different from its own; and, neither Agent, nor any Lender, nor any
Issuer nor any of their correspondents shall be liable for any error,
negligence, or mistakes, whether of omission or commission, in following
Borrowing Agent's or any Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit, except for Agent's, any Lender's, any
Issuer's or such correspondents' willful misconduct.
(b) Borrowing Agent shall authorize and direct any Issuer to name
the applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrowing Agent
shall authorize and direct the Issuer to deliver to Agent all instruments,
documents, and other writings and property received by the Issuer pursuant to
the Letter of Credit and to accept and rely upon Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit, the application therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or caused to
be issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority (i) to sign and/or
endorse such Borrower's name upon any warehouse or other receipts, letter of
credit applications and acceptances; (ii) to sign such Borrower's name on bills
of lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or Agent or Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower's
name or Agent's, or in the name of Agent's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof. Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's willful misconduct. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
2.8.4. Disbursements, Reimbursement.
----------------------------
(a) Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Agent a participation in such Letter of Credit and each
drawing thereunder in an amount equal to such Lender's Commitment Percentages of
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing, respectively.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Agent will promptly notify
Borrowers. Provided that it shall have received such notice, Borrowers shall
reimburse (such obligation to reimburse the Agent shall sometimes be referred to
as a "Reimbursement Obligation") the Agent prior to 12:00
26
noon, New York time on each date that an amount is paid by the Agent under any
Letter of Credit (each such date, a "Drawing Date") in an amount equal to the
amount so paid by the Agent. In the event the Borrower fails to reimburse the
Agent for the full amount of any drawing under any Letter of Credit by 12:00
noon, New York time, on the Drawing Date, the Agent will promptly notify each
Lender thereof, and Borrowers shall be deemed to have requested that a Domestic
Rate Loan be made by the Lenders to be disbursed on the Drawing Date under such
Letter of Credit, subject to the amount of the unutilized portion of the lesser
of Maximum Revolving Advance Amount or the Formula Amount and subject to Section
8.2. Any notice given by the Agent pursuant to this Section 2.8.4(b) may be oral
if immediately confirmed in writing; provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice.
(c) Each Lender shall upon any notice pursuant to Section 2.8.4(b)
make available to the Agent an amount in immediately available funds equal to
its Commitment Percentage of the amount of the drawing, whereupon the
participating Lenders shall (subject to Section 2.8.4(d)) each be deemed to have
made a Domestic Rate Loan to Borrowers in that amount. If any Lender so
notified fails to make available to the Agent the amount of such Lender's
Commitment Percentage of such amount by no later than 2:00 p.m., New York time
on the Drawing Date, then interest shall accrue on such Lender's obligation to
make such payment, from the Drawing Date to the date on which such Lender makes
such payment (i) at a rate per annum equal to the Federal Funds Rate during the
first three days following the Drawing Date and (ii) at a rate per annum equal
to the rate applicable to Domestic Rate Loans on and after the fourth day
following the Drawing Date. The Agent will promptly give notice of the
occurrence of the Drawing Date, but failure of the Agent to give any such notice
on the Drawing Date or in sufficient time to enable any Lender to effect such
payment on such date shall not relieve such Lender from its obligation under
this Section 2.8.4(c), provided that such Lender shall not be obligated to pay
interest as provided in Section 2.8.4 (c) (i) and (ii) until and commencing from
the date of receipt of notice from Agent of a drawing. Each Lender's
participation commitment shall continue until the last to occur of any of the
following events: (A) Agent ceases to be obligated to issue or cause to be
issued Letters of Credit hereunder; (B) no Letter of Credit issued or created
hereunder remains outstanding and uncancelled or (C) all Persons (other than the
applicable Borrower) have been fully reimbursed for all payments made under or
relating to Letters of Credit.
(d) With respect to any unreimbursed drawing that is not converted
into a Domestic Rate Loan to Borrowers in whole or in part as contemplated by
Section 2.8.4(b), because of the Borrowers' failure to satisfy the conditions
set forth in Section 8.2 other than any notice requirements or for any other
reason, Borrowers shall be deemed to have incurred from the Agent a borrowing
(each a "Letter of Credit Borrowing") in the amount of such drawing. Such Letter
of Credit Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at the rate per annum applicable to a Domestic Rate
Loan. Each Lender's payment to the Agent pursuant to Section 2.8.4(c) shall be
deemed to be a payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a "Participation Advance" from such Lender in
satisfaction of its participation obligation under this Section 2.8.4.
27
2.8.5. Repayment of Participation Advances.
-----------------------------------
(a) Upon (and only upon) receipt by the Agent for its account of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by the Agent under the Letter of Credit with respect to which any Lender
has made a Participation Advance to the Agent, or (ii) in payment of interest on
such a payment made by the Agent under such a Letter of Credit, the Agent will
pay to each Lender, in the same funds as those received by the Agent, the amount
of such Lender's Commitment Percentage of such funds, except the Agent shall
retain the amount of the Commitment Percentage of such funds of any Lender that
did not make a Participation Advance in respect of such payment by Agent.
(b) If the Agent is required at any time to return to any
Borrower, or to a trustee, receiver, liquidator, custodian, or any official in
any insolvency proceeding, any portion of the payments made by any Borrower to
the Agent pursuant to Section 2.8.5(a) in reimbursement of a payment made under
the Letter of Credit or interest or fee thereon, each Lender shall, on demand of
the Agent, forthwith return to the Agent the amount of its Commitment Percentage
of any amounts so returned by the Agent.
2.8.6. Documentation. Each Borrower agrees to be bound by the
-------------
terms of the Letter of Credit Application and the Agent's written regulations
and customary practices relating to letters of credit, though the Agent's
interpretation of such regulations and practices may be different from such
Borrower's own. In the event of a conflict between the Letter of Credit
Application and this Agreement, this Agreement shall govern. It is understood
and agreed that, except in the case of gross negligence or willful misconduct,
the Agent shall not be liable for any error, negligence and/or mistakes, whether
of omission or commission, in following any Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments or
supplements thereto.
2.8.7. Determination to Honor Drawing Request. In determining
--------------------------------------
whether to honor any request for drawing under any Letter of Credit by the
beneficiary thereof, the Agent shall be responsible only to determine that the
documents and certificates required to be delivered under such Letter of Credit
have been delivered and that they comply on their face with the requirements of
such Letter of Credit.
2.8.8. Nature of Participation and Reimbursement Obligations.
-----------------------------------------------------
Each Lender's obligation in accordance with this Agreement to make the Revolving
Advances or Participation Advances as a result of a drawing under a Letter of
Credit, and the obligations of the Borrowers to reimburse the Agent upon a draw
under a Letter of Credit, shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Section 2.8.8
under all circumstances, including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or other
right which such Lender may have against the Agent, Borrowers or any other
Person for any reason whatsoever;
(ii) the failure of any Borrower or any other Person to
comply, in
28
connection with a Letter of Credit Borrowing, with the conditions set forth in
this Agreement for the making of a Revolving Advance, it being acknowledged that
such conditions are not required for the making of a Letter of Credit Borrowing
and the obligation of the Lenders to make Participation Advances under Section
2.8.4;
(iii) any lack of validity or enforceability of any Letter
of Credit;
(iv) the existence of any claim, set-off, defense or other
right which any Borrower or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for whom
any such transferee may be acting), the Agent or any Lender or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between any
Borrower or Subsidiaries of a Borrower and the beneficiary for which any Letter
of Credit was procured);
(v) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, even if the Agent has been notified thereof;
(vi) payment by the Agent under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit other than as a result of the
gross (not mere) negligence or willful misconduct of Agent;
(vii) any Material Adverse Effect on any Borrower or any
Guarantor;
(viii) any breach of this Agreement or any Other Document by
any party thereto;
(ix) the occurrence or continuance of an insolvency
proceeding with respect to any Borrower or any Guarantor;
(x) the fact that a Default or Event of Default shall have
occurred and be continuing;
(xi) the fact that the Term shall have expired or this
Agreement or the Obligations hereunder shall have been terminated; and
(xii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
2.8.9. Liability for Acts and Omissions. As between any Borrower
--------------------------------
and the Agent and Lenders, such Borrower assumes all risks of the acts and
omissions of, or misuse of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the respective foregoing, the Agent shall not be responsible for: (i) the
29
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged
(even if the Agent shall have been notified thereof); (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
any such Letter of Credit, or any other party to which such Letter of Credit may
be transferred, to comply fully with any conditions required in order to draw
upon such Letter of Credit or any other claim of any Borrower against any
beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among any Borrower and any beneficiary of any Letter of Credit or any
such transferee; (iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter
of Credit of the proceeds of any drawing under such Letter of Credit; or (viii)
any consequences arising from causes beyond the control of the Agent, including
any governmental acts, and none of the above shall affect or impair, or prevent
the vesting of, any of the Agent's rights or powers hereunder. Nothing in the
preceding sentence shall relieve the Agent from liability for the Agent's gross
negligence or willful misconduct in connection with actions or omissions
described in such clauses (i) through (viii) of such sentence.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by the Agent under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith, shall not
put the Agent under any resulting liability to any Borrower or any Lender.
2.9. Additional Payments. Any sums expended by Agent or any Lender due
-------------------
to any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' 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.
(b) Each payment (including each prepayment) by Borrowers 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. Except as expressly provided herein, all
payments (including prepayments) to be made by any Borrower on account of
principal, interest and fees shall be made without set off or counterclaim and
shall be made to Agent on behalf of the Lenders to the Payment Office, in each
case on or prior to 1:00 P.M., New York time, in Dollars and in immediately
available funds.
30
(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 any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 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 Revolving Interest 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 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
31
Settlement Date and, in reliance upon such assumption, make available to
Borrowers a corresponding amount. Agent will promptly notify Borrowers 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 Borrowers; provided, however, that Agent's right to such recovery
-------- -------
shall not prejudice or otherwise adversely affect Borrowers' rights (if any)
against such Lender.
2.11. Mandatory Prepayments.
---------------------
Subject to Section 4.3 hereof, when any Borrower sells or otherwise
disposes of any Collateral other than Inventory in the ordinary course of
business, Borrowers 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
to the outstanding 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. Borrowers shall apply the proceeds of Advances to
---------------
(i) fund in part the acquisition of RHM under the Acquisition Agreement, (ii)
repay existing indebtedness owed to PNC, (iii) pay fees and expenses relating to
the Transactions, and (iv) to provide for their working capital needs.
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 Borrowing Agent 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
32
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.
(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 any 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.
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 the applicable Revolving Interest Rate.
Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the applicable Revolving Interest 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, the Obligations may, at Agent's option, and
shall, at the direction of Required Lenders, bear interest at the applicable
Revolving Interest Rate for Domestic Loans plus two percent (2%) per annum (the
"Default Rate").
33
3.2. Letter of Credit Fees.
---------------------
(a) Borrowers shall pay (x) to Agent, for the benefit of Lenders,
fees for each Letter of Credit for the period from and excluding the date of
issuance of same to and including the date of expiration or termination, equal
to the average daily face amount of each outstanding Letter of Credit multiplied
by the difference of (i) the then Applicable Margin for Eurodollar Rate Loans
per annum minus (ii) .25%, such fees to be calculated on the basis of a 360-day
year for the actual number of days elapsed and to be payable monthly in arrears
on the first day of each month and on the last day of the Term and (y) to the
Issuer, fees for each Letter of Credit for the period from and excluding the
date of issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by .25%, such fees to be calculated on the basis of a 360-day year
for the actual number of days elapsed and to be payable monthly in arrears on
the first day of each month and on the last day of the Term and any and all fees
and expenses as agreed upon by the Issuer and the Borrowing Agent in connection
with any Letter of Credit, including, without limitation, in connection with the
opening, amendment or renewal of any such Letter of Credit and any acceptances
created thereunder and shall reimburse Agent for any and all fees and expenses,
if any, paid by Agent to the Issuer and (z) to the Agent for the Agent's sole
account the Agent's then in effect customary fees and administrative expenses
payable with respect to Letters of Credit as the Agent may generally charge or
incur from time to time in connection with the issuance, maintenance,
modification (if any), assignment or transfer (if any), negotiation and
administration of Letters of Credit (all of the foregoing fees, the "Letter of
Credit Fees"). All such charges shall be deemed earned in full on the date when
the same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. Any such
charge in effect at the time of a particular transaction shall be the charge for
that transaction, notwithstanding any subsequent change in the Issuer's
prevailing charges for that type of transaction. All Letter of Credit Fees
payable hereunder shall be deemed earned in full on the date when the same are
due and payable hereunder and shall not be subject to rebate or proration upon
the termination of this Agreement for any reason. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, the Letter of
Credit Fees may, at Agent's option, and shall, at the direction of Required
Lenders, be increased by an additional two percent (2%) per annum.
On demand, Borrowers will cause cash to be deposited and maintained in
an account with Agent, as cash collateral, in an amount equal to one hundred and
five percent (105%) of the outstanding Letters of Credit, and each Borrower
hereby irrevocably authorizes Agent, in its discretion, on such Borrower's
behalf and in such Borrower's name, to open such an account and to make and
maintain deposits therein, or in an account opened by such Borrower, in the
amounts required hereunder, out of the proceeds of Receivables or other
Collateral or out of any other funds of such Borrower coming into any Lender's
possession at any time. Agent will invest such cash collateral (less applicable
reserves) in such short-term money-market items as to which Agent and such
Borrower mutually agree and the net return on such investments shall be credited
to such account and constitute additional cash collateral. No Borrower may
withdraw amounts credited to any such account except upon payment and
performance in full of all Obligations and termination of this Agreement.
34
3.3. Facility Fee. If, for any fiscal quarter during the Term, the
------------
average daily unpaid balance of the Revolving Advances for each day of such
fiscal quarter does not equal the Maximum Revolving Advance Amount, then
Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a rate
equal to one quarter of one percent (.25%) per annum on the amount by which the
Maximum Revolving Advance Amount exceeds such average daily unpaid balance.
Such fee shall be payable to Agent in arrears on the first day of each fiscal
quarter with respect to the immediately preceding 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 and interest thereon shall be payable at the applicable
Revolving Interest Rate for Domestic Rate Loans during such extension.
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 Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.7. Increased Costs. In the event that 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:
(a) 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 changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) 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, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
35
(c) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement or any
Other Document;
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 Borrowers shall promptly pay Agent or such Lender, upon 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. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowers, and such certification shall be
conclusive absent manifest error.
3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the
--------------------------------------------------------
event that Agent or any Lender shall have determined that:
(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 Borrowing Agent 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 Borrowing
Agent shall notify Agent no later than 1:00 p.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 Borrowing Agent shall notify
Agent, no later than 1:00 p.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 Borrowing Agent shall
notify Agent, no later than 1:00 p.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
no Borrower shall 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.
----------------
36
(a) In the event that Agent or any Lender shall have determined
that 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, Borrowers shall pay upon 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.
(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 Borrowers shall be conclusive
absent manifest error.
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, each Borrower
hereby 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. Each 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. Each Borrower shall promptly provide Agent with written notice of all
commercial tort claims, such notice to contain the case title together with the
applicable court and a brief description of the claim(s). Upon delivery of each
such notice, such Borrower shall be deemed to hereby grant to Agent a security
interest and lien in and to such commercial tort claims and all proceeds
thereof.
4.2. Perfection of Security Interest. Each Borrower shall take all
-------------------------------
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority 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
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers for any
location where the book value of
37
Inventory located at such location is greater than $100,000 in the aggregate
(provided, however, that if Borrowers are unable to obtain any such waiver,
-------- -------
Agent may take a six month rent reserve in the calculation of the Formula Amount
for each such location and Borrowers' failure to obtain such waiver shall not
constitute an Event of Default), (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, (iv) entering into warehousing, lockbox and
other custodial arrangements satisfactory to Agent, and (v) executing and
delivering financing statements, control agreements, 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 the
Uniform Commercial Code as adopted in the State of New York from time to time.
By its signature hereto, each Borrower hereby authorizes Agent to file against
such Borrower, one or more financing, continuation, or amendment statements
pursuant to the Uniform Commercial Code in form and substance satisfactory to
Agent (which statements may have a description of collateral which is broader
than that set forth herein). All charges, expenses and fees Agent may incur in
doing any of the foregoing, and any local taxes relating thereto, shall be
charged to Borrowers' 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. Each 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 and (b) the disposition or transfer of Equipment
during any fiscal year having an aggregate fair market value of not more than
$250,000 (other than Aircraft) and only to the extent that (i) the proceeds of
any such disposition are used to acquire replacement Equipment which is subject
to Agent's first priority security interest or (ii) the proceeds of which are
remitted to Agent to be applied pursuant to Section 2.11.
4.4. Preservation of Collateral. Following the occurrence of a Default or
--------------------------
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
any 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 any 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. Each 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 expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to
38
Borrowers' 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) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest 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) each document and agreement executed by each Borrower or delivered to Agent
or any Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) Schedule 4.5 sets forth each location at which
any Borrower has Equipment and Inventory and shall not be removed from such
locations without the prior written consent of Agent except with respect to (i)
the sale of Inventory in the ordinary course of business, (ii) transfers of
Equipment permitted by Section 4.3 and (iii) the relocation of Inventory and
-----------
Equipment to a location other than as set forth on Schedule 4.5, provided that
------------
(A) the aggregate amount of such relocated Inventory shall not exceed at any one
time One Hundred Thousand Dollars ($100,000.00) and (B) within thirty (30) days
of such relocation, Borrowers shall have delivered to Agent such UCC-1 financing
statements, landlord waivers and other documents as Agent may require to perfect
and protect its interests in such Inventory.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
-----------------------------------------
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. Except as set forth in Section 4.3 hereof, during such period no
Borrower shall, without Agent's prior written consent, pledge, sell, assign,
transfer, 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. Each Borrower shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following 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, Borrowers 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. Each
Borrower shall, 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 any
Borrower's possession, they, and each of them, shall be held by such Borrower in
trust as Agent's trustee, and such Borrower will immediately deliver them to
Agent in their original form together with any necessary endorsement.
4.7. Books and Records. Each 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
39
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 Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes
--------------------
and directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
any Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and authorizes such
accountants to provide to Agent and each Lender any information such accountants
may have concerning such Borrower's financial status and business operations.
Each Borrower hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such Borrower, whether made by such Borrower or otherwise; however, Agent and
each Lender will attempt to obtain such information or materials directly from
such Borrower prior to obtaining such information or materials from such
accountants or such authorities.
4.9. Compliance with Laws. Each Borrower shall comply with all acts,
--------------------
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to its respective Collateral or any part thereof or
to the operation of such Borrower's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect. The assets of
Borrowers at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the assets of
Borrowers so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent and each
----------------------
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower's business. Agent, any Lender and their agents may enter upon any of
each Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower's business.
4.11. Insurance. Each Borrower shall bear the full risk of any loss of
---------
any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts customary for companies engaged in businesses
similar to the Borrowers and with carriers reasonably acceptable to Agent, each
Borrower shall (a) keep all its insurable properties and properties in which
each 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 such Borrower's including, without limitation,
business interruption insurance; (b) maintain a
40
bond in such amounts as is customary in the case of companies engaged in
businesses similar to such Borrower 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 such Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Borrower is engaged in business; (e) furnish Agent
with (i) copies of all policies and evidence of the maintenance of such policies
by the renewal thereof at least thirty (30) days before any expiration date, and
(ii) appropriate loss payable endorsements in form and substance reasonably
satisfactory to Agent, naming Agent as a co-insured and loss payee with respect
to the Collateral as its interests may appear with respect to all insurance
coverage referred to in clauses (a) and (c) above, and providing (A) that all
proceeds thereunder shall be payable to Agent (and jointly with Agent in the
case of Arch Air and Mercy so long as such proceeds are delivered directly 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 the applicable Borrower to make payment for such loss to Agent and not
to such Borrower and Agent jointly. If any insurance losses are paid by check,
draft or other instrument payable to any Borrower and Agent jointly, Agent may
endorse such Borrower's name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. Agent is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a) and (b)
above. All loss recoveries received by Agent upon any such insurance may be
applied to the Obligations in such order as Agent in its sole discretion shall
determine; provided, however, as long as no Default or Event of Default shall
have occurred, Agent shall permit Borrowers to use proceeds of insurance losses
up to One Hundred Fifty Thousand Dollars ($150,000.00) in the aggregate during
any fiscal year of Borrowers to repair or replace the damaged Collateral. Any
surplus shall be paid by Agent to Borrowers or applied as may be otherwise
required by law.
4.12. Failure to Pay Insurance. If any 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 such
Borrower, and charge Borrowers' 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. Each Borrower will pay, when due, all taxes,
----------------
assessments and other Charges lawfully levied or assessed upon such 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. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction between any
Borrower and Agent or any Lender which Agent or any Lender may be required to
withhold or pay or if any taxes,
41
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 Borrowers pay the taxes, assessments or other Charges and each
Borrower hereby indemnifies and holds Agent and each Lender harmless in respect
thereof. The amount of any payment by Agent under this Section 4.13 shall be
charged to Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and
added to the Obligations and, until Borrowers 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 Borrowers' credit and Agent shall retain its
security interest in any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Each Borrower shall at all times
--------------------------------
pay, when and as due (subject to any applicable grace period), its rental
obligations under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such leases and keep
them in full force and effect and, at Agent's request will provide evidence of
having done so.
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 a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be reserved against
on Borrowers' financial statements or stated on the accounts receivable
schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of each
---------------------
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 any Borrower who are not
solvent, such Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables to the extent determined not to
be collectible.
(c) Locations of Borrower. Each Borrower's chief executive office
---------------------
is located at the addresses set forth on Schedule 4.15(c) hereto. Until written
----------------
notice is given to Agent by Borrowing Agent of any other office at which any
Borrower keeps its records pertaining to Receivables, all such records shall be
kept at such executive office.
(d) Collection of Receivables. Until any Borrower's authority to
-------------------------
do so is terminated by Agent (which notice Agent may give at any time following
the occurrence and during the continuation of an Event of Default or a Default
or when Agent in its sole discretion deems it to be in Lenders' best interest to
do so), each Borrower will, at such 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 any Borrower's funds or use the same except to pay Obligations.
Each Borrower shall, upon request, deliver to Agent, or deposit in the Blocked
Account, in original form and on the
42
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
-----------------------------------------
following the occurrence and during the continuation of an Event of Default or a
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, so long as the Event of Default or Default is continuing, 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 Borrowers' Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf. Agent shall have
------------------------------------------
the right to receive, endorse, assign and/or deliver in the name of Agent or
any Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such 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; (iv) to sign such 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
Borrowers' 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 such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to prepare, file and sign such 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 necessary 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 have the right at any time to change the address for
delivery of mail addressed to any Borrower to such address as Agent may
designate and to receive, open and dispose of all mail addressed to any
Borrower. Notwithstanding anything in this Section 4.15(f) to the contrary,
provided that no Default or Event of Default shall have occurred and neither
Agent nor any Lender has a good faith belief that such action must be taken
immediately, Agent shall give Borrowers five (5) days notice (together with
copies of all relevant documents) prior to taking any of the actions referred to
in items (v), (vi), (viii) or (ix) above.
(g) No Liability. Neither Agent nor any Lender shall, under any
------------
43
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, or for
any damage resulting therefrom. Following the occurrence of an Event of Default
or Default, Agent may, without notice or consent from any 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 following the occurrence of an Event
of Default or Default the return of the goods represented by any of the
Receivables, without notice to or consent by any Borrower, all without
discharging or in any way affecting any Borrower's liability hereunder. At such
times as no Events of Default or Defaults are continuing, Agent will not
exercise any of the actions set forth in the preceding two sentences other than
those actions already commenced during the continuance of any Events of Default
or Default.
(h) Establishment of a Lockbox Account, Dominion Account. All
----------------------------------------------------
proceeds of Collateral shall, at the direction of Agent, be deposited by
Borrowers into a lockbox account, 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 Borrowers and be acceptable to Agent.
Borrowers shall issue to any such bank an irrevocable letter of 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 Account shall
immediately become the property of Agent and Borrowers shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
blocked account 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 Borrowers 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. No Borrower will, 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
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 such Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease has been
---------
produced by any Borrower, it has been and will be produced by such 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. The Equipment shall be maintained in good
------------------------
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation.
44
4.18. Exculpation of Liability. Nothing herein contained shall be
------------------------
construed to constitute Agent or any Lender as any 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.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any 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 any Borrower of any of
the terms and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall ensure that the Real
---------------------
Property remains in compliance with all Environmental Laws and they shall not
place or permit to be placed any Hazardous Substances on any Real Property
except as permitted by applicable law or appropriate governmental authorities.
(b) Borrowers shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any 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 that 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 any
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any 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
and the Collateral and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent copies of any
request for
45
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between any Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and 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. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent's interest in 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 clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or 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 Borrowers, 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 any Borrower.
(g) If required by Agent as determined in Agent's reasonable
discretion, promptly upon the written request of Agent from time to time,
Borrowers shall provide Agent, at Borrowers' 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 existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. 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. Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrowers 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 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, including
46
any loss of value of the Real Property as a result of the foregoing 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.
Borrowers' 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. Borrowers'
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 Borrowers' 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.
V. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal right
---------
to enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents constitute the legal, valid and binding obligation of such 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 such Borrower's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of such Borrower's by-laws, certificate of incorporation or other
applicable documents relating to such Borrower's formation or to the conduct of
such Borrower's business or of any material agreement or undertaking to which
such Borrower is a party or by which such 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 such Borrower under the provisions of any
agreement, charter document, instrument, by-law, or other instrument to which
such Borrower is a party or by which it or its property may be bound.
5.2. Formation and Qualification. (a) Each Borrower is duly incorporated
---------------------------
and in good standing under the laws of the state listed on Schedule 5.2(a) 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 such 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. The exact organizational identification number
of each Borrower is set forth on Schedule 5.2(a). Each Borrower has delivered
---------------
to Agent true and complete copies of its certificate of incorporation and
by-laws and will promptly notify Agent of any amendment or changes thereto.
47
(b) The only Subsidiaries of each Borrower are listed on Schedule
--------
5.2(b).
------
5.3. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such 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.
5.4. Tax Returns. Each Borrower's federal tax identification number is
-----------
set forth on Schedule 5.4. Each Borrower has filed all federal, state and local
------------
tax returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable. Federal, state and local income tax returns of each 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 June 30, 1997. The provision for taxes on the books of each
Borrower are adequate for all years not closed by applicable statutes, and for
its current fiscal year, and no Borrower has any knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
--------------------
(a) The cash flow projections of the Borrowers on a consolidated
basis for the twelve month period ending December 31, 2003 (the "Projections")
and the pro forma consolidated balance sheet at August 31, 2002 (the "Pro Forma
Balance Sheet"), copies of which are annexed hereto as Exhibit 5.5(a), were
--------------
prepared by the Chief Financial Officer of AMC. The Projections were based on
underlying assumptions which at the date of their preparation provided a
reasonable basis for the projections contained therein. The Pro Forma Balance
Sheet reflects the consummation of the transactions contemplated by the
Acquisition Agreement, the Subordinated Debt Documentation and this Agreement
(the "Transactions"). The Projections together with the Pro Forma Balance
Sheet, are referred to as the "Pro Forma Financial Statements". The historical
financial statements at August 31, 2002 on which the Pro Forma Balance Sheet is
based has been certified as accurate, complete and correct in all material
respects by the President and Chief Financial Officer of AMC and to the best of
his knowledge the pro forma adjustments reflect reasonable business assumptions
based upon present circumstances. The Projections, including the related
schedules and notes thereto, have been prepared, in accordance with GAAP as in
effect on the date of preparation, except as may be disclosed in such financial
statements.
(b) The consolidated balance sheets of AMC, 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
December 31, 2001, and the related statements of income, changes in
stockholder's equity, and changes in cash flow for the fiscal year 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
48
in application in which such accountants concur) and present fairly the
financial position of AMC and its Subsidiaries at such date and the results of
their operations for such period. Except for the Acquisition and as set forth on
Exhibit 5.5(b), since December 31, 2001 with respect to ACM, Mercy and Arch Air
--------------
and the Closing Date with respect to RMH, there has been no change in the
condition, financial or otherwise, of Borrowers or their Subsidiaries as shown
on the balance sheets as of such respective date and no decrease in the
aggregate value of machinery, equipment and Real Property owned by Borrowers and
their respective Subsidiaries, except in the ordinary course of business and
those permitted hereunder, none of which has had a Material Adverse Effect.
5.6. Corporate Name. Except as set forth on Schedule 5.6, no Borrower has
-------------- ------------
been known by any other corporate name in the past five years and does not sell
Inventory or provide services under any other name, nor has any 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) Except as set forth on Schedule 5.7(a), each Borrower has duly
---------------
complied with, and its facilities, business, assets, property, leaseholds and
Equipment are in compliance with, the provisions of the Federal Occupational
Safety and Health Act, the Environmental Protection Act, RCRA and all other
Environmental Laws, except where the failure to comply could not reasonably be
expected to have a Material Adverse Effect; there are no outstanding citations,
notices or orders of non-compliance issued to any Borrower or relating to its
business, assets, property, leaseholds or Equipment under any such laws, rules
or regulations which could reasonably be expected to have a Material Adverse
Effect.
(b) Each Borrower has been issued all material federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.
(c) Except as set forth on Schedule 5.7(c), (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 on any premises leased by any Borrower; (ii) there are no
underground storage tanks or polychlorinated biphenyls on the Real Property or
any premises leased by any Borrower; (iii) neither the Real Property nor any
premises leased by any 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 any Borrower, excepting
in the case of (iii) and (iv), 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 any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
-----------------------------------------------------------
(a) After giving effect to the Transactions, Borrowers will be
solvent, able to pay their debts as they mature, have capital sufficient to
carry on their business and all
49
businesses in which they are about to engage, and (i) as of the Closing Date,
the fair present saleable value of their assets, calculated on a going concern
basis, is in excess of the amount of their liabilities and (ii) subsequent to
the Closing Date, the fair saleable value of their assets (calculated on a going
concern basis) will be in excess of the amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Borrower has (i)
---------------
any pending or threatened litigation, arbitration, actions or proceedings which
could reasonably be expected to have a Material Adverse Effect, and (ii) any
indebtedness for borrowed money other than the Obligations and the Indebtedness
permitted under Section 7.8.
-----------
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect on such Borrower, nor is any Borrower in
violation of any order of any court, governmental authority or arbitration board
or tribunal.
(d) No Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
---------------
Except as set forth in Schedule 5.8(d), (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 each 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 and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor 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) no Borrower nor 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) no
Borrower nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower nor 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 would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR Sec.2615.3 has not been waived, (xi) no
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 any Borrower and any member of the
Controlled Group, and (xii) no Borrower nor any member of
50
the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability 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, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are valid, and to the extent indicated on Schedule
------------ --------
5.9, have been duly registered or filed with all appropriate governmental
---
authorities and constitute all of the intellectual property rights which are
used in the operation of its business; there is no objection to or pending
challenge to the validity of any such patent, trademark, copyright, design
right, tradename, trade secret or license and no Borrower is aware of any
grounds for any challenge, except as set forth in Schedule 5.9 hereto. 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 any Borrower and all trade secrets used by any Borrower consist of
original material or property developed by such Borrower or was lawfully
acquired by such Borrower from the proper and lawful owner thereof. 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 in Schedule 5.9, with
------------
respect to all software used by any Borrower, such Borrower is in possession of
all source and object codes related to each piece of software or is the
beneficiary of a source code escrow agreement, each such source code escrow
agreement being listed on Schedule 5.9 hereto.
------------
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
-------------------- -------------
Borrower (a) is in compliance with and (b) 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 procure such licenses or permits could have a Material
Adverse Effect. That certain Air Carrier Certificate issued to RMH on January
20, 1995 remains in full force and effect (except if such certificate has been
consolidated with an Air Carrier Certificate of another Borrower). That certain
Air Carrier Certificate issued to AMC on March 1, 1992 remains in full force and
effect (except if such certificate has been consolidated with an Air Carrier
Certificate of another Borrower). That certain Air Carrier Certificate issued
to Mercy on November 19, 1997 remains in full force and effect (except if such
certificate has been consolidated with an Air Carrier Certificate of another
Borrower). That certain Air Carrier Certificate issued to Arch Air on August
30, 1995 remains in full force and effect (except if such certificate has been
consolidated with an Air Carrier Certificate of another Borrower). Each
Borrower is an air carrier certified under Section 44705 of Title 49 of the
United States Code.
5.11. Default of Indebtedness. No Borrower is 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. No Borrower is in default in the payment or performance
----------
of any of its material contractual obligations and no Default has occurred.
51
5.13. No Burdensome Restrictions. No Borrower is party to any contract or
--------------------------
agreement the performance of which could have a Material Adverse Effect. No
Borrower has 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. No Borrower is involved in any labor dispute;
-----------------
there are no strikes or walkouts or union organization of any Borrower's
employees threatened in writing or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on Schedule 5.14
-------------
hereto. Borrowers shall be permitted to update Schedule 5.14 from time to time
-------------
so long as any information that is disclosed on such replacement schedules would
not otherwise constitute a Default or Event of Default.
5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
------------------
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin 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.
5.16. Investment Company Act. No Borrower is an "investment company"
----------------------
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by AMC in the
----------
Acquisition Agreement or made by any Borrower in this Agreement or in any
financial statement, report, certificate or any other document furnished in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state any material fact necessary (except with respect to RMH
prior to the Closing Date) to make the statements herein or therein not
misleading. Except with respect to RMH prior to the Closing Date, there is no
fact known to Borrowers or which reasonably should be known to Borrowers which
Borrowers have not disclosed to Agent in writing with respect to the
transactions contemplated by the Acquisition Agreement or this Agreement which
could reasonably be expected to have a Material Adverse Effect.
5.18. Delivery of Acquisition Agreement and Subordinated Debt
-------------------------------------------------------
Documentation. Agent has received complete copies of the Acquisition Agreement
-------------
and the Subordinated Debt Documentation (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto, if any)
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
52
5.19. Swaps. No Borrower is a party to, nor will it be a party to, any
-----
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage, indenture,
----------------------
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents, except for
any such conflict which would not reasonably be expected to have a Material
Adverse Effect.
5.21. Application of Certain Laws and Regulations. No Borrower nor any
-------------------------------------------
Subsidiary of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22. Business and Property of Borrowers. Upon and after the Closing
----------------------------------
Date, Borrowers do not propose to engage in any business other than as described
in (i) the Form 10-K report of AMC in respect of the fiscal year ended December
31, 2001, (ii) the press release dated June 7, 2002 describing the Acquisition
Agreement, and (iii) activities necessary to conduct the foregoing. On the
Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.
5.23. Section 20 Subsidiaries. Borrowers do not intend to use and shall
-----------------------
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or thereafter, Ineligible Securities
being underwritten by a Section 20 Subsidiary.
5.24. Real Property. All real property owned or leased by any Borrower is
-------------
set forth on Schedule 5.24.
-------------
VI. AFFIRMATIVE COVENANTS.
---------------------
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
---------------
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers' Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
-----------------------------------------------------------
53
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks, and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral where the failure to do so could
reasonably be expected to have a Material Adverse Effect; (b) keep in full force
and effect its existence and comply in all material respects with the laws and
regulations governing the conduct of its business where the failure to do so
could reasonably be expected to have a Material Adverse Effect; and (c) make all
such reports and pay all such franchise and other taxes and license fees and do
all such other acts and things as may be lawfully required to maintain its
rights, licenses, leases, powers and franchises under the laws of the United
States or any political subdivision thereof where the failure to do so could
reasonably be expected to have a Material Adverse Effect.
6.3. Violations. Promptly notify Agent in writing of any violation of any
----------
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect.
6.4. Government Receivables. To the extent requested by Agent, take all
----------------------
steps necessary to protect Agent's interest in the Collateral under the Federal
Assignment of Claims Act or other applicable state or local statutes or
ordinances and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between any
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.
6.5. Financial Covenants.
-------------------
(a) Net Worth. Commencing with the fiscal quarter ending December
---------
31, 2002, maintain at the end of each fiscal quarter a Net Worth in an amount
not less than (i) the Opening Net Worth plus (ii) 50% of Borrowers' net income
(only if positive) for each fiscal quarter which ends after the Closing Date.
The initial Net Worth level is 80% of the greater of (x) $38,000,000 or (y)
Shareholders Equity as of the Closing Date (the "Opening Net Worth"). The
calculation of "(ii)" shall be on a cumulative basis.
(b) Fixed Charge Coverage Ratio. Commencing with the fiscal
---------------------------
quarter ending December 31, 2002, maintain a Fixed Charge Coverage Ratio at the
end of each fiscal quarter during each period set forth below with respect to
the four fiscal quarters then ended of not less than the ratio set forth below:
Period Ratio
------ -----
12/31/02 - 12/31/03 1.10 to 1.00
01/01/04 - 12/31/04 1.20 to 1.00
01/01/05 and thereafter 1.75 to 1.00
54
To the extent such ratio is calculated with respect to periods prior
to the Acquisition, the operating results of RMH shall be calculated on a pro
forma basis as if the transactions contemplated by the Acquisition Agreement
were consummated January 1, 2002.
6.6. Execution of Supplemental Instruments. Execute and deliver to Agent
-------------------------------------
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
-----------------------
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrowers shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
6.8. Standards of Financial Statements. Cause all financial statements
---------------------------------
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
6.9. Exercise of Rights. Enforce all of its rights under the Acquisition
------------------
Agreement and all documents executed in connection therewith including, but not
limited to, all indemnification rights and pursue all remedies available to it
with diligence and in good faith in connection with the enforcement of any such
rights.
VII. NEGATIVE COVENANTS.
------------------
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
-----------------------------------------------------
(a) Enter into any merger, consolidation or other reorganization
with or into any other Person or acquire all or a substantial portion of the
assets or stock of any Person or permit any other Person to consolidate with or
merge with it, except that (i) any Borrower may merge with a wholly-owned
Subsidiary or another Borrower in a transaction in which a Borrower (or the
Parent, if one of the merging parties is a Subsidiary) is the surviving
corporation, and (ii) any Borrower may acquire all or a substantial portion of
the assets, stock or other ownership interest of any Person if (1) the Person
being acquired is engaged in, or the assets being acquired are used in, the same
business as is permitted under Section 5.22 or another
------------
55
business reasonably related thereto, (2) at the time of and after giving effect
to such acquisition, no Default or Event of Default would exist, (3) immediately
prior to the consummation of such acquisition Borrowers shall have Undrawn
Availability of at least $10,000,000 (determined without including the acquired
assets in the calculation of the Formula Amount) and after giving effect to such
acquisition, Borrowers shall have Undrawn Availability of at least $10,000,000
(determined without including the acquired assets in the calculation of the
Formula Amount unless clauses (x), (y) and (z) below have been satisfied), (4)
after giving effect to such transaction, Borrowers shall be in compliance, on a
pro forma basis, with Section 6.5 (the Fixed Charge Coverage Ratio to be
determined as if such acquisition had occurred on the first day of the first
fiscal quarter of the immediately preceding four fiscal quarter period tested
under such section and the Net Worth covenant to be determined as of the fiscal
quarter end preceding the acquisition), (5) Agent has received a copy of the
executed purchase agreement, (6) the terms of the transaction shall be
reasonably satisfactory to Agent, (7) the purchase price of the acquisition(s)
does not exceed $10,000,000 in the aggregate in any fiscal year and (8) the
amount of liabilities assumed under each acquisition (excluding borrowings to
effect the acquisition) is not greater than twice the amount of the cash
purchase price of such acquisition. Under no circumstances shall any of the
acquired assets be included in the calculation of the Formula Amount unless and
until (x) Agent obtains a first priority perfected security interest in the
assets comprising Collateral, (y) Agent has performed all due diligence Agent
deems necessary on such acquired assets comprising Collateral, the results of
which are reasonably satisfactory to Agent and (z) such acquired assets
otherwise satisfy the eligibility criteria set forth herein. Assuming all other
conditions of this Section 7.1 are complied with, acquisitions in excess of the
amount set forth in clause (7) above may be completed with the consent of the
Required Lenders, which consent shall not be unreasonably withheld.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business and except
as provided in Section 4.3.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer
-----------------
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any Person (other
----------
than a Borrower or a Subsidiary thereof) by assumption, endorsement or guaranty
thereof or otherwise (other than to Lenders) except the endorsement of checks in
the ordinary course of business and except as set forth on Schedule 7.3.
------------
7.4. Investments. Purchase or acquire obligations or stock of, or any
-----------
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency
56
thereof, (d) investments permitted by Section 7.1(a) and (e) existing
investments set forth on Schedule 7.4.
------------
7.5. Loans. Make advances, loans or extensions of credit to any Person
-----
(other than a Borrower or Subsidiary that becomes a Borrower or Guarantor
hereunder), including without limitation, any Parent or Affiliate other than
extensions of credit to Customers in connection with the upgrading of Aircraft
in the ordinary course of business and the loans set forth on Schedule 7.5
------------
hereof.
7.6. Life Net. Permit Life Net to engage in any business affairs or to
--------
acquire or own any assets or benefit from any of the provisions of this
Agreement relating to Subsidiaries of any Borrower.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
---------
shares of the common stock or preferred stock of AMC (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of any Borrower
other than a dividend to another Borrower. The net exercise of employee stock
options by AMC employees shall not be deemed a violation of this Section 7.7 so
-----------
long as no funds are expended by AMC or any of its subsidiaries in connection
with the exercise of such options.
7.8. Indebtedness; Unfinanced Capital Expenditures; Personal Property
----------------------------------------------------------------
Leases. Permit the aggregate (without duplication) of (i) the amount of
------
Indebtedness (including Aircraft Indebtedness but exclusive of trade debt)
created, incurred or assumed in any period set forth below, plus (ii) the net
present value of future lease payments in respect of operating leases for
Aircraft or Equipment entered into in any fiscal year (based on the Implicit
Discount Rate), plus (iii) the amount of Unfinanced Capital Expenditures made or
committed in any period, to exceed the following amounts at any time during such
period:
Period Amount
------ ------
Closing Date through Fiscal Year
Ending December 31, 2003 $30,000,000
Fiscal Year Ending December 31, 2004 $30,000,000
Fiscal Year Ending December 31, 2005 $35,000,000
Fiscal Year Ending December 31, 2006 $35,000,000
; provided, however, that the following shall be excluded from the calculations
-------- -------
set forth above: (i) Indebtedness to Lenders, (ii) Indebtedness due under the
Subordinated Note, (iii) Indebtedness owing to any Borrower or a Subsidiary
thereof, (iv) refinancing of outstanding Indebtedness, except to the extent that
the principal amount of such Indebtedness owing at the time of the refinancing
is increased in connection with such refinancing, in which event the amount of
borrowing in excess of the outstanding principal amount refinanced shall be
included, (v) expenditures to purchase previously leased Aircraft, provided
that, the foregoing calculations shall include an amount equal to any excess of
(x) the monthly payment in respect of
57
the obligation incurred in the Aircraft purchase over (y) the monthly lease
payments on the terminated lease, such excess to be discounted to the date of
purchase (based on the interest rate on the acquisition indebtedness), (vi)
Indebtedness set forth in Schedule 7.8; and provided, further, that to the
------------
extent the limitations in this Section 7.8 are exceeded in connection with a
-----------
transaction that would result in incremental revenues to Borrowers, such
transaction may be entered into with the consent of the Required Lenders, which
consent shall not be unreasonably withheld, (vii) Indebtedness of up to
$10,000,000 in the aggregate in connection with incurrence of Indebtedness that
is secured by Aircraft then owned by a Borrower if the proceeds of such
Indebtedness are used to repay outstanding Advances and (viii) Indebtedness
assumed or incurred in connection with acquisitions permitted under Section
7.1(a). Notwithstanding the repayment on or prior to the Closing Date to (i)
Bank of America, N.A. of indebtedness of $1,605,000 related to a mortgage on a
facility in Provo, Utah and (ii) U.S. Bank, N.A., as successor to FirStar Bank,
N.A. of indebtedness of $976,000 related to a mortgage on facilities in St.
Louis, Missouri and Sparta, Illinois, such obligations shall be considered
"outstanding indebtedness" for purposes of clause (iv) above.
7.9. Nature of Business. Substantially change the nature of the business
------------------
in which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or property which are useful in,
necessary for and are to be used in its business as conducted on the Closing
Date.
7.10. Transactions with Affiliates. Except as disclosed on Schedule 7.10,
---------------------------- -------------
directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or otherwise deal with, any Affiliate (other
than a Borrower), except transactions in the ordinary course of business, on an
arm's-length basis on terms no less favorable than terms which would have been
obtainable from a Person other than an Affiliate (other than a Borrower).
7.11. Leases. Enter as lessee into any lease arrangement for real
------
property if after giving effect thereto, aggregate annual rental payments for
all leased real property would exceed $4,000,000 in any one fiscal year in the
aggregate for all Borrowers.
7.12. Subsidiaries.
------------
(a) Form any Subsidiary unless such Subsidiary became a Borrower
hereunder pursuant to a joinder agreement in form and substance satisfactory to
Agent or enters into a Guaranty and a Guarantor Security Agreement in favor of
and in form and substance acceptable to Agent in all respects pursuant to which
such Subsidiary grants to Agent for its benefit and the ratable benefit of
Lenders a first priority security interest in such Subsidiary's assets that
constitute Collateral hereunder and unconditionally guarantees the Obligations;
or
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
----------------------------------
December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
58
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
----------------
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, Certificate of Limited
--------------------------------------------------------------
Liability Company, By-Laws, Limited Liability Company Agreement. Amend, modify
---------------------------------------------------------------
or waive any term or provision of its (i) Articles of Incorporation or By-Laws
or (ii) Certificate of Formation or Limited Liability Company or Limited
Liability Company Agreement, as applicable, unless required by law if such
amendment, modification or waiver would adversely effect the Lenders hereunder.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of
---------------------
the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
---------------
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
---------------
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. Except as permitted pursuant to Section
--------------------------
7.18 hereof, at any time, directly or indirectly, prepay any Indebtedness (other
than to Lenders), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Borrower other than (i) a refinancing of any Aircraft
Indebtedness so long as the principal amount of Indebtedness incurred under such
refinancing that exceeds the amount being refinanced is permitted under Section
7.8 and (ii) to prepay Aircraft Indebtedness with the proceeds of insurance with
respect to any loss to an Aircraft.
7.18. Subordinated Note. At any time, directly or indirectly, pay,
-----------------
prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on
account of any principal of, interest on or premium payable in connection with
the repayment or redemption of the Subordinated Note, except regularly scheduled
payments of interest as expressly permitted by the terms of the Subordinated
Note as in effect on the Closing Date; provided, however, that Borrowers may pay
-------- -------
59
principal on the Subordinated Note with the proceeds of additional cash equity
received by Borrowers after the Closing Date if no notice of termination with
regard to this Agreement is outstanding and if prior to and after giving effect
to such payment (i) no Default or Event of Default has occurred and is
continuing and (ii) Undrawn Availability is at least $5,000,000.
7.19. Other Agreements. Enter into any material amendment, waiver or
----------------
modification of the Acquisition Agreement or any related agreements or enter
into any amendment of any agreement in existence on the Closing Date which has
the effect of creating additional Liens on any of the Collateral or enter into
any agreement which has the effect of creating additional Liens on the
Collateral with respect to the assets described in the financing statements on
file on the Closing Date.
VIII. CONDITIONS PRECEDENT.
--------------------
8.1. Conditions to Initial Advances. The agreement of Lenders to make the
------------------------------
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Notes duly executed and
----
delivered by an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each document
-------------------------------------
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by the Agent to be filed, registered or recorded in order to create,
in favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
(c) Authorization Proceedings of Borrowers. Agent shall have
--------------------------------------
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors or the Members, as the case may be, of each
Borrower authorizing (i) the execution, delivery and performance of this
Agreement, the Notes, any related agreements, the Subordinated Debt
Documentation and the Acquisition Agreement (collectively the "Documents") and
(ii) the granting by each Borrower of the security interests in and liens upon
the Collateral in each case certified by the Secretary or an Assistant Secretary
of each Borrower as of the Closing Date; and, such certificate shall state that
the resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrowers. Agent shall have
------------------------------------
received a certificate of the Secretary or an Assistant Secretary of each
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of each Borrower executing this Agreement,
60
any certificate or other documents to be delivered by it pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary;
(e) Certificates. Agent shall have received (i) a copy of the
------------
Articles or Certificate of Incorporation of AMC, Mercy and Arch Air, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation or formation together with copies
of the By-Laws of AMC, Mercy and Arch Air and all agreements of each of AMC's,
Mercy's and Arch Air's shareholders, if any, certified as accurate and complete
by the Secretary of each Borrower and (ii) a copy of the Certificate of Limited
Liability company of RMH, and all amendments thereto, certified by the Secretary
of State or other appropriate official of its jurisdiction or formation together
with copies of the Limited Liability Company Agreement of RMH certified as
accurate and complete by the Chief Financial Officer of AMC;
(f) Good Standing Certificates. Agent shall have received good
--------------------------
standing certificates for each Borrower dated not more than thirty (30) days
prior to the Closing Date, issued by the Secretary of State or other appropriate
official of each Borrower's jurisdiction of incorporation or formation and each
jurisdiction where the conduct of each Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinions. Agent shall have received (i) the executed
--------------
legal opinion of Xxxxx, Xxxxxx & Xxxxxx LLP in form and substance satisfactory
to Agent which shall cover such matters incident to the transactions
contemplated by this Agreement, the Notes and related agreements as Agent may
reasonably require, and each Borrower hereby authorizes and directs such counsel
to deliver such opinions to Agent and Lenders and (ii) a reliance letter from
Xxxx Xxxxx, special counsel to RMH, to the effect that Agent and Lenders may
rely upon the legal opinion rendered by Xxxx Xxxxx to AMC in connection with the
Acquisition Agreement;
(h) No Litigation. (i) No litigation, investigation or proceeding
-------------
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature which could, in the reasonable opinion of Agent, have a Material
Adverse Effect or is inconsistent with the due consummation of the Transactions
shall have been issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have received
--------------------------------
an executed Financial Condition Certificate in the form of Exhibit 8.1(i).
--------------
(j) Collateral Examination. Agent shall have completed Collateral
----------------------
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables and Inventory of each
Borrower and all books and records in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent and
----
Lenders on or prior to the Closing Date pursuant to Article III hereof;
61
(l) Pro Forma Financial Statements. Agent shall have received a
------------------------------
copy of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
(m) Acquisition and Subordinated Debt Documents. Agent shall have
-------------------------------------------
received final executed copies of the Acquisition Agreement and the Subordinated
Debt Documentation, and all related agreements, documents and instruments as in
effect on the Closing Date which shall contain such terms and provisions
including, without limitation, subordination terms, satisfactory to Agent and
which shall be in form and substance satisfactory to Agent and Lenders and the
transactions contemplated by such documentation shall be consummated prior to or
concurrent with the making of the initial Advance including, without limitation,
the receipt by Borrowers of the proceeds of the Subordinated Note in the sum of
at least $20,000,000;
(n) Net Worth. Agent shall have received the Pro Forma Balance
---------
Sheet reflecting a Net Worth of at least $38,000,000;
(o) Insurance. Agent shall have received in form and substance
---------
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;
(p) FAA Documentation. Agent shall have received the FAA Security
-----------------
Agreement, together with all necessary filings and an opinion of counsel of
Xxxxx & Xxxxxxxx;
(q) Payment Instructions. Agent shall have received written
--------------------
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(r) Blocked Accounts. Agent shall have received duly executed
----------------
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(s) Consents. Agent shall have received any and all Consents
--------
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(t) No Adverse Material Change. (i) Since December 31, 2001,
--------------------------
there shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(u) Leasehold Agreements. Agent shall have received landlord,
--------------------
mortgagee or
62
warehouseman agreements satisfactory to Agent with respect to each premises
leased by Borrowers at which Inventory with a value in excess of $100,000 is
located;
(v) Other Documents. Agent shall have the executed Other
---------------
Documents, all in form and substance satisfactory to Agent;
(w) Contract Review. Agent shall have reviewed all material
---------------
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(x) Closing Certificate. Agent shall have received a closing
-------------------
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(y) Borrowing Base. Agent shall have received evidence from
--------------
Borrowers that the aggregate amount of Eligible Receivables, Eligible Third
Party Receivables and Eligible Inventory is sufficient in value and amount to
support Advances in the amount requested by Borrowers on the Closing Date;
(z) Undrawn Availability. After giving effect to the initial
--------------------
Advances hereunder, Borrowers shall have Undrawn Availability of at least
$7,500,000;
(aa) Assignment of Notes. Agent shall have received a collateral
-------------------
assignment of the notes set forth on Schedule 7.5 in form and substance
------------
satisfactory to Agent; and
(bb) Other. All corporate and other proceedings, and all
-----
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
--------------------------
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations
------------------------------
and warranties made by any Borrower in or pursuant to this Agreement and any
related agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have
----------
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made,
63
on such date; provided, however that Agent, in its sole discretion, may continue
-------- -------
to make Advances notwithstanding the existence of an Event of Default or Default
and that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be
----------------
made, after giving effect thereto, the aggregate Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
---------------------------
Each Borrower or AMC, as applicable, shall, until satisfaction in full of
the Obligations and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
------------------------------
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
9.2. Schedules. Deliver to Agent on or before the twentieth (20th) day of
---------
each month as and for the prior month (a) accounts receivable agings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger and (c) Inventory reports and
(d) a monthly Borrowing Base Certificate on a consolidated basis and
consolidating basis (which shall be calculated as of the last day of the prior
month and which shall not be binding upon Agent or restrictive of Agent's rights
under this Agreement), provided, however, that at such times and as so long as
-------- -------
Undrawn Availability is less than $7,500,000, AMC shall deliver to Agent on or
before Wednesday of each week as and for the prior week a weekly Borrowing Base
Certificate (which shall be calculated as of the last day of the prior week and
which shall not be binding upon Agent or restrictive of Agent's rights under
this Agreement). In addition, AMC will deliver to Agent at such intervals as
Agent may require: (i) confirmatory assignment schedules, (ii) copies of
Customer's invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including, without limitation, trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder. The items to
be provided under this Section are to be in form satisfactory to Agent and
executed by AMC and delivered to Agent from time to time solely for Agent's
convenience in maintaining records of the Collateral, and the failure to deliver
any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent's Lien with respect to the Collateral.
64
9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
---------------------
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of AMC stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any litigation, suit
----------
or administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect.
9.5. Material Occurrences. Promptly notify Agent in writing upon the
--------------------
occurrence of (a) any Event of Default or Default; (b) any event of default
under the Subordinated Debt Documentation; (c) any event which with the giving
of notice or lapse of time, or both, would constitute an event of default under
the Subordinated Debt Documentation; (d) any event, development or circumstance
whereby any financial statements or other reports furnished to Agent fail in any
material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of any Borrower as of the
date of such statements; (e) any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of the Code, could subject any Borrower to a tax
imposed by Section 4971 of the Code; (f) each and every default by any Borrower
which might result in the acceleration of the maturity of any Indebtedness in
excess of $250,000, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (g) any other development in the business or affairs of any
Borrower which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action Borrowers propose to
take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if the aggregate
----------------------
amount of any of its Receivables arising out of contracts between any Borrower
and the United States, any state, or any department, agency or instrumentality
of any of them exceeds $250,000.
9.7. Annual Financial Statements. Furnish Agent within ninety (90) days
---------------------------
after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a consolidated basis and an operating segment basis including, but
not limited to, statements of income and stockholders' equity and cash flow from
the beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and satisfactory to Agent (the
"Accountants"). The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused the Loan
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of
65
Default or a Default under this Agreement or any related agreement or, if such
information came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing, and
commencing with the report in respect of the fiscal year beginning January 1,
2003, such report shall contain or have appended thereto calculations which set
forth Borrowers' compliance with the requirements or restrictions imposed by
Sections 6.5, 7.8 and 7.11 hereof. In addition, the reports shall be accompanied
by a certificate of AMC's Chief Financial Officer which shall state that, based
on an examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by such Borrower with respect to such
event, and such certificate shall have appended thereto calculations which set
forth Borrowers' compliance with the requirements or restrictions imposed by
Sections 6.5, 7.8 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within forty five (45)
------------------------------
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers on a consolidated basis and an operating segment analysis and
unaudited statements of income and stockholders' equity and cash flow of
Borrowers on a consolidated basis and an operating segment analysis reflecting
results of operations from the beginning of the fiscal year to the end of such
quarter and for such quarter, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
and recurring year end adjustments that individually and in the aggregate are
not material to the business of Borrowers. The reports shall be accompanied by
a certificate signed by the Chief Financial Officer of AMC, which shall state
that, based on an examination sufficient to permit him to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with respect to
such default, and such certificate shall have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 7.8 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days
----------------------------
after the end of each month, an unaudited balance sheet of Borrowers on a
consolidated basis and unaudited statements of income and stockholders' equity
and cash flow of Borrowers on a consolidated basis reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal and recurring year end
adjustments that individually and in the aggregate are not material to the
business of Borrowers. The reports shall be accompanied by a certificate of
AMC's Chief Financial Officer, which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Borrowers with respect to such event and, such certificate shall
have appended thereto calculations which set forth Borrowers' compliance with
the requirements or restrictions imposed by Sections 6.5, 7.8 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as available, but in any event
-------------
within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and
66
returns as AMC shall send to its stockholders and (ii) copies of all notices
sent pursuant to the Subordinated Debt Documentation.
9.11. Additional Information. Furnish Agent with such additional
----------------------
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Borrowers including, without
limitation and without the necessity of any request by Agent, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of any Borrower's opening of any new office or place of business or any
Borrower's closing of any existing office or place of business, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.12. Projected Operating Budget. Furnish Agent, no later than thirty
--------------------------
(30) days after the beginning of Borrowers' fiscal year 2003 and no later than
thirty (30) days prior to the beginning of each Borrower's fiscal years
commencing with fiscal year 2004, a month by month projected operating budget
and cash flow of Borrowers on a consolidated basis and an operating segment
analysis for such fiscal year (including an income statement for each month),
such budget to be accompanied by a certificate signed by the President or Chief
Financial Officer of AMC to the effect that such budget have been prepared on
the basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such budget was prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with
-------------------------------
the delivery of the financial statements referred to in Sections 9.7 and 9.8 and
upon Agent's request, concurrently with the delivery of each monthly report, a
written report summarizing all material variances from budgets submitted by
Borrowers pursuant to Section 9.12 and a discussion and analysis by management
with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt notice
-------------------------------
of (i) any lapse or other termination of any Consent issued to any Borrower by
any Governmental Body or any other Person that is material to the operation of
any Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with immediate written
--------------------------
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect
67
thereto, (ii) any Borrower or any member of the Controlled Group knows or has
reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Agent, upon request,
--------------------
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
9.17. Subordinated Debt Documentation Certificates. (a) On a date which
--------------------------------------------
is between five and ten days prior to any payment date under the Subordinated
Note, furnish Agent with an officer's certificate which shall state that no
default or event of default has occurred or exists under any of the Subordinated
Debt Documentation.
(b) Deliver to Agent, within five days of delivery to the
Purchasers, copies of all compliance certificates delivered to the Purchasers.
X. EVENTS OF DEFAULT.
-----------------
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
68
10.2. any representation or warranty made or deemed made by any Borrower
in this Agreement or any related agreement or in any certificate, document or
financial statement furnished at any time in connection herewith or therewith
shall prove to have been misleading in any material respect on the date when
made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information when
due or when requested which is not cured within five (5) Business Days from the
occurrence of such failure, or (ii) permit the inspection of its books or
records;
10.4. issuance of a notice of levy, assessment, injunction or attachment
against a material portion of any Borrower's property which is not stayed or
lifted within forty (40) days;
10.5. except as otherwise provided for in Sections 10.1, 10.3 and
10.5(ii), (i) failure or neglect of any Borrower to perform, keep or observe any
term, provision, condition, covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between any Borrower and
Agent or any Lender, or (ii) failure or neglect of any Borrower to perform, keep
or observe any term, provision, condition or covenant, contained in Sections
4.6, 4.9, 4.11, 4.15, 6.1, 6.3, 6.5 or 9.4 hereof which is not cured within
fifteen (15) days from the occurrence of such failure or neglect;
10.6. any judgment or judgments are rendered or judgment liens filed
against one or more Borrowers for an aggregate amount in excess of $250,000
which within forty (40) days of such rendering or filing is not either
satisfied, stayed or discharged of record;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9. any Subsidiary of any Borrower, or any Guarantor, shall (i) apply
for, consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (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,
69
within thirty (30) days, any petition 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;
10.10. any change in any Borrower's condition or affairs (financial or
otherwise) which could reasonably be expected to have a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest except (i) under subsection (g) of the
definition of Permitted Encumbrances and Liens existing on the Closing Date
placed upon fixed assets to secure a portion of the purchase price thereof,
provided that (x) such Lien is listed on Schedule 1.2 and (y) such Lien does not
------------
encumber any other Collateral;
10.12. an event of default has occurred and been declared under the
Subordinated Debt Documentation which default shall not have been cured or
waived within any applicable grace period and for which Purchasers are permitted
to take action pursuant to the terms of the Securities Purchase Agreement as in
effect on the Closing Date;
10.13. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which default is not cured within
any applicable grace period and which default could reasonably be expected to
have a Material Adverse Effect;
10.14. termination or breach of any Guaranty or Guaranty Security
Agreement or similar agreement executed and delivered to Agent in connection
with the Obligations of any Borrower, or if any Guarantor attempts to terminate,
challenges the validity of, or its liability under, any such Guaranty or
Guaranty Security Agreement or similar agreement;
10.15. any Change of Control shall occur;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.17. (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of any
Borrower, the continuation of which is material to the continuation of any
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect;
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10.18. any portion of the Collateral having a value of greater than
$250,000 shall be seized or taken by a Governmental Body, or the title and
rights of any Borrower which is the owner of any material portion of the
Collateral shall have become the subject matter of litigation which is
reasonably likely to have a Material Adverse Effect;
10.19. the operations of any Borrower's facility are interrupted at any
time for more fourteen (14) consecutive days the result of which, in the
reasonable judgment of Agent, would likely have a Material Adverse Effect,
unless such Borrower shall (i) be entitled to receive for such period of
interruption, proceeds of business interruption insurance in amounts
satisfactory to Agent and (ii) receive such proceeds in the amount described in
clause (i) preceding not later than sixty (60) days following the initial date
of any such interruption; provided, however, that notwithstanding the provisions
of clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if such Borrower shall be receiving the proceeds of business
interruption insurance for a period of sixty (60) consecutive days; or
10.20. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
------------------------------------------
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default
-------------------
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over any Borrower. Upon the occurrence of any Event of Default,
Agent shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Agent may enter any of any
Borrower's premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and remove the same to such place as Agent may deem advisable and Agent may
require Borrowers to make the Collateral available to Agent at a convenient
place. With or without having the Collateral at the time or place of sale,
Agent may sell the Collateral, or any part thereof, at public or private sale,
at any time or place, in one or more sales, at such price or prices, and upon
such terms, either for cash, credit or future delivery, as Agent may elect.
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Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrowers reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrowers at
least ten (10) days prior to such sale or sales is reasonable notification. At
any public sale Agent or any Lender may bid for and become the purchaser, and
Agent, any Lender or any other purchaser at any such sale thereafter shall hold
the Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by each Borrower. In connection with the exercise
of the foregoing remedies, Agent is granted permission by Borrowers to use all
of each Borrower's trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with (a) Inventory for the purpose of disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of unfinished
goods. The proceeds realized from the sale of any Collateral shall be applied
as follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations and any fees payable under this
Agreement; and, third, to the principal of the Obligations. If any deficiency
shall arise, Borrowers shall remain liable to Agent and Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
------------------
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
------
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any Borrower's
property held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
---------------------------------
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5. Allocation of Payments After Event of Default. Notwithstanding any
---------------------------------------------
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent's
discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of the Agent in
connection with enforcing the rights of the Lenders under this Agreement and the
Other Documents and any protective advances made by the Agent with respect to
the Collateral under or pursuant to the terms of this Document;
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SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all of the Obligations consisting of accrued fees
and interest;
FOURTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of the outstanding
Letters of Credit);
FIFTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "FOURTH" above;
SIXTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses "THIRD", "FOURTH" and "FIFTH" above; and (iii) to the extent that any
amounts available for distribution pursuant to clause "FIFTH" above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account and applied
(A) first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FOURTH" and
"FIFTH" above in the manner provided in this Section 11.5.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
--------------------------------
12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment
----------------
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
-----
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
-----------
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
73
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
------------------------------
13.1. Term. This Agreement, which shall inure to the benefit of and shall
----
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until October 16, 2006 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon sixty (60) days' prior written notice upon payment in
full of the Obligations. In the event the Obligations are prepaid in full prior
to the last day of the Term (the date of such prepayment hereinafter referred to
as the "Early Termination Date"), Borrowers shall pay to Agent for the benefit
of Lenders an early termination fee in an amount equal to (x) 2.00% of the
Maximum Revolving Advance Amount if the Early Termination Date occurs on or
after the Closing Date to and including the date immediately preceding the first
anniversary of the Closing Date, (y) 1.00% of the Maximum Revolving Advance
Amount if the Early Termination Date occurs on or after the first anniversary of
the Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date, and (z) .25% of the Maximum Revolving Advance
Amount if the Early Termination Date occurs on or after the second anniversary
of the Closing Date to and including the date immediately preceding the third
anniversary of the Closing Date and 0.00% thereafter.
13.2. Termination. The termination of the Agreement shall not affect any
-----------
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders
with an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under the Uniform
Commercial Code to demand the filing of termination statements with respect to
the Collateral, and Agent shall not be required to send such termination
statements to each Borrower, or to file them with any filing office, unless and
until this Agreement shall have been terminated in accordance with its terms and
all Obligations
74
paid in full in immediately available funds. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until all Obligations are paid or performed in full.
XIV. REGARDING AGENT.
---------------
14.1. Appointment. Each Lender hereby designates PNC to act as Agent for
-----------
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in the Fee
Letter), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including
without limitation, collection of the Note) Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
-------- -------
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
----------------
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness, due
execution, enforceability or sufficiency of this Agreement, or any of the Other
Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of
Agent as respects the Advances to Borrowers shall be mechanical and
administrative in nature; Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Agreement except as expressly set forth
herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and
-----------------------------------------
without reliance
75
upon Agent or any other Lender, each Lender has made and shall continue to make
(i) its own independent investigation of the financial condition and affairs of
each Borrower in connection with the making and the continuance of the Advances
hereunder and the taking or not taking of any action in connection herewith, and
(ii) its own appraisal of the creditworthiness of each Borrower. Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by any Borrower pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Note, the Other Documents or the financial
condition of any Borrower, or the existence of any Event of Default or any
Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
-----------------------
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
--------
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless
76
Agent has received notice from a Lender or a Borrower referring to this
Agreement or the Other Documents, describing such Default or Event of Default
and stating that such notice is a "notice of default". In the event that Agent
receives such a notice, Agent shall give notice thereof to Lenders. Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided, that, unless and until
-------- ----
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
---------------
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
-------- ----
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation of
--------------------------------
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
---------------------
statements required under Sections 9.2(d) (only with respect to monthly
Borrowing Base Certificates), 9.7, 9.8, 9.9, 9.12 and 9.13 from Borrowers
pursuant to the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to their
-------------------------------
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
--- -----
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. BORROWING AGENCY.
----------------
15.1. Borrowing Agency Provisions.
---------------------------
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(a) Each Borrower hereby irrevocably designates Borrowing Agent to
be its attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to Borrowers as a result thereof. To induce
Agent and Lenders to do so and in consideration thereof, each Borrower hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party.
(c) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted to
Agent or any Lender to any Borrower, failure of Agent or any Lender to give any
Borrower notice of borrowing or any other notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof. Each Borrower waives all suretyship defenses.
15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
---------------------
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
-------------
16.1. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
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execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the right of Agent or any Lender to bring proceedings
against any Borrower in the courts of any other jurisdiction. Each Borrower
waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. Any judicial proceeding by any
--------------------
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of New York, State of New York.
16.2. Entire Understanding. (a) This Agreement and the documents
--------------------
executed concurrently herewith contain the entire understanding between each
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, signed by each
Borrower's, Agent's and each Lender's respective officers. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Each Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrowers may, subject to the provisions of this Section
16.2 (b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Borrowers, for the purpose of
adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
-------- -------
consent of all Lenders:
(i) increase the Commitment Percentage or maximum dollar
commitment of any Lender or the Maximum Revolving Advance Amount.
(ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any
fee payable by
79
Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or
alter, amend or modify this Section 16.2(b) or Section 2.2(f).
(iv) release any Collateral during any calendar year (other than
in accordance with the provisions of this Agreement) having an aggregate
value in excess of $1,000,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving
effect thereto the total of Revolving Advances outstanding hereunder would
exceed the Formula Amount for more than thirty (30) consecutive Business
Days or exceed one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in
effect on the Closing Date.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within ten (10) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrowers. In the event PNC elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in
writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to PNC or the Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.
Notwithstanding (a) the existence of a Default or an Event of Default, (b)
that any of the other applicable conditions precedent set forth in Section 8.2
hereof have not been satisfied or (c) any other provision of this Loan
Agreement, Agent may at its discretion and without the consent of the Required
Lenders, voluntarily permit the outstanding Revolving Advances at any time to
80
exceed the Formula Amount by up to one hundred and ten percent (110%) of the
Formula Amount for up to thirty (30) consecutive Business Days. For purposes of
the preceding sentence, the discretion granted to Agent hereunder shall not
preclude involuntary overadvances that may result from time to time due to the
fact that the Formula Amount was unintentionally exceeded for any reason,
including, but not limited to, Collateral previously deemed to be either
"Eligible Receivables", "Eligible Third Party Receivables" or "Eligible
Inventory", as applicable, becomes ineligible, collections of Receivables
applied to reduce outstanding Revolving Advances are thereafter returned for
insufficient funds or overadvances are made to protect or preserve the
Collateral. In the event Agent involuntarily permits the outstanding Revolving
Advances to exceed the Formula Amount by more than ten percent (10%), Agent
shall use its efforts to have Borrowers decrease such excess in as expeditious a
manner as is practicable under the circumstances and not inconsistent with the
reason for such excess. Revolving Advances made after Agent has determined the
existence of involuntary overadvances shall be deemed to be involuntary
overadvances and shall be decreased in accordance with the preceding sentence.
In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, the Agent is hereby authorized by
the Borrowers and the Lenders, from time to time in the Agent's sole discretion,
(A) after the occurrence and during the continuation of a Default or an Event of
Default, or (b) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to the Borrowers on behalf of the Lenders which the Agent, in
its reasonable business judgment, deems necessary or desirable (a) to preserve
or protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (iii) to pay any other amount chargeable to the Borrowers pursuant to the
terms of this Agreement; provided, that at any time after giving effect to any
-------- ----
such Revolving Advances the outstanding Revolving Advances do not exceed one
hundred and ten percent (110%) of the Formula Amount.
16.3. Successors and Assigns; Participations; New Lenders.
---------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit
of Borrowers, Agent, each Lender, all future holders of the Obligations and
their respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Borrowers shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its Advances or other
Obligations payable hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event
81
shall Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Transferee. Each Borrower hereby grants
to any Transferee a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Transferee as security
for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in minimum amounts of not less than $5,000,000, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Advances owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence
of manifest error, and Borrowers, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by Borrowers or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.
(e) Each Borrower authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
such Borrower which has been delivered to such Lender by or on behalf of such
Borrower pursuant to this Agreement or in connection with such Lender's credit
evaluation of such Borrower.
82
16.4. Application of Payments. Agent shall have the continuing and
-----------------------
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
any Borrower makes a payment or Agent or any Lender receives any payment or
proceeds of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and
---------
each of their respective officers, directors, Affiliates, employees and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct of the party being indemnified.
16.6. Notice. Any notice or request hereunder may be given to Borrowing
------
Agent or any Borrower or to Agent or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a "Notice") to be given to or made upon any party hereto
under any provision of this Agreement shall be given or made by telephone or in
writing (which includes by means of electronic transmission (i.e., "e-mail") or
facsimile transmission or by setting forth such Notice on a site on the World
Wide Web (a "Website Posting") if Notice of such Website Posting (including the
information necessary to access such site) has previously been delivered to the
applicable parties hereto by another means set forth in this Section 16.6) in
accordance with this Section 16.6. Any such Notice must be delivered to the
applicable parties hereto at the addresses and numbers set forth under their
respective names on Section 16.6 hereof or in accordance with any subsequent
unrevoked Notice from any such party that is given in accordance with this
Section 16.6. Any Notice shall be effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, four days after such Notice is deposited
with the United States Postal Service, with first-class postage prepaid, return
receipt requested;
(c) In the case of a telephonic Notice, when a party is contacted
by telephone, if delivery of such telephonic Notice is confirmed no later than
the next Business Day by hand delivery, a facsimile or electronic transmission,
a Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
83
(d) In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;
(e) In the case of electronic transmission, when actually
received;
(f) In the case of a Website Posting, upon delivery of a Notice of
such posting (including the information necessary to access such site) by
another means set forth in this Section 16.6; and
(g) If given by any other means (including by overnight courier),
when actually received.
Any Lender giving a Notice to Borrowing Agent or any Borrower shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice.
(A) If to Agent or PNC at: PNC Bank, National Association
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: PNC Bank, National Association
PNC Agency Services
One PNC Plaza
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Air Methods Account Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and a copy to: Xxxx & Hessen LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(B) If to a Lender other than Agent, as specified on the signature pages
hereof.
(C) If to Borrowing Agent
or any Borrower, at: Air Methods Corporation
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
84
Attention: Xxxxx Xxxx
Telephone: 000-000-0000
Telecopier 000-000-0000
with a copy to: Xxxxx, Xxxxxx & Xxxxxx LLP
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
--------
3.8, 3.9, 4.19(h), 14.7 and 16.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
------------
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including, without limitation,
--------
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent on its behalf or on behalf of Lenders (a) in
all efforts made to enforce payment of any Obligation or effect collection of
any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with any Borrower, or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
related agreements, may be charged to Borrowers' Account and shall be part of
the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
-----------------
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent
---------------------
or attorney for any of them, shall be liable to any Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.12. Captions. The captions at various places in this Agreement are
--------
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
85
16.13. Counterparts; Telecopied Signatures. This Agreement may be
-----------------------------------
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be deemed to be
an original signature hereto.
16.14. Construction. The parties acknowledge that each party and its
------------
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15. Confidentiality; Sharing Information. (a) Agent, each Lender
------------------------------------
and each Transferee shall maintain the confidentiality of all non-public
information obtained by Agent, such Lender or such Transferee pursuant to the
requirements of this Agreement in accordance with Agent's, such Lender's and
such Transferee's customary procedures for handling confidential information of
this nature; provided, however, Agent, each Lender and each Transferee may
-------- -------
disclose such confidential information (a) to its examiners, affiliates, outside
auditors, counsel and other professional advisors, (b) to Agent, any Lender or,
subject to confidentiality restrictions, to any prospective Transferees and
Purchasing Lenders, and (c) as required or requested by any Governmental Body or
representative thereof or pursuant to legal process; provided, further that (i)
-------- -------
unless specifically prohibited by applicable law or court order, Agent, each
Lender and each Transferee shall use its best efforts as soon as practicable
prior to disclosure thereof, to notify AMC of the applicable request for
disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated.
(b) Each Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision of Section
16.15 as if it were a Lender hereunder. Such authorization shall survive the
repayment of the other Obligations and the termination of this Agreement.
16.16. Publicity. After AMC has made a public announcement, each Borrower
---------
and each Lender hereby authorizes Agent to make appropriate announcements of the
financial arrangement entered into among Borrowers, Agent and Lenders,
including, without limitation,
86
announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem
appropriate.
87
Each of the parties has signed this Agreement as of the day and year first above
written.
AIR METHODS CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
Address: 0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
ROCKY MOUNTAIN HOLDINGS LLC
By: Air Methods Corporation, its sole member
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
Address: 000 Xxxxx 0000 Xxxx
Xxxxx, Xxxx 00000
MERCY AIR SERVICE, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
Address: 0000 Xxxx Xxx
Xxxxxx, Xxxxxxxxxx 00000
ARCH AIR MEDICAL SERVICE, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
Address: 0000 Xxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
88
PNC BANK, NATIONAL ASSOCIATION, as
Lender and as Agent
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
Address: Xxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Commitment Percentage: 57.14%
XXXXX FARGO BANK, N.A.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
----------------------------------------
Title: Vice President
---------------------------------------
Address: 0000 Xxxxxxxx XXX X0000-000
---------------------------------
Xxxxxx, XX 00000
---------------------------------
Commitment Percentage: 42.86%
00
XXXXX XX XXX XXXX )
) ss.
COUNTY OF NEW YORK )
On this 16th day of October, 2002, before me personally came Xxxxxx
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Chairman and Chief Executive Officer of Air Methods Corp., the corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the board of directors of said corporation.
/s/ Xxxxxxx Xxxxxxx
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 16th day of October, 2002, before me personally came Xxxxxx
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Chairman and Chief Executive Officer of Air Methods Corp., the sole member
of Rocky Mountain Holdings LLC, the limited liability company described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the sole member of said limited liability company.
/s/ Xxxxxxx Xxxxxxx
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 16th day of October, 2002, before me personally came Xxxxxx
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Chairman and Chief Executive Officer of Mercy Air Service, Inc., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Xxxxxxx Xxxxxxx
------------------------------
Notary Public
00
XXXXX XX XXX XXXX )
) ss.
COUNTY OF NEW YORK )
On this 16th day of October, 2002, before me personally came Xxxxxx
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Chairman and Chief Executive Officer of Arch Air Medical Service, Inc., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Xxxxxxx Xxxxxxx
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 16th day of October, 2002 before me personally came Xxxx X.
Xxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
is the Vice President of PNC Bank, National Association, and that he was
authorized to sign his name thereto.
/s/ Xxxxxxx Xxxxxxx
------------------------------
Notary Public
STATE OF Colorado )
) ss.
COUNTY OF Denver )
On this 16th day of October, 2002, before me personally came Xxxxxx X.
Xxxxxxxx, to me known, who, being by me duly sworn, did depose and say that s/he
is the Vice President of Xxxxx Fargo Bank, N.A., and that s/he was authorized to
sign her/his name thereto.
/s/ Xxxxxx X. Xxxxx
------------------------------
Notary Public
91
List of Exhibits and Schedules
------------------------------
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 5.5(a) Financial Projections
Exhibit 5.5(b) Changes
Exhibit 8.1(k) Financial Condition Certificate
Exhibit 16.3 Commitment Transfer Supplement
Exhibit A Borrowing Base Certificate
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 5.2(a) States of Qualification and Good Standing and Organizational
ID Numbers
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7(a) Environmental Compliance
Schedule 5.7(c) Releases, etc.
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 5.24 Real Property
Schedule 7.3 Guarantees
Schedule 7.4 Investments
Schedule 7.5 Loans
Schedule 7.8 Indebtedness
Schedule 7.10 Affiliate Transactions
TABLE OF CONTENTS
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
1.1. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
1.2. General Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
1.3. Uniform Commercial Code Terms . . . . . . . . . . . . . . . . .20
-----------------------------
1.4. Certain Matters of Construction . . . . . . . . . . . . . . . .20
-------------------------------
II. ADVANCES, PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .20
------------------
2.1. (a) Revolving Advances. . . . . . . . . . . . . . . . . . . . .20
------------------
(c) Discretionary Rights. . . . . . . . . . . . . . . . . . . .21
--------------------
2.2. Procedure for Borrowing Advances. . . . . . . . . . . . . . . .21
--------------------------------
2.3. Disbursement of Advance Proceeds. . . . . . . . . . . . . . . .23
--------------------------------
2.4. Maximum Advances. . . . . . . . . . . . . . . . . . . . . . . .23
----------------
2.5. Repayment of Advances . . . . . . . . . . . . . . . . . . . . .23
---------------------
2.6. Repayment of Excess Advances. . . . . . . . . . . . . . . . . .24
----------------------------
2.7. Statement of Account. . . . . . . . . . . . . . . . . . . . . .24
--------------------
2.8. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . .24
-----------------
2.8.1. Letter of Credit Facility . . . . . . . . . . . . . . . . . . .25
-------------------------
2.8.2. Issuance of Letters of Credit . . . . . . . . . . . . . . . . .25
-----------------------------
2.8.3. Requirements For Issuance of Letters of Credit; Indemnity . . .25
---------------------------------------------------------
2.8.4. Disbursements, Reimbursement. . . . . . . . . . . . . . . . . .26
----------------------------
2.8.5. Repayment of Participation Advances . . . . . . . . . . . . . .28
-----------------------------------
2.8.6. Documentation . . . . . . . . . . . . . . . . . . . . . . . . .28
-------------
2.8.7. Determination to Honor Drawing Request. . . . . . . . . . . . .28
--------------------------------------
2.8.8. Nature of Participation and Reimbursement Obligations . . . . .28
-----------------------------------------------------
2.8.9. Liability for Acts and Omissions. . . . . . . . . . . . . . . .29
--------------------------------
2.9. Additional Payments . . . . . . . . . . . . . . . . . . . . . .30
-------------------
2.10. Manner of Borrowing and Payment . . . . . . . . . . . . . . . .30
-------------------------------
2.11. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . .32
---------------------
2.12. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . .32
---------------
2.13. Defaulting Lender . . . . . . . . . . . . . . . . . . . . . . .32
-----------------
III. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . .33
-----------------
3.1. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
--------
3.2. Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . .34
---------------------
(b) Facility Fee . . . . . . . . . . . . . . . . . . . . . . .35
------------
3.4. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . .35
---------------------
3.5. Computation of Interest and Fees. . . . . . . . . . . . . . . .35
--------------------------------
3.6. Maximum Charges . . . . . . . . . . . . . . . . . . . . . . . .35
---------------
3.7. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . .35
---------------
3.8. Basis For Determining Interest Rate Inadequate or Unfair. . . .36
--------------------------------------------------------
3.9. Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . .36
----------------
IV. COLLATERAL: GENERAL TERMS. . . . . . . . . . . . . . . . . . . . . . .37
--------------------------
4.1. Security Interest in the Collateral . . . . . . . . . . . . . .37
-----------------------------------
-i-
4.2. Perfection of Security Interest . . . . . . . . . . . . . . . .37
-------------------------------
4.3. Disposition of Collateral . . . . . . . . . . . . . . . . . . .38
-------------------------
4.4. Preservation of Collateral. . . . . . . . . . . . . . . . . . .38
--------------------------
4.5. Ownership of Collateral . . . . . . . . . . . . . . . . . . . .39
-----------------------
4.6. Defense of Agent's and Lenders' Interests . . . . . . . . . . .39
-----------------------------------------
4.7. Books and Records . . . . . . . . . . . . . . . . . . . . . . .39
-----------------
4.8. Financial Disclosure. . . . . . . . . . . . . . . . . . . . . .40
--------------------
4.9. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .40
--------------------
4.10. Inspection of Premises. . . . . . . . . . . . . . . . . . . . .40
----------------------
4.11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .40
---------
4.12. Failure to Pay Insurance. . . . . . . . . . . . . . . . . . . .41
------------------------
4.13. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . .41
----------------
4.14. Payment of Leasehold Obligations. . . . . . . . . . . . . . . .42
--------------------------------
4.15. Receivables . . . . . . . . . . . . . . . . . . . . . . . . . .42
-----------
(a) Nature of Receivables. . . . . . . . . . . . . . . . . . .42
---------------------
(b) Solvency of Customers. . . . . . . . . . . . . . . . . . .42
---------------------
(c) Locations of Borrower. . . . . . . . . . . . . . . . . . .42
---------------------
(d) Collection of Receivables. . . . . . . . . . . . . . . . .42
-------------------------
(e) Notification of Assignment of Receivables. . . . . . . . .43
-----------------------------------------
(f) Power of Agent to Act on Borrowers' Behalf . . . . . . . .43
------------------------------------------
(g) No Liability . . . . . . . . . . . . . . . . . . . . . . .43
------------
(h) Establishment of a Lockbox Account, Dominion Account . . .44
----------------------------------------------------
(i) Adjustments. . . . . . . . . . . . . . . . . . . . . . . .44
-----------
4.16. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .44
---------
4.17. Maintenance of Equipment. . . . . . . . . . . . . . . . . . . .44
------------------------
4.18. Exculpation of Liability. . . . . . . . . . . . . . . . . . . .45
------------------------
4.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . .45
---------------------
4.20. Financing Statements. . . . . . . . . . . . . . . . . . . . . .47
--------------------
V. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .47
------------------------------
5.1. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .47
---------
5.2. Formation and Qualification . . . . . . . . . . . . . . . . . .47
---------------------------
5.3. Survival of Representations and Warranties. . . . . . . . . . .48
------------------------------------------
5.4. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . .48
-----------
5.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . .48
--------------------
5.6. Corporate Name. . . . . . . . . . . . . . . . . . . . . . . . .49
--------------
5.7. O.S.H.A. and Environmental Compliance . . . . . . . . . . . . .49
-------------------------------------
5.8. Solvency; No Litigation, Violation, Indebtedness or Default . .49
-----------------------------------------------------------
5.9. Patents, Trademarks, Copyrights and Licenses. . . . . . . . . .51
--------------------------------------------
5.10. Licenses and Permits. . . . . . . . . . . . . . . . . . . . . .51
--------------------
5.11. Default of Indebtedness . . . . . . . . . . . . . . . . . . . .51
-----------------------
5.12. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . .51
----------
5.13. No Burdensome Restrictions. . . . . . . . . . . . . . . . . . .52
--------------------------
5.14. No Labor Disputes . . . . . . . . . . . . . . . . . . . . . . .52
-----------------
5.15. Margin Regulations. . . . . . . . . . . . . . . . . . . . . . .52
------------------
5.16. Investment Company Act. . . . . . . . . . . . . . . . . . . . .52
----------------------
5.17. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .52
----------
-ii-
5.18. Delivery of Acquisition Agreement and Subordinated
--------------------------------------------------
Debt Documentation . . . . . . . . . . . . . . . . . . . . . .52
------------------
5.19. Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
-----
5.20. Conflicting Agreements . . . . . . . . . . . . . . . . . . . .53
----------------------
5.21. Application of Certain Laws and Regulations . . . . . . . . . .53
-------------------------------------------
5.22. Business and Property of Borrowers. . . . . . . . . . . . . . .53
----------------------------------
1 53
5.24. Real Property . . . . . . . . . . . . . . . . . . . . . . . . .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. Financial Covenants . . . . . . . . . . . . . . . . . . . . . .54
-------------------
(a) Net Worth. . . . . . . . . . . . . . . . . . . . . . . . .54
---------
(b) (a) Fixed Charge Coverage Ratio . . . . . . . . . . . . . .54
---------------------------
6.6. Execution of Supplemental Instruments . . . . . . . . . . . . .55
-------------------------------------
6.7. Payment of Indebtedness . . . . . . . . . . . . . . . . . . . .55
-----------------------
6.8. Standards of Financial Statements . . . . . . . . . . . . . . .55
---------------------------------
6.9. Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . .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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
-----
7.6. Life Net. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
--------
7.7. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .57
---------
7.8. Indebtedness; Unfinanced Capital Expenditures; Personal
-------------------------------------------------------
Property Leases . . . . . . . . . . . . . . . . . . . . . . . .57
---------------
7.9. Nature of Business. . . . . . . . . . . . . . . . . . . . . . .58
------------------
7.10. Transactions with Affiliates. . . . . . . . . . . . . . . . . .58
----------------------------
7.11. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
------
7.12. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . .58
------------
7.13. Fiscal Year and Accounting Changes. . . . . . . . . . . . . . .58
----------------------------------
7.14. Pledge of Credit. . . . . . . . . . . . . . . . . . . . . . . .59
----------------
7.15. Amendment of Articles of Incorporation, By-Laws . . . . . . . .59
-----------------------------------------------
7.16. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . .59
---------------------
7.17. Prepayment of Indebtedness. . . . . . . . . . . . . . . . . . .59
--------------------------
7.18. Subordinated Note . . . . . . . . . . . . . . . . . . . . . . .59
-----------------
7.19. Other Agreements. . . . . . . . . . . . . . . . . . . . . . . .60
----------------
VIII. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . .60
--------------------
8.1. Conditions to Initial Advances. . . . . . . . . . . . . . . . .60
------------------------------
(a) Note . . . . . . . . . . . . . . . . . . . . . . . . . . .60
----
(b) Filings, Registrations and Recordings. . . . . . . . . . .60
-------------------------------------
-iii-
(c) Corporate Proceedings of Borrowers . . . . . . . . . . . .60
----------------------------------
(d) Incumbency Certificates of Borrowers . . . . . . . . . . .60
------------------------------------
(e) Certificates . . . . . . . . . . . . . . . . . . . . . . .61
------------
(f) Good Standing Certificates . . . . . . . . . . . . . . . .61
--------------------------
(g) Legal Opinions . . . . . . . . . . . . . . . . . . . . . .61
--------------
(h) No Litigation. . . . . . . . . . . . . . . . . . . . . . .61
-------------
(i) Financial Condition Certificates . . . . . . . . . . . . .61
--------------------------------
(j) Collateral Examination . . . . . . . . . . . . . . . . . .61
----------------------
(k) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .61
----
(l) Pro Forma Financial Statements . . . . . . . . . . . . . .62
------------------------------
(m) Acquisition and Subordinated Debt Documents. . . . . . . .62
-------------------------------------------
(n) Net Worth. . . . . . . . . . . . . . . . . . . . . . . . .62
---------
(o) Insurance. . . . . . . . . . . . . . . . . . . . . . . . .62
---------
(p) FAA Documentation. . . . . . . . . . . . . . . . . . . . .62
-----------------
(q) Payment Instructions . . . . . . . . . . . . . . . . . . .62
--------------------
(r) Blocked Accounts . . . . . . . . . . . . . . . . . . . . .62
----------------
(s) Consents . . . . . . . . . . . . . . . . . . . . . . . . .62
--------
(t) No Adverse Material Change . . . . . . . . . . . . . . . .62
--------------------------
(u) Leasehold Agreements . . . . . . . . . . . . . . . . . . .62
--------------------
(v) Other Documents. . . . . . . . . . . . . . . . . . . . . .63
---------------
(w) Contract Review. . . . . . . . . . . . . . . . . . . . . .63
---------------
(x) Closing Certificate. . . . . . . . . . . . . . . . . . . .63
-------------------
(y) Borrowing Base . . . . . . . . . . . . . . . . . . . . . .63
--------------
(z) Undrawn Availability . . . . . . . . . . . . . . . . . . .63
--------------------
(aa) Assignment of Notes . . . . . . . . . . . . . . . . . . . . . .63
-------------------
(bb) Other. . . . . . . . . . . . . . . . . . . . . . . . . . .63
-----
8.2. Conditions to Each Advance. . . . . . . . . . . . . . . . . . .63
--------------------------
(a) Representations and Warranties . . . . . . . . . . . . . .63
------------------------------
(b) No Default . . . . . . . . . . . . . . . . . . . . . . . .63
----------
(c) Maximum Advances . . . . . . . . . . . . . . . . . . . . .64
----------------
IX. INFORMATION AS TO BORROWERS . . . . . . . . . . . . . . . . . . . . . .64
---------------------------
9.1. Disclosure of Material Matters. . . . . . . . . . . . . . . . .64
------------------------------
9.2. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . .64
---------
9.3. Environmental Reports . . . . . . . . . . . . . . . . . . . . .65
---------------------
9.4. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .65
----------
9.5. Material Occurrences. . . . . . . . . . . . . . . . . . . . . .65
--------------------
9.6. Government Receivables. . . . . . . . . . . . . . . . . . . . .65
----------------------
9.7. Annual Financial Statements . . . . . . . . . . . . . . . . . .65
---------------------------
9.8. Quarterly Financial Statements. . . . . . . . . . . . . . . . .66
------------------------------
9.9. Monthly Financial Statements. . . . . . . . . . . . . . . . . .66
----------------------------
9.10. Other Reports . . . . . . . . . . . . . . . . . . . . . . . . .66
-------------
9.11. Additional Information. . . . . . . . . . . . . . . . . . . . .67
----------------------
9.12. Projected Operating Budget. . . . . . . . . . . . . . . . . . .67
--------------------------
9.13. Variances From Operating Budget . . . . . . . . . . . . . . . .67
-------------------------------
9.14. Notice of Suits, Adverse Events . . . . . . . . . . . . . . . .67
-------------------------------
9.15. ERISA Notices and Requests. . . . . . . . . . . . . . . . . . .67
--------------------------
-iv-
9.16. Additional Documents . . . . . . . . . . . . . . . . . . . . .68
--------------------
9.17. Subordinated Debt Documentation Certificates. . . . . . . . . .68
--------------------------------------------
X. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . .68
-----------------
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT. . . . . . . . . . . . . . .71
------------------------------------------
11.1. Rights and Remedies . . . . . . . . . . . . . . . . . . . . . .71
-------------------
11.2. Agent's Discretion. . . . . . . . . . . . . . . . . . . . . . .72
------------------
11.3. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
------
11.4. Rights and Remedies not Exclusive . . . . . . . . . . . . . . .72
---------------------------------
11.5. Allocation of Payments After Event of Default . . . . . . . . .72
---------------------------------------------
XII. WAIVERS AND JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . .73
--------------------------------
12.1. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . .73
----------------
12.2. Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
-----
12.3. Jury Waiver . . . . . . . . . . . . . . . . . . . . . . . . . .73
-----------
XIII. EFFECTIVE DATE AND TERMINATION. . . . . . . . . . . . . . . . . . . . .74
------------------------------
13.1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
----
13.2. Termination . . . . . . . . . . . . . . . . . . . . . . . . . .74
-----------
XIV. REGARDING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
---------------
14.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . .75
-----------
14.2. Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . .75
----------------
14.3. Lack of Reliance on Agent and Resignation . . . . . . . . . . .75
-----------------------------------------
14.4. Certain Rights of Agent . . . . . . . . . . . . . . . . . . . .76
-----------------------
14.5. Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . .76
--------
14.6. Notice of Default . . . . . . . . . . . . . . . . . . . . . . .76
-----------------
14.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .77
---------------
14.8. Agent in its Individual Capacity. . . . . . . . . . . . . . . .77
--------------------------------
14.9. Delivery of Documents . . . . . . . . . . . . . . . . . . . . .77
---------------------
14.10. Borrowers' Undertaking to Agent . . . . . . . . . . . . . . . .77
-------------------------------
XV. BORROWING AGENCY . . . . . . . . . . . . . . . . . . . . . . . . . . .77
----------------
15.1. Borrowing Agency Provisions . . . . . . . . . . . . . . . . . .77
---------------------------
15.2. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . .78
---------------------
XVI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
-------------
16.1. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .78
-------------
16.2. Entire Understanding. . . . . . . . . . . . . . . . . . . . . .79
--------------------
16.3. Successors and Assigns; Participations; New Lenders . . . . . .81
---------------------------------------------------
16.4. Application of Payments . . . . . . . . . . . . . . . . . . . .83
-----------------------
16.5. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . .83
---------
16.6. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
------
16.7. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . .85
--------
16.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .85
------------
16.9. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .85
--------
1610. Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . .85
-----------------
16.11. Consequential Damages . . . . . . . . . . . . . . . . . . . . .85
---------------------
16.12. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . .85
--------
-v-
16.13. Counterparts; Telecopied Signatures . . . . . . . . . . . . . .86
-----------------------------------
16.14. Construction. . . . . . . . . . . . . . . . . . . . . . . . . .86
------------
16.15. Confidentiality; Sharing Information. . . . . . . . . . . . . .86
------------------------------------
16.16. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . .86
---------
-vi-
