REVOLVING CREDIT, TERM LOAN, CAPITAL EXPENDITURE LOAN,
GUARANTY, AND
SECURITY AGREEMENT
IBJ WHITEHALL BUSINESS CREDIT CORPORATION
(AS LENDER AND AS AGENT)
WITH
HLM DESIGN, INC.
(BORROWERS)
February 7, 2000
THIS DOCUMENT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO
RULE 24B-2 OF THE COMMISSION.
TABLE OF CONTENTS
I. DEFINITIONS..............................................................1
1.1. Accounting Terms................................................1
1.2. General Terms...................................................1
1.3. Uniform Commercial Code Terms..................................23
1.4. Certain Matters of Construction................................23
II. ADVANCES, PAYMENTS......................................................24
2.1. Revolving Advances.............................................24
2.2. Procedure for Advances Borrowing...............................24
2.3. Disbursement of Advance Proceeds...............................26
2.4. Term Loan......................................................26
2.5. Capital Expenditure Loans......................................27
2.6. Maximum Revolving Advances.....................................27
2.7. Repayment of Advances..........................................27
2.8. Repayment of Excess Advances...................................28
2.9. Statement of Account...........................................28
2.10. Letters of Credit..............................................29
2.11. Issuance of Letters of Credit..................................29
2.12. Requirements For Issuance of Letters of Credit.................30
2.13. Additional Payments............................................32
2.14. Manner of Borrowing and Payment................................32
2.15. Mandatory Prepayments..........................................34
2.16. Use of Proceeds................................................35
2.17. Defaulting Lender..............................................35
III. INTEREST AND FEES.......................................................36
3.1. Interest.......................................................36
3.2. Letter of Credit Fees..........................................36
3.3. Closing Fee....................................................37
3.4. Facility Fee...................................................37
3.5. Collateral Management Fees.....................................38
3.6. Computation of Interest and Fees...............................38
3.7. Maximum Charges................................................38
3.8. Increased Costs................................................38
3.9. Basis For Determining Interest Rate Inadequate or Unfair.......39
3.10. Capital Adequacy...............................................40
IV. COLLATERAL AND GUARANTY: GENERAL TERMS.................................40
4.1. Security Interest in the Collateral............................40
4.2. Perfection of Security Interest................................40
4.3. Disposition of Collateral......................................41
4.4. Preservation of Collateral.....................................41
4.5. Ownership of Collateral........................................41
4.6. Defense of Agent's and Lenders' Interests......................42
4.7. Books and Records..............................................42
4.8. Financial Disclosure...........................................43
4.9. Compliance with Laws...........................................43
4.10. Inspection of Premises.........................................43
4.11. Insurance......................................................43
4.12. Failure to Pay Insurance.......................................45
4.13. Payment of Taxes...............................................45
4.14. Payment of Leasehold Obligations...............................46
4.15. Receivables....................................................46
4.16. Inventory......................................................50
4.17. Maintenance of Equipment.......................................50
4.18. Exculpation of Liability.......................................51
4.19. Environmental Matters..........................................51
4.20. Financing Statements...........................................53
4.21. Affiliate Guaranty.............................................53
V. REPRESENTATIONS AND WARRANTIES..........................................56
5.1. Authority......................................................56
5.2. Formation and Qualification....................................57
5.3. Survival of Representations and Warranties.....................57
5.4. Tax Returns....................................................57
5.5. Financial Statements...........................................57
5.6. Corporate Name.................................................58
5.7. O.S.H.A. and Environmental Compliance..........................58
5.8. Solvency; No Litigation, Violation, Indebtedness or Default....59
5.9. Patents, Trademarks, Copyrights and Licenses...................60
5.10. Licenses and Permits...........................................60
5.11. Default of Indebtedness........................................61
5.12. No Default.....................................................61
5.13. No Burdensome Restrictions.....................................61
5.14. No Labor Disputes..............................................61
5.15. Margin Regulations.............................................61
5.16. Investment Company Act.........................................61
5.17. Disclosure.....................................................61
5.18. [Intentionally Omitted]........................................61
5.19. Swaps..........................................................62
5.20. Conflicting Agreements.........................................62
5.21. Application of Certain Laws and Regulations....................62
5.22. Business and Property of Borrower..............................62
5.23. Regulatory Compliance..........................................62
5.24. Shareholder and Management and Services Agreements.............62
5.25. Seller Notes...................................................62
5.26. Year 2000 Compliance...........................................62
ii
VI. AFFIRMATIVE COVENANTS...................................................63
6.1. Payment of Fees................................................63
6.2. Conduct of Business and Maintenance of Existence and Assets....63
6.3. Violations.....................................................63
6.4. Government Receivables.........................................64
6.5. Net Worth......................................................64
6.6. Leverage Ratio.................................................64
6.7. Senior Leverage Ratio..........................................64
6.8. Capital Expenditures...........................................64
6.9. Fixed Charge Coverage Ratio....................................64
6.10. Senior Fixed Charge Coverage Ratio.............................64
6.11. Execution of Supplemental Instruments..........................65
6.12. Payment of Indebtedness........................................65
6.13. Standards of Financial Statements..............................65
6.14. Exercise of Rights.............................................65
6.15. Shareholder and Management and Services Agreements.............65
6.16. Landlord and Warehouseman Waivers..............................65
6.17. Off-Premises Audit.............................................66
6.18. Indemnification Agreement......................................66
6.19. Release of Liens...............................................66
6.20. Lock-Box Agreements............................................66
6.21. Year 2000 Compliance...........................................66
VII. NEGATIVE COVENANTS......................................................67
7.1. Merger, Consolidation, Acquisition and Sale of Assets..........67
7.2. Creation of Liens..............................................67
7.3. Guarantees.....................................................67
7.4. Investments....................................................67
7.5. Loans..........................................................67
7.6. Dividends......................................................68
7.7. Indebtedness...................................................68
7.8. Nature of Business.............................................68
7.9. Transactions with Affiliates...................................68
7.10. Leases.........................................................68
7.11. Subsidiaries and Managed Firms.................................68
7.12. Fiscal Year and Accounting Changes.............................69
7.13. Pledge of Credit...............................................69
7.14. Amendment of Articles of Incorporation, By-Laws................69
7.15. Compliance with ERISA..........................................69
7.16. Prepayment of Indebtedness.....................................70
7.17. Other Agreements...............................................70
7.18. Changes Relating to Subordinated Indebtedness..................70
VIII. CONDITIONS PRECEDENT....................................................70
8.1. Conditions to Initial Advances.................................70
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8.2. Conditions to Each Advance.....................................73
8.3. Conditions to Each Capital Expenditure Loan....................74
IX. INFORMATION AS TO BORROWERS.............................................74
9.1. Disclosure of Material Matters.................................74
9.2. Schedules......................................................74
9.3. Environmental Reports..........................................75
9.4. Litigation.....................................................75
9.5. Material Occurrences...........................................75
9.6. Government Receivables.........................................75
9.7. Annual Financial Statements....................................75
9.8. Quarterly Financial Statements.................................76
9.9. Monthly Financial Statements...................................76
9.10. Borrowing Base Certificate.....................................76
9.11. Other Reports..................................................77
9.12. Additional Information.........................................77
9.13. Projected Operating Budget.....................................77
9.14. Variances From Operating Budget................................77
9.15. Notice of Suits, Adverse Events................................77
9.16. Notice of Regulatory Issues....................................78
9.17. ERISA Notices and Requests.....................................78
9.18. Additional Documents...........................................79
X. EVENTS OF DEFAULT.......................................................79
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................82
11.1. Rights and Remedies............................................82
11.2. Application of Proceeds........................................82
11.3. Agent's Discretion.............................................83
11.4. Setoff.........................................................83
11.5. Rights and Remedies not Exclusive..............................83
XII. WAIVERS AND JUDICIAL PROCEEDINGS........................................83
12.1. Waiver of Notice...............................................83
12.2. Delay..........................................................83
12.3. Jury Waiver....................................................83
XIII. EFFECTIVE DATE AND TERMINATION..........................................84
13.1. Term...........................................................84
13.2. Termination....................................................84
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XIV. REGARDING AGENT.........................................................85
14.1. Appointment....................................................85
14.2. Nature of Duties...............................................85
14.3. Lack of Reliance on Agent and Resignation......................86
14.4. Certain Rights of Agent........................................86
14.5. Reliance.......................................................86
14.6. Notice of Default..............................................87
14.7. Indemnification................................................87
14.8. Agent in its Individual Capacity...............................87
14.9. Delivery of Documents..........................................87
14.10. Borrowers' Undertaking to Agent................................87
XV. BORROWING AGENCY........................................................88
15.1. Borrowing Agency Provisions....................................88
15.2. Waiver of Subrogation..........................................88
XVI. MISCELLANEOUS...........................................................88
16.1. Governing Law..................................................88
16.2. Entire Understanding...........................................89
16.3. Successors and Assigns; Participations; New Lenders............91
16.4. Application of Payments........................................93
16.5. Indemnity......................................................93
16.6. Notice.........................................................94
16.7. Survival.......................................................95
16.8. Severability...................................................95
16.9. Expenses.......................................................95
16.10. Injunctive Relief..............................................95
16.11. Consequential Damages..........................................96
16.12. Captions.......................................................96
16.13. Counterparts; Telecopied Signatures............................96
16.14. Construction...................................................96
16.15. Confidentiality................................................96
16.16. Foreign Subsidiaries...........................................96
v
REVOLVING CREDIT, TERM LOAN, CAPITAL EXPENDITURE LOAN,
GUARANTY AND
SECURITY AGREEMENT
Revolving Credit, Term Loan, Capital Expenditure Loan,
Guaranty and Security Agreement, dated as of February 7, 2000, among HLM DESIGN,
INC., a corporation organized under the laws of the State of Delaware ("HLM"),
as borrower hereunder (HLM, together with each other Person which, subsequent to
the Closing Date, becomes a borrower hereunder, herein called, individually, a
"Borrower" and, collectively, the "Borrowers"; and pending the inclusion of any
other Person besides HLM as a "Borrower" hereunder, all references herein to
"Borrowers," "each Borrower," the "applicable Borrower", "such Borrower" or any
similar variations thereof (whether singular or plural) shall all mean and refer
to HLM only); all those Domestic Subsidiaries of Borrowers or Managed Firms
existing on the Closing Date and identified as "Affiliate Guarantors" on the
signature pages to this Agreement and all Domestic Subsidiaries of such Persons,
together with each other Domestic Subsidiary of Borrowers or Managed Firm which
from time to time hereafter becomes an "Affiliate Guarantor" hereunder whether
pursuant to the operation and effect of Section 4.21 or otherwise (all of the
foregoing Persons hereinafter being sometimes called, collectively, the
"Affiliate Guarantors" and individually, an "Affiliate Guarantor"); the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender"), as lenders hereunder,
and IBJ WHITEHALL BUSINESS CREDIT CORPORATION, a corporation organized under the
laws of the State of New York ("IBJW"), as agent for Lenders and any Issuer
(IBJW, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrowers, Affiliate Guarantors, Lenders and Agent hereby
agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended April 30,
1999.
1.2. General Terms. For purposes of this Agreement the following
terms shall have the following meanings:
"Accepting Bank" shall have the meaning ascribed to such term
in Section 2.12(a) hereof.
"Accountants" shall mean an independent certified public
accounting firm selected by Borrowers and satisfactory to Agent.
"Acquisition" means the acquisition by Borrowers or any of its
Subsidiaries on or subsequent to the Closing Date of (i) all, or substantially
all, of the Capital Stock of a Person or (ii) all, or substantially all, of the
operating assets or property of any Person, or assets or property which
constitute all, or substantially all, of the assets of a division or a separate
(or separable) line of business of a Person.
"Acquisition Target" shall have the meaning ascribed to such
term in the definition of "Approved Acquisition" set forth below.
"Advances" shall mean and include the Revolving Advances, any
Letters of Credit, the Term Loan and the Capital Expenditure Loans.
"Advance Rates" shall have the meaning set forth in Section
2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a member of Senior Management (i) of such Person, (ii) of any Subsidiary
of such Person or (iii) of any Person described in clause (a) above. For
purposes of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote 10% or more of the securities having ordinary voting power
for the election of directors(or comparable governing body) of such Person, or
(y) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"Affiliate Guarantor" shall have the meaning set forth in the
preamble to this Agreement and shall include any successors and assigns to the
extent permitted under this Agreement.
"Agent" shall have the meaning set forth in the preamble to
this Agreement and shall include its successors and assigns.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the higher of (i) the Base Rate in effect on such day and (ii)
the Federal Funds Rate in effect on such day plus one-half of one percent
(1/2%).
"Applicable Margin" means, with respect to all Eurodollar Rate
Loans, for each period beginning on the fifth (5th) Business Day following the
receipt by Agent of the Financial Reports for fiscal year ending April 30, 2000
and thereafter commencing on the fifth (5th) Business Day following the receipt
by Agent of the Borrower's Financial Reports for the succeeding fiscal quarter
(the "Quarterly Measurement Date") through but excluding the succeeding
Quarterly Measurement Date, the applicable percentage determined from the chart
set forth below based on the Borrower's Total Leverage Ratio with respect to the
most recently ended four quarters prior to the commencement of such period,
based upon the calculations reported in the most recently delivered Financial
Reports, provided, however, that for purposes of the calculation of the Total
Leverage Ratio for any four quarter period ending prior to January 26, 2001, all
calculations of items relating to income and expense for such period (including,
2
without limitation, EBITDA) shall be made giving pro forma effect to the
incurrence of the Revolving Loans, the Capital Expenditure Loans, if any, and
the Term Loan on the Closing Date and the use of the proceeds thereof, as if the
Revolving Loans , Capital Expenditure Loans ,if any, and Term Loans made on the
Closing Date had been incurred on the first day of such four quarter period:
--------------------- ------------ --------------- -----------------
Total Leverage Ratio [*] => [*] [*]
and <=
[*]
--------------------- ------------ --------------- -----------------
Applicable Margin 2.75% 2.50% 2.25%
--------------------- ------------ --------------- -----------------
Notwithstanding the foregoing, at any time during which the Borrowers have
failed to deliver the Financial Reports for the succeeding fiscal quarter on or
before the Quarterly Measurement Date, the Applicable Margin for Eurodollar Rate
Loans shall be 2.75% until such time as the delinquent Financial reports are
delivered to the Agent, at which time the Applicable Margin for Eurodollar Rate
Loans shall be reset as provided above.
"Approved Acquisition" shall mean any Acquisition which the
Required Lenders, in their sole discretion, may approve from time to time.
Without limiting the generality of the foregoing, no Acquisition shall be an
"Approved Acquisition" unless and except to the extent that such Acquisition
meets each of the following conditions, to the sole satisfaction of the Required
Lenders (unless one or more of such conditions is waived in writing by the
Required Lenders): (i) Agent shall have received at least twenty-one (21) days
prior to the intended closing date of the Acquisition a report setting forth all
financial and related information concerning the Acquisition then known to
Borrower, in such form, manner and detail as then reasonably requested by Agent;
(ii) the Acquisition shall have been approved by the board of directors of the
Acquisition Target (as hereinafter defined); i.e., it shall not be a "hostile"
Acquisition; (iii) the Person, operating assets or line of business acquired
(herein, the "Acquisition Target") shall belong to the same, or a substantially
related, line of business as the Borrower, the Borrower's Subsidiaries or the
Managed Firms; (iv) no Event of Default or Default shall exist at the time of
such Acquisition or would result from, or be caused by, its consummation; (v)
Agent shall have received on or prior to the intended closing date of such
Acquisition or the date of their intended execution (if required or permitted to
be executed prior to such Acquisition being consummated, whichever is the
earlier), copies of all material documents, instruments, certificates and
agreements to be executed, or exchanged by, between or among Borrower or any of
its Subsidiaries and the Person or Persons selling the Acquisition Target
evidencing, governing or relating to such Acquisition, either in draft or
executed form, as then appropriate (the "Acquisition Documents"), and the
Required Lenders shall be reasonably satisfied therewith and with any change in
the organizational structure of Borrower and its Subsidiaries resulting
therefrom; (vi) contemporaneously with the closing of each such Acquisition,
Agent shall have received (A) such documents and instruments as Agent shall
-------------
* Confidential portion has been omitted and filed separately with the
Commission.
3
determine may be necessary or advisable to grant or confirm to Agent a Lien on
or security interest in the Capital Stock, operating assets or line of business
so acquired subject to no other Liens, except Permitted Encumbrances, (B) an
Assignment of Acquisition Rights of the purchaser under the Acquisition
Documents, and (C) if the Person is acquired by, and not merged into, Borrower
or any existing Affiliate Guarantor, (i) a joinder agreement in respect of such
Person as an Affiliate Guarantor hereunder in accordance with Section 7.11(a),
(ii) a Collateral Assignment of Management and Services Agreement executed by
such Person in favor of the Agent, for the ratable benefit of the Lenders and
(iii) a Stock Pledge Agreement executed by the Parent of such Approved
Acquisition in favor of the Agent, for the ratable benefit of the Lenders, in
accordance with Section 7.11(a); (vii) at the time of the closing of such
Acquisition, Borrower must demonstrate to the sole satisfaction of the Required
Lenders its compliance with all financial covenants set forth in Sections 6.5
through 6.8 hereof on a pro forma basis, giving effect to such Acquisition as of
the then most recently concluded fiscal month end of Borrower for which
financial reports are then available, on an historical basis, for the respective
twelve (12) fiscal months period then ended as reflected on restated financial
statements (including income statements and balance sheets) for each of such
fiscal periods; (viii) to the extent that any purchase money debt (including,
without limitation any Seller Notes) is to be incurred in connection with any
such Acquisition, all such debt must be Subordinated Debt; (ix) the Acquisition
shall be closed substantially in accordance with the terms of the Acquisition
Documents theretofore received, reviewed and approved by the Required Lenders;
(x) Agent shall have received Pro Forma Financial Statements giving effect to
such Acquisition; (xi) the Acquisition Target must have reported historical
financial statements, prepared in accordance with GAAP, (or, if not, prepared on
a basis otherwise acceptable to the Required Lenders) for fiscal periods ending
not earlier than ninety (90) days from date of Acquisition, and which extend
back at least one (1) full year; (xii) Borrower shall have complied with the
provisions of Section 6.15 and Agent shall have completed an Off-Premises Audit
in relation to such Acquisition Target which is reasonably satisfactory to
Agent; (xiii) on the date of closing of such Acquisition, Agent shall have
received from Borrower's chief executive officer, chief operating officer or
chief financial officer, a certificate, in substantially the form of Exhibit
1.2(a), confirming to Agent compliance with all the foregoing conditions
(including, where appropriate, calculations of covenant compliance); (xiv) Agent
shall have received such other documents, agreements, and information in
connection with the Acquisition Target as it may reasonably request; and (xv)
after giving effect to such Acquisition and any Loans extended in connection
with the financing thereof , Borrowers shall have Undrawn Availability in an
amount determined by Agent in its reasonable credit judgment. Notwithstanding
the foregoing, the B&LP Acquisition shall be deemed an Approved Acquisition if
it meets each of the following conditions, to the sole satisfaction of the
Required Lenders (unless one or more of such conditions is waived in writing by
the Required Lenders): (A) Borrower shall have complied with the provisions of
Section 6.15 and Agent shall have completed an Off-Premises Audit in relation to
the B&LP Acquisition which is reasonably satisfactory to Agent; (B) the B&LP
Acquisition shall be completed within sixty (60) days following the Closing
Date; (C) Accountants shall have delivered to Agent audited financial statements
of B&LP Engineers, Inc. accompanied by an unqualified opinion of the Accountants
as to such financing statements; (D) the B&LP Acquisition shall be closed
substantially in accordance with the terms of the letter of intent, dated as of
October 26, 1999, theretofore received, reviewed and approved by the Agent and
(E) after giving effect to the B&LP Acquisition and any Loans extended in
4
connection with the financing thereof , Borrowers shall have Undrawn
Availability, as of the date of the closing of such Acquisition, of One Million
Dollars ($1,000,000) and (F) after giving effect to the B&LP Acquisition, the
Loan Parties shall otherwise be in compliance with Section 7.11 hereof.
"Assignment of Acquisition Rights" means, collectively, any
collateral assignment of rights under acquisition documents or any purchase
agreement executed in connection with an Approved Acquisition together with any
required Consent of the applicable parties selling such Acquisition Target; such
"Assignment of Acquisition Rights" to be substantially in the form of Exhibit
1.2(b) hereto.
"Authority" shall have the meaning set forth in Section
4.19(d).
"Bank" shall mean IBJ Whitehall Bank & Trust Company, together
with its successors and assigns.
"Base Rate" shall mean the base commercial lending rate of the
Bank as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by the Bank 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 the Bank to any particular class or
category of customers of the Bank, its Affiliates or Subsidiaries.
"Billed Eligible Receivables" shall mean those Eligible
Receivables (a) which are evidenced by an invoice or other documentary evidence
reasonably satisfactory to Agent and (b) which are due or unpaid for not more
than ninety (90) days after the original due date, not to exceed, however, one
hundred and twenty (120) days from the original invoice date.
"B&LP Acquisition" shall mean the acquisition by Borrower of
all of the authorized, issued and outstanding Capital Stock of B&LP Engineers,
Inc., a Texas corporation.
"Borrower" or "Borrowers" shall have the meaning set forth in
the preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrowers on a consolidated basis" shall mean the
consolidation in accordance with GAAP of the accounts or other items of each
Borrower and its Subsidiaries and Managed Firms (if any).
"Borrowers' Account" shall have the meaning set forth in
Section 2.9.
"Borrowing Agent" shall mean HLM, individually, pending the
inclusion of any other Person as "Borrower" hereunder; and, thereafter, HLM or
such other Person as the Borrowers, collectively between or among themselves,
may elect as their agent from time to time pursuant hereto, subject to Agent's
prior approval.
"Borrowing Base Certificate" shall have the meaning set forth
in Section 9.10.
5
"Business Cycle" shall mean that section of a fiscal year
consisting of a Business Period of four (4) weeks which is followed by a second
Business Period of four (4) weeks which is followed by a final Business Period
of five (5) weeks.
"Business Day" shall mean with respect to Eurodollar Rate
Loans, any day on which commercial banks are open for domestic and international
business, including dealings in Dollar deposits in London, England and New York,
New York and with respect to all other matters, any day other than a day on
which commercial banks in New York are authorized or required by law to close.
"Business Period" shall mean that period of time constituting
part of the Business Cycle which consists of either four (4) calendar weeks or
five (5) calendar weeks, as applicable.
"Capital Expenditure Loan Rate" shall mean an interest rate
per annum equal to (a) the sum of the Alternate Base Rate plus one percent (1%),
with respect to Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus
three and 50/100ths of one percent (3.50%), with respect to Eurodollar Rate
Loans.
"Capital Expenditure Loans" shall have the meaning set forth
in Section 2.5(a) hereof, as amended, modified, supplemented and restated from
time to time.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests and limited liability
company membership interests, whether general or limited, voting or non-voting,
of such Person, including any preferred stock.
"Cash Flow" of Borrowers on a consolidated basis for any
period, shall mean the sum of (i) Earnings Before Interest and Taxes for such
period, plus (ii) depreciation and amortization and all other non-cash charges,
which were deducted in determining net income for such period, minus (iii) the
sum of (a) scheduled repayments of the Term Loan and/or the Capital Expenditure
Loans, to the extent actually paid during the period, and (b) non-cash credits
which were taken into account in determining Earnings Before Interest and Taxes
for such period.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.
"Change of Control" shall mean the occurrence of any of the
following: (a) any Person or group of Persons shall acquire beneficial ownership
of more than 25% of the outstanding Voting Stock of the Borrower or any
Affiliate Guarantor (within the meaning of Section 13(d) or 14(d) of the
Securities and Exchange Act of 1934, as amended, and the applicable rules and
regulations thereunder), (b) any merger, consolidation or sale of substantially
all of the property or assets of any Borrower or Affiliate Guarantor, (c)
Borrower shall cease to own, beneficially and of record, 100% of the Capital
Stock of its Subsidiaries or (d) Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxx,
collectively, shall cease to own, beneficially and of record, more than 50% of
the shares of Capital Stock of each of the Managed Firms.
6
"Charges" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, liens, claims and charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing or other authority, domestic
or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon any Collateral, any
Borrower, any of Borrower's Affiliates, or any Affiliate Guarantor.
"Closing Date" shall mean February __, 2000 or such other date
as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Contract Rights and any rights of payment which
have been earned under a Contract Right;
(f) all Subsidiary Stock and Managed Firm Stock;
(g) all Real Property;
(h) all Securities;
(i) all Leasehold Interests;
(j) all of each of Borrower's or any Affiliate Guarantor's
right, title, and interest in all Regulatory Licenses or Approvals to the extent
Borrower or the Affiliate Guarantors may grant security interests in such items;
(k) all of each Borrower's or any Affiliate Guarantor'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 or any Affiliate Guarantor's rights as a consignor, a consignee, an
unpaid vendor, mechanic, artisan, or other lien or, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower or
7
Affiliate Guarantor from any Customer relating to the Receivables; (iv) other
property, including warranty claims, relating to any items securing this
Agreement; (v) all of each Borrower's or any Affiliate Guarantor's instruments,
investment property, documents, chattel paper, warehouse receipts, deposit
accounts, money and securities; (vi) if and when obtained by any Borrower or
Affiliate Guarantor, all real and personal property of third parties in which
such Borrower or Affiliate Guarantor has been granted a lien or security
interest as security for the payment or enforcement of Receivables; and (vii)
any other goods, personal property or real property now owned or hereafter
acquired in which any Borrower or Affiliate Guarantor 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 or Agent and any Affiliate
Guarantor;
(l) all of each Borrower's and any Affiliate Guarantor's
ledger sheets, ledger cards, files, correspondence, records, books of account,
business papers, computers, computer software (owned by any Borrower or any
Affiliate Guarantor or in which Borrower or any Affiliate Guarantor has an
interest), computer programs, tapes, disks and documents relating to (a), (b),
(c), (d), (e), (f), (g), (h), (i), (j), or (k) of this Paragraph; and
(m) all proceeds and products of (a), (b), (c), (d), (e),
(f), (g), (h), (i), (j), (k), or (l) 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.
"Collateral Assignment of Management and Services Agreements"
shall mean an assignment by HLM to the Agent, for the ratable benefit of the
Lenders, of its rights under each Management and Services Agreement at any time
executed by any Subsidiary of Borrower or any Managed Firm in favor of HLM.
"Collateral Assignment of Shareholder Agreements" shall mean
an assignment by HLM to the Agent, for the ratable benefit of the Lenders, of
its rights under any Shareholder Agreement from time to time entered into by and
among the shareholders of the Managed Firms.
"Commitment" shall mean, for any Lender, its respective
commitment to make Loans hereunder in accordance with its respective Commitment
Percentage. "Commitments" shall mean, collectively, the aggregate commitment of
all Lenders.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document in the
form of Exhibit 16.3 hereto, properly completed and otherwise in form and
substance satisfactory to Agent by which the Purchasing Lender purchases and
assumes a portion of the obligation of Lenders to make Advances under this
Agreement.
8
"Concentration Account" shall mean any blocked account or
concentration account established in connection with Section 4.15(d) hereof.
"Concentration Account Agreement" shall mean the agreement
entered into between the Borrowers or Affiliate Guarantors and the Concentration
Bank outlining the terms and conditions of the Concentration Account.
"Concentration Bank" shall mean a bank acceptable to both
Agent and Borrowers which enters into a Concentration Account Agreement.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's or any Affiliate Guarantor's business, including, without
limitation, any Consents required under all applicable federal, state or other
applicable law.
"Contract Rate" shall have the meaning set forth in Section
3.1 hereof.
"Contract Rights" shall mean all rights of the Borrower or any
Affiliate Guarantor arising under or in connection with any contract to the
extent that any party may grant a security interest in such rights. "Contract
Rights" shall include, without limitation, all rights of the Borrower under the
Management and Services Agreements and the Shareholder Agreements.
"Controlled Group" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Borrower or any Affiliate
Guarantor, are treated as a single employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with
respect to any Receivable and/or the prospective purchaser of goods, services or
both with respect to any contract or contract right, and/or any party who enters
into or proposes to enter into any contract or other arrangement with any
Borrower or any Affiliate Guarantor, pursuant to which such Borrower or
Affiliate Guarantor is to deliver any personal property or perform any services.
"Default" shall mean an event which, with the giving of notice
or passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in
Section 2.17 hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the
United States of America.
"Domestic Rate Loan" shall mean any Advance that bears
interest based upon the Alternate Base Rate.
9
"Domestic Subsidiaries" shall mean all Subsidiaries which are
incorporated or otherwise organized pursuant to the laws of any state within the
United States of America.
"Early Termination Date" shall have the meaning set forth in
Section 13.1 hereof.
"Earnings Before Interest and Taxes" of Borrowers on a
consolidated basis for any period shall mean the sum 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 Borrowers on a consolidated
basis for such period, plus (iii) all charges against income of Borrowers on a
consolidated basis for such period for federal, state and local taxes actually
paid.
"EBITDA" of the Borrowers on a consolidated basis for any
period shall mean the sum of (i) Earnings Before Interest and Taxes for such
period plus (ii) depreciation expenses for such period, plus (iii) amortization
expenses for such period.
"Eligible Receivables" shall mean and include with respect to
each Borrower or Affiliate Guarantor, each Receivable of such Person arising in
the ordinary course of such Person's business and which Agent, in its sole
reasonable credit judgment, shall deem to be an Eligible Receivable, based on
such considerations as Agent may from time to time deem appropriate. Without
limitation, 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). In addition, no Receivable shall be an
Eligible Receivable if:
(a) it arises out of a sale made by any Borrower or
Affiliate Guarantor to an Affiliate of any Borrower or Affiliate Guarantor or to
a Person controlled by an Affiliate of any Borrower or such Affiliate Guarantor;
(b) fifty percent (50%) or more of the Receivables from
such Customer are not deemed Eligible Receivables hereunder (as such percentage
may, in Agent's sole credit judgment, be increased or decreased from time to
time);
(c) any covenant, representation or warranty contained in
this Agreement with respect to such Receivable and with respect to which Agent,
in its sole discretion, finds to be to be material has been breached;
(d) 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;
10
(e) 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 credit judgment;
(f) 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;
(g) Agent believes, in its sole reasonable 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;
(h) the Customer is the United States of America, any
state or any department, agency or instrumentality of any of them, unless
Borrower or applicable Affiliate Guarantor 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; provided,
however, that for any such Receivables existing as of the Closing Date for which
Borrower or any applicable Affiliate Guarantor has not complied with the
foregoing condition, such Receivables shall not be considered ineligible
hereunder solely by reason of such non-compliance for a period of thirty (30)
days following the Closing Date.
(i) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the Customer or the services giving
rise to such Receivable have not been performed by the applicable Borrower and
accepted by the Customer or the Receivable otherwise does not represent a final
sale;
(j) the Receivables of the Customer exceed a credit limit
determined by Agent, in its sole credit judgment, to the extent such Receivable
exceeds such limit; provided, that Borrowers have been notified of such credit
limit by Agent at least twenty-five (25) days previously in writing;
(k) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim, the Customer is also a creditor or supplier
of a Borrower or Affiliate Guarantor or the Receivable is contingent in any
respect or for any reason;
(l) the applicable Borrower or Affiliate Guarantor has
made any agreement with any Customer for any deduction therefrom, except for
discounts or allowances made in the ordinary course of business for prompt
payment, all of which discounts or allowances are reflected in the calculation
of the face value of each respective invoice related thereto;
(m) shipment of the merchandise or the rendition of
services has not been completed;
(n) any return, rejection or repossession of the
merchandise has occurred;
11
(o) such Receivable is not payable to a Borrower or
Affiliate Guarantor; or
(p) such Receivable is not otherwise satisfactory to Agent
as determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
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 and
each Affiliate Guarantor all of such Borrower's or Affiliate Guarantor's goods
(other than Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery, apparatus,
motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories
and all replacements and substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate Loan" shall mean an Advance at any time that
bears interest based on the Eurodollar Rate.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for
the then current Interest Period relating thereto the rate per annum (such
Eurodollar Rate to be adjusted to the next higher 1/100th of one percent (.01%))
equal to the quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus
the aggregate of the rates (expressed as a decimal) of reserve requirements
current on the day that is two (2) Business Days prior to the beginning of the
Interest Period (including without limitation basic, supplemental, marginal and
emergency reserves) under any regulation promulgated by the Board of Governors
of the Federal Reserve System (or any other governmental authority having
jurisdiction over the Bank) as in effect from time to time, dealing with reserve
requirements prescribed for Eurocurrency funding including any reserve
requirements with respect to "Eurocurrency liabilities" under Regulation D of
the Board of Governors of the Federal Reserve System.
"Event of Default" shall mean the occurrence and continuance
of any of the events set forth in Article X hereof.
"Excess Cash Flow" of Borrowers on a consolidated basis for
any period shall mean the amount so defined (and calculated) in accordance with
the Excess Cash Flow Certificate set forth in Exhibit 2.15(b) attached hereto.
Excess Cash Flow shall be equal to the sum of EBITDA minus (i) nonfinanced
capital expenditures and (ii) Fixed Charges.
12
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank.
"Financial Reports" shall mean: (i) for annual financial
reports, the following: (A) Borrowers' 10-K report, as filed with the Securities
and Exchange Commission, for the applicable fiscal year ended, provided that
such 10-K report can be delivered within ninety (90) days following the last day
of the applicable fiscal year, accompanied by, as an attachment thereto, (B) the
financial statements of Borrowers on a consolidated 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 the Accountants; and (C)
separate from the 10-K report, but within the aforementioned time limit, the
financial statements of Borrowers on a consolidating 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 by Borrowers in
accordance with GAAP applied on a basis consistent with prior practices, and
reasonable detail and complete and correct in all material respects, but
unaudited; (ii) for quarterly financial reports, (A) Borrowers' 10-Q report, as
filed with the Securities and Exchange Commission, for the applicable fiscal
quarter ended, provided that such 10-Q report can be delivered within forty-five
(45) days following the last day of the applicable fiscal quarter, accompanied
by, as an attachment thereto (B) the financial statements of Borrowers on a
consolidated basis including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current fiscal
quarter to the end of such fiscal quarter and the balance sheet as at the end of
such fiscal quarter, all prepared by Borrowers in accordance with GAAP applied
on a basis consistent with prior practices, in reasonable detail, and complete
and correct in all material respects, subject to normal year end adjustments;
and (C) separate from the 10-Q report, but within the aforementioned time limit,
the financial statements of the Borrowers on a consolidating 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 quarter
and the balance sheet as at the end of such fiscal quarter, all prepared by
Borrowers in accordance with GAAP applied on a basis consistent with prior
practices, in reasonable detail, and complete and correct in all material
respects, subject to normal year end adjustments; and (iii) for all monthly
financial reports, within thirty (30) days after each fiscal month, an unaudited
balance sheet of Borrowers on a consolidated and consolidating basis and
unaudited statements of income and stockholders' equity and cash flow of
Borrowers on a consolidated and consolidating basis reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared by Borrower in accordance with GAAP applied on a basis
consistent with prior practices, in reasonable detail, and complete and correct
in all material respects, subject to normal year end adjustments.
Notwithstanding the foregoing, however, in respect of Borrowers' annual and
quarterly financial statements and reports, described in clauses (i) and (ii)
above, respectively, as being attached to
13
Borrowers' 10-K and 10-Q reports, if (i) Borrowers cease to be publicly held
companies, (ii) the 10-K or 10-Q reports referenced above cannot be delivered
within the aforementioned time limits, (iii) the 10-K and 10-Q reports
referenced above fail to contain, as attachments thereto, said financial
statements, then, with respect to all such financial statements and reports the
Borrowers shall deliver such financial statements and reports directly to the
Agent within the aforementioned time periods separate and apart from the 10-K
and 10-Q reports.
"Fixed Charges" of Borrowers on a consolidated basis for any
period, shall mean the sum of scheduled principal payments on Total Funded Debt,
interest expense, taxes and capitalized lease payments.
"Fixed Charge Coverage Ratio" of Borrowers on a consolidated
basis for any fiscal period shall mean (a) Operating Cash Flow divided by (b)
Fixed Charges for such period.
"Foreign Subsidiaries" shall mean all Subsidiaries which are
incorporated or otherwise organized pursuant to the laws of a country, or
jurisdiction within a country, other than the United States of America.
"Formula Amount" shall have the meaning set forth in Section
2.1(a).
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"General Intangibles" shall mean and include as to each
Borrower and each Affiliate Guarantor all of such Borrower's and such Affiliate
Guarantor's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower or Affiliate Guarantor to
secure payment of any of the Receivables by a Customer, all rights of
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Governmental Body" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
"Guaranteed Obligations" shall have the meaning set forth in
Section 4.21 hereof.
"Hazardous Discharge" shall have the meaning set forth in
Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, 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
14
and 27 of 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.
"IBJW" shall have the meaning set forth in the preamble to
this Agreement and shall include its successors and assigns.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Indemnification Agreement" shall mean the Environmental
Indemnity and Warranty Agreement, substantially in the form of Exhibit 6.16
attached hereto, made by the Loan Parties to Agent for the benefit of Agent and
all Lenders; such Indemnification Agreement to be executed upon the acquisition
by any Loan Party of any Real Property other than Leasehold Interests.
"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 and
each Affiliate Guarantor all of such Borrower's or such Affiliate Guarantor's
now owned or hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in such Borrower's or such Affiliate Guarantor'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.
"Issuer" shall mean any Person who issues a Letter of Credit
and/or accepts a draft pursuant to the terms thereof (it being agreed that so
long as IBJW shall be Agent or Lender, then the Issuing Bank shall be the Bank;
provided, however, that in the event that IBJW is neither the Agent nor a
Lender, the "Issuer" with respect to all subsequently issued Letters of Credit
or acceptances thereunder shall be a Lender selected by the Borrower).
15
"Leasehold Interests" shall mean all of each Borrower's or
each of Affiliate Guarantor's right, title and interest in and to any Real
Property owned by a Person other than Borrower, whether as tenant, lessee,
licensee, operator or otherwise.
"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.
"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 2.10.
"Leverage Ratio" of Borrowers on a consolidated basis for any
period shall mean (a) Total Funded Debt divided by (b) EBITDA for such period.
"LIBOR" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto, the rate per annum quoted by the Agent
to Borrowers two (2) Business Days prior to the first day of such Interest
Period as the rate available to Bank in the interbank market for offshore Dollar
deposits in immediately available funds for a period equal to such Interest
Period and in an amount equal to the amount of such Eurodollar Rate Loan.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Loan" means a Domestic Rate Loan or a Eurodollar Rate Loan.
"Loan Party" means, collectively, Borrower, the Affiliate
Guarantors and any other Person (other than Agent and each Lender) which is or
becomes a party to any Other Document or otherwise guarantees, or becomes a
surety for the payment of, any Obligations.
"Lock-Box Account" shall have the meaning set forth in Section
4.15(d).
"Lock-Box Agreement" shall have the meaning set forth in
Section 4.15(d).
"Lock-Box Bank" shall have the meaning set forth in Section
4.15(d).
"Managed Firm" shall mean any Person which is not a Subsidiary
of any Borrower or a Subsidiary of any Subsidiary of any Borrower but which has
entered into a Management and Services Agreement with a Borrower.
"Managed Firm Stock" shall mean all of the issued and
outstanding Capital Stock of any Managed Firm owned at any time by principal
shareholders of the Managed Firms.
16
"Management and Services Agreements" shall mean those certain
Management and Services Agreements by and among HLM and each Affiliate Guarantor
or each Foreign Subsidiary whereby HLM is appointed as the sole and exclusive
manager of each of the Affiliate Guarantor's and each of the Foreign
Subsidiary's general business functions.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b) 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 Capital Expenditure Loan Amount" shall mean an amount
equal to (x) One Million Dollars ($1,000,000), minus (y) the total amount of
principal payments received by Lenders with respect to the Capital Expenditure
Loans.
"Maximum Revolving Advance Amount" shall mean Seventeen
Million Dollars ($17,000,000).
"Monthly Advances" shall have the meaning set forth in Section
3.1 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Net Worth" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrowers on a consolidated basis as may
properly be classified as such in accordance with GAAP consistently applied,
less (b) the aggregate amount of all liabilities of the Borrowers on a
consolidated basis as may properly be classified as such in accordance with GAAP
consistently applied.
"Note" shall mean collectively, the Term Note, the Revolving
Credit Note and the Capital Expenditure Loan Note.
"Obligations" shall mean and include any and all of each
Borrower's Indebtedness and/or liabilities to Agent, Lenders, any Issuer or the
Bank or any corporation that directly or indirectly controls or is controlled by
or is under common control with Agent, any Lender, any Issuer or the Bank of
every kind, nature and description, direct or indirect, secured or unsecured,
joint, several, joint and several, absolute or contingent, 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, Lenders, any Issuer or the
Bank and any Borrower and all obligations of any Borrower to Agent, Lenders, any
Issuer or the Bank to perform acts or refrain from taking any action.
"Operating Cash Flow" of Borrower on a consolidated basis for
any period, shall mean the sum of EBITDA minus capital expenditures (net of
Indebtedness incurred to finance
17
such expenditures) in an amount for such period not to exceed the amount
permitted under Section 6.7.
"Other Documents" shall mean the Note, the Stock Pledge
Agreement, the Shareholders Pledge Agreement, any Assignment of Acquisition
Rights, any Collateral Assignment of Management and Services Agreements, any
Collateral Assignment of Shareholder Agreements, the Indemnification Agreement,
the Trademark Security Agreement, any Letter of Credit Application and any and
all other agreements, instruments and documents, including, without limitation,
guaranties, pledges, security agreements, powers of attorney, consents, and all
other writings heretofore, now or hereafter executed by any Loan Party 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 fifty percent (50%) of the
shares of stock or other ownership interests having ordinary voting power to
elect a majority of the directors of the Person, or other Persons performing
similar functions for any such Person.
"Participant" shall mean each Person who shall be granted the
right by any Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000; thereafter, such other office of Agent, if any, which it
may designate by notice to Borrowing Agent and to each Lender to be the Payment
Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of
Agent for the benefit of Agent, Lenders, any Issuer and/or the Bank which, in
each case, secure Obligations; (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 Borrower; provided, that, the Lien shall have no effect on the priority
of the Liens in favor of Agent, except as to any such Liens which arise by
statute and which by law would be prior to those Liens in favor of Agent, or the
value of the assets in which Agent has such a Lien and a stay of enforcement of
any such Lien shall be in effect; (c) Liens disclosed in the financial
statements referred to in Section 5.5, the existence of which Agent has
consented to in writing; (d) deposits or pledges to secure obligations under
worker's compensation, social security or similar laws, or under unemployment
insurance; (e) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of any Borrower's or Affiliate Guarantor'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 or Affiliate
Guarantor's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower or Affiliate Guarantor;
(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 or Affiliate Guarantors and (y) the aggregate
amount of Indebtedness secured by
18
such Liens incurred as a result of such purchases during any fiscal year shall
not exceed the amount provided for in Section 6.7; (h) other Liens incidental to
the conduct of Borrowers' or Affiliate Guarantors' business or the ownership of
its property and assets which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and which do not in the
aggregate materially detract from Agent's or Lenders' rights in and to the
Collateral or the value of Borrowers' or Affiliate Guarantors' property or
assets or which do not materially impair the use thereof in the operation of
Borrowers' or Affiliate Guarantors business; and (i) Liens disclosed on Schedule
1.2.
"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 Affiliate
Guarantors or any member of the Controlled Group or any such Plan to which any
Borrower, any Affiliate Guarantor or any member of the Controlled Group is
required to contribute on behalf of any of its employees.
"Projections" shall have the meaning set forth in Section
5.5(a) hereof.
"Purchasing Lender" shall have the meaning set forth in
Section 16.3(c) hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. ss.6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's and each of
Affiliate Guarantors right, title and interest in and to the owned and leased
premises (but only to the extent of the space or area actually leased)
identified on Schedule 4.19 hereto.
"Receivables" shall mean and include, as to each Borrower and
each Affiliate Guarantor, all of such Borrower's or such Affiliate Guarantors'
accounts, contract rights, instruments (including those evidencing indebtedness
owed to Borrowers or Affiliate Guarantors by their respective Affiliates),
documents, chattel paper, general intangibles relating to accounts, drafts and
acceptances, and all other forms of obligations owing to such Borrower or such
Affiliate Guarantor arising out of or in connection with the sale or lease of
Inventory or the rendition of services, all guarantees and other security
therefor, whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to Agent hereunder.
"Regulatory Body" shall mean any governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
body, agency, bureau or entity (including, without limitation, any and all state
licensing and registration boards for architects and engineers).
"Regulatory Licenses or Approvals" shall mean all
authorizations, Consents, approvals, licenses and exemptions, registrations and
filings with, and reports to, any Regulatory Body.
19
"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 of ERISA or the regulations promulgated thereunder except to the
extent the thirty (30) day notice period has been waived by PBGC regulations..
"Required Lenders" shall mean Lenders holding at least
fifty-one percent (51%) of the Advances and, if no Advances are outstanding,
shall mean Lenders holding at least fifty-one percent (51%) of the Commitment
Percentages; provided, however, that, in the event no more than two (2) Lenders
maintain Commitment Percentages under this Agreement, "Required Lenders" shall
mean Lenders holding one hundred percent (100%) of the Advances and, if no
Advances are outstanding, shall mean Lenders holding one hundred percent (100%)
of the Commitment Percentages under this Agreement.
"Revolving Advances" shall mean Advances made other than
Letters of Credit, the Capital Expenditure Loans and the Term Loan.
"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) with respect to Domestic Rate Loans, the sum of the Alternate
Base Rate plus 50/100ths of one percent (.50%), and (b) with respect to
Eurodollar Rate Loans, (i) from the Closing Date through and until the fifth
(5th) Business Day following the receipt by Agent of the Financial Reports for
fiscal year ended April 30, 2000, the sum of the Eurodollar Rate plus two and
75/100ths of one percent (2.75%), and (ii) thereafter, the sum of the Eurodollar
Rate plus the Applicable Margin.
"Securities" shall mean and include, as to each Borrower and
each Affiliate Guarantor, all marketable securities owned by such Borrower or
Affiliate Guarantor, whether now existing or hereafter created, including any
held by any intermediary in any "street" name, pursuant to any custody
arrangement or otherwise.
"Seller Notes" shall mean any and all promissory notes
executed by any Borrower or Affiliate Guarantor in conjunction with an
Acquisition by such Borrower or Affiliate Guarantor. The term "Seller Notes"
shall refer, collectively, to both those Seller Notes previously issued in
connection with an Acquisition as well as any such Seller Notes which in the
future may be issued in connection with an Acquisition.
"Senior Fixed Charge Ratio" of Borrowers on a consolidated
basis for any fiscal period shall mean (a) Operating Cash Flow, divided by (b)
Senior Fixed Charges for such period.
"Senior Fixed Charges" of Borrowers on a consolidated basis
for any fiscal period shall mean the sum of scheduled principal payments on
Total Senior Funded Debt, interest expense on Total Senior Funded Debt, taxes
and capitalized lease payments.
"Senior Management" shall mean any president, chief executive
officer, chief financial officer, or chief operating officer of any Person.
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"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.
"Shareholder Agreements" shall mean those shareholder
agreements by and among the individual shareholders of the Managed Firms which
generally restrict the ability of these shareholders to exercise certain rights
commonly associated with ownership of common stock or other ownership interests
(including, without limitation a restriction of the ability of each shareholder
to sell, pledge or otherwise transfer the stock or other ownership interests)
and effectively provide shareholders of such entities with nominee shareholder
status.
"Shareholder Pledge Agreement" shall mean the pledge
agreement, dated as of the Closing Date, executed by each principal shareholder
(as defined by the Agent in its reasonable credit judgment) of each of the
Managed Firms in favor of Agent for the ratable benefit of Lenders whereby such
shareholders pledge the Managed Firm Stock.
"Stock Pledge Agreement" shall mean the pledge agreement,
dated as of the Closing Date, executed by HLM in favor of Agent for the ratable
benefit of Lenders whereby HLM pledges one hundred percent (100%) of the
authorized, issued, and outstanding Capital Stock of all of its Domestic
Subsidiaries and sixty-five percent (65%) of all of the authorized, issued, and
outstanding Capital Stock of all of its direct Foreign Subsidiaries.
"Subordinated Indebtedness" means all Indebtedness of Borrower
or any of the other Loan Parties which is subordinated, in a manner satisfactory
to the Required Lenders, in right of payment and claim to the Obligations. The
term "Subordinated Indebtedness" shall include, without limitation, all Seller
Notes required to be subordinated under this Agreement.
"Subordination Agreements" shall have the meaning set forth in
Section 5.25 hereof.
"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. Without limitation, the term
"Subsidiary" shall include all Domestic Subsidiaries and all Foreign
Subsidiaries.
"Subsidiary Stock" shall mean (a) one hundred percent (100%)
of all of the issued and outstanding shares of Capital Stock of (i) any Domestic
Subsidiary of Borrower owned at any time by Borrower and (ii) any Domestic
Subsidiary of any Domestic Subsidiary of Borrower at any time owned by such
Domestic Subsidiary of Borrower and (b) sixty-five percent (65%) of all of the
issued and outstanding shares of Capital Stock of any direct Foreign Subsidiary
of Borrower owned at any time by Borrower.
"Tangible Net Worth" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrowers on a consolidated basis as may be
properly classified as such in accordance with GAAP consistently applied
excluding such other assets as are properly
21
classified as intangible assets under GAAP, less (b) the aggregate amount of all
liabilities of the Borrowers on a consolidated basis.
"Term" shall have the meaning set forth in Section 13.1
hereof.
"Term Loan" shall have the meaning given to such term in
Section 2.4 hereof.
"Term Loan Rate" shall mean an interest rate per annum equal
to (a) the sum of the Alternate Base Rate plus two percent (2.00%) with respect
to Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus four and
50/100ths of one percent (4.50%) with respect to Eurodollar Rate Loans.
"Term Note" shall mean , collectively, the promissory notes
described in Section 2.4 hereof.
"Termination Event" shall mean: (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower,
any Affiliate Guarantor 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, any Affiliate Guarantor or any
member of the Controlled Group from a Multiemployer Plan.
"Total Funded Debt" of Borrowers on a consolidated basis for
any period, shall mean and include the sum of all Indebtedness for borrowed
money (including, without limitation any Indebtedness owed under the Seller
Notes and other Subordinated Indebtedness, and any capital lease obligations)
for such period.
"Total Leverage Ratio" of Borrowers on a consolidated basis
for any period shall mean (a) Total Funded Debt divided by (b) EBITDA for such
period.
"Total Senior Funded Debt" of Borrowers on a consolidated
basis for any period, shall mean and include the sum of all Indebtedness for
borrowed money (excluding any Subordinated Indebtedness, including any such
indebtedness owed under the Seller Notes) and any capital lease obligations for
such period.
"Total Senior Leverage Ratio" of Borrowers on a consolidated
basis for any period shall mean (a) Total Senior Funded Debt divided by (b)
EBITDA for such period.
"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. ss. 2601 et seq., applicable state law, or any
other applicable Federal or state laws now in force or hereafter
22
enacted relating to toxic substances. "Toxic Substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Trademark Security Agreement" shall mean the Collateral
Assignment and Security Agreements (Trademarks), dated as of the Closing Date,
made by HLM of Northamerica, Inc., an Iowa corporation, as an Affiliate
Guarantor hereunder in favor of Agent, for the ratable benefit of the Lenders.
"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.
"Unbilled Eligible Receivables" shall mean those Eligible
Receivables (a) which are not Billed Eligible Receivables and (b) which remain
in an unbilled form from the creation of such Receivable or accrual of such
Receivable for not more than sixty (60) days.
"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 (other than the Term Loan and the Capital Expenditure Loans) plus (ii)
all amounts due and owing to Borrowers' trade creditors which are outstanding
beyond normal trade terms, plus (iii) fees and expenses owing under this
Agreement and any of the Other Documents for which Borrowers are liable but
which have not been paid or charged to Borrowers' Account.
"Voting Stock" of any Person means Capital Stock of such
Person the holders of which are entitled under ordinary circumstances to vote in
the election of directors (or others performing similar functions) of such
Person.
"Week" shall mean the time period commencing with the opening
of business on a Wednesday and ending on the end of business the following
Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and
defined in the Uniform Commercial Code as adopted in the State of New York shall
have the meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
23
II. ADVANCES, PAYMENTS.
2.1. Revolving Advances. (a) 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 and (y) an amount equal to the
sum of:
(i) up to [*] of Billed Eligible Receivables, plus
(ii) up to [*] of Unbilled Eligible Receivables not to
exceed, however, [*] of the amount determined pursuant to
clause (i) above; 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 foregoing formula 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 a series of secured promissory notes issued to the
Lenders participating in the making of Revolving Advances in the principal
amounts equal to each Lender's respective Commitment Percentage (collectively,
the "Revolving Credit Note"), substantially in the form attached hereto as
Exhibit 2.1(a).
(b) [Intentionally Omitted]
2.2. Procedure for Advances Borrowing.
(a) Borrowing Agent on behalf of any Borrower may notify Agent
prior to 11:00 a.m. on a Business Day of a Borrower's request to incur, on that
day, a Revolving Advance hereunder. Subject to the satisfaction of the
conditions set forth in Section 8.3 hereof, in the event that any Borrower
desires a Capital Expenditure Loan, it shall give Agent at least three (3)
Business Days prior written notice. 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, Lenders, the Bank and/or any Issuer, 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, Lenders, the Bank and/or any Issuer and such request
shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event
Borrowers desire 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
*Confidential portion has been omitted and filed separately with the
Commission.
24
borrowed, which amount shall be an integral multiple of Five Hundred Thousand
Dollars ($500,000), and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for 30, 60, 90,
120 or 180 days. No Eurodollar Rate Loan shall be made available to Borrower
during the continuance of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrowing Agent may elect as set forth in (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.
(d) 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(e), 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(e) hereinbelow.
(e) 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 three (3) Eurodollar Rate
Loans, in the aggregate.
(f) At its option and upon three (3) Business Days' prior
written notice, any Borrower may prepay the Eurodollar Rate Loans in whole at
any time or in part from time to time, without premium or penalty (subject to
the provisions of Section 13.1 of this Agreement), 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, such Borrower shall
indemnify Agent and Lenders therefor in accordance with Section 2.2(g) hereof.
(g) 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
25
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. 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.
(h) 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, as the case may be, 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 the Bank 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. Term Loan. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a term loan (the "Term Loan")
to Borrowers in a sum equal to such Lender's Commitment Percentage of the Term
Loan. The Term Loan shall be equal to, in the aggregate, Two Million Dollars
($2,000,000), shall be advanced on the Closing Date and shall be, with respect
to principal, payable (based on an assumed level principal amortization of
26
thirty-six (36) months) in equal (or nearly equal) monthly installments,
commencing on the last day of the first calendar month following the Closing
Date, and continuing on the last day of each succeeding calendar month, with a
final payment equal in amount to the then outstanding and unpaid Term Loans,
together with accrued interest thereon, due and payable upon the last day of the
Term, subject to acceleration upon the occurrence of an Event of Default under
this Agreement or termination of this Agreement. The Term Loan shall be
evidenced by one or a series of secured promissory notes issued to each Lender
participating in the disbursement of the Term Loan, equal in amount to such
Lender's Commitment Percentage of the Term Loan (collectively, the "Term Note")
in substantially the form attached hereto as Exhibit 2.4. Once repaid, a Term
Loan may not be reborrowed. The Term Loan may consist of either Domestic Rate
Loans or Eurodollar Rate Loans and may be converted pursuant to Section 2.2
hereof.
2.5. Capital Expenditure Loans.
(a) Subject to the terms and conditions set forth in this
Agreement (including, but not limited to, Sections 2.2 and 8.3 hereof), each
Lender, severally and not jointly, agrees to make Advances to Borrower to
finance Borrower's purchase of Equipment for use in Borrower's business
("Capital Expenditure Loans") in the sum equal to such Lender's Commitment
Percentage of an amount not to exceed eighty percent (80%) of the net invoice
cost of such Equipment purchased by a Borrower (which shall be exclusive of
shipping, handling, taxes, installation and all other "soft" costs), provided
that the total amount of all outstanding Capital Expenditure Loans shall not
exceed the Maximum Capital Expenditure Loan Amount. All Capital Expenditure
Loans must be in original principal amounts of not less than Two Hundred Fifty
Thousand Dollars ($250,000). Once repaid, a Capital Expenditure Loan may not be
reborrowed. Capital Expenditure Loans may consist of either Domestic Rate Loans
or Eurodollar Rate Loans and may be converted pursuant to Section 2.2 hereof.
(b) Advances constituting Capital Expenditure Loans shall be
amortized on the basis of an assumed sixty (60) month term and be payable, with
respect to principal, in equal (or nearly equal) monthly installments based upon
the amortization schedule set forth above, commencing on the last day of the
first calendar month following the first disbursement of Capital Expenditure
Loans, and on the last day of each calendar month thereafter, with a final
payment equal in amount to the then outstanding and unpaid Capital Expenditure
Loans, together with any accrued interest thereon, due and payable upon the last
day of the Term, subject to acceleration upon the occurrence of an Event of
Default under this Agreement or termination of this Agreement. Each Lender's
Commitment Percentage of the Capital Expenditure Loans shall be evidenced by and
be subject to the terms of a secured promissory note, in substantially the form
attached hereto as Exhibit 2.5(b) (collectively, the "Capital Expenditure
Note").
2.6. Maximum Revolving Advances. The aggregate balance of Revolving
Advances outstanding at any time shall not exceed the lesser of (a) Maximum
Revolving Advance Amount or (b) the Formula Amount.
2.7. Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided. The
Term Loan shall be due and
27
payable as provided in Section 2.4 hereof and in the Term Note. The Capital
Expenditure Loans shall be due and payable as provided in Section 2.5 hereof and
in the Capital Expenditure Note. Notwithstanding anything to contrary herein,
any amounts outstanding under the Loans, not otherwise due and payable herein,
shall be due and payable on the last day of the Term, subject to acceleration
upon the occurrence of an Event of Default under this Agreement or termination
of this Agreement.
(b) Each Borrower recognizes that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to Collateral
and/or proceeds of Collateral and deposited in a Concentration Account may not
be deemed good, collected funds by such Concentration Bank on the date received.
Accordingly, each Borrower further acknowledges that such amounts shall be
deemed collected and received from the Concentration Bank by Agent on the date
good funds are actually received by Agent via wire transfer or otherwise. For
purposes of the preceding sentence, the Agent shall be deemed to have received a
payment on a particular day if it receives, by wire transfer or otherwise, the
same prior to 1:00 p.m. (New York City time) on such day or, if received after
such time, on the next following Business Day. In consideration of Agent's
agreement (i) in the event that the Concentration Bank is not the Bank, to
conditionally credit Borrowers' Account as of one (1) Business Day after which
Agent receives those items of payment constituting good, collected funds and
(ii) otherwise, to conditionally credit Borrowers' Account as of the same day
Agent receives such items of payment constituting good, collected funds, 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 receipt of such items of payment. 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 related agreements 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 Revolving 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.
2.8. Repayment of Excess Advances. The aggregate balance of Advances
(other than the Term Loan and the Capital Expenditure Loans) 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.
2.9. 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
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each Advance made by Lenders 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 Lenders 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.
2.10. Letters of Credit.
(a) Subject to the terms and conditions hereof, Agent shall
(a) issue or cause the issuance of Letters of Credit ("Letters of Credit") by
the Issuer 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
Five Hundred Thousand Dollars ($500,000), in the aggregate, at any time. No
Letter of Credit shall have an expiration date which is later than five (5)
Business Days prior to the last day of the Term. 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 Revolving
Interest Rate for Domestic Rate Loans; Letters of Credit that have not been
drawn upon shall not bear interest.
(b) In the case of any Letters of Credit issued by the Bank,
such Letters of Credit created thereunder shall be subject to the terms and
conditions set forth in the Letter of Credit and Security Agreement attached
hereto as Exhibit 2.10, except to the extent that the terms hereof conflict with
such Letter of Credit and Security Agreement, in which case the terms hereof
shall govern.
2.11. 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, Issuer's standard form of letter of credit and security
agreement, standard form of letter of credit application and standard form of
letter of credit authority agreement substantially in the form of Exhibit 2.11
hereto (collectively, the "Letter of Credit Application") and any draft if
applicable, completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent or Issuer 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 arrange the issuance of any amendment, extension or renewal of any Letter
of Credit.
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(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts or acceptances of issuance 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 (x)
with respect to stand-by Letters of Credit, not later than one (1) year after
such Letter of Credit's date of issuance and in no event later than five (5)
days prior to the last day of the Term and (y) with respect to documentary
Letters of Credit, not later than six (6) months after such Letter of Credit's
date of issuance and in no event later than five (5) days prior to 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.
(c) Agent shall use its reasonable efforts to notify Lenders
of the request by Borrowing Agent for a Letter of Credit hereunder.
(d) Agent and each Issuer shall each have absolute discretion
whether to accept any draft drawn on a Letter of Credit. Without in any way
limiting Agent's and each Issuer's absolute discretion whether to accept any
draft, Borrowing Agent will not present for acceptance any draft, and Agent and
each Issuer will generally not accept any drafts (i) that arise out of
transactions involving the sale of goods by any Borrower not in the ordinary
course of its business, (ii) that involve a sale to an Affiliate of any
Borrower, (iii) that involve any purchase for which Agent, or any Issuer, as
appropriate, has not received all related documents, instruments and forms
requested by Agent or such Issuer, (iv) for which Agent or any Issuer, as
appropriate, is unable to locate a purchaser in the ordinary course of business
on standard terms, or (v) that is not eligible for discounting with Federal
Reserve Banks pursuant to paragraph 7 of Section 13 of the Federal Reserve Act,
as amended.
2.12. Requirements For Issuance of Letters of Credit.
(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, expense or liability, including, without
limitation, payments made by Agent, any Lender, any bank accepting such Letter
of Credit (an "Accepting Bank"), or any Issuer and expenses and reasonable
attorneys' fees incurred by Agent, any Lender or any Issuer arising out of, or
in connection with, any Letter of Credit to be issued for any Borrower; provided
that no Borrower shall be liable for the payment of any portion of such loss,
cost, expense or liability determined by a court of competent jurisdiction in a
final proceeding to have resulted primarily from the gross (not mere) negligence
or willful misconduct of the Agent, such Issuer or such Lender, respectively.
Borrowers shall be bound by Agent's or 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 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' gross negligence or willful misconduct.
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(b) Borrowing Agent shall authorize and direct any Issuer of a
Letter of Credit to name the applicable Borrower as the "Applicant" or "Account
Party" therein to deliver to Agent all related payment/acceptance advices, 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 or the application 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 if an Event of
Default or Default arising in connection with Section 10.7 shall have occurred,
(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 such acts determined by a court of competent
jurisdiction in a final proceeding to have resulted primarily from Agent's or
its attorney's gross (not mere) negligence or willful misconduct. This power,
being coupled with an interest, is irrevocable as long as any Letters of Credit
remain outstanding.
(d) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all unreimbursed reimbursement obligations arising from disbursements
made or obligations incurred with respect to the Letters of Credit be deemed to
have irrevocably purchased an undivided participation in (i) each such
unreimbursed reimbursement obligation, (ii) Agent's credit support enhancement
provided to the Issuer of any Letter of Credit and (iii) each Revolving Advance
made as a consequence of the issuance of a Letter of Credit and all
disbursements thereunder, in each case in an amount equal to such Lender's
applicable Commitment Percentage times the outstanding amount of the Letters of
Credit and disbursements thereunder. In the event that at the time a
disbursement is made the unpaid balance of Revolving Advances exceeds or would
exceed, with the making of such disbursement, the amount permitted under Section
2.1(a) hereof, and such disbursement is not reimbursed by Borrowers within two
(2) Business Days, Agent shall promptly notify each Lender and upon Agent's
demand each Lender shall pay to Agent such Lender's proportionate share of such
unreimbursed disbursement together with such Lender's proportionate share of
Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from any Borrower of any
amount disbursed by Agent for which Agent had already been reimbursed by
Lenders, Agent shall deliver to each Lender that Lender's pro rata share of such
repayment. 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 Letters of
Credit issued 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.
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(e) Each Borrower shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other formalities of
any kind, to reimburse Agent for any amounts paid by Agent with respect to any
Letter of Credit issued for the account of such Borrower, including all fees,
costs and expenses paid by Agent to any bank that issues letters of credit. The
obligation of each Lender to deliver to Agent an amount equal to its respective
pro rata share of each payment made by Agent shall be absolute and unconditional
and such remittance shall be made notwithstanding the occurrence or continuation
of an Event of Default or Default or the failure to satisfy any condition set
forth in subsection 8.2. If any Lender fails to make available to Agent the
amount of such Lender's pro rata share of any payments made by Agent in respect
of such Letter of Credit as provided in this subsection 2.12, Agent shall be
entitled to recover such amount on demand from such Lender together with
interest at the Federal Funds Rate.
2.13. Additional Payments. Any sums expended by Agent or any Lender due
to any Borrower's or any Affiliate Guarantor's failure to perform or comply with
its obligations under this Agreement or any Other Document including, without
limitation, any Borrower's or Affiliate Guarantor'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.
2.14. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances and each Capital
Expenditure Loan 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 the Revolving Advances shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Each payment (including each prepayment) by Borrowers on account of
the principal of the Term Note, shall be made from or to, or applied to that
portion of the Term Loan evidenced by the Term Note pro rata according to the
Commitment Percentages of Lenders. Each payment (including each prepayment) by
any Borrower on account of the principal of the Capital Expenditure Loans, shall
be applied to the Capital Expenditure Loans pro rata according to the Commitment
Percentage of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by Borrower on account of principal, interest
and fees shall be made without set off or counterclaim 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.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.14(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by Borrower on account of Revolving Advances
shall be applied first to those Revolving Advances advanced by Agent. On or
before 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
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between (w) such Revolving Advances and (x) such repayments and (ii) if the
aggregate amount of repayments applied to outstanding Revolving Advances during
such Week exceeds the aggregate amount of new Revolving Advances made during
such Week, then Agent shall provide each Lender with funds in an amount equal to
its applicable Commitment Percentage of the difference between (y) such
repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Contract Rate on outstanding Advances which it has
funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments
received and Revolving 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 "benefited 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 benefited
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 benefited Lender to share the excess payment or benefits
of such Collateral or proceeds ratably with each of Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefited Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest. Each Lender so purchasing a portion of another Lender's
Advances may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to 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.
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2.15. Mandatory Prepayments.
(a) 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 (i) if the
Collateral disposed of is Equipment, the purchase of which was financed by a
Capital Expenditure Loan, (x) first, to the outstanding principal installments
of the Capital Expenditure Loans in the inverse order of the maturities thereof,
(y) second, to the outstanding principal installments of the Term Loan in the
inverse order of the maturities thereof, and (z) third, to the remaining
Advances in such order as Agent may determine, subject to Borrowers' ability to
reborrow Revolving Advances in accordance with the terms hereof or (ii) if the
Collateral disposed of is Real Property or Equipment other than as set forth in
(i) above, (x) first, to the outstanding principal installments of the Term Loan
in the inverse order of the maturities thereof, (y) second, to the outstanding
principal installments of the Capital Expenditure Loans in the inverse order of
the maturities thereof and (z) third, to the remaining Advances in such order as
Agent may determine, subject to Borrowers' ability to reborrow Revolving
Advances in accordance with the terms hereof. Notwithstanding the foregoing,
unless and until an Event of Default has occurred and is continuing, Borrower
may sell or otherwise dispose of Collateral not to exceed One Hundred Thousand
Dollars ($100,000) in the aggregate, in any fiscal year and retain such net
proceeds solely to acquire replacement Collateral without making a mandatory
prepayment hereunder so long as (a) the fair market value of the acquired
Collateral is equal to or greater than the fair market value of the Collateral
which was sold, (b) the acquired Collateral is purchased by such Borrower within
ninety (90) days of the sale of the Collateral, (c) the proceeds of such sale
are remitted to Agent to be held by Agent as security for the payment of the
Obligations until the replacement Collateral is acquired, (d) the acquired
Collateral shall be deemed to be acceptable Collateral by Agent in its
reasonable discretion and (e) the acquired Collateral shall be subject to
Agent's first priority security interest created hereunder. If Borrower fails to
meet the conditions set forth above, Borrower hereby authorizes Agent and
Lenders to apply the proceeds held by Agent as a prepayment of the Advances in
the manner set forth above.
(b) Borrowers shall prepay the outstanding amount of the Term
Loan in an amount equal to fifty percent (50%) of Excess Cash Flow for each
fiscal year commencing on or after April 30, 2001, payable upon delivery of the
Financial Reports to Agent referred to in and required by Section 9.7 for such
fiscal year but in any event not later than ninety (90) days after the end of
each such fiscal year, such delivery of payment to be accompanied by the Excess
Cash Flow Certificate attached hereto as Exhibit 2.15(b). The amount of this
payment of Excess Cash Flow, subject to availability and compliance with Section
2.6 hereof, shall be charged to such Borrowers' Account as a Revolving Advance
and added to the Obligations hereunder, or, at Agent's option, shall be paid to
Agent for the ratable benefit of Lenders immediately upon demand and shall be
applied ratably to the outstanding principal installments of the Term Loan in
the inverse order of the maturities thereof. In the event that the financial
statement is not so delivered, then a calculation based upon estimated amounts
shall be made by Agent upon which
34
calculation Borrowers shall make the prepayment required by this Section
2.15(b), subject to adjustment when the financial statement is delivered to
Agent as required hereby. The calculation made by Agent shall not be deemed a
waiver of any rights Agent or Lenders may have as a result of the failure by
Borrowers to deliver such financial statement.
2.16. Use of Proceeds. Borrowers shall apply the proceeds of (i)
Revolving Advances and the Term Loan made on the Closing Date to repay existing
indebtedness and to pay fees and expenses relating to this transaction, (ii)
Revolving Advances made on and after the Closing Date to provide for their
respective working capital needs and to finance, in part, Approved Acquisitions;
and (iii) Capital Expenditure Loans to provide funds for the purchase of
Equipment as permitted under Section 2.5 hereof.
2.17. 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 2.17 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(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 2.17,
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 2.17 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
35
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 to Agent for the
benefit of Lenders 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 or, for Eurodollar Rate Loans with an Interest Period in
excess of 90 days, at the earlier of (a) each 90 day period on the anniversary
date of the commencement of such Eurodollar Rate Loan or (b) the end of the
Interest Period. Interest charges shall be computed on the actual principal
amount of Advances outstanding during the month (the "Monthly Advances") at a
rate per annum equal to (i) with respect to Revolving Advances, the Revolving
Interest Rate, (ii) with respect to the Term Loans, the applicable Term Loan
Rate and (iii) with respect to the Capital Expenditure Loans, the Capital
Expenditure Loan Rate (as applicable, the "Contract Rate"). Whenever, subsequent
to the date of this Agreement, the Alternate Base Rate is increased or
decreased, the applicable Contract Rate for Domestic Rate Loans shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Alternate Base Rate during the time such change or
changes remain in effect. Upon and after the occurrence of an Event of Default,
and during the continuation thereof the Obligations shall bear interest at the
applicable Contract Rate for Domestic Loans plus two (2%) percent per annum (the
"Default Rate").
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,
which fees shall be calculated in accordance with Section 3.6 hereof and shall
be equal in amount to (i) one percent (1%) per annum of the undrawn face amount
thereof, on any documentary Letters of Credit, and (ii) two percent (2%) per
annum of the undrawn face amount thereof, on any standby Letter of Credit;
determined, in each case, on a daily average basis, payable monthly on the first
day of each calendar month, beginning with the first day of the first calendar
month following the issuance thereof, and continuing on a monthly basis until
each such Letter of Credit expires or is fully drawn down or upon the last day
of the Term and (y) to Agent for the benefit of the Issuer 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 (all of the foregoing fees, the "Letter of
Credit Fees"). Any such charge shall be the charge for that transaction,
notwithstanding any subsequent change in the Issuer's prevailing charges for
that type of transaction. All such charges and all other Letter of Credit
payables hereunder shall be deemed earned in full on the date when the
36
same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
(b) Following the occurrence of a Default arising in
connection with Section 10.7 or an Event of Default or upon termination of this
Agreement in accordance with Section 13.1, Borrowers will cause either (i) cash
to be deposited and maintained in an account with Agent, as cash Collateral, in
an amount equal to one hundred five percent (105%) of the outstanding Letters of
Credit or (ii) a stand-by letter of credit, in a face amount equal to one
hundred five percent (105%) of the outstanding Letters of Credit, to be issued
by a financial institution acceptable to Agent, in its sole credit judgment, in
favor of Agent for the benefit of Lenders and any Issuer. In furtherance of
subsection (i) above, 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 to be made by such Borrower, 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 or
terminate any stand-by letter of credit issued pursuant to subsection (ii) above
except upon payment and performance in full of all Obligations and termination
of this Agreement or upon termination of all outstanding Letters of Credit.
3.3. Closing Fee. Upon the execution of this Agreement, Borrowers shall
pay to Agent a non-refundable, fully earned closing fee in an amount previously
agreed upon by Borrower and Agent.
3.4. Facility Fee.
(a) If, for any fiscal quarter during the Term, the average
daily unpaid balance of the Advances (other than the Term Loan and the Capital
Expenditure Loans) 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 50/100ths of one percent
(.50%) per annum on the amount by which the Maximum Revolving Advance Amount
exceeds such average daily unpaid balance.
(b) If, for any fiscal quarter during the Term, the average
daily unpaid balance of the Advances of Capital Expenditure Loans for each day
of such fiscal quarter does not equal the Maximum Capital Expenditure Loan
Amount, then Borrowers shall pay to Agent for the ratable benefit of Lenders a
fee at a rate equal to 50/100ths of one percent (.50%) per annum on the amount
by which the Maximum Capital Expenditure Loan Amount exceeds such average daily
unpaid balance.
(c) The fees referenced in (a) and (b) above shall be payable
to Agent in arrears on the first day of each fiscal quarter.
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3.5. Collateral Management Fees.
(a) Borrowers shall pay Agent a collateral management fee
equal to Two Thousand Dollars ($2,000) per month commencing on March 1, 2000 and
on the first day of each month thereafter during the Term. The collateral
management fee shall be deemed earned in full on the date when same is due and
payable hereunder and shall not be subject to rebate or proration upon
termination of this Agreement for any reason.
(b) Audit Fees. Borrowers shall pay to Agent on the first day
of each month following any month in which Agent performs any collateral
monitoring, namely any field examination, collateral analysis or other business
analysis, the need for which is to be determined by Agent and which monitoring
is undertaken by Agent or for Agent's benefit, a collateral monitoring fee in an
amount equal to Seven Hundred Dollars ($700), per day, for each person employed
to perform such monitoring plus all costs and disbursements incurred by Agent in
the performance of such examination or analysis. Such collateral monitoring will
be performed no more than one (1) time each fiscal quarter unless Agent
reasonably believes, in its sole credit judgment, that circumstances require
additional collateral monitoring or upon the occurrence of a Default or Event of
Default.
3.6. 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 Contract Rate for Domestic Rate Loans during such extension.
3.7. 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.
3.8. 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
3.8, 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);
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(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
(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.
3.9. 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 for any Interest Period;
(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 10:00 a.m. (New York City time)
two (2) Business Days prior to the date of such proposed borrowing, that its
request for such borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which
was to have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent
shall notify Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City
time) two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, Lenders shall have no obligation to make
an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar
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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.
3.10. Capital Adequacy.
(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 3.10, 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 3.10 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 3.10(a) hereof when delivered to Borrowers shall be
conclusive absent manifest error.
IV. COLLATERAL AND GUARANTY: GENERAL TERMS.
4.1. Security Interest in the Collateral. To secure the prompt payment
and performance to Agent, each Issuer and each Lender of the Obligations, each
Borrower and Affiliate Guarantor hereby assigns, pledges and grants to Agent for
the ratable benefit of Agent, each Issuer, and each Lender a continuing security
interest in and to all of its Collateral, whether now owned or existing or
hereafter acquired or arising and wherever located. Each Borrower and Affiliate
Guarantor shall xxxx its books and records as may be necessary or appropriate to
evidence, protect and perfect Agent's security interest and shall cause its
financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Each Borrower and Affiliate
Guarantor shall take all action 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, (iii) delivering to
Agent, endorsed or accompanied by
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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, blocked account and
other custodial arrangements satisfactory to Agent, and (v) executing and
delivering financing statements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Agent, relating
to the creation, validity, perfection, maintenance or continuation of Agent's
security interest under the Uniform Commercial Code or other applicable law.
Agent is hereby authorized to file financing statements signed by Agent instead
of any Borrower in accordance with Section 9-402(2) of Uniform Commercial Code
as adopted in the State of New York. All charges, expenses and fees Agent may
incur in doing any of the foregoing, and any local taxes relating thereto, shall
be charged to such Borrowers' Account as a Revolving Advance 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 and Affiliate Guarantor
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 obsolete and worn-out Equipment in the ordinary course of business
during any fiscal year having an aggregate fair market value of not more than
One Hundred Thousand Dollars ($100,000) 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 as a prepayment on the Term Loan and/or the Capital
Expenditure Loans, as required by Section 2.15 hereof.
4.4. Preservation of Collateral. Following the occurrence of a Default
arising in connection with Section 10.7 or any Event of Default and the demand
by Agent for payment of all Obligations due and owing, 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 Borrower's or Affiliate Guarantor'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 or any
Affiliate Guarantor'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 Borrower's or any Affiliate
Guarantor's owned or leased property. Each Borrower and Affiliate Guarantor
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 Borrowers' Account as a
Revolving Advance 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 and Affiliate Guarantor shall be the sole owner of and fully authorized
and able to sell, transfer, pledge and/or grant a first
41
priority security interest in each and every item of 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 and Affiliate Guarantor 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 and
Affiliate Guarantor that appear on such documents and agreements shall be
genuine and each Borrower and Affiliate Guarantor shall have full capacity to
execute same; and (d) each Borrower's and Affiliate Guarantor's Equipment and
Inventory shall be located as set forth on Schedule 4.5 and shall not be removed
from such location(s) without the prior written consent of Agent except with
respect to the sale of Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof.
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. During such period no Borrower or Affiliate Guarantor shall, without
Agent's prior written consent, pledge, sell (except Inventory in the ordinary
course of business and Equipment to the extent permitted in Section 4.3 hereof),
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 and Affiliate Guarantor 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 and Affiliate
Guarantors 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. At any time following the occurrence of
an Event of Default or a Default arising pursuant to Section 10.7, Agent, in its
sole credit judgment, may cause each Borrower and Affiliate Guarantor to, or may
itself on behalf of Borrowers and Affiliate Guarantors, instruct all suppliers,
carriers, forwarders, warehouses 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 such Borrower's or Affiliate Guarantor's possession, they, and each of
them, shall be held by such Borrower or Affiliate Guarantor in trust as Agent's
trustee, and such Borrower or Affiliate Guarantor will immediately deliver them
to Agent in their original form together with any necessary endorsement.
4.7. Books and Records. Each Borrower and Affiliate Guarantor shall (a)
keep proper books of record and account in which full, true and correct entries
will be made of all dealings or transactions of or in relation to its business
and affairs; (b) set up on its books accruals with respect to all taxes,
assessments, charges, levies and claims; and (c) on a reasonably current basis
set up on its books, from its earnings, allowances against doubtful Receivables,
advances and investments and all other proper accruals (including without
limitation by reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence, or amortization
of properties), which should be set aside from such earnings in connection with
its business. All determinations pursuant to this subsection shall be made in
42
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 and Affiliate Guarantors.
4.8. Financial Disclosure. Each Borrower and Affiliate Guarantor hereby
irrevocably authorizes and directs all accountants and auditors employed by such
Borrower or Affiliate Guarantor at any time during the Term to exhibit and
deliver to Agent and each Lender copies of any of such Borrower's or such
Affiliate Guarantor's financial statements, trial balances or other accounting
records of any sort in the accountant's or auditor's possession, and to disclose
to Agent and each Lender any information such accountants may have concerning
such Borrower's or such Affiliate Guarantor's financial status and business
operations. Each Borrower and Affiliate Guarantor hereby authorizes all federal,
state and municipal authorities to furnish to Agent and each Lender copies of
reports or examinations relating to such Borrower or Affiliate Guarantor,
whether made by such Borrower or Affiliate Guarantor or otherwise; however,
Agent and each Lender will attempt to obtain such information or materials
directly from such Borrower or Affiliate Guarantor prior to obtaining such
information or materials from such accountants or such authorities.
4.9. Compliance with Laws. Each Borrower and Affiliate Guarantor shall
comply in all material respects 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
or such Affiliate Guarantor's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on such Borrower or
Affiliate Guarantor. Each Borrower and Affiliate Guarantor may, however, contest
or dispute any acts, rules, regulations, orders and directions of those bodies
or officials in any reasonable manner, provided that (i) any related Lien is
inchoate or stayed or (ii) sufficient reserves are established to the reasonable
satisfaction of Agent to protect Agent's Lien on or security interest in the
Collateral. The Collateral at all times shall be maintained in accordance with
the requirements of all insurance carriers which provide insurance with respect
to the Collateral 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 and each Affiliate Guarantor's books,
records, audits, correspondence and all other papers relating to the Collateral
and the operation of each Borrower's and each Affiliate Guarantor's business.
Agent, any Lender and their agents may enter upon any of such Borrower's or such
Affiliate Guarantor'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 or such Affiliate Guarantor's business; provided, however, that
unless and until a Default arising in connection with Section 10.7 or Event of
Default has occurred and is continuing, Agent shall give twenty-four (24) hours
prior notice to Borrowers of such inspection.
4.11. Insurance. Each Borrower and Affiliate Guarantor shall bear the
full risk of any loss of any nature whatsoever with respect to the Collateral.
At each Borrower's and each Affiliate Guarantor's own cost and expense in
amounts and with carriers acceptable to Agent, each Borrower and Affiliate
Guarantor shall (a) keep all its insurable properties and properties in
43
which each Borrower and Affiliate Guarantor 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 or
such Affiliate Guarantor's; (b) maintain a bond in such amounts as is customary
in the case of companies engaged in businesses similar to such Borrower or
Affiliate Guarantor 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 or Affiliate Guarantor 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 any Borrower or Affiliate Guarantor 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 satisfactory to Agent, naming Agent as a
co-insured and loss payee as its interests may appear with respect to all
insurance coverage referred to in clauses (a) and (c) above, and providing (A)
that all proceeds thereunder shall be payable jointly to Agent and the named
applicable Loan Party as named insured, (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 or Affiliate Guarantor
to make payment for such loss to such Borrower or Affiliate Guarantor and Agent
jointly. In regard to any insurance losses which are paid by check, draft or
other instrument payable to any Borrower or Affiliate Guarantor and Agent
jointly, Agent may endorse such Borrower's or such Affiliate Guarantor's name
thereon and do such other things as Agent may deem advisable to reduce the same
to cash. Upon the occurrence of an Event of Default or a Default pursuant to
Section 10.7 or for losses in excess of Two Hundred Thousand Dollars ($200,000),
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 credit judgment shall determine. Any surplus shall be
paid by Agent to applicable Borrowers or Affiliate Guarantors or applied as may
be otherwise required by law. Any deficiency thereon shall be paid by Borrowers
or Affiliate Guarantors to Agent, on demand. Anything hereinabove to the
contrary notwithstanding, and subject to the fulfillment of the conditions set
forth below, Agent shall remit to Borrowers or Affiliate Guarantors, as
applicable, insurance proceeds received by Agent during any calendar year under
insurance policies procured and maintained by Borrowers or Affiliate Guarantors
which insure Borrowers' or Affiliate Guarantors' insurable properties to the
extent such insurance proceeds do not exceed Two Hundred Thousand Dollars
($200,000) in the aggregate during such calendar year or Two Hundred Thousand
Dollars ($200,000) per occurrence. In the event the amount of insurance proceeds
received by Agent for any occurrence exceeds Two Hundred Thousand Dollars
($200,000), then Agent shall not be obligated to remit the insurance proceeds to
Borrowers or Affiliate Guarantors, as applicable, unless Borrowers and Affiliate
Guarantors shall provide Agent with evidence reasonably satisfactory to Agent
that the insurance proceeds will be used by Borrowers or Affiliate Guarantors,
as applicable, to repair, replace or
44
restore the insured property which was the subject of the insurable loss. In the
event Borrowers or Affiliate Guarantors have previously received (or, after
giving effect to any proposed remittance by Agent to Borrowers or Affiliate
Guarantors would receive) insurance proceeds which equal or exceed Two Hundred
Thousand Dollars ($200,000) in the aggregate during any calendar year, then
Agent shall either remit the insurance proceeds to Borrowers or Affiliate
Guarantors, as applicable, upon Borrowers' or Affiliate Guarantors' providing
Agent with evidence reasonably satisfactory to Agent that the insurance proceeds
will be used by Borrowers or Affiliate Guarantors, as applicable, to repair,
replace or restore the insured property which was the subject of the insurable
loss, or, if applicable Borrower or Affiliate Guarantor does not provide Agent
therewith, apply the proceeds to the Obligations, as aforesaid. The agreement of
Agent to remit insurance proceeds in the manner above provided shall be subject
in each instance to satisfaction of each of the following conditions: (x) No
Event of Default or Default shall then have occurred and be continuing, and (y)
Borrowers and Affiliate Guarantors shall use such insurance proceeds to repair,
replace or restore the insurable property which was the subject of the insurable
loss and for no other purpose.
4.12. Failure to Pay Insurance. If any Borrower or Affiliate Guarantor
fails to obtain insurance as hereinabove provided, or to keep the same in force,
Agent, if Agent so elects, may, after five (5) days prior written notice to such
Borrower or Affiliate Guarantor, obtain such insurance and pay the premium
therefor for Borrowers' Account, and charge Borrowers' Account therefor and such
expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower and Affiliate Guarantor will pay,
when due, all taxes, assessments and other Charges lawfully levied or assessed
upon such Borrower or Affiliate Guarantor 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 or any Affiliate
Guarantor and Agent or any Lender which Agent or any Lender may be required to
withhold or pay or if any taxes, assessments, or other Charges remain unpaid
after the date fixed for their payment, or if any claim shall be made which, in
Agent's or any Lender's sole credit judgment, may possibly create a valid Lien
on the Collateral, Agent may, after five (5) days prior written notice to
Borrowers, pay the taxes, assessments or other Charges and each Borrower and
Affiliate Guarantor hereby indemnifies and holds Agent and each Lender harmless
in respect thereof. Agent will not pay any taxes, assessments or Charges to the
extent that any Borrower or Affiliate Guarantor has contested or disputed those
taxes, assessments or Charges in good faith, by expeditious protest,
administrative or judicial appeal or similar proceeding provided that any
related tax lien is stayed or sufficient reserves are established to the
reasonable satisfaction of Agent to protect Agent's security interest in or Lien
on the Collateral. The amount of any payment by Agent under this Section 4.13
shall be charged to Borrowers' Account as a Revolving Advance and added to the
Obligations and, until Borrowers or Affiliate Guarantors 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.
45
4.14. Payment of Leasehold Obligations. Each Borrower and Affiliate
Guarantor shall at all times pay, when and as due, 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 Affiliate Guarantor, or work, labor or
services theretofore rendered by a Borrower or Affiliate Guarantor as of the
date each Receivable is created. Same shall be due and owing in accordance with
the applicable Borrower's or Affiliate Guarantor's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of each
Borrower's and each Affiliate Guarantor'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 or Affiliate Guarantor who are not solvent such
Borrower or Affiliate Guarantor has set up on its books and in its financial
records bad debt reserves adequate to cover such Receivables.
(c) Locations of Borrower. Each Borrower's and each Affiliate
Guarantor's chief executive office is located at the applicable 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 or Affiliate Guarantor
keeps its records pertaining to Receivables, all such records shall be kept at
such executive office.
(d) Establishment of Lock-Box Accounts and Concentration
Account; Collections.
(i) Each Borrower and Affiliate Guarantor shall establish
a lock-box account (the "Lock-Box Account") pursuant to a
Lock-Box Agreement (the "Lock-Box Agreement") with any Lender
or such other financial institutions as is acceptable to the
Agent (the "Lock-Box Bank") in which all Customers shall
directly remit all payments on their Receivables. Set forth at
Schedule 4.15(d) is a listing as of the Closing Date of the
Lock-Box Account, Lock-Box Bank, Concentration Account and
Concentration Bank and the respective addresses and account
numbers. All amounts on deposit in the Lock-Box Account shall
be transferred on a daily basis to the Concentration Account.
Unless otherwise agreed to by the Agent, the Lock-Box Bank and
the Concentration Bank shall acknowledge and agree, pursuant
to its Lock-Box Agreement or Concentration Account Agreement,
as the case may be, that all payments and deposits made to the
Lock-Box Account of such Lock-Box Bank or the Concentration
Account (in the case of the Concentration Bank) are the sole
and exclusive property of Agent,
46
for the benefit of itself, the Issuers and the Lenders, that
each of such Lock-Box Bank and the Concentration Bank has no
right to setoff against its Lock-Box Account or the
Concentration Account, as the case may be, except as expressly
provided in its Lock-Box Agreement or the Concentration
Account Agreement, as the case may be, and that such Lock-Box
Bank will wire transfer immediately available funds in a
manner satisfactory to Agent, funds deposited into its
Lock-Box Account to the Concentration Account on a daily basis
as soon as such funds are collected. Each Borrower and
Affiliate Guarantor agrees that all payments, whether by cash,
check, wire transfer or any other instrument on deposit in the
Lock-Box Account or the Concentration Account shall be the
sole and exclusive property of the Agent, for the benefit of
itself, the Issuers and the Lenders, and neither the Borrowers
nor any Affiliate Guarantors shall have any right, title or
interest therein. None of the Bank, Agent, any Issuer or any
Lender assumes any responsibility for such Lock Box Account or
Concentration Account (unless such Person shall also be the
applicable Lock-Box Bank or Concentration Bank and in such
event only as set forth in the applicable Concentration
Account Agreement), including without limitation, any claim of
accord and satisfaction or release with respect to deposits
accepted by any bank thereunder.
(ii) All Customers of Borrowers or Affiliate Guarantors
shall directly remit all payments constituting proceeds of
Collateral to the Lock-Box Account in the form received. All
such payments, whether by cash, check, wire transfer or other
instrument, made to the Lock-Box Account, shall be the
exclusive property of the Agent, for the benefit of itself,
the Issuers and the Lenders, and neither the Borrowers nor the
Affiliate Guarantors shall have any right, title or interest
therein.
(iii) None of the Borrowers nor any Affiliate Guarantors
shall, without obtaining the prior consent of the Agent,
establish any accounts, other than the Lock-Box Account and
the Concentration Account, pursuant to which payments on
account of Receivables are made to or on behalf of any of the
Borrowers or any of the Affiliate Guarantors. In addition,
none of the Borrowers nor any of the Affiliate Guarantors
shall modify in any respect, without the prior consent of the
Agent, the Lock-Box Agreement, Concentration Account Agreement
or other arrangement relating to the Lock-Box Account or the
Concentration Account.
(e) Payments Held in Trust. To the extent that,
notwithstanding the terms of clause (d) above, (i) Customers remit any payments
on account of the Receivables of the Borrowers or the Affiliate Guarantors
directly to any of them or (ii) any Customer is prohibited by law to remit
payments to the Lock-Box Account (due to such Lock-Box Account's location
outside the state where such Customer is located or otherwise), such payments
shall be held by the Borrowers and the Affiliate Guarantors in trust for the
Agent, on behalf of itself, the Issuers and the Lenders, and shall, promptly
upon receipt thereof, be sent via overnight delivery service for deposit in the
same form received into the Lock-Box Account.
(f) Application of Amounts in Concentration Account. All
amounts deposited in the Concentration Account from time to time shall be
applied (which application
47
shall be conditioned upon final collection) as of one (1) Business Day after
(unless such day is not a Business Day in which case on the following Business
Day) such amounts are transferred from the Concentration Bank (in the event that
the Concentration Bank is not the Bank) and received by Agent to the Obligations
in accordance with this Section 4.15(f). In the event that the Concentration
Bank is also the Bank, such payments shall be applied (which application shall
be conditioned upon final collection) on the same day (unless such day is not a
Business Day in which case on the following Business Day) such amounts are
received by Agent to the Obligations in accordance with Section 4.15(f). For
purposes of the preceding sentence, the Agent shall be deemed to have received a
payment on a particular day if it received by wire transfer or otherwise the
same prior to 1:00 p.m. (New York City time) on such day or, if received after
such time, on the next following Business Day. In consideration of Agent's
agreement (i) in the event that the Concentration Bank is not the Bank, to
conditionally credit Borrowers' Account as of one (1) Business Day after which
Agent receives those items of payment constituting good, collected funds and
(ii) otherwise, to conditionally credit Borrowers' Account as of the same day
Agent receives such items of payment constituting good, collected funds, 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 receipt of such items of payment. 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. Subject to
Section 16.4, the Agent shall apply all amounts deposited in the Concentration
Account as follows:
(i) first, to pay Obligations in respect of any expense
reimbursements or indemnities then due to the Agent,
including, without limitation, fees and expenses owing
hereunder;
(ii) second, to pay Obligations in respect of any expense
reimbursements or indemnities then due to the Lenders and the
Issuers;
(iii) third, to pay Obligations in respect of any fees due
to the Agent, the Lenders and the Issuers;
(iv) fourth, to pay interest due in respect of the
Revolving Loans;
(v) fifth, to pay the principal outstanding with respect
to the Revolving Loans;
(vi) sixth, to cash collateralize the aggregate amount of
outstanding Letters of Credit on terms and in form and
substance satisfactory to the Agent;
(vii) seventh, to the payment of all other Obligations
other than the Term Loans and Capital Expenditure Loans; and
(viii) eighth, as instructed by the Borrowers.
Each prepayment of a Revolving Loan pursuant to this Section shall be applied,
first, to the payment of Domestic Rate Loans and second, to the payment of
Eurodollar Rate Loans. If
48
sufficient funds are not available to fund all payments to be made in respect of
any of the Obligations described in any of the foregoing clauses (i) through
(vi), the available funds being applied with respect to any such Obligations
referred to in any one of such clauses shall be allocated to the payment of such
Obligations ratably, based on the proportion of the Agent's, each Lender's, and
the Issuers' interest in the aggregate outstanding Obligations described in such
clauses.
(g) Additional Payments. If at any time the Agent determines
that any funds held in the Lock-Box Account or the Concentration Account are
subject to the Lien of any Person, other than the Agent as herein provided, (a)
the Borrowers and the Affiliate Guarantors agree, forthwith upon demand by the
Agent, to pay to the Agent as additional funds to be deposited and held in the
Concentration Account, an amount equal to the amount of funds subject to such
Lien, or (b) if no such payment is made, the Agent shall establish sufficient
reserves in the amount of such funds.
(h) Notification of Assignment of Receivables. At any time
following the occurrence of an Event of Default or a Default arising pursuant to
Section 10.7, Agent shall have the right to send notice of the assignment of,
and Agent's security interest in, the Receivables to any and all Customers or
any third party holding or otherwise concerned with any of the Collateral.
Thereafter, Agent shall have the sole right to collect the Receivables, take
possession of the Collateral, or both. Agent's actual collection expenses,
including, but not limited to, stationery and postage, telephone and telecopy,
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.
(i) 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 or Affiliate Guarantor any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and each
Borrower and Affiliate Guarantor hereby waives notice of presentment, protest
and non-payment of any instrument so endorsed. Each Borrower and Affiliate
Guarantor hereby constitutes Agent or Agent's designee as such Borrower's or
such Affiliate Guarantor's attorney with power (i) to endorse such Borrower's or
Affiliate Guarantor's name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral; (ii) to sign such Borrower's
or Affiliate Guarantor'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 or Affiliate Guarantor'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 prepare, file and sign such Borrower's or Affiliate Guarantor's
name on a proof of claim in bankruptcy or similar document against any Customer;
(vi) to prepare, file and sign such Borrower's or Affiliate Guarantor's name on
any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables; and (vii) to do all other acts and things
necessary to carry out this Agreement. Following the occurrence of an Event of
Default or Default arising pursuant to Section 10.7, each Borrower and each
Affiliate Guarantor shall hereby constitute Agent or Agent's designee as such
Borrower's or such Affiliate Guarantor's attorney with power (a) to demand
payment of the Receivables; (b) to enforce payment of the Receivables by legal
proceedings or otherwise; (c) to
49
exercise all of Borrowers' and Affiliate Guarantors' rights and remedies with
respect to the collection of the Receivables and any other Collateral; (d) to
settle, adjust, compromise, extend or renew the Receivables; and (e) to settle,
adjust or compromise any legal proceedings brought to collect Receivables. 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 following the occurrence of an Event of Default
or any Default arising pursuant to Section 10.7, to change the address for
delivery of mail addressed to any Borrower or Affiliate Guarantor to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Borrower or Affiliate Guarantor.
(j) No Liability. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom, except for any such errors or omissions
or delays of any kind determined by a court of competent jurisdiction in a final
proceeding to have resulted primarily from Agent's or such Lender's gross (not
mere) negligence or willful misconduct. Following the occurrence of an Event of
Default or any Default arising pursuant to Section 10.7, Agent may, without
notice or consent from any Borrower or Affiliate Guarantor, 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 any Default arising pursuant to Section 10.7 the return of the
goods represented by any of the Receivables, without notice to or consent by any
Borrower or Affiliate Guarantor, all without discharging or in any way affecting
any Borrower's or Affiliate Guarantor's liability hereunder.
(k) Adjustments. No Borrower or Affiliate Guarantor 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 or Affiliate Guarantor.
4.16. Inventory. To the extent Inventory held for sale or lease has
been produced by any Borrower or Affiliate Guarantor, it has been and will be
produced by such Borrower or Affiliate Guarantor in accordance with the Federal
Fair Labor Standards Act of 1938, as amended.
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 or Affiliate Guarantor shall use or operate the Equipment in violation
of any law, statute, ordinance, code, rule or regulation.
50
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's or Affiliate
Guarantor'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 Borrower's or Affiliate
Guarantor's obligations under any contract or agreement assigned to Agent or
such Lender, and neither Agent nor any Lender shall be responsible in any way
for the performance by Borrower or Affiliate Guarantor of any of the terms and
conditions thereof.
4.19. Environmental Matters.
(a) Borrowers and Affiliate Guarantors 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 not prohibited by applicable law or appropriate governmental
authorities.
(b) Borrowers and Affiliate Guarantors 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 and Affiliate Guarantors 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 and Affiliate Guarantors 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 or Affiliate Guarantors in connection with
the transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower or Affiliate Guarantor 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 or Affiliate Guarantor'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 or Affiliate Guarantor 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 is not
51
intended to create nor shall it create any obligation upon Agent or any Lender
with respect thereto.
(e) Borrowers and Affiliate Guarantors shall promptly forward
to Agent copies of any request for 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 or Affiliate Guarantor to dispose of Hazardous
Substances and shall continue to forward copies of correspondence between any
Borrower or Affiliate Guarantor and the Authority regarding such claims to Agent
until the claim is settled. Borrowers and Affiliate Guarantors shall promptly
forward to Agent copies of all documents and reports concerning a Hazardous
Discharge at the Real Property that any Borrower or Affiliate Guarantor 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 and Affiliate Guarantors 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 or Affiliate
Guarantor shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or any Borrower or Affiliate Guarantor 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 or
Affiliate Guarantor.
(g) Promptly upon the written request of Agent from time to
time, Borrowers and Affiliate Guarantors shall provide Agent, at Borrowers' or
Affiliate Guarantors' 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. If such estimates, individually or in
the aggregate, exceed One Hundred Thousand Dollars ($100,000), Agent shall have
the right to require Borrowers or Affiliate Guarantors to post a bond, letter of
credit or other security reasonably satisfactory to Agent to secure payment of
these costs and expenses. The environmental site assessments required hereunder
will typically be performed not more than
52
once a year unless (i) Agent reasonably believes, in its sole credit judgment,
that environmental circumstances require an additional site assessment, (ii) a
Phase 1 Environmental Report requires completion of a Phase 2 environmental
study, (iii) a Default or Event of Default has occurred or (iv) such additional
site assessment is otherwise required by law.
(h) Borrowers and Affiliate Guarantors 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 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' and Affiliate Guarantors' 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' and Affiliate Guarantors' obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
(i) For purposes of Sections 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrowers' and Affiliate
Guarantors' right, title and interest in and to its owned and leased premises
(but only to the extent of the space or area actually leased).
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.
4.21. Affiliate Guaranty.
(a) The Guarantee. The Affiliate Guarantors hereby jointly and
severally guarantee to the Agent and the Lenders and their respective successors
and assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations of Borrowers to the Agent and the
Lenders (such Obligations herein called, collectively, the "Guaranteed
Obligations"), in each case strictly in accordance with the terms hereof. The
Affiliate Guarantors hereby further jointly and severally agree that if
Borrowers shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Affiliate
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal.
(b) Obligations Unconditional. The obligations of the
Affiliate Guarantors hereunder are absolute and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Borrowers under this
53
Agreement, the Notes or any Other Document or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section that the obligations of the Affiliate
Guarantors hereunder shall be absolute and unconditional, joint and several,
under and all circumstances. Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Affiliate Guarantors hereunder which shall
remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to
any of the Affiliate Guarantors, the time for any performance
of or compliance with any of the Guaranteed Obligations shall
be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or
instrument referred to herein or therein shall be done or
omitted;
(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations
shall be modified, supplemented or amended in any respect, or
any right under this Agreement or the Notes or any Other
Document shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt
with; or
(iv) any lien or security interest granted to, or in favor
of, the Agent as security for any of the Guaranteed
Obligations shall fail to be perfected.
(c) The Affiliate Guarantors hereby expressly waive diligence,
presentment, demand of payment, protest and all notices whatsoever, and any
requirement that Agent or any Lender exhaust any right, power or remedy or
proceed against Borrowers under this Agreement or the Notes or any Other
Document, or against any other Person under any other guaranty of, or security
for, any of the Guaranteed Obligations.
(d) Reinstatement. The obligations of the Affiliate Guarantors
hereunder shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Borrower in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise and the Affiliate Guarantors jointly and
severally agree that they will indemnify each Agent and Lender on demand for all
reasonable costs and expenses (including, without limitation, fees of counsel)
incurred by Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
54
(e) Deferral of Subrogation. Each Affiliate Guarantor hereby
subordinates to Agent and each Lender its rights of subrogation or contribution
against any Borrower, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Bankruptcy
Code) or otherwise by reason of any payment by it pursuant to the provisions
hereof and further agrees with each Borrower for the benefit of each of its
creditors (including, without limitation, Agent and each Lender) that any such
payment by it shall constitute a contribution of capital by such Affiliate
Guarantor to such Borrower (or an investment in the equity capital of such
Borrower by such Affiliate Guarantor) until all Obligations are fully paid and
satisfied and all Commitments are terminated.
(f) Remedies. The Affiliate Guarantors jointly and severally
agree that, as between the Affiliate Guarantors and Agent and Lenders, the
Guaranteed Obligations may be declared to be forthwith due and payable as
provided herein (and shall be deemed to have become automatically due and
payable in the circumstances provided herein) for purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against the Borrowers and that, in the event of such declaration (whether or not
due and payable by the Borrowers) shall forthwith become due and payable by the
Affiliate Guarantors for purposes hereof.
(g) Instrument for the Payment of Money. Each Affiliate
Guarantor hereby acknowledges that its guaranty herein constitutes an instrument
for the payment of money.
(h) Continuing Guaranty. The guaranty set forth herein is a
continuing guaranty, and shall apply to all Guaranteed Obligations, whenever and
howsoever arising.
(i) Rights of Contribution. The Affiliate Guarantors hereby
agree, as between themselves, that if any Affiliate Guarantor shall become an
"Excess Funding Guarantor" (as defined below) by reason of the payment by such
Affiliate Guarantor of any Guaranteed Obligations, each other Affiliate
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Affiliate Guarantor's "Pro Rata Share" (as defined below and determined, for
this purpose, without reference to the properties, debts and liabilities of such
Excess Funding Guarantor) of the "Excess Payment" (as defined below) in respect
of such Guaranteed Obligations. The payment obligation of an Affiliate Guarantor
to any Excess Funding Guarantor under this Section shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Affiliate Guarantor under the other provisions of this subsection (i) and
such Excess Funding Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all such
obligations. For purposes hereof, (x) "Excess Funding Guarantor" means, in
respect of any Guaranteed Obligations, an Affiliate Guarantor that has paid an
amount in excess of its Pro Rata Share of such Guaranteed Obligations, (y)
"Excess Payment" means, in respect of any Guaranteed Obligations, the amount
paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such
Guaranteed Obligations (z) "Pro Rata Share" means, for any Affiliate Guarantor,
the ratio (expressed as a percentage) of (i) the amount by which the aggregate
present fair saleable value of all assets of such Affiliate Guarantor (excluding
any shares of stock or other ownership interests of any other Affiliate
Guarantor) exceeds the amount of all the debts and liabilities of such Affiliate
Guarantor (including contingent, subordinated, unmatured and unliquidated
liabilities, but excluding the obligations of
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such Affiliate Guarantor hereunder and any obligations of any other Affiliate
Guarantor that have been guaranteed by such Affiliate Guarantor) to (ii) the
amount by which the aggregate fair saleable value of all assets of all of the
Affiliate Guarantors exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Affiliate Guarantor hereunder) of the Affiliate
Guarantors, determined (A) with respect to any Affiliate Guarantor that is a
party hereto on the Closing Date, as of the Closing Date, and (B) with respect
to any other Affiliate Guarantor, as of the date such Affiliate Guarantor
becomes an Affiliate Guarantor hereunder.
(j) General Limitation on Guaranteed Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Affiliate Guarantors hereunder,
after giving effect to the contribution rights provided in subsection (i) above,
would otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability hereunder, then, notwithstanding any other provision hereof to the
contrary, the amount of such liability shall, without any further action by any
Affiliate Guarantor, Agent, any Lender or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
(k) Incorporation of Governing Terms. Each Affiliate Guarantor
acknowledges and agrees that, as a Loan Party and, as applicable, a Subsidiary
of Borrower, without limitation, it shall be subject to, and bound by, all
covenants, agreements, representations and warranties applicable to it set forth
in Sections V, VI and VII of this Agreement as fully and completely as Borrower.
V. REPRESENTATIONS AND WARRANTIES.
Each Loan Party represents and warrants, and represents and warrants as
to its respective Subsidiaries, as follows:
5.1. Authority. Each Loan Party 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. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Loan Party's corporate powers, have been duly authorized, are not in
contravention of law or the terms of such Loan Party's by-laws, certificate of
incorporation or other applicable documents relating to such Loan Party's
formation or to the conduct of such Loan Party's business or of any material
agreement or undertaking to which such Loan Party is a party or by which such
Loan Party 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 Loan Party
under the provisions of any agreement, charter document, instrument, by-law, or
other instrument to which such Loan Party or its property is a party or by which
it may be bound.
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5.2. Formation and Qualification.
(a) Each Loan Party, and each of its respective Subsidiaries,
is duly incorporated and in good standing under the laws of the state or other
jurisdiction listed on Schedule 5.2(a) and is qualified to do business and is in
good standing in the jurisdictions listed on Schedule 5.2(a) which constitute
all jurisdictions in which qualification and good standing are necessary for
such Person to conduct its business and own its property and where the failure
to so qualify could reasonably be expected to have a Material Adverse Effect on
such Person. Each Loan Party has delivered to Agent true and complete copies of
its certificate or articles of incorporation and by-laws and will promptly
notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
(c) The only Managed Firms of each Borrower are listed on
Schedule 5.2(c).
5.3. Survival of Representations and Warranties. All representations
and warranties of such Loan Party contained in this Agreement and the Other
Documents shall be true at the time of such Loan Party'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 Loan Party's federal tax identification number
is set forth on Schedule 5.4. Each Loan Party and each of its respective
Subsidiaries 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 Loan Party and each of its respective
Subsidiaries 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 April 26, 1996. The provision for
taxes on the books of each Loan Party and each of its respective Subsidiaries
are adequate for all years not closed by applicable statutes, and for its
current fiscal year, and no Loan Party nor any Subsidiary of such Loan Party has
any knowledge of any deficiency or additional assessment in connection therewith
not provided for on its books.
5.5. Financial Statements.
(a) The twelve-month cash flow projections of the Borrowers on
a consolidated basis for the period from April 28, 2000 through April 25, 2003
and their projected balance sheets as of the Closing Date, copies of which are
annexed hereto as Exhibit 5.5(a) (the "Projections") were prepared by the Chief
Financial Officer of Borrowing Agent, are based on underlying assumptions which
provide a reasonable basis for the projections contained therein and reflect
Borrowers' judgment based on present circumstances of the most likely set of
conditions and course of action for the projected period. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as the
"Pro Forma Financial Statements".
(b) The consolidated and consolidating balance sheets of the
Borrowers, their Subsidiaries, their Managed Firms and such other Persons
described therein (including the accounts of all Subsidiaries for the respective
periods during which a subsidiary relationship existed) as of October 29, 1999,
and the related statements of income, changes in stockholder's
57
equity, and changes in cash flow for the period ended on such date, all
accompanied by reports thereon containing opinions without qualification by
independent certified public accountants, copies of which have been delivered to
Agent, have been prepared in accordance with GAAP, consistently applied (except
for changes in application in which such accountants concur and present fairly
the financial position of the Borrowers, their Subsidiaries and the Managed
Firms at such date and the results of their operations for such period. Since
October 29, 1999, there has been no change in the condition, financial or
otherwise, of Borrowers, their Subsidiaries or the Managed Firms as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Borrowers, their
Subsidiaries, and the Managed Firms, except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse.
5.6. Corporate Name. Except as set forth on Schedule 5.6, no Loan Party
has been known by any other corporate name in the past five years and does not
sell Inventory under any other name nor has any Loan Party 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. Except as otherwise
disclosed on Schedule 5.7:
(a) Each Loan Party and each of its respective Subsidiaries
has duly complied with, and its facilities, business, assets, property,
leaseholds and Equipment are in compliance in all material respects with, the
provisions of the Federal Occupational Safety and Health Act, the Environmental
Protection Act, RCRA and all other Environmental Laws; there have been no
outstanding citations, notices or orders of non-compliance issued to any Loan
Party or any of its respective Subsidiaries 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 on such
Person.
(b) Each Loan Party and each of its respective Subsidiaries
has been issued all required federal, state and local licenses, certificates or
permits relating to all applicable Environmental Laws.
(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 any premises
leased by any Loan Party or any Subsidiary of such Loan Party; (ii) there are no
underground storage tanks or polychlorinated biphenyls on the Real Property or
any premises leased by any Loan Party or any Subsidiary of such Loan Party;
(iii) neither the Real Property nor any premises leased by any Loan Party or any
Subsidiary of such Loan Party 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 Loan Party or any
Subsidiary of such Loan Party, excepting such quantities as are handled in
accordance with all applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of any Borrower or of its tenants.
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5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the Transactions, each Loan Party
and each of its respective Subsidiaries is solvent, able to pay its debts as
they mature, has capital sufficient to carry on its business and all businesses
in which it is about to engage, and (i) as of the Closing Date, the fair present
saleable value of its assets, calculated on a going concern basis, is in excess
of the amount of its liabilities and (ii) subsequent to the Closing Date, the
fair saleable value of its assets (calculated on a going concern basis) will be
in excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Loan Party (nor
any Subsidiaries of such Loan Parties) has (i) any pending or threatened
litigation, arbitration, actions or proceedings which involve the substantial
likelihood of having a Material Adverse Effect on such Loan Party or Subsidiary
of such Loan Party, and (ii) any liabilities nor indebtedness for borrowed money
other than the Obligations.
(c) No Loan Party nor any Subsidiary of any Loan Party is in
violation of any applicable statute, regulation or ordinance (including, without
limitation, any state statute, regulation or ordinance regarding the regulation
or licensing of architects or engineers) in any respect which could reasonably
be expected to have a Material Adverse Effect on such Person, nor is any Loan
Party or any Subsidiary of a Loan Party in violation of any order of any court,
governmental authority or arbitration board or tribunal.
(d) No Loan Party, Subsidiary of a Loan Party, 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 Loan Party, each Subsidiary of the Loan Parties and each member of the
Controlled Group has met all applicable minimum funding requirements under
Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code (or is established under a prototype document and/or
is within the retroactive remedial amendment period for the so called "GUST
Amendments") and the trust related thereto is exempt from federal income tax
under Section 501(a) of the Code, (iii) no Loan Party, Subsidiary of a Loan
Party, 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 which is a pension plan under ERISA Section 3(2) exceeds the present value
of the accrued benefits and other liabilities of such Plan and no Loan Party,
Subsidiary of any Loan Party, 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 Loan Party,
Subsidiary of any Loan Party, or 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 Loan Party, Subsidiary of any Loan Party, nor any
member of a Controlled Group has incurred any material liability for any excise
tax arising under Section 4972 or 4980B of the Code, and no fact exists
59
which could give rise to any such liability, (viii) no Loan Party, Subsidiary of
any Loan Party, 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 Loan Party, each Subsidiary of such Loan
Party and each member of the Controlled Group has made all contributions due and
payable with respect to each Plan, within the time period prescribed by ERISA,
(x) there exists no event described in Section 4043(b) of ERISA, for which the
thirty (30) day notice period contained in 29 CFR ss.2615.3 has not been waived,
(xi) no Loan Party, Subsidiary of a Loan Party, 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 Loan Party, Subsidiary of a Loan Party, and any member of the Controlled
Group, and (xii) no Loan Party, Subsidiary of a Loan Party, nor any member of
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 Loan Party or
its respective Subsidiaries are set forth on Schedule 5.9, are valid and have
been duly registered or filed with all appropriate governmental authorities and
constitute all of the intellectual property rights which are necessary for the
operation of its business; there is no objection to or pending challenge to the
validity of any such material patent, trademark, copyright, design right,
tradename, trade secret or license and no Loan Party or Subsidiary of such Loan
Party 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, copyright, copyright application and
copyright license owned or held by any Loan Party or its Subsidiaries and all
trade secrets used by any Loan Party or its Subsidiaries consist of original
material or property developed by such Loan Party or applicable Subsidiary or
was lawfully acquired by such Loan Party or Subsidiary of such Loan Party 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. With respect to all software used by any Loan Party or the respective
Subsidiaries of any Loan Party, such Person 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 unless the absence of such source and object codes would not
result in a Material Adverse Effect.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
Loan Party and its respective Subsidiaries (a) is in compliance with and (b) has
procured and is now in possession of, all material licenses or permits
(including, without limitation, all licenses required for the conduct of all
architects and engineers employed by such Person) required by any applicable
federal, state, provincial 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 on such Person.
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5.11. Default of Indebtedness. No Loan Party or Subsidiary of such Loan
Party 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 Loan Party and no Subsidiary of any Loan Party is
in default in the payment of any of its contractual obligations in an amount in
excess of One Hundred Thousand Dollars ($100,000) or in the performance of any
of its contractual obligations which could reasonably be expected to have a
Material Adverse Effect on such Loan Party or Subsidiary of Loan Party and no
Default has occurred.
5.13. No Burdensome Restrictions. No Loan Party and no Subsidiary of
such Loan Party is party to any contract or agreement the performance of which
could have a Material Adverse Effect on such Loan Party or Subsidiary. No Loan
Party 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 Loan Party and no Subsidiary of any Loan
Party is involved in any labor dispute; there are no strikes or walkouts or
union organization of any Loan Party's (or its Subsidiaries') employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. No Loan Party and no Subsidiary of any Loan
Party 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 or Regulation G 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 Loan Party and no Subsidiary of any
Loan Party 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 any Loan Party
in this Agreement or in any financial statement, report, certificate or any
other document furnished in connection herewith contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements herein not misleading. There is no fact known to any Loan Party or
its Subsidiaries or which reasonably should be known to any Loan Party or its
Subsidiaries which the Loan Parties have not disclosed to Agent in writing with
respect to the transactions contemplated by this Agreement which could
reasonably be expected to have a Material Adverse Effect on any Loan Party or
such Loan Party's Subsidiaries.
5.18. [Intentionally Omitted]
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5.19. Swaps. No Loan Party and no Subsidiary of any Loan Party is a
party to, nor will it be a party to, any swap agreement whereby such Person 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 Loan Party or any
Subsidiary of any Loan Party 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.
5.21. Application of Certain Laws and Regulations. No Loan Party nor
any Subsidiary or Affiliate of any Loan Party 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 Borrower. Upon and after the Closing
Date, no Loan Party nor any Subsidiary of any Loan Party proposes to engage in
any business other than business conducted by the Loan Parties and such
Subsidiaries on the Closing Date and activities necessary to conduct the
foregoing. On the Closing Date, each Loan Party and its respective Subsidiaries
will own all the property and possess all of the rights and Consents necessary
for the conduct of the business of such Loan Party or such Subsidiary, as
applicable.
5.23. Regulatory Compliance. Except as would not be reasonably expected
to have a Material Adverse Effect, each Loan Party and Subsidiary of any Loan
Party has been issued all federal, state and local approvals, Consents,
licenses, certificates or permits (including, without limitation, all state
licenses required in connection with the provision of architectural and
engineering services) required by any applicable Regulatory Body or any
Governmental Body necessary for the conduct of such Loan Party's or such
Subsidiary's business and has made all filings and registrations required by any
Regulatory Body or Governmental Body.
5.24. Shareholder and Management and Services Agreements. Except for
the agreements described in Schedule 5.24, true and complete copies of which
have been delivered to Agent, there are no other Shareholders Agreements or
Management and Services Agreements.
5.25. Seller Notes. Except for the promissory notes described in
Schedule 5.25, true and complete copies of which have been delivered to Agent,
there are no other Seller Notes and, pursuant to subordination provisions in
form and content satisfactory to Agent, all Seller Notes have been fully
subordinated to the Indebtedness created hereunder.
5.26. Year 2000 Compliance. Each Loan Party and each Loan Party's
respective Subsidiaries has (i) completed a review and assessment of all
material areas within its respective businesses and operations (including those
affected by their respective suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (which term, as used herein, shall mean the
risk that computer applications used by any Loan Party or Subsidiary of such
Loan
62
Party (or their respective suppliers and vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis (a "Year 2000 Plan"), and
(iii) to date, implemented that plan in accordance with its terms. Each of the
Loan Parties and each Subsidiary of such Loan Parties reasonably believes that
all computer applications (including those of its suppliers and vendors) that
are material to its respective businesses and operations are currently capable
of performing properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
VI. AFFIRMATIVE COVENANTS.
Until payment in full of the Obligations and termination of this
Agreement, each Borrower shall, and shall cause each other Loan Party and each
other Subsidiary of Borrower or any Loan Party to:
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 Lock-Box
Accounts, Concentration Accounts or similar blocked account arrangement as
provided for in Section 4.15(d). 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)
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; (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 on such Loan Party or
Subsidiary of such Loan Party; 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 on such Loan Party or Subsidiary of such Loan Party.
6.3. Violations.
(a) Promptly notify Agent in writing of any violation of any
material Regulatory License or Approval, law, statute, regulation or ordinance
of any applicable Regulatory Body, or of any agency thereof, applicable to any
Loan Party or Subsidiary of any Loan Party.
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(b) 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 Loan Party or Subsidiary of any Loan Party which
could reasonably be expected to have a Material Adverse Effect on any such Loan
Party or Subsidiary.
6.4. Government Receivables. At Agent's reasonable request, use its
reasonable best efforts to 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 Loan Party and the United States, any state or any
department, agency or instrumentality of any of them.
6.5. Net Worth. Maintain a Net Worth as of the end of each fiscal
quarter, beginning with the fiscal quarter of the Borrowers ending April 30,
2000, equal to the sum of (i) [*] (the "Base Amount"), plus (ii) a cumulative
sum, determined by adding together for each fiscal quarter of the Borrowers
ending subsequent to the fiscal quarter ending October 29, 1999, an amount equal
to [*] of Borrowers' net income, on a consolidated basis, for each such fiscal
quarter, determined in accordance with GAAP consistently applied on a basis
consistent with prior practices (without giving credit for any losses, however).
6.6. Leverage Ratio. Maintain as of the end of each fiscal quarter of
the Borrowers, beginning with the fiscal quarter of the Borrowers ending on
April 30, 2000, a Leverage Ratio, determined for the four (4) consecutive fiscal
quarters ending on each such fiscal quarter end date, not to exceed [*].
6.7. Senior Leverage Ratio. Maintain as of the end of each fiscal
quarter of the Borrowers, beginning with the fiscal quarter of the Borrowers
ending on April 30, 2000, a Senior Leverage Ratio, determined for the four (4)
consecutive fiscal quarters ending on each such fiscal quarter end date, not to
exceed [*].
6.8. Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including capitalized
leases) in an amount not to exceed: [*] in any fiscal year.
6.9. Fixed Charge Coverage Ratio Beginning with the fiscal quarter of
the Borrowers ending on April 30, 2000, and continuing on a quarterly basis
thereafter at the end of each fiscal quarter, maintain a Fixed Charge Coverage
Ratio for the four (4) consecutive fiscal quarters ending on each such date, of
not less than: (i) [*], through the fiscal quarter ending October 31, 2000;
and (ii) [*], commencing with the fiscal quarter ending January 31, 2001 and
thereafter.
6.10. Senior Fixed Charge Coverage Ratio. Beginning with the fiscal
quarter of the Borrowers ending on April 30, 2000, and continuing on a quarterly
basis thereafter at the end of each fiscal quarter, maintain a Senior Fixed
Charge Coverage Ratio for the four (4) consecutive fiscal quarters ending on
each such date, of not less than: (i) [*], through the fiscal quarter ending
October 31, 2000; and (ii) [*], commencing with the fiscal quarter ending
January 31, 2001 and thereafter.
*Confidential portion has been omitted and filed separately with the
Commission.
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6.11. 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 (including, without limitation, Subordination Agreements for all
Seller Notes issued subsequent to the Closing Date, an Assignment of Acquisition
Rights to be executed in connection with any Approved Acquisition, a Collateral
Assignment of Shareholder Agreements or Collateral Assignment of Management and
Services Agreements to be executed in connection with any Shareholder Agreement
or Management and Services Agreement issued subsequent to the Closing Date,
Stock Pledge Agreements for any Person that, subsequent to the Closing Date,
becomes a Subsidiary of Borrower or any Subsidiary of such Subsidiary and
Shareholder Pledge Agreements for any Person that, subsequent to the Closing
Date, becomes a Managed Firm), and such other instruments as Agent may request,
in order that the full intent of this Agreement may be carried into effect.
6.12. 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 each Loan Party or Subsidiary of any Loan Party
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.
6.13. Standards of Financial Statements. Cause all Financial Reports
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 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).
6.14. Exercise of Rights. Enforce all of its rights under the
Acquisition Documents executed in connection with any Approved Acquisition,
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.
6.15. Shareholder and Management and Services Agreements Each Managed
Firm shall at all times (a) maintain a Shareholder Agreement with its respective
principle shareholders (as such term is defined by Agent in its reasonable
credit judgment); each such Shareholder Agreement to be in substantially the
form delivered to Agent pursuant to this Agreement. HLM shall at all times
maintain a Management and Services Agreement with each Subsidiary of any
Borrower, each Subsidiary of any Subsidiary of Borrower and each Managed Firm;
each such Management and Services Agreement to be in substantially the form
delivered to Agent pursuant to this Agreement.
6.16. Landlord and Warehouseman Waivers. The Loan Parties shall use
their best efforts to deliver to the Agent within thirty (30) days following the
Closing Date waivers of contractual and statutory landlord's, landlord's
mortgagee's and warehouseman's Liens in form and substance satisfactory to the
Agent under each existing lease, warehouse agreement or
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similar agreement to which any Loan Party is a party; provided that such waivers
will in any event be incorporated when the existing lease, warehouse agreement
or similar agreement is amended, renewed or extended and each Loan Party will
obtain waivers of both contractual and statutory landlord's, landlord's
mortgagee's and warehouseman's Liens in form and substance satisfactory to the
Agent in connection with each new lease, warehouse agreement or similar
agreement entered into by such Loan Party.
6.17. Off-Premises Audit. Borrower shall provide Agent with written
notice of any proposed Acquisition in a sufficient amount of time in advance of
such proposed Acquisition for Agent to assemble a schedule of information
("Schedule of Information") required by it in connection with the approval of
such Acquisition under this Agreement. Upon receipt by Borrower of such Schedule
of Information, Borrower shall gather such information as to the Acquisition
Target (as defined in the definition of "Approved Acquisition" in Section 1.2
hereof) and deliver the same to Agent within a reasonable amount of time (such
delivery of information, the "Off-Premises Audit"). In the event that Agent, in
its sole reasonable judgment, believes that the Off-Premises Audit fails to
provide sufficient information for the Acquisition approval process contemplated
under this Agreement, the agent shall be permitted to conduct an on-premises
field audit, provided that any representative of Agent shall, as to the
Acquisition Target, (A) represent himself or herself as a member of the
Borrower's audit team and (B) coordinate and arrange any such on-premises field
audit with Borrower in its reasonable discretion.
6.18. Indemnification Agreement. Contemporaneously with the acquisition
of any Real Property (other than Leasehold Interests), each Loan Party shall
execute an Indemnification Agreement in substantially the form of Exhibit 6.16
hereto.
6.19. Release of Liens. All UCC termination statements and other
releases of Liens and security interests (other than the pay-off letters
acknowledging the release of such Liens and security interests which shall be
delivered to Agent on the Closing Date in connection with the Indebtedness being
refinanced with the proceeds of the initial Advances) related to the
Indebtedness being refinanced with the proceeds of the initial Advances shall be
executed and delivered to Agent in proper form for filing within five (5)
Business Days following the Closing Date.
6.20. Lock-Box Agreements. The Borrower shall deliver to the Agent
within thirty (30) days following the Closing Date duly executed Lock Box
Agreements with financial institutions acceptable to Agent for the collection or
servicing of the Receivables and proceeds of the Collateral.
6.21. Year 2000 Compliance. Subsequent to the Closing Date, each Loan
Party and each Subsidiary of any Loan Party shall continue to take all actions
necessary or reasonably advisable to resolve any Year 2000 Problem and ensure
that the Loan Parties will continue to be Year 2000 Compliant.
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VII. NEGATIVE COVENANTS.
Until satisfaction in full of the Obligations and termination of this
Agreement, no Borrower shall, and shall not permit any other Loan Party, any
Subsidiary of Borrower or any Subsidiary of any other Loan Party to:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Except for Approved Acquisitions, 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 Capital Stock of any Person or
permit any other Person to consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business.
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 by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on Schedule 7.3, (b) guarantees made in the ordinary
course of business up to an aggregate amount of Two Hundred Fifty Thousand
Dollars ($250,000) at any time outstanding and (c) the endorsement of checks in
the ordinary course of business.
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 one hundred eighty (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 one hundred
eighty (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, (d) U.S.
money market funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof and (e) Capital Stock acquired
pursuant to an Approved Acquisition.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business and (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of One Hundred Thousand Dollars ($100,000) at any time outstanding; provided,
however, that advances, loans or extensions of credit to Foreign Subsidiaries of
any Loan Party which are otherwise permitted hereunder shall not in the
aggregate at any time outstanding exceed One Million Dollars ($1,000,000).
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7.6. Dividends. Declare, pay or make any dividend or distribution on
any shares of the common stock, preferred stock or other ownership interests of
any Loan Party or any Subsidiary of any Loan Party (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 other ownership
interests, or of any options to purchase or acquire any such shares of common or
preferred stock or other similar ownership interests of any Loan Party or any
Subsidiary of any Loan Party.
7.7. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of any Loan Party or any Subsidiary of
any Loan Party except in respect of (i) Indebtedness to Lenders; (ii)
Indebtedness incurred for capital expenditures permitted under Section 6.7
hereof; provided, however, that the maximum aggregate amount outstanding at any
time of such Indebtedness under clause (ii) hereof shall not exceed those limits
prescribed in Section 6.7 hereof; (iii) Indebtedness evidenced by Seller Notes
issued in connection with an Approved Acquisition, provided, that the holder of
such Seller Note executes a Subordination Agreement in substantially the form of
Exhibit 5.25; and (iv) the existing Indebtedness described on Schedule 7.7.
7.8. 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 presently
conducted.
7.9. Transactions with Affiliates. Except as set forth on Schedule 7.9
hereto, directly or indirectly, purchase, acquire or lease any property from, or
sell, transfer or lease any property to, or otherwise deal with, any Affiliate
or any officer or director of any Loan Party or Affiliate of any Loan Party,
except, provided that no Event of Default shall have occurred and be continuing,
(a) transactions disclosed 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 or such officer or director and
(b) the management by HLM of its Subsidiaries and the Managed Firms as outlined
in the Management and Services Agreements.
7.10. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 6.7 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed Five Million Dollars ($5,000,000) in any one fiscal year.
7.11. Subsidiaries and Managed Firms.
(a) Form any Subsidiary except pursuant to an Approved
Acquisition; provided, however, that (i) any Subsidiary which is established,
created or acquired hereafter either pursuant to an Approved Acquisition or
otherwise with the prior written consent of the Required Lenders, shall, as soon
as practicable after, but in any event, not later than fifteen (15) days' after,
its establishment, creation or acquisition, become an Affiliate Guarantor by its
execution and delivery to Agent of a Joinder Agreement in substantially the same
form of Exhibit 7.11 hereto and (ii) the Parent of such new Subsidiary shall
execute a pledge agreement
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in substantially the same form as the Stock Pledge Agreement; and provided
further that Agent shall have received all documents, including legal opinions,
it may reasonably require to establish compliance with each of the foregoing
conditions.
(b) Enter into any Management and Services Agreement (except
in connection with an Approved Acquisition) with any other Person without the
prior written consent of the Required Lenders; provided, however, that (i) any
Person which, after entering into a Management and Services Agreement with the
prior written consent of the Required Lenders, shall, as soon as practicable
after, but in any event, not later than thirty (30) days' after, the execution
of such Management and Services Agreement, become an Affiliate Guarantor by its
execution and delivery to Agent of a Joinder Agreement in substantially the same
form of Exhibit 7.11 hereto and (ii) the principal shareholders of such new
Managed Firm shall execute a pledge agreement in substantially the same form as
the Shareholder Pledge Agreement; and provided further that Agent shall have
received all documents, including legal opinions, it may reasonably require to
establish compliance with each of the foregoing conditions.
(c) Except for the retention of consultants in the ordinary
course and those entities set forth on Schedule 7.11 hereto, enter into any
partnership, joint venture or similar arrangement; provided, however, that no
Loan Party or Subsidiary of any Loan Party shall invest or otherwise transfer
more than Twenty-five Thousand Dollars ($25,000) in any single entity listed on
such Schedule 7.11 the Loan Parties shall at no time have investments
outstanding in such joint venture entities which equal in the aggregate more
than Two Hundred Thousand Dollars ($200,000).
7.12. Fiscal Year and Accounting Changes. Change its fiscal year from
April 30 or make any significant change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law.
7.13. 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 Loan Party's business as
conducted on the date of this Agreement.
7.14. Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any term or provision of its Articles of Incorporation or By-Laws unless
required by law.
7.15. 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) (or substantially
similar replacement plans), plans which do not involve material employer
contributions or any Plan arising in connection with an Approved Acquisition for
a period of up to two (2) years following the closing date of such Approved
Acquisition, (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, Loan Party,
Subsidiary of
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any Loan Party or any member of the Controlled Group or the imposition of a lien
on the property of any Borrower, Loan Party, Subsidiary of any Loan Party 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 material 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.
7.16. Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Loan Party or any Subsidiary of any
Loan Party.
7.17. Other Agreements. Enter into any material amendment, waiver or
modification of the Management and Services Agreements, the Shareholder
Agreements or any related agreements.
7.18. Changes Relating to Subordinated Indebtedness. Borrowers will
not, and will not permit any of the other Loan Parties or any Subsidiary of any
Loan Party, directly or indirectly, to change or amend the terms of any
Subordinated Indebtedness (including, without limitation all Seller Notes) if
the effect of any such amendment is to: (a) increase the interest rate on such
Indebtedness; (b) change the dates upon which payments of principal or interest
are due on such Indebtedness; (c) change any event of default or add or change
any covenant with respect to such Indebtedness; (d) change the prepayment
provisions of such Indebtedness; (e) change the subordination provisions thereof
(or the subordination terms of any guaranty thereof); or (f) change or amend any
other term if such change or amendment would materially increase the obligations
of the obligor or confer additional material rights on the holder of such
Indebtedness in a manner adverse to Borrowers, any of such other Loan Parties,
any Subsidiary of any Loan Party, the Agent or any Lenders.
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) Notes. Agent shall have received the Notes duly executed
and delivered by an authorized officer of each Borrower;
(b) Filings, Registrations, Recordings and Searches. 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
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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 signed
and delivered to Agent. The Agent shall also have received UCC, tax and judgment
lien searches with respect to each Loan Party in such jurisdictions as the Agent
shall require, and the results of such searches shall be satisfactory to the
Agent;
(c) Corporate Proceedings. Agent shall have received a copy of
the resolutions in form and substance reasonably satisfactory to Agent, of the
Board of Directors of each Loan Party authorizing (i) the execution, delivery
and performance of this Agreement, the Notes, and any related agreements
(collectively the "Documents") to which each is party; (ii) the granting by each
Loan Party of the security interests in and liens upon the Collateral; and (iii)
the guarantee by each Affiliate Guarantor of the Guaranteed Obligations, in each
case certified by the Secretary or an Assistant Secretary of each Loan Party 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. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Loan Party, dated
the Closing Date, as to the incumbency and signature of the officers of each
Loan Party, executing this Agreement, 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 a copy of the
Articles or Certificate of Incorporation, Articles of Organization or
Partnership Agreement of each Loan Party, and all amendments thereto, certified
by the Secretary of State or other appropriate official of its jurisdiction of
incorporation together with copies of the By-Laws or Operating Agreement of each
Loan Party and all agreements of each Loan Party's shareholders certified as
accurate and complete by the Secretary of each Loan Party;
(f) Good Standing Certificates. Agent shall have received good
standing certificates for each Loan Party dated not more than thirty (30) days
prior to the Closing Date, issued by the Secretary of State or other appropriate
official of each Loan Party's jurisdiction of incorporation or organization and
each jurisdiction of qualification where the conduct of each Loan Party's
business activities or the ownership of its properties and the absence of such
good standing status could reasonably result in a Material Adverse Effect;
(g) Legal Opinion. Agent shall have received the executed
legal opinions of Xxxxx Xxxxxx, in-house legal counsel to HLM, as to corporate
matters and Underwood, Kinsey, Xxxxxx & Xxxxxx, P.A., outside legal counsel to
the Loan Parties, 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 Loan
Party hereby authorizes and directs such counsel to deliver such opinions to
Agent and Lenders;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Loan Party or against the officers or directors of any
Loan Party (A) in connection with the Other Documents
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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 materially adverse to any Loan
Party or the conduct of its business or inconsistent with the due consummation
of the Transactions shall have been issued by any Governmental Body;
(i) Collateral Examination. Agent shall have completed
Collateral examinations and received any requested appraisals, the results of
which shall be satisfactory in form and substance to Lenders, of the
Receivables, Inventory, General Intangibles, Real Property, Leasehold Interest,
and Equipment of each Borrower and all books and records in connection
therewith;
(j) Fees. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date pursuant to Article III hereof;
(k) Insurance. Agent shall have received in form and substance
satisfactory to Agent, (i) certified copies of each Loan Party's casualty
insurance policies, together with loss payable endorsements on Agent's standard
form of loss payee endorsement naming Agent as loss payee, and (ii) certified
copies of each Loan Party's liability insurance policies, together with
endorsements naming Agent as a co-insured.
(l) Payment Instructions. Agent shall have received written
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(m) Concentration Account Agreements. Agent shall have
received duly executed Concentration Account Agreements with financial
institutions acceptable to Agent for the collection or servicing of the
Receivables and proceeds of the Collateral.
(n) 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;
(o) No Adverse Material Change. (i) since October 29, 1999,
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 Lenders shall have been proven
to be inaccurate or misleading in any material respect;
(p) Stock Pledge Agreement and Other Documents. Agent shall
have received (i) the executed Stock Pledge Agreement, (ii) a collateral
assignment of HLM's rights under the Management and Services Agreements, (ii) a
collateral assignment of HLM's rights under the Shareholder Agreements, (iii) a
Shareholder Pledge Agreement for each Managed Firm executed by the principal
shareholders of such Managed Firm and (iv) the executed Other Documents, all in
form and substance satisfactory to Agent;
(q) Seller Notes. Agent shall have received copies of all
Seller Notes in existence on Closing Date.
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(r) Pay-Off Letters. Agent shall have received pay-off letters
in form and substance satisfactory to the Agent in regard to all Indebtedness
being refinanced with the proceeds of the initial Advances.
(s) 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;
(t) 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 the
Closing Date, (ii) the Loan Parties 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;
(u) Borrowing Base. Agent shall have received evidence from
Borrowers that the aggregate amount of Eligible Receivables is sufficient in
value and amount to support Advances in the amount requested by Borrowers on the
Closing Date;
(v) Undrawn Availability. After giving effect to the initial
Revolving Advances hereunder, the payment of all closing costs associated
herewith (regardless whether required to be paid on the Closing Date) and the
bringing current of all trade accounts payable more than sixty (60) days past
due, Borrowers shall have Undrawn Availability of at least $1,500,000; and
(w) 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, Lenders and
their 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 Loan Party 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
(except to the extent that they relate to an earlier date or may be untrue or
incorrect solely as a result of occurrences permitted under this Agreement);
(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, on such date; provided, however that Lenders,
in their sole credit judgment, 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;
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(c) Maximum Revolving Advances. In the case of any Revolving
Advances requested to be made, after giving effect thereto, the aggregate
Revolving Advances shall not exceed the maximum amount of Advances permitted
under Section 2.1 hereof; and
(d) Maximum Letters of Credit. In the case of any Letters of
Credit requested to be made, after giving effect thereto, the aggregate face
amount and reimbursement obligations outstanding in respect of Letters of Credit
shall not exceed the Maximum Amount permitted under Section 2.10.
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.
8.3. Conditions to Each Capital Expenditure Loan. The agreement of
Lenders to make any Capital Expenditure Loan is subject to satisfaction of the
following conditions precedent: (a) receipt by Agent of (i) a copy of the
invoice relating to the Equipment being purchased, (ii) evidence that such
Equipment has been shipped to a Borrower, (iii) evidence that the requested
Capital Expenditure Loan does not exceed eighty percent (80%) of the net invoice
cost of such Equipment purchased by Borrower (which shall be exclusive of
shipping, handling, taxes, installation and all other "soft" costs), (iv)
evidence of payment by Borrowers or a request by Borrowers for Agent to pay a
vendor for such Equipment, and (v) such other documentation and evidence that
Agent may request; and (b) after giving effect thereto, the aggregate Capital
Expenditure Loans shall not exceed the Maximum Capital Expenditure Loan Amount.
IX. INFORMATION AS TO BORROWERS.
Until satisfaction in full of the Obligations and the termination of
this Agreement, each Borrower shall, and shall cause each other Loan Party and
each Subsidiary of each Loan Party to:
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 Loan Party's or any respective Subsidiary's reclamation or repossession of,
or the return to any Loan Party or any Subsidiary of any Loan Party 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 fifteenth (15th) day
of each month as and for the prior month (a) accounts receivable agings and (b)
accounts payable schedules. In addition, each Loan Party 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
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in form satisfactory to Agent and executed by each Loan Party and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the Collateral, and any Loan Party's 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.
9.3. Environmental Reports. (a) Concurrently with the delivery of the
Financial Reports referred to in Section 9.7 and (b) to the extent that
Borrowers or Affiliate Guarantors become owners of any real property,
concurrently with the delivery of the Financial Reports referred to in Section
9.8 or at the request of Agent, furnish Agent with a certificate signed by the
President of each Loan Party or Subsidiary of such Loan Party, in the form of
Exhibit 9.3 hereto, stating, to the best of his knowledge, that each Loan Party
or applicable Subsidiary 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 such Person 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 Person 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 Loan Party or any Subsidiary of
any Loan Party, 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 on any Loan Party or any Subsidiary
of any Loan Party.
9.5. Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) 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 Loan
Party or its Subsidiaries as of the date of such statements; (c) any accumulated
retirement plan funding deficiency under Section 412 which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject any Loan Party , any Subsidiary of any Loan Party or
any member of the Controlled Group of a Loan Party to a tax imposed by Section
4971 of the Code; (d) each and every default by any Loan Party or Subsidiary of
a Loan Party which might result in the acceleration of the maturity of any
Indebtedness, 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 (e) any other development in the business or affairs of any
Loan Party or Subsidiary of any Loan Party which could reasonably be expected to
have a Material Adverse Effect; in each case describing the nature thereof and
the action that such Persons propose to take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts previously unreported to Agent between any
Loan Party and the United States, any state, or any department, agency or
instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within 90 days after
the end of each fiscal year of Borrowers, the Financial Reports for such fiscal
year. The report of the Accountants shall be accompanied by (a) any management
letter delivered by such Accountants
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to Borrowers and (b) a statement of the Accountants certifying that (i) the
Financial Reports for such fiscal year have been audited in accordance with
GAAP, (ii) the opinion given by such Accountants as to the Financial Reports
delivered under this Section is an unqualified opinion (iii) they have reviewed
sections of this Agreement, including, without limitation, Sections 6.5, 6.6,
6.7, 6.8 and 7.10, (iv) 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 Default or a Default under Sections 6.5, 6.6, 6.7, or
6.8 and 7.10 of this 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. In addition, the Financial Reports shall be
accompanied by a certificate of each Borrower's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, the Financial Reports being delivered pursuant to this
Section 9.7 have been prepared in compliance with GAAP, 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, 6.6, 6.7, 6.8 and 7.10
hereof such certificate and calculations to be substantially in the form of
Exhibit 9.7 hereto.
9.8. Quarterly Financial Statements. Furnish Agent within 45 days after
the end of each fiscal quarter, the Financial Reports for such fiscal quarter.
The Financial Reports shall be accompanied by a certificate signed by the Chief
Financial Officer of each Borrower, which shall state that, based on an
examination sufficient to permit him to make an informed statement, the
Financial Reports being delivered pursuant to this Section 9.8 have been
prepared in compliance with GAAP, 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, 6.6, 6.7, 6.8 and 7.10 hereof.
9.9. Monthly Financial Statements. Furnish Agent within 30 days after
the end of each month, the Financial Reports for such month. The Financial
Reports shall be accompanied by a certificate of each Borrower's Chief Financial
Officer, which shall state that, based on an examination sufficient to permit
him to make an informed statement, the Financial Reports being delivered
pursuant to this Section 9.9 have been prepared in compliance with GAAP, 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, 6.6, 6.7, 6.8 and 7.10 hereof.
9.10. Borrowing Base Certificate. Deliver to Agent a certificate of
each Borrower's Chief Financial Officer (a "Borrowing Base Certificate") in the
form of Exhibit 9.10 hereto which shall state Borrower's Formula Amount as of
the date thereof and which shall attach the calculation of such Formula Amount.
This Borrowing Base Certificate shall be delivered on that Business Day closest
to the middle of each Business Period (for example, for the Business Periods of
four (4) weeks, the Business Day closest to the 15th day of such Business
Period; and
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for the Business Periods of five (5) weeks, the Business Day closest to the 17th
or 18th day of such Business Period, as applicable) and on the last Business Day
during the applicable Business Period.
9.11. Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports and returns as each Loan Party or Subsidiary of
any Loan Party shall send to its stockholders.
9.12. 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 the Loan Parties and their
respective Subsidiaries 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 Loan Party's opening of
any new office or place of business or any Loan Party's closing of any existing
office or place of business, (c) at least thirty (30) days prior thereto, notice
of any Loan Party's name change or change of identity or corporate structure,
(d) at least thirty (30) days prior thereto, notice of any Loan Party's change
of the location of its chief executive office and (e) promptly upon any Loan
Party's or any Subsidiary of any Loan Parties learning thereof, notice of any
labor dispute to which any Loan Party or Subsidiary of any Loan Party 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 Loan Party or
Subsidiary of any Loan Party is a party or by which any Loan Party or any
Subsidiary of any Loan Party is bound.
9.13. Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each Borrower's fiscal years commencing with
its fiscal year beginning May 1, 2000, a month by month projected operating
budget and cash flow of Borrowers on a consolidated and consolidating basis for
such fiscal year (including an income statement for each month and a balance
sheet as at the end of the last month in each fiscal quarter), such projections
to be accompanied by a certificate signed by the President or Chief Financial
Officer of each Borrower to the effect that such projections 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 projections were
prepared.
9.14. Variances From Operating Budget. Furnish Agent, concurrently with
the delivery of the Financial Reports referred to in Section 9.7 and each
monthly report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.13 and a discussion and analysis by
management with respect to such variances.
9.15. Notice of Suits, Adverse Events. Furnish Agent with prompt notice
of (i) any lapse or other termination of any Consent issued to any Loan Party or
any Subsidiary of any Loan Party by any Governmental Body or any other Person
that is material to the operation of such Person'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 Loan Party or
any Subsidiary of any Loan Party with any Governmental Body or Person, if such
reports indicate any material change in the business, operations, affairs or
condition of any such
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Loan Party or Subsidiary, or if copies thereof are requested by Agent or any
Lender, and (iv) copies of any material notices and other communications from
any Governmental Body or Person which specifically relate to any Loan Party.
9.16. Notice of Regulatory Issues. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent or any material Regulatory
License or Approval issued to any Loan Party or any Subsidiary of any Loan Party
by any applicable Regulatory Body or (ii) any refusal by any applicable
Regulatory Body or any other Person to renew or extend any such Consent or
Regulatory License or Approval; and promptly provide Agent with (x) copies of
any periodic or special reports filed by any Loan Party or any Subsidiary of any
Loan Party with any applicable Regulatory Body, if such reports indicate any
material change in the business, operations, affairs or condition of any such
Loan Party or Subsidiary, or if copies thereof are requested by Agent or any
Lender and (y) copies of any material notices and other communications from any
Regulated Body which specifically relate to any Loan Party or its Subsidiaries.
9.17. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Loan Party, any Subsidiary of any Loan Party 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 Loan Party or 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 thereto, (ii) any Loan Party,
any Subsidiary of any Loan Party 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 Loan Party, Subsidiary of
any Loan Party 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
Loan Party, Subsidiary of Loan Party or any member of the Controlled Group with
respect to such request, (iv) to the extent it would constitute a Material
Adverse Effect, 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 Loan Party, Subsidiary of any Loan Party or any member of the
Controlled Group was not previously contributing shall occur, (v) any Loan
Party, Subsidiary of any Loan Party 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 Loan Party, Subsidiary of any Loan Party or any member of the
Controlled Group shall receive any 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 Loan
Party, Subsidiary of any Loan Party 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 Loan Party, Subsidiary of any Loan Party
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 Loan Party, Subsidiary of any
Loan Party or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemploy-
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er 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.
9.18. 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.
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;
10.2. any representation or warranty made or deemed made by any Loan
Party in this Agreement or any related agreement or in any certificate, document
or financial or other 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 Loan Party to (i) furnish financial information
when due which is unremedied for a period of fifteen (15) days, (ii) furnish
financial information when requested which is unremedied for a period of fifteen
(15) days following receipt by Borrowers of written notice by Agent or (iii)
permit the inspection of its books or records in accordance with the provisions
of Section 4.10;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Loan Party's property or any
property of any Subsidiary of any Loan Party which is not stayed or lifted
within thirty (30) days;
10.5. (a) failure or neglect of any Loan Party to perform, keep or
observe any term, provision, condition or covenant, contained in Sections 6.5,
6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.15, 6.17, 6.18, 6.19, 6.20, 9.7, 9.8,
9.9, 9.10 or Article VII of this Agreement;
(b) except as otherwise provided for in Sections 10.1, 10.3 or
10.5(a), failure or neglect of any Loan Party to perform, keep or observe any
term, provision, condition or covenant herein contained, or contained in any
other agreement or arrangement, now or hereafter entered into between any Loan
Party and Agent or any Lender; which is not cured within fifteen (15) days from
Borrowers' receipt of written notice from Agent of the occurrence of such
failure or neglect;
10.6. any judgment or judgments are rendered or judgment liens filed
against any Loan Party or any Subsidiary of any Loan Party for an aggregate
amount in excess of Two Hundred Thousand Dollars ($200,000), exclusive of
insurance for which the insurer has admitted liability,
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which within thirty (30) days of such rendering or filing is not either
satisfied, stayed or discharged of record unless such judgment or judgment lien
shall be contested by the applicable Loan Party or Subsidiary in good faith and
Borrowers establish reserves in an amount satisfactory to the Required Lenders;
10.7. any Loan Party or any Subsidiary of any Loan Party 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 Loan Party or any Subsidiary of any Loan Party 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 change in any Loan Party's condition or affairs (financial or
otherwise) or the condition or affairs of any Subsidiary of any Loan Party
(financial or otherwise) which in Agent's sole credit judgment has a Material
Adverse Effect;
10.10. any Lien created hereunder or provided for hereby or under any
related agreement, other than a Permitted Encumbrance, for any reason ceases to
be or is not a valid and perfected Lien having a first priority interest and
such occurrence is not the result of any failure on the part of Agent to file or
maintain any necessary filings;
10.11. a default of the obligations of any Loan Party or any Subsidiary
of any Loan Party under any agreements related to Indebtedness or any operating
lease obligations shall occur and is not cured within any applicable grace
period or a default of the obligations of any Loan Party or any Subsidiary of
any Loan Party under any other agreement to which it is a party shall occur,
either of which materially adversely affects its condition, affairs or prospects
(financial or otherwise) which default is not cured within any applicable grace
period;
10.12. termination or breach of the Stock Pledge Agreement, the
Shareholders Pledge Agreement or similar agreement executed and delivered to
Agent in connection with the Obligations of any Borrower, or if any Pledgor (as
defined in the Stock Pledge Agreement) or any principal shareholder of the
Managed Firms attempts to terminate, challenges the validity of, or its
liability under, the Stock Pledge Agreement, Shareholders Pledge Agreement or
similar agreement;
10.13. a default by HLM under any Management and Services Agreement
shall occur and is not cured within any applicable grace period;
10.14. any Management and Services Agreement or Shareholder Agreement
is terminated without the consent of the Agent;
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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 Loan Party, or any Loan Party shall so
claim in writing to Agent and such occurrence is not a result of any action or
inaction of the Agent, the Lenders or any Issuer;
10.17. (i) any applicable Regulatory Body shall (a) revoke, terminate,
suspend or modify any of the Regulatory Licenses or Approvals of any Loan Party
or any Subsidiary of any Loan Party and such revocation, termination, suspension
or modification could reasonably be expected to have a Material Adverse Effect ,
or (b) commence proceedings to suspend, revoke, terminate or adversely modify
any such Regulatory License or Approval 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 Regulatory License or Approval and the staff of
such applicable Regulatory Body issues a report recommending the termination,
revocation, suspension or material, adverse modification of such Regulatory
License or Approval; (ii) any applicable Regulatory Body shall revoke,
terminate, suspend or modify any approval status, registration status, license,
permit or similar right of any of the Loan Parties or the Subsidiaries of such
Loan Parties and such revocation, termination, suspension or modification could
reasonably be expected to have a Material Adverse Effect;
10.18. (i) any Governmental Body shall (a) revoke, terminate, suspend
or adversely modify any license, permit, patent trademark or tradename of any
Loan Party or any Subsidiary of any Loan Party, the continuation of which is
material to the continuation of any Loan Party's business or the business of any
Subsidiary of any Loan Party, 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
Loan Party's business or the business of any Subsidiary of any Loan Party 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 Loan Party's business or the
business of any Subsidiary of any Loan Party 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 on any Loan Party or its Subsidiaries;
10.19. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Loan Party or the title and rights of any Loan Party
or any original owner which is the owner of any material portion of the
Collateral shall have become the subject matter of litigation which might, in
the sole credit judgment of Agent, upon final determination, result in material
impairment or loss of the security provided by this Agreement or the Other
Documents;
10.20. an event or condition specified in Sections 7.15 or 9.17 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 Loan Party,
any Subsidiary of any Loan Party or any member of the Controlled Group shall
incur a liability to a participant, Plan, the PBGC, the United States
81
Department of Labor, the Internal Revenue Service or other governmental agency
which, in the reasonable judgment of Agent, would have a Material Adverse Effect
on any Loan Party or any Subsidiary of any Loan Party.
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
any Loan Party or any Subsidiary of any Loan Party 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 such Loan Party or
Subsidiary. Upon the occurrence of any Event of Default, (x) no Borrower or
Affiliate Guarantor may make any payment of interest, principal, fees or other
payment of any kind on the Seller Notes or otherwise for the account of the
holder of any such Seller Note and (y) 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 Loan Party's premises or other premises without legal process and
without incurring liability to any Loan Party 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 the Loan Parties 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. 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 the Loan Parties reasonable notification of
such sale or sales, it being agreed that in all events written notice mailed to
Loan Parties at least five (5) 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 Loan Party. In
connection with the exercise of the foregoing remedies, Agent is granted
permission to use all of each Loan Party's trademarks, trade styles, trade
names, patents, patent applications, licenses, franchises and other proprietary
rights which are used in connection with Inventory for the purpose of disposing
of such Inventory.
11.2. Application of Proceeds. The proceeds realized from the sale of
any Collateral shall be applied as follows: first, to the reasonable costs,
expenses and attorneys' fees and
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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; third, to fees payable in connection
with this Agreement; fourth, to furnish to Agent cash collateral in an amount
not less than 105% of the aggregate undrawn amount of all Letters of Credit,
such cash collateral arrangements to be in form and substance satisfactory to
Agent; and, fifth, to the principal of the Obligations. If any deficiency shall
arise, Borrowers shall remain liable to Agent and Lenders therefor.
11.3. Agent's Discretion. Agent shall have the right in its sole credit
judgment 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.
11.4. Setoff. In addition to any other rights which Agent, any Lender,
any Accepting Bank, Bank or any Issuer may have under applicable law, upon the
occurrence of an Event of Default hereunder, Agent, such Lender, such Accepting
Bank, Bank and such Issuer shall have a right to apply any Loan Party's property
held by Agent, such Lender, such Issuer, such Accepting Bank or such Bank to
reduce the Obligations.
11.5. 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.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Loan Party 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
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
83
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
Loan Party, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until February __, 2003 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) 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) three
percent (3%) of the aggregate Commitments made to Borrower on the Closing Date
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) two percent (2%) of the aggregate Commitments made to Borrower on the
Closing Date 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, (z) one percent (1%) of the
aggregate Commitments made to Borrower on the Closing Date if the Early
Termination Date occurs on or after the second anniversary of the Closing Date
and prior to the last day of the Term; provided, however, that such early
termination fee shall be waived in full by the Lenders in the event the
Obligations are prepaid in full prior to the last day of the Term due to the
occurrence of (A) a public offering of the common stock of HLM the proceeds of
which are sufficient to prepay the Obligations in full or (B) the Required
Lenders unreasonably withhold the approval of an Acquisition (such that
acquisition of an Acquisition Target is not deemed an Approved Acquisition
hereunder) or all Lenders unreasonably refuse a request by Borrowing Agent for
an increase in the total Commitments extended under this Agreement.
13.2. Termination. The termination of the Agreement shall not affect
any Loan Party'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 Loan Party waives any rights which it may have under Section
9-404(1) of 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 Loan Party, or to file them with any
filing
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office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations 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 IBJW 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 Sections
3.3 and 3.4), 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. None
of Agent, any Lender, Bank, any Accepting Bank or any Issuer nor any of their
respective 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 Loan Party 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, enforceability or sufficiency
of this Agreement, or any of the Other Documents or for any failure of any Loan
Party 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 Loan Party. 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.
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14.3. Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent, any Issuer, any Accepting Bank 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 or other
Loan Party 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 Loan Party 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 Loan Party, 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 Loan Party, 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. If no
such successor Agent is appointed at the end of such sixty (60) day period,
Agent may designate one of the Lenders as a successor Agent.
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. The rights of the Agent vis-a-vis the Loan Parties in
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respect of the provisions of this Section 14.5 are further outlined in the
standard form Advances and Reports Authority Agreement in substantially the form
of Exhibit 14.5 hereto.
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 Agent has received notice from a Lender or a Loan
Party 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, each
Issuer, and each Accepting Bank 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, such Issuer and such Accepting Bank 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 the
indemnified party'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 Loan Party as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Loan Party 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 documents and
information from any Borrower pursuant to Section 9.7 through and including 9.9
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.
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XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
(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. None of Agent, any
Accepting Bank, any Issuer or 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, Bank, each Issuer, each
Accepting Bank and each Lender and holds Agent, Bank, each Issuer, each
Accepting Bank and each Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or injury asserted
against Agent, Bank, any Issuer, any Accepting Bank 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
by 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.
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
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within the State of New York. Any judicial proceeding brought by or against any
Loan Party 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 execution and delivery of this
Agreement, each Loan Party 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 Loan Party 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 CT CORPORATION SYSTEM which each
Loan Party 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 Loan Party in the courts
of any other jurisdiction. Each Loan Party 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 Loan Party 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 City 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, each Affiliate
Guarantor, 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, each Affiliate Guarantor'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 and each
Affiliate Guarantor 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 and Affiliate Guarantors 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 and the Affiliate Guarantors, for the purpose of adding or deleting
any provisions or otherwise changing, varying or waiving in any manner the
rights of Lenders, Agent, Borrowers or Affiliate Guarantors thereunder or the
conditions, provisions or terms thereof or 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:
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(i) increase the Commitment Percentage of any Lender.
(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 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).
(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 $500,000.
(v) change the rights and duties of Agent.
(vi) increase the Advance Rates above the Advance Rates in
effect on the Closing Date.
(vii) increase (x) the aggregate principal amount of the
Term Loan, (y) the Maximum Capital Expenditure Loan Amount, or
(z) Maximum Revolving Advance Amount or 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 sixty (60) consecutive Business
Days or exceed one hundred ten percent (110%) of the Formula
Amount.
(viii) release any Affiliate Guarantor from its
obligations arising hereunder or under the Other Documents.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Affiliate Guarantors, Lenders and Agent and all future
holders of the Obligations. In the case of any waiver, Borrowers, Affiliate
Guarantors, 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.
(c) 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 Agent may, at its option,
require such Lender to assign its interest in the Advances to Agent 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 Borrower. In the event IBJW elects to
require any Lender to assign its interest to IBJW or to the Designated Lender,
IBJW 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 IBJW or the
Designated Lender no later than five (5) days
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following receipt of such notice pursuant to a Commitment Transfer Supplement
executed by such Lender, IBJW or the Designated Lender, as appropriate, and
Agent.
Notwithstanding the foregoing, Agent may at its discretion and without the
consent of the Required Lenders, voluntarily permit the outstanding Revolving
Advances at any time to 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 which was previously
deemed to be Eligible Receivables becoming ineligible or collections of
Receivables which were applied to reduce outstanding Revolving Advances are
thereafter returned for insufficient funds.
16.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of the Loan Parties, Agent, each Lender, all future holders of the
Obligations and their respective successors and assigns, except that no Loan
Party 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 Loan Party 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 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 Loan Party
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 (i) with the consent of Agent, which
consent shall not be unreasonably withheld or delayed, and (ii) absent the
occurrence and continuation of any Default or any Event of Default, with the
consent of the Borrowing Agent, which consent 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 Five Million Dollars ($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
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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 notation for that purpose; provided,
however, that such transferor Lender shall remain bound by the confidentiality
provisions of Section 16.15 hereof. 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 $2,500 payable by the applicable Purchasing Lender upon the effective
date of each transfer or assignment to such Purchasing Lender.
(e) The Loan Parties authorize 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
the Loan Parties which has been delivered to such Lender by or on behalf of the
Loan Parties pursuant to this Agreement or in connection with such Lender's
credit evaluation of Borrowers.
(f) Each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof shall
deliver to the Borrowing Agent and Agent within fifteen (15) days after the date
on which such Lender becomes a Lender pursuant to Section 16.3(c) hereof, a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender in the form set forth in Exhibit 16.3(A) or 16.3(B), as applicable,
to the effect that such Lender is capable under the provisions of an applicable
tax treaty concluded by the United States of America (in which case the
certificate shall be accompanied by two executed copies of Form 1001) or under
Section 1442 of the Code (in which case the certificate shall be accompanied by
two copies of Form 4224) of receiving payments of interest hereunder without
deduction or withholding of United States federal income tax. Each such Lender
further agrees to deliver to Borrowing Agent and Agent from time to time a true
and accurate certificate executed in duplicate by a duly authorized officer of
such Lender substantially in the form set forth in Exhibit 16.3(A) or 16.3(B),
as applicable, before or promptly upon the occurrence of any event requiring a
change in the most recent certificate previously delivered by it to Borrowing
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Agent pursuant to this Section 16.3(f). Further, each Lender which delivers a
certificate in the form of Exhibit 16.3(A) covenants and agrees to deliver to
Borrowing Agent within fifteen (15) days prior to February 1, 2001 (if this
Agreement is still in effect on such date), and every anniversary of such date
thereafter on which this Agreement is still in effect, two accurate and complete
original signed copies of Form 1001 (or any successor form or forms required
under the Code or the applicable regulations promulgated thereunder) and a
certificate in the form of Exhibit 16.3(A) and each Lender that delivers a
certificate in the form of Exhibit 16.3(B) covenants and agrees to deliver to
Borrowing Agent within fifteen (15) days prior to the beginning of each
subsequent taxable year of such Lender during which this Agreement is still in
effect, two accurate and complete original signed copies of Form 4224 (or any
successor form or forms required under the Code or the applicable regulations
promulgated thereunder) and a certificate in the form of Exhibit 16.3(B). Each
such certificate shall certify as to one of the following:
(i) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United
States of America federal income tax; or
(ii) that such Lender is not capable of receiving payments
of interest hereunder without deduction or withholding of
United States of America federal income tax as specified
therein.
Each Lender shall promptly furnish to Borrowing Agent such
additional documents as may be reasonably required by Borrowing Agent to
establish any exemption from or reduction of any taxes required to be deducted
or withheld and which may be obtained without undue expense to such Lender.
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, provided, however,
that absent the occurrence of an Event of Default hereunder, Agent shall not
apply the proceeds of Collateral to prepay outstanding Term Loans and Capital
Expenditure Loans except as specifically set forth in Section 2.15 hereof. 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 Loan Party shall indemnify Agent, Bank, each
Issuer, each Accepting Bank, 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, Bank, such Issuer, such Accepting Bank
or any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental
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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, Bank, any Issuer,
any Accepting Bank or any Lender is a party thereto, except to the extent that
any of the foregoing, as determined by a court of competent jurisdiction in a
final proceeding, arises out of the gross (not mere) negligence or willful
misconduct of the party being indemnified.
16.6. Notice. Any notice or request hereunder may be given to any Loan
Party 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 or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:
(A) If to Agent or to
IBJW as Lender at: IBJ Whitehall Business Credit Corporation
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:Xxxxxx Xxxxxx
Telephone:(000) 000-0000
Telecopier:(000) 000-0000
with a copy to: King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention:Xxxxxx X. Xxxxx, Esq.
Telephone:(000) 000-0000
Telecopier:(000) 000-0000
(B) If to a Lender other than Agent or IBJW, as specified on the
signature pages hereof
94
(C) If to Borrowing Agent
or any Loan Party, at: HLM Design, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention:Xxxxxx X. Xxxxxxx, S.V.P.
Telephone:000-000-0000
Telecopier:000-000-0000
with a copy to: Xxxxxxxxx Xxxxxx Xxxxxx & Xxxxxx, P.A.
0000 Xxxxxxxxx Xxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention:Xxxxxxx X. Xxxx, Esq.
Telephone:000-000-0000
Telecopier:000-000-0000
16.7. Survival. The obligations of Borrowers or any other Loan Party
under Section 2.2(g); Sections 3.8, 3.9, 3.10, to the extent that Borrower's
obligations thereunder did not come into effect until after termination of this
Agreement, such as, but not limited, by retroactive application of pertinent
laws or regulations; Section 4.19(h); Section 14.7; and Section 16.5; each 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 and disbursements incurred by Agent, Agent on behalf
of Lenders and 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 Loan Party, 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 Loan Party recognizes that, in the event
any Loan Party 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.
95
16.11. Consequential Damages. None of Agent, Bank, any Issuer, any
Accepting Bank, any Lender, nor any agent or attorney for any of them, shall be
liable to any Loan Party 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.
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. Borrower is a publicly traded company. Agent,
each Lender and each Transferee shall hold all non-public information,
including, without limitation, all Financial Reports delivered in connection
with Section 9.9, 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
to any prospective Transferees and Purchasing Lenders, so long as such
prospective Transferees and Purchasing Lenders agree in writing to be bound by
the terms of this Section 16.15, 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
prior to disclosure thereof, to notify the Borrowing Agent 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 Loan Party 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.
16.16. Foreign Subsidiaries. Any references to the laws of the United
States of America applicable to Subsidiaries shall, in respect of all Foreign
Subsidiaries, refer to applicable corresponding laws of the relevant
jurisdiction or country of such Foreign Subsidiary's organization.
96
Each of the parties has signed this Agreement as of the day and year
first above written.
ATTEST: HLM DESIGN, INC., as Borrower and Borrowing
Agent
By: /s/ Xxxxxx X. Xxxxxx
------------------------
/s/ Xxxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxx
-------------------------- Title: President
Name: Xxxxxx X. Xxxxxxx
Title: Assistant Secretary
ATTEST: JPJ ARCHITECTS, INC., as Affiliate Guarantor
By: /s/ Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx ------------------------
-------------------------- Name: Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxxx Title: President
Title: Secretary
ATTEST: HLM DESIGN USA, INC., as Affiliate Guarantor
By: /s/ Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx ------------------------
-------------------------- Name: Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxxx Title: President
Title: Secretary
ATTEST: HLM DESIGN ARCHITECTURE
ENGINEERING AND PLANNING, P.C., as
Affiliate Guarantor
By: /s/ Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx ------------------------
-------------------------- Name: Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxxx Title: President
Title: Secretary
97
ATTEST: HLM DESIGN OF NORTHAMERICA, INC., as
Affiliate Guarantor
By: /s/ Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx ------------------------
-------------------------- Name: Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxxx Title: President
Title: Secretary
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION, as Lender and as Agent
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
------------------------
Title: Vice President
------------------------
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Commitment Percentage: 100%
98
STATE OF GEORGIA )
) ss.
COUNTY OF XXXXXX )
On this 3rd day of February, 2000, before me personally came Xxxxxx X.
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the President of HLM Design, Inc., the corporation described in and which
executed the foregoing instrument as "Borrower" and "Borrowing Agent"; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order.
/s/ Xxxxxxxxxxx X. Xxxxx
---------------------------
NOTARY PUBLIC
STATE OF GEORGIA )
) ss.
COUNTY OF XXXXXX )
On this 3rd day of February, 2000, before me personally came Xxxxxx X.
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the President of JPJ Architects, Inc., the corporation described in and which
executed the foregoing instrument as an "Affiliate Guarantor"; that he knows the
seal of each said corporation; that each seal affixed to said instrument is such
applicable corporate seal; that it was so affixed by order of the board of
directors of each said corporation, and that he signed his name thereto by like
order.
/s/ Xxxxxxxxxxx X. Xxxxx
---------------------------
NOTARY PUBLIC
99
STATE OF GEORGIA )
) ss.
COUNTY OF XXXXXX )
On this 3rd day of February, 2000, before me personally came Xxxxxx X.
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the President of HLM Design USA, Inc., the corporation described in and which
executed the foregoing instrument as an "Affiliate Guarantor"; that he knows the
seal of each said corporation; that each seal affixed to said instrument is such
applicable corporate seal; that it was so affixed by order of the board of
directors of each said corporation, and that he signed his name thereto by like
order.
/s/ Xxxxxxxxxxx X. Xxxxx
---------------------------
NOTARY PUBLIC
STATE OF GEORGIA )
) ss.
COUNTY OF XXXXXX )
On this 3rd day of February, 2000, before me personally came Xxxxxx X.
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the President of HLM Design Architecture Engineering and Planning, P.C., the
corporation described in and which executed the foregoing instrument as an
"Affiliate Guarantor"; that he knows the seal of each said corporation; that
each seal affixed to said instrument is such applicable corporate seal; that it
was so affixed by order of the board of directors of each said corporation, and
that he signed his name thereto by like order.
/s/ Xxxxxxxxxxx X. Xxxxx
---------------------------
NOTARY PUBLIC
000
XXXXX XX XXXXXXX )
) ss.
COUNTY OF XXXXXX )
On this 3rd day of February, 2000, before me personally came Xxxxxx X.
Xxxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the President of HLM Design of Northamerica, Inc., the corporation described in
and which executed the foregoing instrument as an "Affiliate Guarantor"; that he
knows the seal of each said corporation; that each seal affixed to said
instrument is such applicable corporate seal; that it was so affixed by order of
the board of directors of each said corporation, and that he signed his name
thereto by like order.
/s/ Xxxxxxxxxxx X. Xxxxx
---------------------------
NOTARY PUBLIC
STATE OF GEORGIA )
) ss.
COUNTY OF XXXXXX )
On this 3rd day of February, 2000, before me personally came Xxxxxx X. Xxxxxx,
to me known, who, being by me duly sworn, did depose and say that he is the Vice
President of IBJ Whitehall Business Credit Corporation, the corporation
described in and which executed the foregoing instrument as "Lender" and "Agent"
and that he signed his name thereto by on behalf of said corporation.
/s/ Xxxxxxxxxxx X. Xxxxx
---------------------------
NOTARY PUBLIC
101
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 1.2(a) Certificate Regarding Approved Acquisition
Exhibit 1.2(b) Assignment of Acquisition Rights
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 2.5(b) Capital Expenditure Note
Exhibit 2.10 Letter of Credit Security Agreement
Exhibit 2.11 Letter of Credit Authority Agreement
Exhibit 2.15(b) Excess Cash Flow Certificate
Exhibit 5.5(a) Financial Projections
Exhibit 5.25 Subordination Agreement
Exhibit 6.16 Indemnification Agreement
Exhibit 7.11 Joinder Agreement
Exhibit 9.3 Certificate Regarding Environmental Reports
Exhibit 9.7 Compliance Certificate
Exhibit 9.10 Borrowing Base Certificate
Exhibit 14.5 Advances and Reports Authority Agreement
Exhibit 16.3 Commitment Transfer Supplement
Exhibit 16.3(A) Tax Withholding Certificate
Exhibit 16.3(B) Tax Withholding Certificate
102
SCHEDULES
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.15(d) Lock-Box Accounts and Concentration Accounts
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.2(c) Managed Firms
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7 Environmental
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 5.24 Shareholder Agreements and Management and Services Agreements
Schedule 5.25 Seller Notes
Schedule 7.3 Guarantees
Schedule 7.7 Indebtedness
Schedule 7.9 Transactions with Affiliates
Schedule 7.11 Joint Ventures
103
