Exhibit 10.1
REVOLVING CREDIT, TERM LOAN, GUARANTY
AND
SECURITY AGREEMENT
AMONG
PNC BANK, NATIONAL ASSOCIATION
(AS AGENT),
CERTAIN FINANCIAL INSTITUTIONS PARTY HERETO
(AS LENDERS),
EASY GARDENER, INC.
(AS BORROWER),
U. S. HOME & GARDEN, INC.
(AS HOLDINGS)
AND
CERTAIN OF THEIR SUBSIDIARIES
Dated as of November 15, 2001
TABLE OF CONTENTS
Page
I. DEFINITIONS 1
1.1 Accounting Terms 1
1.2 General Terms 1
1.3 Uniform Commercial Code Terms 16
1.4 Certain Matters of Construction 16
II. ADVANCES, PAYMENTS 16
2.1 (a) Revolving Advances 16
(b) Discretionary Rights 17
2.2 Procedure for Revolving Advances Borrowing 17
2.3 Disbursement of Advance Proceeds 18
2.4 Term Loan 18
2.5 Maximum Revolving Advances 19
2.6 Repayment of Advances 19
2.7 Repayment of Excess Advances 19
2.8 Statement of Account 19
2.9 Letters of Credit 20
2.10 Issuance of Letters of Credit 20
2.11 Requirements For Issuance of Letters of Credit 20
2.12 Additional Payments 21
2.13 Manner of Borrowing and Payment 22
2.14 Mandatory Prepayments 23
2.15 Use of Proceeds 23
2.16 Defaulting Lender 23
III. INTEREST AND FEES 24
3.1 Interest 24
3.2 Letter of Credit Fees 24
3.3 (a) Closing Fee 25
(b) Facility Fee 25
(c) Agency Fee 25
(d) Other Fees 25
3.4 Collateral Monitoring Fee 25
3.5 Other Expenses 25
3.6 Computation of Interest and Fees 26
3.7 Maximum Charges 26
3.8 Increased Costs 26
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TABLE OF CONTENTS
(continued)
Page
3.9 Basis For Determining Interest Rate Inadequate or Unfair 26
3.10 Capital Adequacy 27
3.11 Gross Up for Taxes 27
3.12 Withholding Tax Exemption 28
IV. COLLATERAL: GENERAL TERMS 28
4.1 Security Interest in the Collateral 28
4.2 Perfection of Security Interest 28
4.3 Disposition of Collateral 29
4.4 Preservation of Collateral 29
4.5 Ownership of Collateral 29
4.6 Defense of Agent's and Lenders' Interests 29
4.7 Books and Records 30
4.8 Financial Disclosure 30
4.9 Compliance with Laws 30
4.10 Inspection of Premises 30
4.11 Insurance 30
4.12 Failure to Pay Insurance 31
4.13 Payment of Taxes 31
4.14 Payment of Leasehold Obligations 32
4.15 Receivables 32
(a) Nature of Receivables 32
(b) Solvency of Customers 32
(c) Location of Credit Parties 32
(d) Collection of Receivables 32
(e) Notification of Assignment of Receivables 33
(f) Power of Agent to Act on Credit Parties Behalf 33
(g) No Liability 33
(h) Establishment of a Lockbox Account, Dominion Account 34
(i) Adjustments 34
4.16 Inventory 34
4.17 Maintenance of Equipment 34
4.18 Exculpation of Liability 34
4.19 Environmental Matters 34
4.20 Financing Statements 36
V. REPRESENTATIONS AND WARRANTIES 36
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TABLE OF CONTENTS
(continued)
Page
5.1 Authority 36
5.2 Formation and Qualification 36
5.3 Survival of Representations and Warranties 37
5.4 Tax Returns 37
5.5 Financial Statements 37
5.6 Corporate Name 38
5.7 O.S.H.A. and Environmental Compliance 38
5.8 Solvency; No Litigation, Violation, Indebtedness or Default 38
5.9 Patents, Trademarks, Copyrights and Licenses 39
5.10 Licenses and Permits 39
5.11 Default of Indebtedness 40
5.12 No Default 40
5.13 No Burdensome Restrictions 40
5.14 No Labor Disputes 40
5.15 Margin Regulations 40
5.16 Investment Company Act 40
5.17 Disclosure 40
5.18 Swaps 40
5.19 Conflicting Agreements 40
5.20 Application of Certain Laws and Regulations 41
5.21 Business and Property of Borrower 41
5.22 Section 20 Subsidiaries 41
VI. AFFIRMATIVE COVENANTS 41
6.1 Payment of Fees 41
6.2 Conduct of Business and Maintenance of Existence and Assets 41
6.3 Violations 41
6.4 Government Receivables 41
6.5 Net Worth 41
6.6 Fixed Charge Coverage Ratio 42
6.7 Execution of Supplemental Instruments 42
6.8 Payment of Indebtedness 42
6.9 Standards of Financial Statements 42
6.10 Appraisals 43
VII. NEGATIVE COVENANTS 43
7.1 Merger, Consolidation, Acquisition and Sale of Assets 43
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TABLE OF CONTENTS
(continued)
Page
7.2 Creation of Liens 43
7.3 Guarantees 43
7.4 Investments 43
7.5 Loans, etc. 44
7.6 Capital Expenditures 44
7.7 Dividends, etc 44
7.8 Indebtedness 44
7.9 Nature of Business 44
7.10 Transactions with Affiliates 44
7.11 Leases 44
7.12 Subsidiaries 45
7.13 Fiscal Year and Accounting Changes 45
7.14 Pledge of Credit 45
7.15 Amendments 45
7.16 Compliance with ERISA 45
7.17 Prepayment of Indebtedness 45
7.18 Subordinated Obligations 45
VIII. CONDITIONS PRECEDENT 46
8.1 Conditions to Initial Advances 46
(a) Note 46
(b) Filings, Registrations and Recordings 46
(c) Corporate Proceedings of Borrower 46
(d) Incumbency Certificates of Borrower 46
(e) Corporate Proceedings of each Guarantor 47
(f) Incumbency Certificates of each Guarantor 47
(g) Certificates 47
(h) Good Standing Certificates 47
(i) Legal Opinion 47
(j) No Litigation 47
(k) Financial Condition Certificate 47
(l) Collateral Examination 47
(m) Financial Statements 47
(n) Fees 48
(o) Pro Forma Financial Statements 48
(p) EBITDA Projections 48
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TABLE OF CONTENTS
(continued)
Page
(q) Subordination Agreement 48
(r) Subordinated Notes 48
(s) Junior Subordinated Debentures 48
(t) Insurance 48
(u) Payment Instructions 48
(v) Blocked Accounts 48
(w) Consents 48
(x) No Adverse Material Effect 48
(y) Leasehold Agreements 48
(z) Other Documents 48
(aa) Contract Review 48
(bb) Closing Certificate 49
(cc) Formula Amount 49
(dd) Undrawn Availability 49
(ee) Other 49
8.2 Conditions to Each Advance 49
(a) Representations and Warranties 49
(b) No Default 49
(c) Maximum Advances 49
IX. INFORMATION AS TO CREDIT PARTIES 49
9.1 Disclosure of Material Matters 49
9.2 Schedules 50
9.3 Environmental Reports 50
9.4 Litigation 50
9.5 Material Occurrences 50
9.6 Government Receivables 50
9.7 Annual Financial Statements 50
9.8 Quarterly Financial Statements 51
9.9 Monthly Financial Statements 51
9.10 Other Reports 51
9.11 Additional Information 51
9.12 Projected Operating Budget 52
9.13 Variances From Operating Budget 52
9.14 Notice of Suits, Adverse Events 52
9.15 ERISA Notices and Requests 52
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TABLE OF CONTENTS
(continued)
Page
9.16 Additional Documents 53
X. EVENTS OF DEFAULT 53
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT 55
11.1 Rights and Remedies 55
11.2 Agent's Discretion 55
11.3 Setoff 56
11.4 Rights and Remedies not Exclusive 56
11.5 Allocation of Payments After Event of Default 56
XII. WAIVERS AND JUDICIAL PROCEEDINGS 57
12.1 Waiver of Notice 57
12.2 Delay 57
12.3 Jury Waiver 57
XIII. EFFECTIVE DATE AND TERMINATION 57
13.1 Term 57
13.2 Termination 57
XIV. GUARANTY 57
14.1 Guaranty 57
14.2 Guarantors' Obligations Unconditional 58
14.3 Subordination 60
14.4 Waiver of Subrogation 61
14.5 Fraudulent Transfer Limitation 61
14.6 Contribution Among Guarantors 61
14.7 Future Guarantors 62
14.8 Joint and Several Obligation 62
14.9 No Waiver 62
14.10 Representations and Warranties 62
XV. REGARDING AGENT 62
15.1 Appointment 62
15.2 Nature of Duties 63
15.3 Lack of Reliance on Agent and Resignation 63
15.4 Certain Rights of Agent 64
15.5 Reliance 64
15.6 Notice of Default 64
15.7 Indemnification 64
15.8 Agent in its Individual Capacity 64
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TABLE OF CONTENTS
(continued)
Page
15.9 Delivery of Documents 64
15.10 Credit Parties' Undertaking to Agent 64
XVI. MISCELLANEOUS 65
16.1 Governing Law 65
16.2 Entire Understanding 65
16.3 Successors and Assigns; Participations; New Lenders 67
16.4 Application of Payments 68
16.5 Indemnity 68
16.6 Notice 68
16.7 Survival 70
16.8 Severability 70
16.9 Expenses 70
16.10 Injunctive Relief 70
16.11 Consequential Damages 70
16.12 Captions 71
16.13 Counterparts; Facsimile Signatures 71
16.14 Construction 71
16.15 Confidentiality; Sharing Information 71
16.16 Publicity 71
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REVOLVING CREDIT, TERM LOAN, GUARANTY
AND
SECURITY AGREEMENT
THIS REVOLVING CREDIT, TERM LOAN, GUARANTY AND SECURITY AGREEMENT, dated as
of November 15, 2001 (the "Agreement"), is entered into by and among EASY
GARDENER, INC., a Delaware corporation ("Borrower"), U. S. HOME & GARDEN, INC.,
a Delaware corporation of which Borrower is a wholly-owned Subsidiary
("Holdings"), the various Subsidiaries of Borrower and Holdings whose names
appear on the signature pages to this Agreement or who may hereafter become
parties hereto by executing and delivering an Instrument of Joinder (such
Subsidiaries and Holdings sometimes being referred to herein collectively as the
"Guarantors" and individually as a "Guarantor"; and the Guarantors and Borrower
sometimes being referred to herein collectively as the "Credit Parties" and
individually as a "Credit Party"), the financial institutions which are now or
which hereafter become a party hereto (collectively, the "Lenders" and
individually a "Lender") and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as agent
for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1 Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrower for the fiscal year ended June 30,
2001, unless otherwise agreed by Agent.
1.2 General Terms. For purposes of this Agreement the following terms shall
have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Advance Rates" shall have the meaning set forth in Section
2.1(a)(y)(iii) hereof.
"Advances" shall mean and include the Revolving Advances, Letters of
Credit and the Term Loan.
"Affiliate" of any Person shall mean (a) any Person that, directly or
indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director or officer (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of
a Person shall mean the power, direct or indirect, (x) to vote five percent
(5%) or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the
direction of the management and policies of such Person whether by contract
or otherwise.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Agreement" shall have the meaning set forth in the preamble hereto.
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"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
(0.5%).
"Applicable Law" shall mean all laws, rules and regulations applicable
to the Person, conduct, transaction, covenant, Other Documents or contract
in question, including all applicable common law and equitable principles;
all provisions of all applicable state, federal and foreign constitutions,
statutes, rules, regulations and orders of any Governmental Body, and all
orders, judgments and decrees of all courts and arbitrators.
"Authority" shall have the meaning set forth in Section 4.19(d)
hereof.
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change
in such rate. This rate of interest is determined from time to time by PNC
as a means of pricing some loans to its customers and is neither tied to
any external rate of interest or index nor does it necessarily reflect the
lowest rate of interest actually charged by PNC to any particular class or
category of customers of PNC.
"Benefited Lender" shall have the meaning set forth in Section 2.13(d)
hereof.
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h)
hereof.
"Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Person.
"Borrower's Account" shall have the meaning set forth in Section 2.8
hereof.
"Business Day" shall mean any day other than Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required by law
to be closed for business in East Brunswick, New Jersey and, if the
applicable Business Day relates to any Eurodollar Rate Loans, such day must
also be a day on which dealings are carried on in the London interbank
market.
"Capital Expenditures" shall mean expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life
of more than one year, including the total principal portion of Capitalized
Lease Obligations, which, in accordance with GAAP, would be classified as
capital expenditures.
"Capitalized Lease Obligation" shall mean any Indebtedness of Borrower
represented by obligations under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et
seq.
"Change of Control" shall mean the failure of Xxxxxxx Xxxxxx to be
President and CEO of Borrower, in substantially the same capacity as he
functions in those offices on the Closing Date; provided that if such
failure arises from the death or disability of Xxxxxxx Xxxxxx, a Change of
Control shall not be deemed to have occurred unless Borrower shall have
failed to replace Xx. Xxxxxx in such capacities with a person or persons
acceptable to Agent within 90 days.
"Change of Ownership" shall mean, (a) the failure of Holdings to own
and control, directly, 100% of the equity interests of Borrower and
directly or indirectly, 100% of the equity interests of each of Ampro
Industries, Inc., Golden West Agri-Products, Inc., Weed Wizard Acquisition
Corp., Xxxxxxxxx Consumer Products, Inc. and Xxxxxxxxx Consumer Products
Group, Inc. or (b) the acquisition
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of ownership, directly or indirectly, beneficially or of record, by any
Person or group (within the meaning of the Securities Exchange Act of 1934,
as amended, and the rules of the Securities and Exchange Commission
thereunder as in effect on the date hereof), other than Xxxxxxx Xxxxxx
and/or Xxxxxxx Xxxxxx (and/or any entity of which Xx. Xxxxxx and/or Xx.
Xxxxxx have voting and management control and more than 50% of the economic
interests), of shares representing fifty percent (50%) or more of the
aggregate ordinary voting power represented by the issued and outstanding
equity interests of Holdings.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance,
stamp, occupation and property taxes, custom duties, fees, assessments,
liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed
by any taxing or other authority, domestic or foreign (including, without
limitation, the Pension Benefit Guaranty Corporation or any environmental
agency or superfund), upon the Collateral, Borrower or any of its
Affiliates.
"Closing Date" shall mean November 20, 2001 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", with respect to any Person, shall mean all of such
Person's personal property, including:
(a) all Receivables (including, all Intercompany Obligations);
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Subsidiary Stock; and
(f) all of such Person'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 such Person's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other
lienor, including stoppage in transit, setoff, detinue, replevin,
reclamation and repurchase; (iii) all additional amounts due to such
Person from any Customer relating to the Receivables; (iv) other
property, including warranty claims, relating to any goods securing
this Agreement; (v) all of such Person's contract rights, rights of
payment which have been earned under a contract right, instruments
(including promissory notes), documents, chattel paper (including
electronic chattel paper), warehouse receipts, deposit accounts,
letters of credit and money; (vi) all commercial tort claims (whether
now existing or hereafter arising); (vii) if and when obtained by such
Person, all real and personal property of third parties in which such
Person has been granted a lien or security interest as security for
the payment or enforcement of Receivables; and (viii) any other goods,
personal property or real property now owned or hereafter acquired in
which such Person 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 such Person;
(g) all of such Person's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers,
computer software (owned by
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such Person or in which it has an interest), computer programs, tapes,
disks and documents relating to the items referred to in any of the
foregoing clauses (a), (b), (c), (d), (e) or (f); and
(h) all proceeds and products of the items referred to in any of
the foregoing clauses (a), (b), (c), (d), (e), (f) or (g) in whatever
form, including, but not limited to: cash, deposit accounts (whether
or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance),
negotiable instruments and other instruments for the payment of money,
chattel paper, security agreements, documents, eminent domain
proceeds, condemnation proceeds and tort claim proceeds.
For avoidance of doubt, Collateral shall not include ownership interests in the
Trust or treasury stock of Holdings.
"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 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.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to
carry on Borrower's business, including, without limitation, any Consents
required under all applicable federal, state or other applicable law.
"Contract Rate" shall mean, as applicable, the Revolving Interest Rate
or the Term Loan Rate.
"Controlled Group" shall mean, with respect to any Person, all members
of a controlled group of corporations and all trades or businesses (whether
or not incorporated) under common control which, together with such Person,
are treated as a single employer under Section 414 of the Code.
"Credit Parties" and "Credit Party" shall have the respective meanings
set forth in the preamble to this Agreement.
"Current Assets" of any Person at a particular date, shall mean all
cash, cash equivalents, accounts and inventory of such Person and all other
items which would, in conformity with GAAP, be included under current
assets on a consolidated balance sheet of such Person as at such date;
provided, however, that such amounts shall not include (a) any amounts for
any Indebtedness owing by an Affiliate of such Person, unless such
Indebtedness arose in connection with the sale of goods or rendition of
services in the ordinary course of business and would otherwise constitute
current assets in conformity with GAAP, (b) any shares of stock issued by
an Affiliate of such Person, or (c) the cash surrender value of any life
insurance policy.
"Current Liabilities" of any Person at a particular date, shall mean
all amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of such Person, as at such
date, but in any event including, without limitation, the amounts of (a)
all Indebtedness of such Person payable on demand, or, at the option of the
Person to whom such Indebtedness is owed, not more than twelve (12) months
after such date, (b) any payments in respect of any Indebtedness of such
Person (whether installment, serial maturity, sinking fund payment or
otherwise) required to be made not more than twelve (12) months after such
date, (c) all reserves in respect of liabilities or Indebtedness payable on
demand or, at the option of the Person to whom such Indebtedness is owed,
not more than twelve (12) months after such date, the validity of which is
not
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contested at such date, and (d) all accruals for federal or other taxes
measured by income payable within a twelve (12) month period.
"Customer" of any Person shall mean and include the account debtor
with respect to any Receivable and/or the purchaser of goods, services or
both with respect to any contract or contract right, and/or any party who
enters into any contract or other arrangement with such Person, pursuant to
which such Person is to deliver any personal property or perform any
services.
"Customs" shall have the meaning set forth in Section 2.11(c) hereof.
"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
2.16(a) hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Designated Lender" shall have the meaning set forth in Section
16.2(b) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Domestic Rate Loan" shall mean any Advance that bears interest based
upon the Alternate Base Rate.
"Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.
"Earnings Before Interest and Taxes" of any Person shall mean for any
period the sum of (i) net income (or loss) of such Person for such period
(excluding extraordinary gains and losses, plus (ii) all interest expense
of such Person for such period, plus (iii) all charges against income of
such Person for such period for federal, state and local taxes actually
paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses for such
period, plus (iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include Inventory valued at the
lower of cost or market value, determined on a first-in-first-out basis,
which is not, in Agent's opinion, obsolete, slow moving or unmerchantable
and which Agent, in its sole discretion, shall not deem ineligible
Inventory, based on such considerations as Agent may from time to time deem
appropriate including, without limitation, whether the Inventory is subject
to a perfected, first priority security interest in favor of Agent and
whether the Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over
such goods or the use or sale thereof. Eligible Inventory shall include all
Inventory in-transit for which title has passed to the applicable Credit
Party, which is insured to the full value thereof and for which Agent shall
have in its possession (a) all negotiable bills of lading properly endorsed
and (b) all non-negotiable bills of lading issued in Agent's name.
"Eligible Receivables" shall mean and include with respect to any
Credit Party, each Receivable of Borrower arising in the ordinary course of
such Credit Party's business and which Agent, in its sole credit judgment,
shall deem to be an Eligible Receivable, based on such considerations as
Agent may from time to time deem appropriate. A Receivable shall not be
deemed eligible unless such Receivable is subject to Agent's first priority
perfected security interest and no other Lien (other than
5
Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Agent. In addition, no Receivable
shall be an Eligible Receivable if:
(a) it arises out of a sale made by such Credit Party to an
Affiliate of such Credit Party or to a Person controlled by an
Affiliate of Borrower;
(b) it is due or unpaid more than one hundred twenty (120) days
after the original invoice date or more than sixty (60) days after the
due date;
(c) fifty percent (50%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder; provided, that
Seasonal Receivables shall only be deemed not to be Eligible
Receivables for purposes of this clause (c) to the extent not paid
within their originally stated terms. Such percentage may, in Agent's
sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property or call a meeting of its creditors, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due
or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary
case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any
petition which is filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of
effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United
States of America, unless the sale is on letter of credit, guaranty or
acceptance terms or supported by credit insurance, in each case
acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(h) Agent believes, in its sole judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by
reason of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless
Borrower assigns its right to payment of such Receivable to Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.)
or has otherwise complied with other applicable statutes or
ordinances;
(j) the goods giving rise to such Receivable have not been
shipped to the Customer or the services giving rise to such Receivable
have not been performed by Borrower or the Receivable otherwise does
not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in its sole discretion, to the extent such
Receivable exceeds such limit (provided that with respect to
Receivables in existence and considered Eligible Receivables at the
time that Agent imposes any such Credit Limit, the effect of which
would be to render such Receivables no longer Eligible Receivables,
such credit limit shall take effect on the tenth (10th) Business Day
following its imposition
6
with respect to outstanding Advances but shall have immediate effect
for purposes of any additional Advances);
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim (to the extent of the portion of such
Receivable that is subject to offset, deduction, defense, dispute, or
counterclaim), the Customer is also a creditor or supplier of such
Credit Party or the Receivable is contingent in any respect or for any
reason;
(m) such Credit Party 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;
(n) any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed;
(o) such Receivable is not payable to such Credit Party; 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" of any Person shall mean and include all of such Person'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" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum
determined by PNC by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by PNC in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average
of the London interbank offered rates for U.S. Dollars quoted by the
British Bankers' Association as set forth on Bridge Information Services
(formerly known as Dow Xxxxx Markets Service) (or appropriate successor or,
if British Banker's Association or its successor ceases to provide such
quotes, a comparable replacement determined by PNC) display page 3750 (or
such other display page on the Bridge Information Services system as may
replace display page 3750) two (2) Business Days prior to the first day of
such Interest Period for an amount comparable to such Eurodollar Rate Loan
and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the Reserve Percentage. The
Eurodollar Rate may also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA as shown on
Eurodollar Rate =Bridge Information Services display page 3750 or
appropriate successor (including the Reuters Service LIBOR Page)
-------------------------------------------------------------------
1.00 - Reserve Percentage.
7
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Event of Default" shall have the meaning set forth in Article X
hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or if such rate is
not so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by PNC from three
Federal funds brokers of recognized standing selected by PNC.
"Fee Letter" shall mean the fee letter dated as of November 15, 2001
between Borrower and PNC.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to
any period of determination, the ratio of (a) EBITDA minus (i) capitalized
expenditures made during such period minus (ii) cash taxes paid during such
period, to (b) the sum (without duplication) of all Senior Debt Payments
(excluding payments to reduce the principal of the Revolving Advances) and
all Subordinated Debt Payments during such period.
"Formula Amount" shall have the meaning set forth in Section 2.1(a)
hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" of any Person shall mean and include all of such
Person's general intangibles, whether now owned or hereafter acquired
including, without limitation, all payment intangibles, 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, trademark
applications, service marks, trade secrets, goodwill, copyrights, design
rights, software, computer information, source codes, codes, records and
dates, registrations, licenses, franchises, customer lists, tax refunds,
tax refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to such Person to secure
payment of any of the Receivables by a Customer (other than to the extent
covered by Receivables) all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or
pertaining to a government.
"Guarantor" is defined in the preamble.
"Guaranty" shall mean any guaranty of the obligations of Borrower
executed by a Guarantor in favor of Agent for its benefit and for the
ratable benefit of Lenders, whether pursuant to Article XIV hereof or
otherwise.
"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
8
amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 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.
"Holdings" shall mean U.S. Home & Garden Inc., a corporation organized
under the laws of the State of Delaware.
"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.
"Indenture" shall have the meaning set forth in Section 7.18 hereof.
"Ineligible Security" shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System
under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24,
Seventh), as amended.
"Instrument of Joinder" shall mean an Instrument of Joinder
substantially in the form of Exhibit 14.7 hereto, pursuant to which a
Person becomes a party to this Agreement as a Guarantor.
"Intercompany Note" shall mean a promissory note substantially in the
form of Exhibit 7.8 hereto, evidencing Intercompany Obligations owed to
Borrower by one of its Subsidiaries.
"Intercompany Obligations" shall have the meaning set forth in Section
14.3 hereof.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).
"Inventory" of any Person shall mean and include all of such Person's
now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any consignment
arrangement, contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of
any kind, nature or description which are or might be used or consumed in
such Person's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or
other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(iii) hereof.
"Investment Property" of any Person shall mean and include all of such
Person's now owned or hereafter acquired securities (whether certificated
or uncertificated), securities entitlements, securities accounts,
commodities contracts and commodities accounts.
"Issuer" shall mean any Person who issues a Letter of Credit and/or
accepts a draft pursuant to the terms hereof.
9
"Junior Subordinated Debentures" shall refer to those certain Junior
Subordinated Deferrable Interest Debentures issued by Holdings in
connection with the Trust Preferred Securities.
"Leasehold Interests" of any Person shall mean all of such Person's
right, title and interest in and to any leasehold estate in real property.
"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.
"Lender Default" shall have the meaning set forth in Section 2.16(a)
hereof.
"Letter of Credit Application" shall have the meaning set forth in
Section 2.10(a) hereof.
"Letter of Credit Fees" shall have the meaning set forth in Section
3.2 hereof.
"Letters of Credit" shall have the meaning set forth in Section 2.9
hereof.
"Liabilities" shall have the meaning set forth in Section 14.1 hereof.
"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.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the condition, operations, assets, business or prospects of the Credit
Parties taken as a whole or of Borrower, (b) Borrower's ability to pay the
Obligations in accordance with the terms thereof, (c) the value of the
Collateral taken as a whole, or Agent's Liens on the Collateral or the
priority of any such Lien or (d) the practical realization of the benefits
of Agent's and each Lender's rights and remedies under this Agreement and
the Other Documents.
"Maximum Revolving Advance Amount" shall mean $31,000,000.
"Maximum Term Loan" shall mean $2,000,000.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Net Orderly Liquidation Value" shall mean, with respect to Eligible
Inventory, the value of such Eligible Inventory as determined by reference
to the most recent inventory appraisal satisfactory to Agent.
"Net Worth" of any Person at a particular date, shall mean all amounts
which would be included under shareholders' equity on a consolidated
balance sheet of such Person determined in accordance with GAAP as at such
date.
"Non-Defaulting Lenders" shall have the meaning set forth in Section
2.16(b) hereof.
"Note" shall mean both the Term Note and the Revolving Credit Note.
"Notice" shall have the meaning set forth in Section 16.6 hereof.
10
"Obligations" shall mean and include any and all loans, advances,
debts, liabilities, obligations, covenants and duties owing by the Borrower
or any Guarantor to Lenders or Agent or to any other direct or indirect
subsidiary or affiliate of Agent or any Lender of any kind or nature,
present or future (including, without limitation, any interest accruing
thereon after maturity, or after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding
relating to the Borrower or any Guarantor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including, without
limitation, this Agreement and the Other Documents) whether or not for the
payment of money, whether arising by reason of an extension of credit,
opening of a letter of credit, loan, equipment lease or guarantee, under
any interest or currency swap, future, option or other similar agreement,
or in any other manner, whether arising out of overdrafts or deposit or
other accounts or electronic funds transfers (whether through automated
clearing houses or otherwise) or out of the Agent's or any Lenders
non-receipt of or inability to collect funds or otherwise not being made
whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by
assignment or participation), absolute or contingent, joint or several, due
or to become due, now existing or hereafter arising, contractual or
tortious, liquidated or unliquidated, regardless of how such indebtedness
or liabilities arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of Borrower's Indebtedness and/or
liabilities under this Agreement, the Other Documents or under any other
agreement between Agent or Lenders (on the one hand) and Borrower or nay
Guarantor (on the other hand) and any amendments, extensions, renewals or
increases and all costs and expenses of Agent and any Lender incurred in
the documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including but not
limited to reasonable attorneys' fees and expenses and all obligations of
Borrower and the Guarantors to Agent or Lenders to perform acts or refrain
from taking any action.
"Other Documents" shall mean the Note, the Fee Letter, the
Subordination Agreement, the Intercompany Notes and all other agreements,
instruments and documents, including, without limitation, guaranties,
pledges, powers of attorney, consents, interest or currency swap agreements
or other similar agreements and all other writings heretofore, now or
hereafter executed by Borrower or any Guarantor and/or delivered to Agent
or any Lender in respect of the transactions contemplated by this
Agreement.
"Out-of-Formula Loans" shall have the meaning set forth in Section
16.2(b).
"Overadvance Threshold Amount" shall have the meaning set forth in
Section 16.2(b) hereof.
"Participant" shall mean each Person who shall be granted the right by
any Lender to participate in any of the Advances and who shall have entered
into a participation agreement in form and substance satisfactory to such
Lender.
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000; thereafter, such other office of Agent, if
any, which it may designate by notice to Borrower and to each Lender to be
the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be
in effect; (c) Liens disclosed in the financial statements referred to in
Section 5.5; (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
11
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 Borrower's business; (f) judgment Liens that have been
stayed or bonded and mechanics', workers', materialmen's or other like
Liens arising in the ordinary course of Borrower's business with respect to
obligations which are not due or which are being contested in good faith by
Borrower; (g) Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien
shall not encumber any other property of Borrower and (y) the aggregate
amount of Indebtedness secured by such Liens incurred as a result of such
purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; (h) other Liens incidental to the conduct of Borrower's
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
Borrower's property or assets or which do not materially impair the use
thereof in the operation of Borrower's 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 Borrower or any member
of the Controlled Group or any such Plan to which Borrower or any member of
the Controlled Group is required to contribute on behalf of any of its
employees.
"Pro Forma Balance Sheet" shall have the meaning set forth in Section
5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b)
hereof.
"Purchasing Lender" shall have the meaning set forth in Section
16.3(c) hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
X.X.X.xx.xx. 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all right, title and interest in and to the
owned and leased premises identified on Schedule 4.19 hereto and shall
include the Leasehold Interests.
"Receivables" of any Person shall mean and include all of such
Person's accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Person by its Affiliates), documents, chattel
paper (including electronic chattel paper), general intangibles relating to
accounts, drafts and acceptances, credit card receivables and all other
forms of obligations owing to such Person arising out of or in connection
with the sale or lease of Inventory or the rendition of services, all
supporting obligations, guarantees and other security therefor, whether
secured or unsecured, now existing or hereafter created, and whether or not
specifically sold or assigned to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
"Register" shall have the meaning set forth in Section 16.3(d) hereof.
"Release" and "Releases" shall have the meaning set forth in Section
5.7(c)(i) hereof.
12
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Required EBITDA" shall mean, for purposes of Section 7.18 hereof, the
amount set forth below opposite the month in which such determination is
made, in each case for the applicable Determination Period, for which
purpose "Determination Period" shall mean the period of 12 consecutive
months ended on the last day of the second month ended prior to the date of
determination (by way of illustration, for a determination made during the
month of March 2002, the Determination Period will be the 12-month period
ended on January 31, 2002):
Month of Determination Required EBITDA
---------------------- ---------------
December 2001 $5,396,000
January 2002 $5,944,000
February 2002 $6,438,000
March 2002 $6,402,000
April 2002 $7,265,000
May 2002 $8,884,000
June 2002 $9,383,000
July 2002 $9,537,000
August 2002 $10,507,000
September 2002 $10,540,000
October 2002 $10,511,000
November 2002 $10,477,000
December 2002 $10,440,000
January 2003 $10,398,000
February 2003 $10,442,000
March 2003 $10,470,000
April 2003 $10,683,000
May 2003 $10,937,000
June 2003 $11,188,000
July 2003 $11,380,000
August 2003 $11,511,000
September 2003 $11,547,000
October 2003 $11,515,000
November 2003 $11,479,000
December 2003 $11,438,000
January 2004 $11,392,000
February 2004 $11,440,000
March 2004 $11,471,000
April 2004 $11,703,000
May 2004 $11,978,000
June 2004 $12,252,000
July 2004 $12,460,000
August 2004 $12,603,000
September 2004 $12,642,000
October 2004 $12,608,000
November 2004 $12,568,000
"Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66 2/3%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding at least sixty-six and two-thirds
percent (66 2/3%) of the Commitment Percentages; provided that the
foregoing percentages shall be increased to one hundred percent (100%) at
any and all times when there are fewer than three (3) Lenders.
13
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including, without limitation, supplemental, marginal and emergency
reserve requirements) with respect to eurocurrency funding.
"Revolving Advances" shall mean Advances made other than Letters of
Credit, and the Term Loan.
"Revolving Credit Note" shall mean the promissory notes referred to in
Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum equal
to (a) the sum of the Alternate Base Rate plus one-half of one percent
(0.5%) with respect to Domestic Rate Loans and (b) the sum of the
Eurodollar Rate plus two and three-fourths percent (2.75%)with respect to
Eurodollar Rate Loans.
"Seasonal Receivables" shall mean Receivables that fail to be Eligible
Receivables solely by virtue of clause (b) of the definition of Eligible
Receivables and that are evidenced by invoices having specific, stated
payment due dates or stated payment terms in excess of 120 days.
"Seasonal Receivables Advance Rate" shall have the meaning set forth
in Section 2.1(a)(y)(ii) hereof.
"SEC Report" shall mean the most recent annual report of Holdings as
filed on Form 10-K with the Securities and Exchange Commission.
"Section 20 Subsidiary" shall mean the Subsidiary of the bank holding
company controlling PNC, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"Senior Debt Payments" shall mean and include all cash actually
expended by Holdings and its Subsidiaries on a consolidated basis to make
(a) interest payments on any Advances hereunder, plus (b) scheduled
principal payments on the Term Loan, plus (c) payments for all fees,
commissions and charges set forth herein and with respect to any Advances,
plus (d) capitalized lease payments, plus (e) all payments with respect to
any other Indebtedness for borrowed money (including, without limitation,
the Subordinated Notes and the Junior Subordinated Debentures).
"Settlement Date" shall mean the Closing Date and thereafter Wednesday
or Thursday of each week or more frequently if Agent deems appropriate
unless such day is not a Business Day in which case it shall be the next
succeeding Business Day.
"Subordinated Debt Payments" shall mean and include all cash actually
expended to make payments of principal and interest on the Subordinated
Notes.
"Subordinated Loan" shall mean the loan evidenced by the Subordinated
Notes.
"Subordinated Note Holders" shall mean, collectively, LEG Partners III
SBIC, L.P., LEG Co-Investors, LLC, LEG Partners Debenture SBIC, L.P., LEG
Partners III, L.P., LEG Co-Investors II, LLC, 555 Madison Investors, LLC
and their respective successors and assigns.
"Subordinated Notes" shall mean the subordinated promissory notes
issued by Borrower in favor of the Subordinated Note Holders Incorporated
dated as of November 15, 2001 in the aggregate principal amount of
$6,849,315.
14
"Subordination Agreement" shall mean the Subordination Agreement dated
as of November 15, 2001 among Agent, Borrower, the Guarantors and the
Subordinated Note Holders.
"Subsidiary" or in the collective, "Subsidiaries" shall mean a
corporation or other entity of whose shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or
other Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person.
"Subsidiary Stock" shall mean, with respect to any Person, all of the
issued and outstanding shares of capital stock of such Person's
Subsidiaries excluding the ownership interests of the Trust and of Egarden,
Inc.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to 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 one percent (1%) with respect to
Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus three and
one-fourth percent (3.25%) with respect to Eurodollar Rate Loans.
"Term Note" shall have the meaning set forth 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 Borrower or any
member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan
or Multiemployer Plan; (v) any event or condition (a) which might
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan or Multiemployer Plan,
or (b) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete withdrawal within
the meaning of Sections 4203 and 4205 of ERISA, of Borrower or any member
of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests 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. xx.xx.
2601 et seq., applicable state law, or any other applicable Federal or
state laws now in force or hereafter enacted relating to toxic substances.
"Toxic Substance" includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in Section 5.5(a)
hereof.
"Transferee" shall have the meaning set forth in Section 16.3(b)
hereof.
"Trust" shall mean U.S. Home & Garden Trust I, a Delaware business
trust and wholly owned Subsidiary of Holdings.
"Trust Preferred Securities" shall mean trust securities issued by the
Trust.
"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) plus (ii) all amounts due and owing to
Borrower's trade creditors which are outstanding beyond 60 days, plus (iii)
fees and expenses for which Borrower is liable but which have not been paid
or charged to Borrower's Account.
15
"Website Posting" shall have the meaning set forth in Section 16.6
hereof.
"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.
"Working Capital" at a particular date, shall mean the excess, if any,
of Current Assets over Current Liabilities at such date.
1.3 Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the State of New York from time to time
shall have the meaning given therein unless otherwise defined herein. To the
extent the definition of any category or type of collateral is expanded by any
amendment, modification or revision to the Uniform Commercial Code, such
expanded definition will apply automatically as of the date of such amendment,
modification or revision.
1.4 Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1 (a) Revolving Advances. Subject to the terms and conditions set forth
in this Agreement including, without limitation, Section 2.1(b), each Lender,
severally and not jointly, agrees make Revolving Advances to Borrower in
aggregate amounts outstanding at any time up 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 eighty-five percent (85%), subject to the provisions of
Section 2.1(b) hereof (the "Receivables Advance Rate"), of Eligible
Receivables, plus
(ii) up to eighty-five percent (85%), subject to the provisions
of Section 2.1(b) hereof (the "Seasonal Receivables Advance Rate"), of
Seasonal Receivables due and unpaid one hundred eighty (180) days or
less from invoice date and sixty (60) days or less from due date,
provided that in no event shall the amount determined pursuant to this
clause (ii) be permitted to exceed $1,500,000, plus
(iii) up to eighty-five percent (85%), subject to the provisions
of Section 2.1(b) hereof ("Inventory Advance Rate") of the Net Orderly
Liquidation Value of Eligible Inventory, subject to the provisions of
Section 2.1(b) hereof (the Inventory Advance Rate, Receivables Advance
Rate and the Seasonal Receivables Advance Rate, being referred to
collectively as the "Advance Rates") provided that in no event shall
the amount determined pursuant to this clause (iii) be permitted to
exceed $10,000,000, minus
(iv) the aggregate amount of outstanding Letters of Credit, minus
(v) such reserves as Agent may reasonably deem proper and
necessary from time to time.
The amount derived from the sum of Sections 2.1(a)(y)(i), (ii) and (iii)
minus Sections 2.1 (a)(y)(iv) and (v) at any time and from time to time shall be
referred to as the "Formula Amount"; provided that at no time may more than
$500,000 of the Formula Amount be attributable to Receivables owed by Tru Serve
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and its Affiliates, unless otherwise agreed by Agent. The Revolving Advances
shall be evidenced by one or more secured promissory notes (collectively, the
"Revolving Credit Note") substantially in the form attached hereto as Exhibit
2.1(a).
(b) Discretionary Rights. Subject to Section 16.2, the Advance Rates
may be increased or decreased by Agent at any time and from time to time in
the exercise of its reasonable discretion. Borrower consents to any such
increases or decreases and acknowledges that decreasing the Advance Rates
or increasing or imposing the reserves may limit or restrict Advances
requested by Borrower. Agent shall give Borrower five (5) days' prior
written notice of its intention to decrease the Advance Rates.
2.2 Procedure for Revolving Advances Borrowing.
(a) Borrower may notify Agent prior to 11:00 a.m., Pacific Time, on a
Business Day of Borrower's request to incur, on that day, a Revolving
Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation,
become due, same shall be deemed a request for a Revolving Advance as of
the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of subsection (a) above, in the
event Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall
give Agent at least three (3) Business Days' prior written notice,
specifying (i) the date of the proposed borrowing (which shall be a
Business Day), (ii) the type of borrowing and the amount on the date of
such Advance to be borrowed, which amount shall be an integral multiple of
$500,000, and (iii) the duration of the first Interest Period therefor.
Interest Periods for Eurodollar Rate Loans shall be for one, two or three
months (except that during the period of 90 days commencing on the Closing
Date, all Interest Periods shall be for one month); provided, if an
Interest Period would end on a day that is not a Business Day, it shall end
on the next succeeding Business Day unless such day falls in the next
succeeding calendar month in which case the Interest Period shall end on
the next preceding Business Day. No Eurodollar Rate Loan shall be made
available to Borrower during the continuance of a Default or an Event of
Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in subsection (b)(iii) above provided that
the exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits and
no Interest Period shall end after the last day of the Term.
Borrower shall elect the initial Interest Period applicable to a Eurodollar
Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(b)
or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the
case may be. Borrower shall elect the duration of each succeeding Interest
Period by giving irrevocable written notice to Agent of such duration not less
than three (3) Business Days prior to the last day of the then current Interest
Period applicable to such Eurodollar Rate Loan. If Agent does not receive timely
notice of the Interest Period elected by Borrower, Borrower shall be deemed to
have elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.
(d) Provided that no Event of Default shall have occurred and be
continuing, Borrower may, 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 Borrower desires to so convert a loan, Borrower
shall give Agent not less than three (3) Business Days' prior written
notice to convert from a Domestic Rate Loan to a Eurodollar Rate Loan or
one (1) Business Day's prior written notice to convert from a Eurodollar
Rate Loan to a Domestic Rate Loan, specifying the date of such conversion,
the loans to be converted and if
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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 ten (10)
Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior written
notice, Borrower may prepay the Eurodollar Rate Loans in whole at any time
or in part from time to time with accrued interest on the principal being
prepaid to the date of such repayment. Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of
such prepayment. In the event that any prepayment of a Eurodollar Rate Loan
is required or permitted on a date other than the last Business Day of the
then current Interest Period with respect thereto, Borrower shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f) hereof.
(f) Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment,
conversion of or any default by Borrower in the payment of the principal of
or interest on any Eurodollar Rate Loan or failure by Borrower to complete
a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate
Loan after notice thereof has been given, including, but not limited to,
any interest payable by Agent or Lenders to lenders of funds obtained by it
in order to make or maintain its Eurodollar Rate Loans hereunder. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Agent or any Lender to Borrower shall be conclusive
absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any
Lender (for purposes of this subsection (g), the term "Lender" shall
include any Lender and the office or branch where any Lender or any
corporation or bank controlling such Lender makes or maintains any
Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the
obligation of Lenders to make Eurodollar Rate Loans hereunder shall
forthwith be cancelled and Borrower 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, Borrower 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
Borrower 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 Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Borrower or deemed to have been requested by
Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances, be made available
to Borrower on the day so requested by way of credit to Borrower's operating
account at PNC, or such other bank as Borrower may designate following
notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4 Term Loan. Subject to the terms and conditions of this Agreement, each
Lender, severally and not jointly, will make a Term Loan to Borrower in the sum
equal to such Lender's Commitment Percentage of $2,000,000. The Term Loan shall
be advanced on the Closing Date and shall be, with respect to principal, payable
as follows, subject to acceleration upon the occurrence of an
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Event of Default under this Agreement or termination of this Agreement: The Term
Loan shall be, with respect to principal, payable in equal monthly installments
of $33,333.33, commencing on January 1, 2002 and on the first day of each month
thereafter with the balance payable upon the expiration of the Term, subject to
acceleration upon the occurrence of an Event of Default under this Agreement or
termination of this Agreement. The Term Loan shall be evidenced by one or more
secured promissory notes (collectively, the "Term Note") in substantially the
form attached hereto as Exhibit 2.4.
2.5 Maximum Revolving Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount less the aggregate amount of outstanding Letters of Credit or (b)
the Formula Amount.
2.6 Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on the
last day of the Term subject to earlier prepayment as herein provided. The
Term Loan shall be due and payable as provided in Section 2.4 hereof and in
the Term Note, subject to mandatory prepayments as herein provided.
(b) Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrower's
Account as of the Business Day on which Agent receives those items of
payment, Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Agent on account
of the Obligations one (1) Business Day after (i) the Business Day Agent
receives such payments via wire transfer or electronic depository check or
(ii) in the case of payments received by Agent in any other form, the
Business Day such payment constitutes good funds in Agent's account. Agent
is not, however, required to credit Borrower's Account for the amount of
any item of payment which is unsatisfactory to Agent and Agent may charge
Borrower's Account for the amount of any item of payment which is returned
to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at
the Payment Office not later than 12:00 p.m. Pacific Time, on the due date
therefor in lawful money of the United States of America in federal funds
or other funds immediately available to Agent. Agent shall have the right
to effectuate payment on any and all Obligations due and owing hereunder by
charging Borrower's Account or by making Advances as provided in Section
2.2 hereof.
(d) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
pursuant to Section 2.5 hereof 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.
2.8 Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Agent and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower unless Agent receives a written
statement of Borrower's specific exceptions thereto within thirty (30) days
after such statement is received by Borrower. The records of
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Agent with respect to the loan account shall be conclusive evidence absent
manifest error of the amounts of Advances and other charges thereto and of
payments applicable thereto.
2.9 Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of Letters of Credit ("Letters of Credit") on
behalf of Borrower; provided, however, that Agent will not be required to issue
or cause to be issued any Letters of Credit to the extent that the face amount
of such Letters of Credit would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) outstanding Letters of Credit to exceed the lesser
of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount. The
maximum amount of outstanding Letters of Credit shall not exceed $2,000,000 in
the aggregate at any time. All disbursements or payments related to Letters of
Credit shall be deemed to be Domestic Rate Loans consisting of Revolving
Advances and shall bear interest at the applicable Contract Rate; Letters of
Credit that have not been drawn upon shall not bear interest.
2.10 Issuance of Letters of Credit.
(a) Borrower may request Agent to issue or cause the issuance of a
Letter of Credit by delivering to Agent at the Payment Office, Agent's form
of Letter of Credit Application (the "Letter of Credit Application")
completed to the satisfaction of Agent; and, such other certificates,
documents and other papers and information as Agent may reasonably request.
Borrower also has the right to give instructions and make agreements with
respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or
any other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent
upon any amendment, extension or renewal of any Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts or acceptances of usance drafts when presented
for honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an expiry date
not later than one (1) year after such Letter of Credit's date of issuance
and in no event later than the last day of the Term. Each Letter of Credit
shall be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, and any amendments or revision thereof adhered to by the Issuer and,
to the extent not inconsistent therewith, the laws of the State of New
York.
(c) Agent shall use its reasonable efforts to notify Lenders of the
request by Borrower for a Letter of Credit hereunder.
(d) Agent shall have absolute discretion whether to accept any draft.
Without in any way limiting Agent's absolute discretion whether to accept
any draft, Borrower will not present for acceptance any draft, and Agent
will generally not accept any drafts (i) that arise out of transactions
involving the sale of goods by Borrower not in the ordinary course of its
business, (ii) that involve a sale to an Affiliate of Borrower, (iii) that
involve any purchase for which Agent has not received all related
documents, instruments and forms requested by Agent, (iv) for which Agent
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.
2.11 Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit, Borrower
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 or any Issuer and expenses and
reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising
out of, or in connection with, any Letter of Credit to be issued or created
for Borrower. Borrower shall be bound by Agent's or any Issuer's
regulations and good faith interpretations of any Letter of Credit issued
or created for Borrower's 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,
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whether of omission or commission, in following 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.
(b) Borrower shall authorize and direct any Issuer to name Borrower as
the "Applicant" or "Account Party" of each Letter of Credit. If Agent is
not the Issuer of any Letter of Credit, Borrower shall authorize and direct
the Issuer to deliver to Agent all instruments, documents, and other
writings and property received by the Issuer pursuant to the Letter of
Credit and to accept and rely upon Agent's instructions and agreements with
respect to all matters arising in connection with the Letter of Credit or
any Letter of Credit Application therefor.
(c) In connection with all Letters of Credit issued or caused to be
issued by Agent under this Agreement, Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority if an Event of
Default or Default shall have occurred and be continuing, (i) to sign
and/or endorse Borrower's name upon any warehouse or other receipts, letter
of credit applications and acceptances; (ii) to sign Borrower's name on
bills of lading; (iii) to clear Inventory through the United States of
America Customs Department ("Customs") in the name of Borrower or Agent or
Agent's designee, and to sign and deliver to Customs officials powers of
attorney in the name of Borrower for such purpose; and (iv) to complete in
Borrower's name or Agent's, or in the name of Agent's designee, any order,
sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent nor its
attorneys will be liable for any acts or omissions nor for any error of
judgment or mistakes of fact or law, except for Agent's or its attorney's
gross 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 each such unreimbursed reimbursement obligation. 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 lesser
of the Maximum Revolving Advance Amount or the Formula Amount, and such
disbursement is not reimbursed by Borrower 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 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 Letter of Credit issued hereunder remains outstanding and uncancelled or
(C) all Persons (other than Borrower) have been fully reimbursed for all
payments made under or relating to Letters of Credit.
2.12 Additional Payments. Any compensation demanded by Agent or any Lender
pursuant to this Agreement or any Other Documents (including, without
limitation, pursuant to Sections 3.2, 3.3, 3.4, 3.5, 3.8, 3.10 and 3.11 hereof)
and any sums expended by Agent or any Lender due to Borrower's failure to
perform or comply with its obligations under this Agreement or any Other
Documents including, without limitation, Borrower's obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance and added to the Obligations. Without in any way limiting
Agent's right to any such payment or to charge Borrower's Account in payment
thereof, Agent agrees to furnish to Borrower notice of each payment so charged
to Borrower's Account.
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2.13 Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders. The Term Loan shall be
advanced according to the Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrower on account of
the principal of and interest on the Revolving Advances, shall be applied
to the Revolving Advances pro rata according to the applicable Commitment
Percentages of Lenders. Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the 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. 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. Pacific Time, in Dollars and in immediately available
funds.
(c) (i) Notwithstanding anything to the contrary contained in Sections
2.13(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. Pacific Time, on each Settlement Date commencing with the
first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new
Revolving Advances made by Agent during the preceding Week (if any) exceeds
the aggregate amount of repayments applied to outstanding Revolving
Advances during such preceding Week, then each Lender shall provide Agent
with funds in an amount equal to its applicable Commitment Percentage of
the difference between (w) such Revolving Advances and (x) such repayments
and (II) if the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate amount of new
Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to its applicable Commitment
Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Contract Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement
Date. Such certificate of Agent shall be conclusive in the absence of
manifest error.
(d) If any Lender or Participant (a "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 the other 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
22
Percentage of the Advances available to Agent, Agent may (but shall not be
obligated to) assume that such Lender shall make such amount available to
Agent on the next Settlement Date and, in reliance upon such assumption,
make available to Borrower a corresponding amount. Agent will promptly
notify Borrower of its receipt of any such notice from a Lender. If such
amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Rate (computed on the basis
of a year of three hundred sixty (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 subsection (e) shall be
conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after
such Settlement Date, Agent shall be entitled to recover such an amount,
with interest thereon at the rate per annum then applicable to such
Revolving Advances hereunder, on demand from Borrower; provided, however,
that Agent's right to such recovery shall not prejudice or otherwise
adversely affect Borrower's rights (if any) against such Lender.
2.14 Mandatory Prepayments.
(a) Subject to Section 4.3 hereof, when any Credit Party sells or
otherwise disposes of any Collateral other than Inventory in the ordinary
course of business, Borrower shall repay the Advances in an amount equal to
the net proceeds of such sale (i.e., gross proceeds less the reasonable
costs of such sales or other dispositions and net of amounts payable in
respect of any Permitted Encumbrance allocable to such Collateral), 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 (and each other Credit Party
covenants to take such actions as may be necessary to permit Borrower to
comply with this sentence). The foregoing shall not be deemed to be implied
consent to any such sale otherwise prohibited by the terms and conditions
hereof. Such repayments shall be applied to the Advances in such order as
Agent may determine, subject to Borrower's ability to reborrow Advances in
accordance with the terms hereof.
2.15 Use of Proceeds. Borrower shall apply the proceeds of Advances to (i)
repay existing indebtedness owed to Bank of America, (ii) pay fees and expenses
relating to this transaction, and (iii) to provide for its working capital and
general corporate needs and those of its Subsidiaries (subject to Section 7.5).
2.16 Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations under this Agreement) to make available its
portion of any Advance or (y) notifies either Agent or Borrower that it
does not intend to make available its portion of any Advance (if the actual
refusal would constitute a breach by such Lender of its obligations under
this Agreement) (each, a "Lender Default"), all rights and obligations
hereunder of such Lender (a "Defaulting Lender") as to which a Lender
Default is in effect and of the other parties hereto shall be modified to
the extent of the express provisions of this Section 2.16 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.
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(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 2.16, 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 2.16 shall be deemed to release any Defaulting
Lender from its obligations under this Agreement and the Other Documents,
shall alter such obligations, shall operate as a waiver of any default by
such Defaulting Lender hereunder, or shall prejudice any rights which
Borrower, Agent or any Lender may have against any Defaulting Lender as a
result of any default by such Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting
Lender and shall be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1 Interest. Interest on Advances shall be payable in arrears on the first
day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months 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 at a rate per annum equal to (i) with respect to Revolving Advances
the applicable Revolving Interest Rate and (ii) with respect to the Term Loan,
the applicable Term 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 shall be similarly changed without
notice or demand of any kind by an amount equal to the amount of such change in
the Alternate Base Rate during the time such change or changes remain in effect.
The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans
without notice or demand of any kind on the effective date of any change in the
Reserve Percentage as of such effective date. Upon and after the occurrence of
an Event of Default, and during the continuation thereof, at the option of Agent
or at the direction of Required Lenders, the Obligations shall bear interest at
the applicable Contract Rate plus two percent (2%) per annum (the "Default
Rate").
3.2 Letter of Credit Fees.
(a) Borrower shall pay (x) to Agent, for the benefit of Lenders, fees
for each Letter of Credit for the period from and excluding the date of
issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by two and one-half percent (2.50%) per annum, such fees to be
calculated on the basis of a three hundred sixty (360) -day year for the
actual number of days elapsed and to be payable monthly in arrears on the
first day of each month and on the last day of the Term and (y) to the
Issuer, (A) an issuance fee for each Letter of Credit for the period from
and excluding the date of issuance of same to and including the date of
expiration or termination, equal to the average daily face amount of each
outstanding Letter of Credit multiplied by one-quarter of one percent
(0.25%) per annum, such fees to be calculated on the basis of a three
hundred sixty (360) -day year for the actual number of days elapsed and to
be payable monthly in arrears on the first day of each month and on the
last day of the Term and (B) any and all fees and expenses as agreed upon
by the Issuer and the Borrower 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"). All such charges shall be deemed earned in full on the date when
the same are due and payable
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hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason. Any such charge in effect at
the time of a particular transaction shall be the charge for that
transaction, notwithstanding any subsequent change in the Issuer's
prevailing charges for that type of transaction. All Letter of Credit Fees
payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
(b) If so requested by Agent when a Default or Event of Default is
continuing, Borrower will cause cash to be deposited and maintained in an
account with Agent, as cash collateral, in an amount equal to one hundred
and five percent (105%) of the outstanding Letters of Credit, and Borrower
hereby irrevocably authorizes Agent, in its discretion, on Borrower's
behalf and in Borrower's name, to open such an account and to make and
maintain deposits therein, or in an account opened by Borrower, in the
amounts required to be made by Borrower, out of the proceeds of Receivables
or other Collateral or out of any other funds of 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 Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional
cash collateral, which amounts may not be withdrawn except that the portion
thereof allocable to a particular Letter of Credit may be withdrawn (x)
upon the expiration of such Letter of Credit or (y) if such Letter of
Credit is drawn, upon the payment in full of all reimbursement obligations
in respect of such Letter of Credit.
3.3 (a) Closing Fee. Upon the execution of this Agreement, Borrower shall
pay to Agent the closing fee set forth in the Fee Letter.
(b) Facility Fee. If, for any month during the Term, the average daily
unpaid balance of the Revolving Advances for each day of such month does
not equal the Maximum Revolving Advance Amount, then Borrower shall pay to
Agent, for the ratable benefit of the Lenders, a fee at a rate equal to
one-half of one percent (0.5%) per annum on the amount by which the Maximum
Revolving Advance Amount exceeds such average daily unpaid balance. Such
fee shall be payable to Agent in arrears on the first day of each month
with respect to the previous month.
(c) Agency Fee. For as long as the Obligations remain outstanding
(other than contingent obligations which survive the termination of this
Agreement), Borrower shall pay to Agent the agency fee set forth in the Fee
Letter, in the amounts and at the times provided in the Fee Letter.
(d) Other Fees. Borrower shall pay to Agent such other fees as may be
provided for in the Fee Letter at the times, in the amounts and upon the
terms and conditions set forth therein.
3.4 Collateral Monitoring Fee. Borrower shall pay to Agent a collateral
monitoring fee in the amount and at the times set forth in the Fee Letter, in
connection with any field examination, collateral analysis or other business
analysis performed by Agent, the need for which is to be determined by Agent
(such determination to be made in Agent's reasonable discretion unless a Default
or Event of Default shall have occurred and be continuing) and which monitoring
is undertaken by Agent for Agent's benefit. The collateral monitoring 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 pro-ration upon termination of this Agreement
for any reason. In addition, Borrower shall pay to Agent the sums provided in
the Fee Letter for persons (other than Agent's management personnel) employed to
conduct audits of Borrower. Agent and the Lenders agree that not more than four
(4) audits per year shall be conducted in the absence of an Event of Default.
3.5 Other Expenses Borrower shall pay all costs required to be paid in any
Fee Letter, and all expenses incurred by Agent relating to reasonable legal,
accounting and audit fees, searches and the filings and recordings in accordance
with the Uniform Commercial Code, and any other expenses incurred by Agent in
connection with the structuring, documenting, closing, monitoring or enforcing
of this Agreement and the transactions contemplated herein.
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3.6 Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of three hundred sixty (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 Borrower, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrower and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.8 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 Documents or change the basis of
taxation of payments to Agent or any Lender of principal, fees, interest or
any other amount payable hereunder or under any Other Documents (except for
changes in the rate of tax on the overall net income of Agent or any Lender
by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or
for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other
Documents;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, 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, as the
case may be. Agent or such Lender shall certify the amount of such additional
cost or reduced amount to Borrower, and such certification shall be conclusive
absent manifest error. Notwithstanding the foregoing, any demand for
compensation pursuant to this Section 3.8 shall be made within 180 days after
Agent or the applicable Lender receives actual notice or obtains actual
knowledge of the matter giving rise to such demand and, in the event that such
demand is not made within such 180 day period, Borrower shall not be obligated
to pay any portion of the demanded compensation accruing prior to the 180th day
preceding such demand.
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
applicable pursuant to Section 2.2 hereof for any Interest Period; or
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(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar
Rate Loan,
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. EST, two (2) Business Days prior to
the date of such proposed borrowing, that its request for such borrowing shall
be cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to
an affected type of Eurodollar Rate Loan shall be continued as or converted into
a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00
a.m. EST, two (2) Business Days prior to the proposed conversion, shall be
maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any
outstanding affected Eurodollar Rate Loans shall be converted into a Domestic
Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 a.m. EST, two
(2) Business Days prior to the last Business Day of the then current Interest
Period applicable to such affected Eurodollar Rate Loan, shall be converted into
an unaffected type of Eurodollar Rate Loan, on the last Business Day of the then
current Interest Period for such affected Eurodollar Rate Loans. Until such
notice has been withdrawn, Lenders shall have no obligation to make an affected
type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate
Loans and Borrower shall not have the right to convert a Domestic Rate Loan or
an unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar
Rate Loan.
3.10 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, Borrower 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. Notwithstanding the foregoing, any demand for compensation
pursuant to this Section 3.10 shall be made within 180 days after Agent or
the applicable Lender receives actual notice or obtains actual knowledge of
the matter giving rise to such demand and, in the event that such demand is
not made within such 180 day period, Borrower shall not be obligated to pay
any portion of the demanded compensation accruing prior to the 180th day
preceding such demand.
(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 Borrower shall be
conclusive absent manifest error.
3.11 Gross Up for Taxes. If Borrower shall be required by Applicable Law to
withhold or deduct any taxes from or in respect of any sum payable under this
Agreement or any of the Other Documents, (a) the sum payable to Agent or such
Lender shall be increased as may be necessary so that, after making all required
withholding or deductions, Agent or such Lender (as the case may be) receives an
amount equal to the sum it would have received had no such withholding or
deductions been
27
made, (b) Borrower shall make such withholding or deductions, and (c) Borrower
shall pay the full amount withheld or deducted to the relevant taxation
authority or other authority in accordance with Applicable Law.
3.12 Withholding Tax Exemption. At least five (5) Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States or any state thereof agrees that it will deliver to Borrower and Agent
two (2) duly completed copies of United States Internal Revenue Service Form
1001 or 4224, certifying in either case that such Lender is entitled to receive
payment under this Agreement and its Notes without deduction or withholding of
any United States federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to Borrower and Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires (currently, three (3) successive calendar years for Form 1001
and one calendar year for Form 4224) or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by Borrower or Agent, in each case, certifying that such Lender is
entitled to receive payments under this Agreement and its Note without deduction
or withholding of any United States federal income taxes, unless an event
(including any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required that renders all
such forms inapplicable or that would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises Borrower
and Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income taxes.
IV. COLLATERAL: GENERAL TERMS
4.1 Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Credit Party
hereby assigns, pledges and grants to Agent for its benefit and for the ratable
benefit of each Lender a continuing security interest in and to all of its
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Each Credit Party shall xxxx its books and records as may
be necessary or appropriate to evidence, protect and perfect Agent's security
interest and shall cause its financial statements to reflect such security
interest. Each Credit Party shall promptly provide Agent with written notice of
all commercial tort claims, such notice to contain the case title together with
the applicable court and a brief description of the claim(s). Upon delivery of
each such notice, such Credit Party shall be deemed to hereby grant to Agent a
security interest and lien in and to such commercial tort claims and all
proceeds thereof.
4.2 Perfection of Security Interest. Each Credit Party shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent (provided that any such arrangements other than lockboxes shall be
reasonable), and (v) executing and delivering financing statements, control
agreements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent's security interest
under the Uniform Commercial Code or other applicable law. Agent is hereby
authorized to file financing statements signed by Agent instead of the Credit
Parties in accordance with the Uniform Commercial Code as adopted in the State
of New York from time to time. By its signature hereto, each Credit Party hereby
authorizes Agent to file against such Credit Party one or more financing
continuation or amendment statements pursuant to the Uniform Commercial Code in
form and substance satisfactory to Agent (which statements may have a
description of collateral which is broader than that set forth herein). All
charges, expenses and fees Agent may incur in doing any of the foregoing, and
any local taxes relating thereto, shall be charged to Borrower's Account
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as a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or,
at Agent's option, shall be paid to Agent for its benefit and for the ratable
benefit of Lenders immediately upon demand.
4.3 Disposition of Collateral. The Credit Parties 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 $100,000 (for all Credit
Parties taken together) and only to the extent that (i) the net cash proceeds of
any such disposition are used to acquire replacement Equipment which is subject
to Agent's first priority security interest or (ii) the net cash proceeds of
which are remitted to Agent to be applied pursuant to Section 2.14.
4.4 Preservation of Collateral. At any time when a Default or Event of
Default has occurred and is continuing, in addition to the rights and remedies
set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral, including the hiring of such security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of the Credit Parties' 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 the Credit Parties' owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of the Credit Parties' owned or leased property, except as otherwise
disclosed on Schedule 4.4. The Credit Parties 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 Borrower's 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) the applicable
Credit Party shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest (subject only
to Permitted Encumbrances that are purchase money security interests) 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 the Credit
Parties (or any of them) or delivered to Agent or any Lender in connection with
this Agreement shall be true and correct in all material respects; (c) all
signatures and endorsements of any Credit Party that appear on such documents
and agreements shall be genuine and such Credit Party shall have full capacity
to execute same; and (d) each Credit Party'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 Credit Party 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. The Credit Parties shall defend Agent's interests in the Collateral
against any and all Persons whatsoever (other than with respect to Permitted
Encumbrances). 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,
the Credit Parties 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
29
herein and further provided by the Uniform Commercial Code or other applicable
law. At any time the Credit Parties shall, if reasonably requested by Agent, and
if an Event of Default shall have occurred and be continuing, Agent may, at its
option, instruct all suppliers, carriers, forwarders, warehousers or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent's order and if they shall come into any Credit Party's possession, they,
and each of them, shall be held by such Credit Party in trust as Agent's
trustee, and such Credit Party will immediately deliver them to Agent in their
original form together with any necessary endorsement.
4.7 Books and Records. Each Credit Party shall (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by the Credit Parties.
4.8 Financial Disclosure. Each Credit Party hereby irrevocably authorizes
and directs all accountants and auditors employed by such Credit Party at any
time during the Term to exhibit and deliver to Agent and each Lender copies of
any of such Credit Party'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 Credit Party's financial status and business operations. Each
Credit Party hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such Credit Party, whether made by such Credit Party or otherwise; however,
Agent and each Lender will attempt to obtain such information or materials
directly from the Credit Parties prior to obtaining such information or
materials from such accountants or such authorities.
4.9 Compliance with Laws. Each Credit Party shall comply with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to the Collateral or any part thereof or to the
operation of such Credit Party's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect. Each Credit Party may,
however, contest or dispute any acts, rules, regulations, orders and directions
of those bodies or officials in any reasonable manner, provided that any related
Lien is inchoate or stayed and sufficient reserves are established to the
reasonable satisfaction of Agent to protect Agent's Lien on or security interest
in the Collateral. The 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 the Credit Parties` books, records, audits,
correspondence and all other papers relating to the Collateral and the operation
of Borrower's business. Agent, any Lender and their agents may enter upon any of
the Credit Parties' 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 the
Credit Parties' business, provided, that if no Default or Event of Default is
continuing, the applicable Credit Party shall receive reasonable advance notice
of any such entry that is proposed to be made other than during business hours.
4.11 Insurance. The Credit Parties shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At its own cost and
expense in amounts and with carriers acceptable to Agent, each Credit Party
shall (a) keep all its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended
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coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to that of such Credit
Party including, without limitation, business interruption insurance; (b)
maintain a bond in such amounts as is customary in the case of companies engaged
in businesses similar to such Credit Party 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 Credit Party either directly or through authority
to draw upon such funds or to direct generally the disposition of such assets;
(c) maintain public and product liability insurance against claims for personal
injury, death or property damage suffered by others; (d) maintain all such
worker's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which such Credit Party is engaged in business; (e)
upon Agent's request, obtain and maintain a life insurance policy covering the
life of Xxxxxxx Xxxxxx in the face amount of at least $2,000,000, provided that
he is reasonably insurable; (f) 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), (c) and (e) above, and providing
(A) that all proceeds thereunder shall be payable to Agent, (B) no such
insurance shall be affected by any act or neglect of the insured or owner of the
property described in such policy, and (C) that such policy and loss payable
clauses may not be cancelled, amended or terminated unless at least thirty (30)
days' prior written notice is given to Agent. In the event of any loss
thereunder, the carriers named therein hereby are directed by Agent and such
Credit Party to make payment for such loss to Agent and not to such Credit Party
and Agent jointly. If any insurance losses are paid by check, draft or other
instrument payable to any Credit Party and Agent jointly, Agent may endorse such
Credit Party's name thereon and do such other things as Agent may deem advisable
to reduce the same to cash. Agent is hereby authorized to adjust and compromise
claims under insurance coverage referred to in clauses (a), (b) and (e) above.
All loss recoveries received by Agent upon any such insurance may be applied to
the Obligations, in such order as Agent in its sole discretion shall determine.
Any surplus shall be paid by Agent to the applicable Credit Party or applied as
may be otherwise required by law. Anything hereinabove to the contrary
notwithstanding, and subject to the fulfillment of the conditions set forth
below, Agent shall remit to Borrower (for the benefit of the Credit Parties)
insurance proceeds received by Agent during any calendar year under insurance
policies procured and maintained by the Credit Parties which insure their
insurable properties to the extent such insurance proceeds do not exceed
$150,000 in the aggregate during such calendar year or $75,000 per occurrence.
In the event the amount of insurance proceeds received by Agent for any
occurrence exceeds $75,000, then Agent shall not be obligated to remit the
insurance proceeds to Borrower unless Borrower shall provide Agent with evidence
reasonably satisfactory to Agent that the insurance proceeds will be used by the
Credit Parties to repair, replace or restore the insured property which was the
subject of the insurable loss. In the event Borrower have previously received
(or, after giving effect to any proposed remittance by Agent to Borrower would
receive) insurance proceeds which equal or exceed $150,000 in the aggregate
during any calendar year, then Agent may, in its sole discretion, either remit
the insurance proceeds to Borrower upon Borrower's providing Agent with evidence
reasonably satisfactory to Agent that the insurance proceeds will be used by the
Credit Parties to repair, replace or restore the insured property which was the
subject of the insurable loss, or 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) the Credit Parties 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 Credit Party fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
such Credit Party, and charge Borrower's Account therefor as a Revolving Advance
of a Domestic Rate Loan and such expenses so paid shall be part of the
Obligations.
4.13 Payment of Taxes. Each Credit Party will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon it or any of the
Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social
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security benefits, withholding, and sales taxes; provided, however, that the
applicable Credit Party shall have the right to contest in good faith, by an
appropriate proceeding timely initiated and diligently conducted, the validity,
amount or imposition of any such tax, assessment or charge, and upon such good
faith contest to delay or refuse payment thereof, if any related tax lien is
stayed and sufficient reserves are established to the reasonable satisfaction of
Agent to protect Agent's security interest in or Lien on the Collateral. If any
tax by any governmental authority is or may be imposed on or as a result of any
transaction between any of the Credit Parties 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
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to any Credit Party pay the taxes, assessments or other Charges and the
Credit Parties hereby jointly and severally indemnify and hold Agent and each
Lender harmless in respect thereof. Agent will not pay any taxes, assessments or
Charges to the extent that the same are being contested or disputed by any
Credit Party in accordance with the proviso to the first sentence of this
Section 4.13. The amount of any payment by Agent under this Section 4.13 shall
be charged to Borrower's Account as a Revolving Advance and added to the
Obligations.
4.14 Payment of Leasehold Obligations. Each Credit Party shall at all times
pay, when and as due (subject to any applicable grace or cure periods), 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; provided, that no Credit Party shall be in default
of its obligations under this Section 4.14 if such Credit Party reserves amounts
necessary to satisfy its obligations under any such lease in connection with any
good faith dispute with the landlord of the premises subject to such lease and
during the pendency of such dispute the Collateral, Agent's Lien therein and
such Credit Party occupancy of the leased premises remain unimpaired.
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 the applicable Credit
Party, or work, labor or services theretofore rendered by such Credit Party
as of the date each Receivable is created. Same shall be due and owing in
accordance with such Credit Party's standard terms of sale without dispute,
setoff or counterclaim except as may be stated on the accounts receivable
schedules delivered by Borrower to Agent.
(b) Solvency of Customers. Each Customer, to the best of the Credit
Parties' 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 the Credit
Parties who are not solvent, the applicable Credit Party has set up on its
books and in its financial records bad debt reserves adequate to cover such
Receivables.
(c) Location of Credit Parties. Borrower's chief executive office is
located at 0000 Xxxxxxxx Xxxxxx, Xxxx, Xxxxx 00000-0000. Borrower maintains
its records pertaining to the Receivables primarily at its chief executive
office and all other records pertaining to the Receivables are maintained
at one or more of the locations described on Schedule 4.15(c). Until
written notice is given to Agent by any Credit Party of any other office at
which any Credit Party keeps its records pertaining to Receivables, all
such records shall be kept at such executive office and the locations
described on Schedule 4.15(c).
(d) Collection of Receivables. Until the Credit Parties' authority to
do so is terminated by Agent (which notice Agent may give at any time
following the occurrence and during the continuation of a Default or Event
of Default), each Credit Party will, at its sole cost and expense, but on
Agent's behalf and for Agent's account, collect as Agent's property and in
trust for Agent all amounts received on Receivables, and shall not
commingle such collections with such Credit Party's funds or use
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the same except to pay Obligations. Each Credit Party shall deposit in the
Blocked Account or, upon request by Agent, deliver to Agent, in original
form and on the date of receipt thereof, all checks, drafts, notes, money
orders, acceptances, cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time following
the occurrence of an Event of Default or a Default, Agent shall have the
right to send notice of the assignment of, and Agent's security interest
in, the Receivables to any and all Customers or any third party holding or
otherwise concerned with any of the Collateral. Thereafter, Agent shall
have the sole right to collect the Receivables, take possession of the
Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial
and clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrower's Account and added to the
Obligations.
(f) Power of Agent to Act on Credit Parties Behalf. Agent shall have
the right to receive, endorse, assign and/or deliver in the name of Agent
or any Credit Party any and all checks, drafts and other instruments for
the payment of money relating to the Receivables, and each Credit Party
waives notice of presentment, protest and non-payment of any instrument so
endorsed. Each Credit Party hereby constitutes Agent or Agent's designee as
such Credit Party's attorney with power (i) to endorse such Credit Party's
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) to sign such Credit Party'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 Credit
Party's name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect,
or perfect Agent's interest in the Collateral and to file same; (v) to
demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise all of
such Credit Party's rights and remedies with respect to the collection of
the Receivables and any other Collateral; (viii) to settle, adjust,
compromise, extend or renew the Receivables; (ix) to settle, adjust or
compromise any legal proceedings brought to collect Receivables; (x) to
prepare, file and sign such Credit Party's name on a proof of claim in
bankruptcy or similar document against any Customer; (xi) to prepare, file
and sign such Credit Party's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the
Receivables; and (xii) to do all other acts and things necessary to carry
out this Agreement; provided that (A) Agent shall only take the actions
referred to in clauses (ii), (v), (vi), (vii), (viii), (ix) and (xii)
following the occurrence and during the continuance of an Event of Default,
and (B) unless an Event of Default is continuing, Agent shall only take the
actions referred to in clauses (x) and (xi) if the applicable Credit Party
has not done so promptly following Agent's request. 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, to change the address for delivery of mail addressed to any Credit
Party to such address as Agent may designate and to receive, open and
dispose of all mail addressed to such Credit Party.
(g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment
thereof, or for any damage resulting therefrom. Following the occurrence of
and during the continuance of an Event of Default or Default Agent may,
without notice or consent from any Credit Party, 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 and during the continuance of an Event of Default, the return of
the goods represented by any of the Receivables, without notice to or
consent by any Credit Party, all without discharging or in any way
affecting any Credit Party's liability hereunder.
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(h) Establishment of a Lockbox Account, Dominion Account. All proceeds
of Collateral shall be deposited by each Credit Party into a lockbox
account, dominion account or such other "blocked account" ("Blocked
Accounts") as Agent may require pursuant to an arrangement with such bank
as may be selected by such Credit Party and be acceptable to Agent. Each
Credit Party shall issue to any such bank, an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to
Agent, either to any account maintained by Agent at said bank or by wire
transfer to appropriate account(s) of Agent. All funds deposited in such
Blocked Accounts shall immediately become the property of Agent and each
Credit Party shall obtain the agreement by such bank to waive any offset
rights against the funds so deposited (other than offset rights in respect
of ordinary fees and charges of maintaining such account). Neither Agent
nor any Lender assumes any responsibility for such blocked account
arrangement, including without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts
("Depository Accounts") in the name of Agent at a bank or banks for the
deposit of such funds and the Credit Parties shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository
Accounts of Agent in lieu of depositing same to the Blocked Accounts.
Notwithstanding the foregoing, so long as the Credit Parties have
established their respective accounts with Agent at the Closing Date as
contemplated by Section 8.1(v), the Credit Parties shall have a period of
thirty (30) days following the Closing Date within which to enter into a
lockbox agreement acceptable to Agent with respect to funds that may
continue to be deposited into the Credit Parties' former accounts.
(i) Adjustments. No Credit Party 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, extensions, adjustments, returns, discounts, credits and
allowances as have been heretofore customary in the business of such Credit
Party.
4.16 Inventory. To the extent Inventory held for sale or lease has been
produced by a Credit Party, it has been and will be produced by such Credit
Party in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder.
4.17 Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Credit Party shall use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. The Credit Parties shall have the
right to sell Equipment to the extent set forth in Section 4.3 hereof.
4.18 Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Credit Party'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 the Credit Parties' 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 such Credit Party of any
of the terms and conditions thereof.
4.19 Environmental Matters. (a) Each Credit Party shall ensure that the
Real Property remains in compliance with all Environmental Laws and they shall
not place or permit to be placed any Hazardous Substances on any Real Property
except as permitted by applicable law or appropriate governmental authorities.
(b) Each Credit Party shall establish and maintain a system to assure
and monitor continued compliance in all material respects with all
applicable Environmental Laws which system shall include periodic reviews
of such compliance.
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(c) Each Credit Party shall (i) employ in connection with the use of
the Real Property appropriate technology necessary to maintain compliance
in all material respects 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. Each Credit Party shall use its
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 such Credit Party in connection with
the transport or disposal of any Hazardous Waste generated at the Real
Property.
(d) In the event that any Credit Party 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 such Credit Party'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 such Credit Party shall, within five (5) Business Days, give written
notice of same to Agent detailing facts and circumstances of which such
Credit Party 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 Collateral and is not intended to
create nor shall it create any obligation upon Agent or any Lender with
respect thereto.
(e) Each Credit Party 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 such Credit Party to dispose of Hazardous Substances and shall continue
to forward copies of correspondence between such Credit Party and the
Authority regarding such claims to Agent until the claim is settled. Each
Credit Party shall promptly forward to Agent copies of all documents and
reports concerning a Hazardous Discharge at the Real Property that such
Credit Party 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 Collateral.
(f) Each Credit Party 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 a Credit Party shall fail to
respond promptly to any Hazardous Discharge or Environmental Complaint or
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 the Collateral: (A)
give such notices or (B) enter onto the Real Property (or authorize third
parties to enter onto the Real Property) and take such actions as Agent (or
such third parties as directed by Agent) deem reasonably necessary or
advisable, to 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 Borrower, and until paid shall be added to and
become a part of the Obligations secured by the Liens created by the terms
of this Agreement or any other agreement between Agent, any Lender and
Borrower or any other Credit Party.
(g) Promptly upon the written request of Agent from time to time, the
Credit Parties shall provide Agent, at the Credit Parties' 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
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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 $100,000, Agent shall
have the right to require the applicable Credit Party to post a bond,
letter of credit or other security reasonably satisfactory to Agent to
secure payment of these costs and expenses.
(h) The Credit Parties shall, jointly and severally, 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 Collateral 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. The Credit Parties' 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. The Credit
Parties' obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of any Credit Party's right, title
and interest in and to its owned and leased premises described on Schedule
4.19.
4.20 Financing Statements. As of the Closing Date, 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. Following the Closing Date,
except as respects the financing statements filed by Agent, the financing
statements described on Schedule 1.2 and Permitted Encumbrances, no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Authority. Each Credit Party has full corporate power, authority and
legal right to enter into this Agreement and the Other Documents and to perform
all its respective Obligations hereunder and thereunder. This Agreement and the
Other Documents to which any Credit Party is a party constitute the legal, valid
and binding obligation of such Credit Party, enforceable in accordance with
their terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance, fraudulent transfer
or similar laws affecting creditors' rights generally and by general principles
of equity, whether considered in a proceeding at law or in equity. The
execution, delivery and performance of this Agreement and of the Other Documents
(a) are within each Credit Party's corporate powers, have been duly authorized,
are not in contravention of law or the terms of each Credit Party's by-laws,
certificate of incorporation or other applicable documents relating to such
Credit Party's formation or to the conduct of such Credit Party's business or of
any material agreement or undertaking to which such Credit Party is a party or
by which such Credit 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 any Credit Party under the provisions of any agreement, charter document,
instrument, by-law, or other instrument to which any Credit Party is a party or
by which it or its property may be bound.
5.2 Formation and Qualification. (a) Each Credit Party is duly incorporated
and in good standing under the laws of the applicable state listed on Schedule
5.2(a) and is qualified to do business
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and is in good standing in the states listed on Schedule 5.2(a) which constitute
all states in which qualification and good standing are necessary for such
Credit Party 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.
Each Credit Party has delivered to Agent true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Agent of any
amendment or changes thereto.
(b) A true and complete list of all Subsidiaries of each Credit Party
is set forth on Schedule 5.2(b).
5.3 Survival of Representations and Warranties. All representations and
warranties of the Credit Parties contained in this Agreement and the Other
Documents shall be true at the time of their 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 Credit Party's federal tax identification number is
set forth on Schedule 5.4. Each Credit Party 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 Credit Party have
been examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending June 30, 2001. The provision for taxes on the books of the
Credit Parties is adequate for all years not closed by applicable statutes, and
for its current fiscal year, and the Credit Party's have no knowledge of any
deficiency or additional assessment in connection therewith not provided for on
its books.
5.5 Financial Statements.
(a) The pro forma consolidated and consolidating balance sheet of
Holdings (the "Pro Forma Balance Sheet") furnished to Agent on the Closing
Date reflects the consummation of the transactions contemplated under this
Agreement (the "Transactions") and is a true and complete copy of such
balance sheet, which presents fairly the consolidated financial condition
of Holdings as of the Closing Date after giving effect to the Transactions,
and has been prepared in accordance with GAAP, consistently applied. Such
copy of the Pro Forma Balance Sheet has been certified as a true and
complete copy by the President or Chief Financial Officer of Holdings. All
financial statements referred to in this subsection (a), including the
related schedules and notes thereto, have been prepared, in accordance with
GAAP, except as may be disclosed in such financial statements.
(b) The twelve-month cash flow projections of Holdings and each
entity's projected balance sheets as of the Closing Date, copies of which
are annexed hereto as Exhibit 5.5(b) (the "Projections") were prepared by
the Chief Financial Officer of Holdings, as applicable, are based on
underlying assumptions which provide a reasonable basis for the projections
contained therein and reflect both Holdings' judgment based on present
circumstances of the anticipated course of business of Holdings and its
consolidated Subsidiaries for the projected period. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as
the "Pro Forma Financial Statements".
(c) The monthly internal and annual audited consolidated and
consolidating balance sheets of Holdings and it Subsidiaries (which shall
include Borrower and its Subsidiaries) and such other Persons described
therein (including the accounts of all Subsidiaries for the respective
periods during which a subsidiary relationship existed) as of June 30,
2001, and the related statements of income, changes in stockholder's
equity, and changes in cash flow for the period ended on such date, monthly
accounts receivable and accounts payable agings, and monthly inventory
designations, 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
Holdings and its Subsidiaries (which shall include Borrower and its
Subsidiaries) at such date and the results of their operations for such
period. Since June 30, 2001 there
37
has been no change in the condition, financial or otherwise, of Holdings
and its Subsidiaries (which shall include Borrower and its Subsidiaries),
taken as a whole, 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 Holdings or its Subsidiaries (which shall include
Borrower and its Subsidiaries), except changes in the ordinary course of
business, none of which individually or in the aggregate has been
materially adverse.
5.6 Corporate Name. None of the Credit Parties has been known by any other
corporate name in the past five years and does not sell Inventory under any
other name except as set forth on Schedule 5.6, nor has any Credit 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, except as set forth on Schedule 5.6.
5.7 O.S.H.A. and Environmental Compliance. Except as disclosed in Schedule
5.7:
(a) Each Credit Party has duly complied in all material respects 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, RCRA and all other
Environmental Laws; there have been no outstanding citations, notices or
orders of non-compliance issued to any Credit Party or relating to its
business, assets, property, leaseholds or Equipment under any such laws,
rules or regulations.
(b) Each Credit Party has been issued all material 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 (each, a "Release", and collectively referred to as
"Releases") of Hazardous Substances at, upon, under or within any Real
Property or any premises leased by any Credit Party; (ii) to the best
knowledge of the Credit Parties after due inquiry, there are no underground
storage tanks or polychlorinated biphenyls on the Real Property or any
premises leased by any Credit Party; (iii) to the best knowledge of the
Credit Parties after due inquiry, neither the Real Property nor any
premises leased by any Credit 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
Credit 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 such Credit Party or of its tenants.
5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
(a) On the Closing Date after giving effect to the Transactions, (i)
each Credit Party is solvent (net of its intercompany payables and treating
as assets its rights under Section 14.6 hereof), 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, (ii) the fair present saleable
value of its assets, calculated on a going concern basis, is in excess of
the amount of its liabilities (net of its intercompany payables and
treating as assets its rights under Section 14.6 hereof) and (iii) the fair
saleable value of its assets (calculated on a going concern basis) will be
in excess of the amount of its liabilities (net of its intercompany
payables and treating as assets its rights under Section 14.6 hereof).
(b) Except as disclosed in Schedule 5.8(b) or in the SEC Report, no
Credit Party has (i) pending or threatened litigation, arbitration, actions
or proceedings which involve the possibility of having a Material Adverse
Effect, or (ii) liabilities or indebtedness for borrowed money other than
the Obligations.
(c) None of the Credit Parties is in violation of any applicable
statute, regulation or ordinance in any respect which could reasonably be
expected to have a Material Adverse Effect, nor is any of them in violation
of any order of any court, governmental authority or arbitration board or
tribunal.
38
(d) Neither Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred
any "accumulated funding deficiency," as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code, whether or not waived, and Borrower
and each member of the Controlled Group has met all applicable minimum
funding requirements under Section 302 of ERISA in respect of each Plan,
(ii) each Plan which is intended to be a qualified plan under Section
401(a) of the Code as currently in effect has been determined by the
Internal Revenue Service to be qualified under Section 401(a) of the Code
and the trust related thereto is exempt from federal income tax under
Section 501(a) of the Code, (iii) neither Borrower nor any member of the
Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become
due which are unpaid, (iv) no Plan has been terminated by the plan
administrator thereof nor by the PBGC which could give rise to any material
liability, and there is no occurrence which would cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and
neither Borrower nor any member of the Controlled Group knows of any facts
or circumstances which would materially change the value of such assets and
accrued benefits and other liabilities, (vi) neither Borrower nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan,
which breach could give rise to any material liability, (vii) neither
Borrower 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 which could give rise to any such liability,
(viii) neither Borrower nor any member of the Controlled Group nor, to the
best of any Credit Party's knowledge, 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 which could give rise to any material
liability, (ix) Borrower and each member of the Controlled Group has made
all contributions due and payable with respect to each Plan, except to the
extent that the failure to make any such contribution would not give rise
to any material liability, (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) neither Borrower nor any member
of the Controlled Group has any fiduciary responsibility for investments
with respect to any plan existing for the benefit of persons other than
employees or former employees of Borrower and any member of the Controlled
Group, and (xii) neither Borrower nor any member of the Controlled Group
has withdrawn, completely or partially, from any Multiemployer Plan 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 Credit Party
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 patent, trademark, copyright, design right, tradename, trade secret or
license and no Credit 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, design right, copyright,
copyright application and copyright license owned or held by any Credit Party
and all trade secrets used by any Credit Party consist of original material or
property developed by a Credit Party or was lawfully acquired by the applicable
Credit 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 Credit Party, such
Credit Party is in possession of all source and object codes related to each
piece of software or is the beneficiary of a source code escrow agreement, each
such source code escrow agreement being listed on Schedule 5.9 hereto.
5.10 Licenses and Permits. Except as set forth in Schedule 5.10, each
Credit Party (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state, provincial or local law or regulation for the operation of its
39
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.
5.11 Default of Indebtedness. None of the Credit Parties 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, other than
trade payables which are outstanding beyond their terms in the ordinary course
of the Credit Parties' businesses.
5.12 No Default. None of the Credit Parties is in default in the payment or
performance of any of its contractual obligations, except defaults which could
not reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect and no Default has occurred and shall, at the request of
Agent, deliver a certificate of non-default.
5.13 No Burdensome Restrictions. None of the Credit Parties is party to any
contract or agreement the performance of which could have a Material Adverse
Effect. None of the Credit Parties 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. None of the Credit Parties is involved in any labor
dispute; there are no strikes or walkouts or union organization of any of their
respective 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. None of the Credit Parties is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16 Investment Company Act. None of the Credit Parties 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 of the Credit
Parties 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 or therein not misleading in light of the
circumstances in which such statements were made, it being understood that,
except as set forth in Section 5.5 hereof, no representation or warranty is made
with respect to the Projections or other prospective financial information.
There is no fact known to any of the Credit Parties (other than information
concerning general economic conditions known to the public generally) or which
reasonably should be known to any of them which has not been 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.
5.18 Swaps. None of the Credit Parties is a party to, nor will it be a
party to, any swap agreement whereby it 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.
5.19 Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Credit Party or
affecting the Collateral conflicts with, or requires
40
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.
5.20 Application of Certain Laws and Regulations. Neither any Credit Party
nor any Affiliate of any of them 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.
5.21 Business and Property of Borrower. Upon and after the Closing Date,
none of the Credit Parties proposes to engage in any business other than the
manufacturing and marketing of a broad range of brand-name consumer lawn and
garden products, activities necessary to conduct the foregoing, and businesses
substantially similar or substantially related to the foregoing. On the Closing
Date, each Credit Party will own all the property and possess all of the rights
and Consents necessary for the conduct of its business.
5.22 Section 20 Subsidiaries. None of the Credit Parties intends to use and
shall not use any portion of the proceeds of the Advances, directly or
indirectly, to purchase during the underwriting period, or for 30 days
thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary.
VI. AFFIRMATIVE COVENANTS.
Until payment in full of the Obligations and termination of this Agreement:
6.1 Payment of Fees. Borrower shall pay to Agent on demand all usual and
customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Blocked Accounts or Depository Accounts as provided for in Section 4.15(h).
Agent may, without making demand, charge Borrower's Account for all such fees
and expenses.
6.2 Conduct of Business and Maintenance of Existence and Assets. Each
Credit Party shall (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 material 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; and (c)
make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect.
6.3 Violations. Each Credit Party shall 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 such Credit Party which could
reasonably be expected to have a Material Adverse Effect.
6.4 Government Receivables. 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 Credit Party and the United
States, any state or any department, agency or instrumentality of any of them.
6.5 Net Worth. Borrower shall maintain a minimum Net Worth at the end of
each fiscal quarter set forth below in an amount not less than the amount set
forth opposite such fiscal quarter and
41
shall maintain such Net Worth at all times thereafter until the succeeding
minimum Net Worth becomes applicable:
Fiscal Quarter Ended Minimum Net Worth
-------------------- -----------------
December 2001 $9,750,000
March 2002 $13,000,000
June 2002 $13,750,000
September 2002 $11,000,000
December 2002 $10,750,000
March 2003 $14,250,000
June 2003 $15,000,000
September 2003 $12,250,000
December 2003 $12,000,000
March 2004 $15,500,000
June 2004 $16,250,000
September 2004 $13,500,000
6.6 Fixed Charge Coverage Ratio. Borrower shall maintain a Fixed Charge
Coverage Ratio at the end of each fiscal quarter set forth below (determined for
the period of four (4) consecutive fiscal quarters then ended) of not less than
the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ended Minimum Fixed Charge Coverage Ratio
-------------------- -----------------------------------
March 2002 0.90
June 2002 1.0
September 2002 1.10
December 2002 1.10
March 2003 1.20
June 2003 1.20
September 2003 and each
fiscal quarter thereafter 1.25;
provided, that in determining the Fixed Charge Coverage Ratio, the following
adjustments shall be made with respect to those portions of the applicable
period of determination that precede the Closing Date: (a) principal
amortization of indebtedness shall be deemed to be $33,333.33 per month; (b)
taxes shall be deemed to be zero ($-0-) per month; and (c) Capital Expenditures
shall be deemed to be $100,000 per month.
6.7 Execution of Supplemental Instruments. Each Credit Party shall promptly
upon demand therefor, execute and deliver to Agent from time to time, such
supplemental agreements, statements, assignments and transfers, or instructions
or documents relating to the Collateral, and such other instruments as Agent may
reasonably request, in order that the full intent of this Agreement may be
carried into effect.
6.8 Payment of Indebtedness. Each Credit Party shall 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 of 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 Borrower 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.
6.9 Standards of Financial Statements. Each Credit Party shall cause all
financial statements referred to in Article IX 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
42
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).
6.10 Appraisals. Each Credit Party hereby authorizes Agent to conduct, at
the Credit Parties' expense, a re-appraisal of the Inventory on or before March
31, 2002, and on an annual basis thereafter.
VII. NEGATIVE COVENANTS.
Until satisfaction in full of the Obligations and termination of this
Agreement:
7.1 Merger, Consolidation, Acquisition and Sale of Assets.
(a) No Credit Party shall enter into any merger, consolidation or
other reorganization with or into any other Person or acquire all or a
substantial portion of the assets or stock of any Person or permit any
other Person to consolidate with or merge with it, provided that any
Guarantor may merge with any other Guarantor or into Borrower.
(b) No Credit Party shall sell, lease, transfer or otherwise dispose
of any of its properties or assets, except in the ordinary course of its
business and except as provided in Section 4.3; provided that the assets of
Egarden, Inc. may be disposed of so long as Holdings and Borrower exercise
commercially reasonable efforts to obtain the release of the Credit Parties
from any further liability or contingent liability in respect of the
obligations of Egarden, Inc. (including without limitation in respect of
the equipment leases listed in Item 1 of Schedule 7.3), provided that (in
the event USHG and the Company are unable to obtain such release in spite
of such commercially reasonable efforts) the Credit Parties shall be
permitted to pay up to $90,000 per annum in order to prevent a default
under any Egarden Inc. obligations for which the Credit Parties remain
contingently liable
7.2 Creation of Liens. No Credit Party shall 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. No Credit Party shall 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 and any guaranty issued
in connection with the extension, replacement, renewal or refinancing of the
Indebtedness so guaranteed, to the extent not otherwise prohibited hereunder and
to the extent that the amount of such Indebtedness is not increased or (b) the
endorsement of checks in the ordinary course of business.
7.4 Investments. No Credit Party shall 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, and (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof; provided that this Section shall not prohibit any Credit Party from
owning the capital stock of its Subsidiaries that it owns as of the date hereof
or from owning any additional capital stock of such existing Subsidiaries, to
the extent that the investment made to acquire such additional capital stock is
otherwise permitted by this Agreement.
43
7.5 Loans, etc. No Credit Party shall make advances, loans or extensions of
credit to any Person, including without limitation, any other Credit Party,
other than (a) extensions of credit made by any Credit Party to another Credit
Party that is a Subsidiary of Borrower in the form of Intercompany Obligations
evidenced by Intercompany Notes, (b) the loan to Xxxxxxx Xxxxxx having an
outstanding balance of $560,000 at the Closing Date, provided that the amount
thereof shall not be increased and no portions thereof that are repaid may be
reborrowed (although the maturity thereof may be extended) and (c) other loans
to officers, directors, employees and Affiliates in the ordinary course of
business not to exceed the aggregate amount of $100,000 at any time outstanding.
Without limiting the foregoing, no Credit Party shall be permitted to make any
payments of any kind to Holdings except pursuant to Section 7.7.
7.6 Capital Expenditures. No Credit Party shall contract for, purchase or
make any expenditure or commitments for Capital Expenditures in any fiscal year
in an aggregate amount for all Credit Parties in excess of $1,500,000.
7.7 Dividends, etc. No Credit Party shall declare, pay or make any dividend
or distribution on any shares of its capital stock (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of such Credit
Party, except that so long as no notice of termination with regard to this
Agreement is outstanding (except for a notice of termination given by Borrower
provided that Borrower has given Agent at least 5 Business Days' prior written
notice of the proposed payment), Borrower shall be permitted to make payments to
the extent permitted by Section 7.18 with respect to Holdings' payments of
interest on the Junior Subordinated Debentures. Notwithstanding the foregoing,
any wholly-owned Subsidiary of Borrower shall be permitted to pay dividends and
make distributions to Borrower. This Section 7.7 shall not prohibit payments to
Holdings for the payment by Holdings of professional fees, taxes and other
ordinary course of business operating expenses (including salaries and other
employee compensation) incurred by Holdings solely in its capacity as parent
corporation of Borrower, provided that the aggregate amounts of such payments to
Holdings in any fiscal year shall not exceed the aggregate amount of the
applicable expenses for such fiscal year (as set forth in Holdings' budget for
such fiscal year as approved by Agent) by more than ten percent (10%).
7.8 Indebtedness. No Credit Party shall create, incur, assume or suffer to
exist any Indebtedness (exclusive of trade debt) except in respect of (i)
Indebtedness to Lenders; (ii) Indebtedness incurred for Capital Expenditures
permitted under Section 7.6 hereof; provided, however, that the maximum
aggregate amount outstanding at any time of such Indebtedness shall not exceed
$1,000,000; (iii) Indebtedness consisting of Intercompany Obligations to the
extent permitted under Section 7.5; and (iv) Indebtedness listed on Schedule 7.8
hereto and any renewal, extension, refinancing or replacement of such
Indebtedness listed on Schedule 7.8, so long as the amount of such Indebtedness
is not increased.
7.9 Nature of Business. No Credit Party shall change the nature of the
business in which it is presently engaged to the extent that, after giving
effect thereto, the representation set forth in Section 5.21 would no longer be
true, 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.
7.10 Transactions with Affiliates. No Credit Party shall directly or
indirectly, purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, any Affiliate, except (a)
transactions in the ordinary course of business, on an arm's-length basis on
terms no less favorable than terms which would have been obtainable from a
Person other than an Affiliate and (b) transactions permitted by Sections 7.5
and 7.7 hereof.
7.11 Leases. No Credit Party shall enter as lessee into any lease
arrangement for real or personal property (unless capitalized and permitted
under Section 7.6 hereof) if after giving effect thereto, aggregate annual
rental payments for all leased property of all Credit Parties would exceed the
aggregate
44
annual rental payments of all Credit Parties for the fiscal year ended June 30,
2001 by more than $150,000.
7.12 Subsidiaries.
(a) No Credit Party shall form any Subsidiary unless (i) such
Subsidiary expressly joins in this Agreement as a Guarantor and becomes
jointly and severally liable for the Obligations and (ii) Agent shall have
received all documents, including legal opinions, it may reasonably require
to establish compliance with each of the foregoing conditions.
(b) No Credit Party shall enter into any partnership, joint venture or
similar arrangement.
7.13 Fiscal Year and Accounting Changes. No Credit Party shall change its
fiscal year from June 30, 2001 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.
7.14 Pledge of Credit. No Credit Party shall 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 businesses that
would not cause the representation set forth in Section 5.21 to be untrue.
7.15 Amendments. No Credit Party shall (a) amend, modify or waive any
material term or material provision of its Articles of Incorporation or By-Laws
unless required by law, (b) amend, modify or waive any term or provision of the
Junior Subordinated Debentures or any document governing or related to them
(including the Indenture identified in Section 7.18) or (c) amend, modify or
waive any term or provision applicable to the Subordinated Notes except to the
extent not otherwise prohibited by this Agreement or the Subordination
Agreement.
7.16 Compliance with ERISA. No Credit Party shall (i) (x) maintain, or
permit any member of the Controlled Group to maintain, or (y) become obligated
to contribute, or permit any member of the Controlled Group to become obligated
to contribute, to any Plan, other than those Plans disclosed on Schedule 5.8(d),
(ii) engage, or permit any member of the Controlled Group to engage, in any
non-exempt "prohibited transaction", as that term is defined in Section 406 of
ERISA and Section 4975 of the Code, (iii) incur, or permit any member of the
Controlled Group to incur, any "accumulated funding deficiency", as that term is
defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or
permit any member of the Controlled Group to terminate, any Plan where such
event could result in any liability of such Credit Party or any member of its
Controlled Group or the imposition of a lien on the property of such Credit
Party or any member of its Controlled Group pursuant to Section 4068 of ERISA,
(v) assume, or permit any member of its 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 its 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 its Controlled Group to fail to comply, with the requirements
of ERISA or the Code or other applicable laws in respect of any Plan, (ix) fail
to meet, or permit any member of its Controlled Group to fail to meet, all
minimum funding requirements under ERISA or the Code or postpone or delay or
allow any member of its Controlled Group to postpone or delay any funding
requirement with respect of any Plan.
7.17 Prepayment of Indebtedness. No Credit Party shall, except as permitted
pursuant to Section 7.18 hereof, at any time, directly or indirectly, prepay any
Indebtedness (other than to Lenders and trade payables in the ordinary course of
business), or repurchase, redeem, retire or otherwise acquire any of its
Indebtedness.
7.18 Subordinated Obligations. No Credit Party shall at any time, directly
or indirectly, pay, prepay, repurchase, redeem, retire or otherwise acquire, or
make any payment on account of any
45
principal of, interest on or premium payable in connection with the repayment or
redemption of the Subordinated Note, except as expressly permitted in the
Subordination Agreement by the terms of the Subordinated Note as in effect on
the Closing Date. Borrower shall be permitted to make distributions to Holdings
in order to permit Holdings to make scheduled payments of interest on the Junior
Subordinated Debentures provided that (a) at the time of any such payment,
Holdings shall have achieved the Required EBITDA, (b) Borrower shall have
Undrawn Availability on the date of, and immediately after giving effect to such
distributions by Borrower and payments of interest by Holdings of $500,000 for
any payments made during March and April, and $1,000,000 for any payments made
during the remaining months of any given calendar year, and (c) there shall not
be in effect any notice from Agent to Borrower stating that Borrower is
prohibited from making such payment, which notice Agent shall be entitled to
give if any Default or Event of Default shall have occurred and be continuing,
provided that, solely in the case of a Default or Event of Default arising from
a violation of a provision of Article IX hereof, such violation shall be
continuing for a period thirty (30) days or more. To the extent that Borrower is
permitted to make a distribution to Holdings pursuant to the preceding sentence,
Holdings shall be permitted to make the corresponding interest payment. In
furtherance of the foregoing restrictions on payments in respect of the Junior
Subordinated Debentures, Holdings hereby appoints Agent as its attorney, with
full power to execute and deliver, in the name and stead of Holdings, notices
invoking deferral of payments in respect of the Junior Subordinated Debentures
as contemplated by Section 3.11 of the indenture governing the Junior
Subordinated Debentures (the "Indenture"), for such periods as Agent may
determine (including any extensions thereof in accordance with the Indenture),
provided that Agent shall not exercise such power until the first to occur of
(a) an Event of Default involving non-payment of the Obligations, (b) an
acceleration of the maturity of the Obligations, and (c) the sixth (6th)
Business Day prior to the date on which an Event of Default would exist under
the Indenture if such deferral were not invoked. Without limiting Agent's right
pursuant to the preceding sentence, Agent agrees to provide Holdings with a copy
of any notice sent by Agent invoking a deferral pursuant to the Indenture.
Holdings further covenants to deliver to Agent, immediately upon Holdings'
receipt thereof, a copy of any notice received by Holdings pursuant to Section
13.4 of the Indenture instituting a payment block with respect to the Junior
Subordinated Debentures.
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 Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed and
delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or
reasonably requested by the Agent to be filed, registered or recorded in
order to create, in favor of Agent, a perfected security interest in or
lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested;
(c) Corporate Proceedings of Borrower. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to
Agent, of the Board of Directors of Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Note and any related
agreements (collectively the "Documents") and (ii) the granting by Borrower
of the security interests in and liens upon the Collateral in each case
certified by the Secretary or an Assistant Secretary of Borrower as of the
Closing Date; and, such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded as
of the date of such certificate;
(d) Incumbency Certificates of Borrower. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement, the Other Documents, any certificate or
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other documents to be delivered by it pursuant hereto, together with
evidence of the incumbency of such Secretary or Assistant Secretary;
(e) Corporate Proceedings of each Guarantor. Agent shall have received
a copy of the resolutions in form and substance reasonably satisfactory to
Agent, of the Board of Directors of Guarantor authorizing the execution,
delivery and performance of this Agreement and the Other Documents to which
it is a party, certified by the Secretary or an Assistant Secretary of each
Guarantor 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;
(f) Incumbency Certificates of each Guarantor. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each
Guarantor, dated the Closing Date, as to the incumbency and signature of
the officers of each Guarantor 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;
(g) Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation of Borrower and each Guarantor, 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 of Borrower and each Guarantor, certified as accurate
and complete by the Secretary of Borrower and such Guarantor;
(h) Good Standing Certificates. Agent shall have received good
standing certificates for Borrower and each Guarantor dated as of a recent
date, issued by the Secretary of State or other appropriate official of
Borrower's and each Guarantor's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's and each Guarantor's business
activities or the ownership of its properties necessitates qualification;
(i) Legal Opinion. Agent shall have received the executed legal
opinion of Blank Rome Xxxxxxx & XxXxxxxx LLP, counsel to the Credit
Parties, in form and substance satisfactory to Agent which shall cover such
matters incident to the transactions contemplated by this Agreement, the
Note, the Other Documents and related agreements as Agent may reasonably
require and each Credit Party hereby authorizes and directs such counsel to
deliver such opinions to Agent and Lenders;
(j) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any of the Credit Parties or any of their respective
officers or directors (A) in connection with this Agreement, the Other
Documents or any of the transactions contemplated thereby and which, in the
reasonable opinion of Agent, is deemed material or (B) which could, in the
reasonable opinion of Agent, have a Material Adverse Effect; and (ii) no
injunction, writ, restraining order or other order of any nature materially
adverse to any Credit Party or the conduct of its business or inconsistent
with the due consummation of the Transactions shall have been issued by any
Governmental Body;
(k) Financial Condition Certificate. Agent shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(k);
(l) Collateral Examination. Agent shall have completed Collateral
examinations including, but not limited to, field examinations, and
received appraisals, the results of which shall be satisfactory in form and
substance to Lenders, of the Receivables, Inventory, General Intangibles,
Leasehold Interests and Equipment of the Credit Parties and all books and
records in connection therewith;
(m) Financial Statements. Agent shall have received a copy of
Holdings' audited consolidated and consolidating financial statements for
the fiscal year ended June 30, 2001, and a copy of Holdings' most recent
interim consolidated financial statements;
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(n) Fees. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date hereunder, including, without
limitation, pursuant to Article III hereof;
(o) Pro Forma Financial Statements. Agent shall have received a copy
of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
(p) EBITDA Projections. Agent shall have received, for purposes of
Section 7.18, projections of Holdings' EBITDA on a rolling 12-month basis
as at the end of each calendar month commencing December 2001 through
December 2004;
(q) Subordination Agreement. The Subordination Agreement shall have
been executed and delivered by all parties thereto and shall be
satisfactory in form and substance to Agent in its sole discretion;
(r) Subordinated Notes. Agent shall have received final executed
copies of the Subordinated Note Documentation which shall contain such
terms and provisions including, without limitation, subordination terms,
satisfactory to Agent, and Borrower shall have received proceeds from the
issuance and sale of the Subordinated Notes of not less than $6,000,000,
net of expenses;
(s) Junior Subordinated Debentures. Agent shall be satisfied that the
terms of the Junior Subordinated Debentures provide that payments of
interest on the Junior Subordinated Debentures may be deferred for up to
sixty (60) months, without giving rise to a default thereunder;
(t) Insurance. Agent shall have received evidence to its satisfaction
that the Credit Parties have in force insurance complying with the
requirements of Section 4.11, reflecting Agent's status as loss payee or
additional insured, as applicable;
(u) Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
(v) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing
of the Receivables and proceeds of the Collateral, subject to Section
4.15(h);
(w) 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;
(x) No Adverse Material Effect. (i) since June 30, 2001, there shall
not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent or Lenders shall have
been proven to be inaccurate or misleading in any material respect;
(y) Leasehold Agreements. Agent shall have received landlord or
warehouseman agreements satisfactory to Agent with respect to all premises
leased by any Credit Party at which Inventory and books and records are
located;
(z) Other Documents. Agent shall have received the executed Other
Documents, all in form and substance satisfactory to Agent;
(aa) Contract Review. Agent shall have reviewed all material contracts
of Borrower including, without limitation, the Trust Preferred Securities,
leases, union contracts, labor contracts,
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vendor supply contracts, license agreements and distributorship agreements
and such contracts and agreements shall be satisfactory in all respects to
Agent;
(bb) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Credit Party
dated as of the date hereof, stating that (i) all representations and
warranties set forth in this Agreement and the Other Documents are true and
correct on and as of such date, (ii) each Credit Party is on such date in
compliance with all the terms and provisions set forth in this Agreement
and the Other Documents and (iii) no Default or Event of Default shall then
have occurred and be continuing;
(cc) Formula Amount. Agent shall have received evidence from Borrower
that the aggregate amount of Eligible Receivables, Seasonal Receivables and
Eligible Inventory is sufficient in value and amount to support Advances in
the amount requested by Borrower on the Closing Date;
(dd) Undrawn Availability. After giving effect to the initial Advances
hereunder, Borrower shall have Undrawn Availability of at least $2,999,983;
and
(ee) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions
shall be satisfactory in form and substance to Agent and its counsel.
8.2 Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations and
warranties made by the Credit Parties 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 such representations and warranties related
solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects as of
such earlier date;
(b) No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date; provided, however that Agent,
in its sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made
shall not be deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be
made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum amount of Advances permitted under Section 2.5 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO CREDIT PARTIES.
Until satisfaction in full of the Obligations and the termination of this
Agreement:
9.1 Disclosure of Material Matters. Each Credit Party shall, promptly upon
learning thereof, report to Agent all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, such Credit Party's reclamation or repossession of, or the
return to
49
such Credit Party of, a material amount of goods or claims or disputes asserted
by any Customer or other obligor.
9.2 Schedules. Borrower shall deliver to Agent on or before the fifteenth
(15th) day of each month as and for the prior month (a) accounts receivable
agings inclusive of reconciliations to the general ledger, (b) accounts payable
schedules inclusive of reconciliations to the general ledger, (c) Inventory
reports and (d) a borrowing base certificate in form and substance reasonably
satisfactory to Agent (which shall be calculated as of the last day of the prior
month and which shall not be binding upon Agent or restrictive of Agent's rights
under this Agreement). In addition, Borrower will deliver to Agent at such
intervals as Agent may reasonably 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 reasonably require including, without
limitation, trial balances and test verifications. Agent shall have the right to
confirm and verify all Receivables by any manner and through any medium it
considers advisable and do whatever it may deem reasonably necessary to protect
its interests hereunder. The items to be provided under this Section are to be
in form satisfactory to Agent and executed by Borrower and delivered to Agent
from time to time solely for Agent's convenience in maintaining records of the
Collateral, and Borrower'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. Borrower shall furnish Agent, concurrently with
the delivery of the financial statements referred to in Sections 9.7 and 9.8,
with a certificate signed by the President of Borrower stating, to the best of
his knowledge, that each Credit Party is in compliance in all material respects
with all Environmental Laws and all federal, state and local laws relating to
occupational safety and health. To the extent that any Credit Party 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 Credit
Party will implement in order to achieve full compliance.
9.4 Litigation. Each Credit Party shall promptly notify Agent in writing of
any litigation, suit or administrative proceeding affecting such Credit 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.
9.5 Material Occurrences. Each Credit Party shall, 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 such Credit Party as of the date of such statements; (c) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject such Credit Party to a tax imposed by Section 4971 of
the Code; (d) each and every default by such Credit Party which might result in
the acceleration of the maturity of any Indebtedness in excess of $100,000,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of such Credit Party
which could reasonably be expected to have a Material Adverse Effect; in each
case describing the nature thereof and the action such Credit Party proposes to
take with respect thereto.
9.6 Government Receivables. Each Credit Party shall notify Agent
immediately if any of its Receivables arise out of contracts between such Credit
Party and the United States, any state, or any department, agency or
instrumentality of any of them.
9.7 Annual Financial Statements. Holdings shall furnish Agent as soon as
filed with the Securities and Exchange Commission and in any event within one
hundred five (105) days after the end of each fiscal year of Holdings, financial
statements of Holdings 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
50
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Holdings and reasonably satisfactory to Agent
(the "Accountants"). The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused this Agreement
to be reviewed, (ii) in making the examination upon which such report was based
either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth the Credit Parties' compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof. In addition, the
reports shall be accompanied by a certificate of Borrower's Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
or the applicable Credit Party with respect to such event, and such certificate
shall have appended thereto calculations which set forth the Credit Parties'
compliance with the requirements or restrictions imposed by Sections 6.5, 6.6,
7.6 and 7.11 hereof.
9.8 Quarterly Financial Statements. Holdings shall furnish Agent as soon as
filed with the Securities and Exchange Commission and in any event within fifty
(50) days after the end of each fiscal quarter, an unaudited consolidated
balance sheet of Holdings and unaudited statements of income and stockholders'
equity and cash flow of Holdings reflecting results of operations from the
beginning of the fiscal year to the end of such quarter and for such quarter,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal and recurring year end adjustments that
individually and in the aggregate are not material to the Credit Parties'
business. The reports shall be accompanied by a certificate signed by the Chief
Financial Officer of Holdings, which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Borrower or the applicable Credit Party with respect to such
default and, such certificate shall have appended thereto calculations which set
forth the Credit Parties' compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof.
9.9 Monthly Financial Statements. Holdings shall furnish Agent within
thirty (30) days after the end of each month, an unaudited consolidated balance
sheet of Holdings and unaudited statements of income and stockholders' equity
and cash flow of Holdings reflecting results of operations from the beginning of
the fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the Credit Parties' business. The
reports shall be accompanied by a certificate of Holdings' Chief Financial
Officer, which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
or the applicable Credit Party with respect to such event and, such certificate
shall have appended thereto calculations which set forth the Credit Parties'
compliance with the requirements or restrictions imposed by Sections 6.5, 6.6,
7.6 and 7.11 hereof.
9.10 Other Reports. Each Credit Party shall 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 such Credit
Party shall send to its stockholders.
9.11 Additional Information. Each Credit Party shall 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 Note have been complied with by the Credit Parties
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 the any Credit
51
Party's opening of any new office or place of business or closing of any
existing office or place of business, and (c) promptly upon such Credit Party's
learning thereof, notice of any labor dispute to which a Credit 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 a Credit Party is
a party or by which a Credit Party is bound.
9.12 Projected Operating Budget. Borrower shall furnish Agent, no later
than thirty (30) days prior to the beginning of Borrower's fiscal years
commencing with fiscal year 2001, a month by month projected operating budget
and cash flow of Borrower 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 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.
9.13 Variances From Operating Budget. Borrower shall furnish Agent,
concurrently with the delivery of the financial statements referred to in
Section 9.7 and each monthly report, a written report summarizing all material
variances from budgets submitted by Borrower pursuant to Section 9.12 and a
discussion and analysis by management with respect to such variances.
9.14 Notice of Suits, Adverse Events. Each Credit Party shall furnish Agent
with prompt notice of (i) any lapse or other termination of any Consent issued
by any Governmental Body or any other Person that is material to the operation
of such Credit Party'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 such Credit Party with any Governmental
Body or Person, if such reports indicate any material change in the business,
operations, affairs or condition of such Credit Party, or if copies thereof are
requested by Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
such Credit Party.
9.15 ERISA Notices and Requests. Each Credit Party shall furnish Agent with
immediate written notice in the event that (i) such Credit Party or any member
of its 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 Credit Party or any member of its 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) such Credit Party or any
member of its 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 Credit Party or any member of its 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 such Credit Party or any member of its Controlled Group with respect
to such request, (iv) any increase in the benefits of any existing Plan or the
establishment of any new Plan or the commencement of contributions to any Plan
to which such Credit Party or any member of its the Controlled Group was not
previously contributing shall occur, (v) such Credit Party or any member of its
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) Borrower or any member of the Controlled Group shall
receive any favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of a Plan under Section 401(a) of
the Code, together with copies of each such letter; (vii) such Credit Party or
any member of its Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) such Credit Party or any member of its 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)
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
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9.16 Additional Documents. Each Credit Party shall 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 Borrower (a) to pay any principal on the Obligations when
due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or any Other Document or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities (except liabilities
referred to in clause (b) below), including, but not limited to, any failure to
comply with the limitations on outstanding Advances hereunder, when due, or (b)
to make any payment of interest on the Obligations or any other payment, fee or
charge provided for herein, which failure, in the case of this clause (b),
continues unremedied for more than three (3) calendar days;
10.2 any representation or warranty made or deemed made by any Credit 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 Credit Party to (i) furnish financial information when
due or when requested, or (ii) permit the inspection of its books or records in
accordance with Section 4.10;
10.4 issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Credit Party's property;
10.5 except as otherwise provided for in this Article X, failure or neglect
of any Credit Party to perform, keep or observe any term, provision, condition,
covenant contained in (a) Article VII or any of Sections 4.3, 4.11, 4.15(h), 6.5
and 6.6 hereof or any undertaking set forth on any Schedule hereto or (b) any
other provision of this Agreement or any other agreement or arrangement, now or
hereafter entered into between any Credit Party and Agent or any Lender,
provided, solely in the case of this clause (b), that if such failure or neglect
is by its nature susceptible of cure, the Credit Parties shall have a period of
thirty (30) days from the occurrence of such failure or neglect within which to
cure same before such failure or neglect becomes an Event of Default;
10.6 any judgment or judgments are rendered or judgment liens filed against
any Credit Party for an aggregate amount in excess of $250,000 which within
thirty (30) days of such rendering or filing is not either satisfied, stayed,
bonded or discharged of record;
10.7 any Credit 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 sixty (60) 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 Credit 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 there shall exist or occur any event or events or condition or
conditions not otherwise referred to in this Article X (which may include,
without limitation, a default of the obligations of any Credit Party under any
other agreement to which it is a party) which have, individually or in the
aggregate, a
53
material adverse effect on (a) the condition, operations, assets or business of
the Credit Parties taken as a whole or of Borrower, (b) Borrower's ability to
pay the Obligations in accordance with the terms thereof, (c) the value of the
Collateral taken as a whole, 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;
10.10 any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.11 an event of default has occurred under the Subordination Agreement or
pursuant to the terms of the Subordinated Notes which default shall not have
been cured or waived within any applicable grace or cure period;
10.12 an event of default shall occur with respect to any other
Indebtedness of a Credit Party (including, without limitation, the Subordinated
Notes and the Junior Subordinated Debentures but excluding trade debt unless
evidenced by a note or similar instrument) and such event of default shall not
have been cured or waived within any applicable grace or cure period.
10.13 termination or breach of the obligations of any Guarantor hereunder
or under any other agreement executed and delivered to Agent in connection with
the Obligations of Borrower, or if any Guarantor attempts to terminate,
challenges the validity of, or its liability under, this Agreement or any such
other agreement;
10.14 any Change of Ownership or Change of Control shall occur;
10.15 any material provision of this Agreement shall, for any reason, cease
to be valid and binding on any Credit Party, or any Credit Party shall so claim
in writing to Agent;
10.16 (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of any
Credit Party, the continuation of which is material to the continuation of such
Credit Party's business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, tradename or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (c) schedule or conduct a hearing on the renewal of any license,
permit, trademark, tradename or patent necessary for the continuation of any
Credit Party's business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, tradename or patent; (ii) any
agreement which is necessary or material to the operation of any Credit Party's
business shall be revoked or terminated and not replaced by a substitute
acceptable to Agent within thirty (30) days after the date of such revocation or
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect;
10.17 any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Credit Party or the title and rights of any Credit
Party which is the owner of any material portion of the Collateral shall have
become the subject matter of litigation which might, in the opinion of Agent,
upon final determination, result in impairment or loss of the security provided
by this Agreement or the Other Documents;
10.18 the operations of any Credit Party's material manufacturing facility
are interrupted at any time for more than 72 hours during any period of 14
consecutive days, unless such Credit Party shall (i) be entitled to receive for
such period of interruption, proceeds of business interruption insurance
sufficient to assure that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive three month period
immediately preceding the initial date of interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty
(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of
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clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if such Credit Party shall be receiving the proceeds of business
interruption insurance for a period of thirty (30) consecutive days;
10.19 certificates representing the Subsidiary Stock, together with stock
powers therefor duly executed in blank, shall not have been delivered to Agent
by 5 p.m. Pacific time on November 27, 2001; or
10.20 an event or condition specified in Sections 7.16 or 9.15 hereof shall
occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Credit Party
or any member of its Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
any of the Credit Parties 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 such Credit Party. Upon the occurrence
of any Event of Default, Agent shall have the right to exercise any and all
other rights and remedies provided for herein, under the Uniform Commercial Code
and at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may
enter any of the Credit Parties' premises or other premises without legal
process and without incurring liability to any Credit 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 Credit 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 Borrower reasonable notification
of such sale or sales, it being agreed that in all events written notice mailed
to Borrower at least ten (10) days prior to such sale or sales is reasonable
notification. At any public sale Agent or any Lender may bid for and become the
purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by the Credit Parties. In
connection with the exercise of the foregoing remedies, Agent is granted
permission to use all of the Credit Parties' (a) 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 and (b) Equipment for the purpose of completing the
manufacture of unfinished goods. The proceeds realized from the sale of any
Collateral shall be applied in the order set forth in Section 11.5 hereof. If
any deficiency shall arise, the Credit Parties shall remain liable to Agent and
Lenders therefor.
11.2 Agent's Discretion. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent's or Lenders' rights hereunder.
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11.3 Setoff. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence and during the continuance of an
Event of Default hereunder, Agent and such Lender shall have a right to apply
any Credit Party's property held by Agent and such Lender to reduce the
Obligations.
11.4 Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5 Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent's
discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of the Agent in
connection with enforcing its rights and the rights of the Lenders under this
Agreement and the Other Documents and any protective advances made by the Agent
with respect to the Collateral under or pursuant to the terms of this Document;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of each of the
Lenders in connection with enforcing its rights under this Agreement and the
Other Documents or otherwise with respect to the Obligations owing to such
Lender;
FOURTH, to the payment of all of the Obligations consisting of accrued fees
and interest;
FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit);
SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "FIFTH" above;
SEVENTH, to the payment of the surplus, if any, to whomever may be lawfully
entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any
amounts available for distribution pursuant to clause "FIFTH" above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account and applied
(A) first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 11.5.
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XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice. Each Credit 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 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 Borrower and the
other Credit Parties, Agent and each Lender, shall become effective on the date
hereof and shall continue in full force and effect until November 19, 2004 (the
"Term") unless sooner terminated as herein provided. Borrower may terminate this
Agreement at any time upon thirty (30) days' prior written notice upon payment
in full of the Obligations.
13.2 Termination. The termination of the Agreement shall not affect
Borrower's, Guarantors', 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 Borrower's
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations have been paid or performed in full after the termination
of this Agreement or the Credit Parties have furnished Agent and Lenders with an
indemnification reasonably satisfactory to Agent and Lenders with respect
thereto. Accordingly, each of the Credit Parties waives any rights which it may
have under the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such termination statements to the Credit Parties, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations 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. GUARANTY.
14.1 Guaranty. Each Guarantor hereby unconditionally guaranties the full
and prompt payment and performance when due, whether by acceleration or
otherwise, and at all times thereafter, of
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any and all present and future Obligations of any type or nature of Borrower or
any other Person (including, without limitation, any other Guarantor) to Agent
and the Lenders arising under or related to this Agreement or any Other Document
and/or any one or more of them, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or noncontingent, including
obligations of performance as well as obligations of payment, including interest
on any of the foregoing whether accruing before or after any bankruptcy or
insolvency case or proceeding involving any Guarantor, Borrower or any other
Person and, if interest on any portion of such obligations ceases to accrue by
operation of law by reason of the commencement of such case or proceeding,
including such interest as would have accrued on any such portion of such
obligations if such case or proceeding had not commenced, and further agrees to
pay all expenses (including reasonable attorneys' fees and legal expenses) paid
or incurred by Agent or any Lender in endeavoring to collect any of the
foregoing, or any part thereof, and in enforcing the obligations of such
Guarantor (collectively, the "Liabilities").
Each Guarantor agrees that, in the event of the dissolution, bankruptcy or
insolvency of Borrower, or the inability or failure of Borrower to pay debts as
they become due, or an assignment by Borrower for the benefit of creditors, or
the commencement of any case or proceeding in respect of Borrower under any
bankruptcy, insolvency or similar laws, and if such event shall occur at a time
when any of the Liabilities may not then be due and payable, Guarantor will pay
to Agent, for the benefit of Agent and the Lenders, forthwith the full amount
which would be payable hereunder by Guarantor if all Liabilities were then due
and payable.
This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty of payment and performance (and not of collection), and
shall remain in full force and effect (notwithstanding, without limitation, the
dissolution of any Guarantor).
14.2 Guarantors' Obligations Unconditional. The covenants and agreements of
each Guarantor set forth in this Guaranty shall be primary obligations of such
Guarantor, and such obligations shall be continuing, absolute and unconditional,
shall not be subject to any counterclaim, setoff, deduction, diminution,
abatement, recoupment, suspension, deferment, reduction or defense (other than
full and strict compliance by Guarantor with its obligations hereunder), whether
based upon any claim that Borrower or any other Person may have against Agent,
any Lender or any other Person or otherwise, and shall remain in full force and
effect without regard to, and shall not be released, discharged or in any way
affected by, any circumstance or condition whatsoever (whether or not any
Guarantor or Borrower shall have any knowledge or notice thereof) including,
without limitation:
A. any amendment, modification, addition, deletion, supplement or renewal
to or of or other change in the Liabilities or this Agreement or the
Other Documents or any related instrument or agreement, or any other
instrument or agreement applicable thereto or any of the parties to
such agreements, or to any collateral, or any furnishing or acceptance
of additional security for, guaranty of or right of offset with
respect to, any of the Liabilities; or the failure of any security or
the failure of Agent or any Lender to perfect or insure any interest
in any Collateral;
B. any failure, omission or delay on the part of any Credit Party, Agent
or any Lender to conform or comply with any term of any instrument or
agreement referred to in clause (A) above;
C. any waiver, consent, extension, indulgence, compromise, release or
other action or inaction under or in respect of any instrument,
agreement, guaranty, right of offset or security referred to in clause
(A) above or any obligation or liability of any Credit Party, Agent or
any Lender, or any exercise or non-exercise by Agent or any Lender of
any right, remedy, power or privilege under or in respect of any such
instrument, agreement, guaranty, right of offset or security or any
such obligation or liability;
D. any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding with respect to any
Credit Party, Agent, any Lender or
58
any other Person or any of their respective properties or creditors,
or any action taken by any trustee or receiver or by any court in any
such proceeding;
E. any limitation on the liability or obligations of any Person under the
Loan Documents or any other related instrument or agreement, the
Liabilities, any collateral security for the Liabilities or any other
guaranty of the Liabilities or any discharge, termination,
cancellation, frustration, irregularity, invalidity or
unenforceability, in whole or in part, of any of the foregoing, or any
other agreement, instrument, guaranty or security referred to in
clause (A) above or any term of any thereof;
F. any merger or consolidation of Borrower or any Guarantor into or with
any other Person or any sale, lease or transfer of any of the assets
of Borrower or any Guarantor to any other Person;
G. any change in the ownership of any of the equity interests of Borrower
or any Guarantor or any corporate change in Borrower or any Guarantor;
or
H. any other occurrence or circumstance whatsoever, whether similar or
dissimilar to the foregoing and any other circumstance that might
otherwise constitute a legal or equitable defense or discharge of the
liabilities of a guarantor or surety or that might otherwise limit
recourse against a Guarantor.
The obligations of each Guarantor set forth herein constitute the full
recourse obligations of such Guarantor, enforceable against it to the full
extent of all its assets and properties.
Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Liabilities and notice of or proof of
reliance by Agent and the Lenders upon this Guaranty or acceptance of this
Guaranty, and the Liabilities, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Guaranty. Each
Guarantor unconditionally waives, to the extent permitted by law: (a) acceptance
of this Guaranty and proof of reliance by Agent and the Lenders hereon; (b)
notice of any of the matters referred to in the foregoing clauses A through H
hereof, or any right to consent or assent to any thereof; (c) all notices that
may be required by statute, rule of law or otherwise, now or hereafter in
effect, to preserve intact any rights against Guarantor, including without
limitation, any demand, presentment, protest, proof or notice of nonpayment
under this Agreement or any Other Document or any related instrument or
agreement, and notice of default or any failure on the part of any Credit Party
to perform and comply with any covenant, agreement, term or condition of this
Agreement, any Other Document or any related instrument or agreement; (d) any
right to the enforcement, assertion or exercise against any Credit Party of any
right, power, privilege or remedy conferred in this Agreement, any Other
Document or any related instrument or agreement or otherwise; (e) any
requirement of diligence on the part of any Person; (f) any requirement of Agent
or any Lender to take any action whatsoever, to exhaust any remedies or to
mitigate the damages resulting from a default under this Agreement, any Other
Document or any related instrument or agreement; (g) any notice of any sale,
transfer or other disposition by any Person of any right under, title to or
interest in this Agreement, any Other Document or any related instrument or
agreement relating thereto or any collateral for the Liabilities; and (h) any
other circumstance whatsoever that might otherwise constitute a legal or
equitable discharge, release or defense of a guarantor or surety, or that might
otherwise limit recourse against a Guarantor (including, without limitation, any
and all benefits under California Civil Code Sections 2809, 2810, 2819, 2822,
2825, 2845, 2846, 2847, 2848, 2849, 2850, 2899 and 3433).
Without limiting the foregoing, each Guarantor hereby absolutely,
unconditionally and irrevocably waives and agrees not to assert or take
advantage of any defense based upon an election of remedies by Agent or any
Lender, including an election to proceed by non-judicial rather than judicial
foreclosure, which destroys or impairs any right of subrogation of such
Guarantor or the right of such Guarantor to proceed against any Person for
reimbursement or both.
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Each Guarantor agrees that this Guaranty shall be automatically reinstated
if and to the extent that for any reason any payment by or on behalf of Borrower
or any other Guarantor is rescinded or must be otherwise restored by Agent or
any Lender, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
Each Guarantor further agrees that, without limiting the generality of this
Guaranty, if an Event of Default shall have occurred and be continuing and Agent
or any Lender is prevented by applicable law from exercising its remedies under
the Loan Documents, Agent and the Lenders shall be entitled to receive hereunder
from each Guarantor, upon demand therefor, the sums which would have otherwise
been due from Borrower had such remedies been exercised.
14.3 Subordination.
A. Subordination to Senior Obligations. (a) Each Guarantor hereby
covenants and agrees that, as provided herein, all indebtedness,
intercompany charges and other sums owing and claims of any nature
whatsoever owed to such Guarantor by any other Credit Party ("Intercompany
Obligations"), the payment of the principal of and interest thereon and any
lien or security interest therefor are hereby expressly made subordinate
and subject in right of payment to the prior payment in full of: (i) all
obligations now or hereafter incurred by any of the Credit Parties under
any of the Loan Documents, (ii) interest thereon (including, without
limitation, any such interest accruing subsequent to the filing by or
against any of the Credit Parties of any proceeding brought under Chapter
11 of 11 U.S.C. ss.101 et seq., as from time to time hereafter amended and
any successor or similar statute ("Bankruptcy Code"), whether or not such
interest is allowed as a claim pursuant to the provisions of such Chapter),
and (iii) all fees, expenses, indemnities and other amounts now or
hereafter payable pursuant to or in connection with the Loan Agreement and
all other Loan Documents (collectively the "Senior Obligations"), and any
lien on any property or asset securing the Senior Obligations.
(b) No payment or prepayment of any Intercompany Obligations (whether
of principal, interest or otherwise) shall be made by any Credit Party at
any time prior to the indefeasible payment in full, in cash, of the Senior
Obligations, provided that the Credit Parties may make payments (not
prepayments) of Intercompany Obligations in the ordinary course of business
to the extent that at the time of, and immediately after giving effect to,
any such payment, no Default or Event of Default exists.
B. Payment Over of Proceeds Upon Bankruptcy. In the event of (i) any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to any Credit Party or to its creditors as
such, or to its properties or assets, or (ii) any liquidation, dissolution
or other winding-up of any Credit Party, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshaling of assets
or liabilities of any Credit Party, then and in any such event the holders
of Senior Obligations shall be entitled to receive payment in full of all
amounts due on or in respect of Senior Obligations, in cash or in any other
manner acceptable to the holders of Senior Obligations, before any Credit
Party is entitled to receive any payment or distribution of any kind or
character on account of principal of or interest on any Intercompany
Obligations of such Credit Party, and to that end the holders of Senior
Obligations shall be entitled to receive, for application to the payment
thereof, any payment or distribution of assets of such Credit Party of any
kind or character including, without limitation, securities that are
subordinated in right of payment to all Senior Obligations to substantially
the same extent as, or to a greater extent than, as provided in this
Guaranty, that may be payable or deliverable in respect of this Guaranty in
any such case, proceeding, dissolution, liquidation or other winding-up or
event referred to in clauses (i) through (iii) above.
C. Payments to be Held in Trust. In the event that a Guarantor shall
receive any payment or distribution of assets of any Credit Party of any
kind or character in respect of the Intercompany Obligations in
contravention of the foregoing Subsection B, then and in such event such
payment or distribution shall be received and held by such Credit Party in
trust for Bank, and shall be paid over or delivered forthwith to Bank, the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of the
Credit Party in trust for
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the holders of the Senior Obligations, and for application to the payment
of, all Senior Obligations remaining unpaid, to the extent necessary to pay
all Senior Obligations in full, in cash or in any other manner acceptable
to Agent, after giving effect to any concurrent payment or distribution to
or for the Senior Obligations.
D. Waiver. Each Guarantor hereby waives presentment, demand for
payment, notice of protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement hereof.
E. Legend. Each Guarantor hereby covenants to cause any instrument
from time to time evidencing any Intercompany Obligations to have fixed
upon it a legend which reads substantially as follows:
"This instrument is subject to Section 14.3 of that certain
Revolving Credit, Term Loan, Guaranty and Security Agreement
dated as of November 15, 2001, among Easy Gardener, Inc.,
U.S. Home & Garden, Inc., certain of their respective
Subsidiaries, PNC Bank, National Association, as Agent, and
various financial institutions, as Lenders, which, among
other things, contains provisions subordinating the maker's
obligations to the holders of Senior Obligations (as defined
in said Agreement), to which provisions the holder of this
instrument, by acceptance hereof, agrees."
F. No Disposition. No Guarantor will sell, assign, pledge, encumber or
otherwise dispose of any of the Intercompany Obligations owed to it,
provided that such Guarantor may forgive Intercompany Obligations or
contribute Intercompany Obligations to a Credit Party.
14.4 Waiver of Subrogation. Each Guarantor hereby irrevocably waives,
solely for the benefit of Agent and the Lenders, until the indefeasible
repayment in full of the Obligations, any claim or other rights which it may now
or hereafter acquire that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Guaranty, including any
right of subrogation, reimbursement, exoneration, or indemnification, any right
to participate in any claim or remedy of Agent and the Lenders against any of
the Credit Parties or any of their assets which Agent or any Lender now have or
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including the right to take or receive
from any Credit Party, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights. If any amount shall be paid to Guarantor in violation of the preceding
sentence and the Liabilities shall not have been indefeasibly paid in cash, such
amount shall be deemed to have been paid to Guarantor for the benefit of, and
held in trust for, Agent and the Lenders, and shall forthwith be paid to Agent
to be credited and applied pursuant to the terms of this Agreement. Guarantor
acknowledges that it will receive substantial direct and indirect benefits from
the financing arrangements contemplated by this Agreement and that the waiver
set forth in this paragraph is knowingly made in contemplation of such benefits.
14.5 Fraudulent Transfer Limitation. If, in any action to enforce this
Guaranty or any proceeding to allow or adjudicate a claim under this Guaranty, a
court of competent jurisdiction determines that enforcement of this Guaranty
against any Guarantor for the full amount of the Guaranteed Obligations is not
lawful under, or would be subject to avoidance under, Xxxxxxx 000 xx xxx Xxxxxx
Xxxxxx Bankruptcy Code or any applicable provision of comparable state law, the
liability of such Guarantor under this Guaranty shall be limited to the maximum
amount lawful and not subject to avoidance under such law.
14.6 Contribution Among Guarantors. The Guarantors desire to allocate among
themselves, in a fair and equitable manner, their rights of contribution from
each other when any payment is made by one of the Guarantors under this
Guaranty. Accordingly, if any payment is made by a Guarantor under this Guaranty
(a "Funding Guarantor") that exceeds its Fair Share, the Funding Guarantor shall
be entitled to a contribution from each other Guarantor in the amount of such
other Guarantor's Fair Share
61
Shortfall, so that all such contributions shall cause each Guarantor's Aggregate
Payments to equal its Fair Share. For these purposes:
(a) "Fair Share" means, with respect to a Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount of such Guarantor to (y) the aggregate Adjusted Maximum Amounts of
all Guarantors, multiplied by (ii) the aggregate amount paid on or before
such date by all Funding Guarantors under this Guaranty.
(b) "Fair Share Shortfall" means, with respect to a Guarantor as of
any date of determination, the excess, if any, of the Fair Share of such
Guarantor over the Aggregate Payments of such Guarantor.
(c) "Adjusted Maximum Amount" means, with respect to a Guarantor as of
any date of determination, the maximum aggregate amount of the liability of
such Guarantor under this Guaranty, limited to the extent required under
Section 14.5 (except that, for purposes solely of this calculation, any
assets or liabilities arising by virtue of any rights to or obligations of
contribution under this Section 14.6 shall not be counted as assets or
liabilities of such Guarantor).
(d) "Aggregate Payments" means, with respect to a Guarantor as of any
date of determination, the aggregate net amount of all payments made on or
before such date by such Guarantor under this Guaranty (including, without
limitation, under this Section 14.6).
The amounts payable as contributions hereunder shall be determined by the
Funding Guarantor as of the date on which the related payment or distribution is
made by the Funding Guarantor, and such determination shall be binding on the
other Guarantors absent manifest error. The allocation and right of contribution
among the Guarantors set forth in this Section 14.6 shall not be construed to
limit in any way the liability of any Guarantor under this Guaranty.
14.7 Future Guarantors. Any other Person who may hereafter become a
Subsidiary of any Credit Party may and shall become a Guarantor under this
Agreement and become bound by the terms and conditions hereof by executing and
delivering an Instrument of Joinder.
14.8 Joint and Several Obligation. This Guaranty and all liabilities of
each Guarantor hereunder shall be the joint and several obligation of each
Guarantor and may be freely enforced against each Guarantor, for the full amount
of the Liabilities (subject to Section 14.5), without regard to whether
enforcement is sought or available against any other Guarantor.
14.9 No Waiver. No delay in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other right or remedy; nor shall any modification or waiver of any of the
provisions of this Guaranty be binding upon Agent and the Lenders except as
expressly set forth in a writing duly signed and delivered on their behalf.
14.10 Representations and Warranties. Each Guarantor hereby expressly
reaffirms each representation and warranty made in this Agreement with respect
to such Guarantor and its property.
XV. REGARDING AGENT.
15.1 Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3 and 3.4 and the Fee Letter), charges and collections (without giving effect
to
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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.
15.2 Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by the Credit Parties or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Credit 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 Credit Party.
The duties of Agent as respects the Advances to Borrower 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.
15.3 Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of the Credit Parties 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 the
Credit Parties. 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 the Credit Parties 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 Documents, or of the financial condition of the Credit
Parties, 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 the Credit Parties, 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
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower, provided that Borrower's
satisfaction need not be sought if at the time such successor Agent is
designated there exists an Event of Default.
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 XV
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
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15.4 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 Documents, 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.
15.5 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.
15.6 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 Credit
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.
15.7 Indemnification. To the extent Agent is not reimbursed and indemnified
by the Credit Parties, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Documents; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
15.8 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 the Credit
Parties (and any of them) as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Credit Parties for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders.
15.9 Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 and borrowing
base calculations from the Credit Parties pursuant to the terms of this
Agreement, Agent will promptly furnish such documents and information to
Lenders.
15.10 Credit Parties' Undertaking to Agent. Without prejudice to its
obligations to Lenders under the other provisions of this Agreement, each Credit
Party 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 Credit Party'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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XVI. MISCELLANEOUS.
16.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against any Credit Party with respect to any of the Obligations, this
Agreement, the Other Documents 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 Credit 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 Credit 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 such Credit Party 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. 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 Credit Party in the courts of any other
jurisdiction. Each Credit 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. Each Credit
Party waives the right to remove any judicial proceeding brought against it in
any state court to any federal court. Any judicial proceeding by a Credit 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 County of New York, State of New York.
16.2 Entire Understanding. (a) This Agreement and the documents executed
concurrently herewith contain the entire understanding between the Credit
Parties, 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 the Credit
Parties', 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 Credit Party 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 the Credit Parties 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 the
applicable Credit Party or Credit Parties, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any
manner the rights of Lenders, Agent or the Credit Parties thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage, the maximum dollar
commitment of any Lender or the Maximum Revolving Advance Amount.
(ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce
any fee payable by Borrower 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).
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(iv) release any Collateral during any calendar year (other than
in accordance with the provisions of this Agreement) having an
aggregate value in excess of $1,000,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving
effect thereto the total of Revolving Advances outstanding hereunder
would exceed the Formula Amount for more than sixty (60) consecutive
Business Days or exceed one hundred and ten percent (110%) of the
Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in
effect on the Closing Date.
(viii) release any Guarantor.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon the Credit Parties, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, the Credit Parties, Agent and Lenders
shall be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrower and/or the other Credit Parties. In the event PNC elects to
require any Lender to assign its interest to PNC or to the Designated Lender,
PNC will so notify such Lender in writing within forty-five (45) days following
such Lender's denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the
Designated Lender, as appropriate, and Agent.
Notwithstanding (a) the existence of a Default or an Event of Default, (b)
that any of the other applicable conditions precedent set forth in Section 8.2
hereof have not been satisfied or (c) any other provision of this Agreement,
Agent may at its discretion and without the consent of the Required Lenders,
voluntarily permit the outstanding Revolving Advances at any time to exceed an
amount equal to the sum of (i) the Formula Amount minus (ii) the amount of
minimum Undrawn Availability required by Section 8.1(ff) hereof at such time
(such sum, the "Overadvance Threshold Amount") by up to ten percent (10%) of the
Overadvance Threshold Amount for up to thirty (30) consecutive Business Days
(the "Out-of-Formula Loans"). If Agent is willing in its sole and absolute
discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be
payable on demand and shall bear interest at the Default Rate; provided that, if
Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed
thereby to have changed the limits of Section 2.1(a). For purposes of this
Section 16.2, the discretion granted to Agent hereunder shall not preclude
involuntary overadvances that may result from time to time due to the fact that
the Overadvance Threshold Amount was unintentionally exceeded for any reason,
including, but not limited to, Collateral previously deemed to be "Eligible
Receivables," "Seasonal Receivables" or "Eligible Inventory," as applicable,
becomes ineligible, collections of Receivables applied to reduce outstanding
Revolving Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the or
Overadvance Threshold Amount by more than ten percent (10%), Agent shall use its
efforts to have Borrower decrease such excess in as expeditious a manner as is
practicable under the circumstances and not inconsistent with the reason for
such excess. Revolving
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Advances made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be
decreased in accordance with the preceding sentence.
In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, the Agent is hereby authorized by
Borrower, the Guarantors and the Lenders, from time to time in the Agent's sole
discretion, (A) after the occurrence and during the continuation of a Default or
an Event of Default, or (B) at any time that any of the other applicable
conditions precedent set forth in Section 8.2 hereof have not been satisfied, to
make Revolving Advances to Borrower on behalf of the Lenders which the Agent, in
its reasonable business judgment, deems necessary or desirable (a) to preserve
or protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (c) to pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.
16.3 Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
each Credit Party, Agent, each Lender, all future holders of the
Obligations and their respective successors and assigns, except that no
Credit 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) The Credit Parties acknowledge 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"), provided, that any such transfer
shall be in a minimum amount of $5,000,000. 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 Borrower 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 Borrower 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
Credit 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 with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part
of its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks
or financial institutions may commit to make Advances hereunder (each a
"Purchasing Lender"), in minimum amounts of not less than $5,000,000,
pursuant to a Commitment Transfer Supplement, executed by a Purchasing
Lender, the transferor Lender, and Agent and delivered to Agent for
recording. Upon such execution, delivery, acceptance and recording, from
and after the transfer effective date determined pursuant to such
Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer
Supplement, have the rights and obligations of a Lender thereunder with a
Commitment Percentage as set forth therein, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to
the extent, and only to the extent, necessary to reflect the addition of
such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Each Credit Party hereby consents to the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the
67
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. Each Credit Party 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 each Lender and the outstanding
principal, accrued and unpaid interest and other fees due hereunder. The
entries in the Register shall be conclusive, in the absence of manifest
error, and each Credit Party, 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 Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $3,500 payable by the applicable Purchasing Lender upon the
effective date of each transfer or assignment to such Purchasing Lender.
(e) Each Credit Party authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or
Purchasing Lender any and all financial information in such Lender's
possession concerning the Credit Parties which has been delivered to such
Lender by or on behalf of any Credit Party pursuant to this Agreement or in
connection with such Lender's credit evaluation of the Credit Parties.
16.4 Application of Payments. Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Credit
Party makes a payment or Agent or any Lender receives any payment or proceeds of
the Collateral for the Credit Parties' 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. The Credit Parties, jointly and severally, shall indemnify
Agent, each Lender and each of their respective officers, directors, Affiliates,
attorneys, employees and agents from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against Agent or any Lender in any litigation, proceeding or
investigation instituted or conducted by any governmental agency or
instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the Other Documents, whether or not Agent or any Lender is a party
thereto, except to the extent that any of the foregoing arises out of the gross
negligence or willful misconduct of the party being indemnified.
16.6 Notice. Any notice or request hereunder may be given to any Credit
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, request, demand,
direction or other communication (for purposes of this Section 16.6 only, a
"Notice") to be given to or made upon any party hereto under any provision of
this Loan Agreement shall be given or made by telephone or in writing (which
includes by means of electronic transmission, including, but not limited to, an
email, or facsimile transmission or by setting forth such Notice on a site on
the World Wide Web (a "Website Posting") if Notice of such Website Posting
(including the information necessary to access such site) has previously been
delivered to the applicable parties hereto by another means set forth in this
Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:
(a) In the case of hand-delivery, when delivered;
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(b) If given by mail, four (4) days after such Notice is deposited
with the United States Postal Service, with first-class postage prepaid,
return receipt requested;
(c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than
the next Business Day by hand delivery, a facsimile or electronic
transmission, a Website Posting or an overnight courier delivery of a
confirmatory Notice (received at or before noon on such next Business Day);
(d) In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party
sending such Notice receives confirmation of the delivery thereof from its
own facsimile machine;
(e) In the case of electronic transmission, when actually received;
(f) In the case of a Website Posting, upon delivery of a Notice of
such posting (including the information necessary to access such site) by
another means set forth in this Section 16.6; and
(g) If given by any other means (including by overnight courier), when
actually received.
Any Lender giving a Notice to a Credit Party shall concurrently send a copy
thereof to the Agent, and the Agent shall promptly notify the other Lenders of
its receipt of such Notice.
(i) If to Agent or PNC at: PNC Bank, National Association
0 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
And
PNC Bank
Agency Services Department
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Manatt, Xxxxxx & Xxxxxxxx, LLP
00000 Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(ii) If to a Lender other than Agent, as specified on the
signature pages hereof
(iii) If to any Credit Party:
Easy Gardener, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxx, Xxxxx 00000-0000
Attention: Xxxxxxx Xxxx, CFO
Facsimile: (000) 000-0000
69
and: U.S. Home & Garden
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Chairman
CEO and President
Facsimile: (000) 000-0000
with a copy to: Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
And
Blank Rome Xxxxxx Xxxxxxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Ethan Seer, Esquire
Facsimile: (000) 000-0000
16.7 Survival. The obligations of the Credit Parties under Sections 2.2(f),
3.7, 3.8, 3.9, 3.10, 4.19(h), 15.7 and 16.5 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations.
16.8 Severability. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
16.9 Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent on its behalf or on behalf of Lenders 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 Credit 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 Borrower's
Account and shall be part of the Obligations, provided that the fees of
attorneys to individual Lenders may not be so charged with respect to matters
not involving a restructuring of the Obligations or enforcement matters
following an Event of Default. Without in any way limiting Agent's right to any
such payment or to charge Borrower's Account in payment thereof, Agent agrees to
furnish to Borrower notice of each payment so charged to Borrower's Account.
16.10 Injunctive Relief. Each Credit Party that, in the event that any of
the Credit Parties fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
16.11 Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to any Credit Party for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
70
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; Facsimile Signatures. This Agreement may be executed in
any number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.
16.14 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15 Confidentiality; Sharing Information. (a) Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent's, such Lender's and such Transferee's customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential information (a) to its
examiners, affiliates, outside auditors, counsel and other professional advisors
who shall also agree to maintain the confidentiality thereof, (b) to Agent, any
Lender or to any prospective Transferees and Purchasing Lenders, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by applicable law or court order, Agent, each Lender and each
Transferee shall use its best efforts prior to disclosure thereof, to notify
Borrower 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 Credit 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.
(b) Each Credit Party acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided
to such Credit Party or one or more of its Affiliates (in connection with
this Agreement or otherwise) by any Lender or by one or more Subsidiaries
or Affiliates of such Lender and each Credit Party hereby authorizes each
Lender to share any information delivered to such Lender by such Credit
Party and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Lender to enter into this Agreement, to any such
Subsidiary or Affiliate of such Lender, it being understood that any such
Subsidiary or Affiliate of any Lender receiving such information shall be
bound by the provisions of this Section 16.15 as if it were a Lender
hereunder. Such authorization shall survive the repayment of the other
Obligations and the termination of the Loan Agreement.
16.16 Publicity. Each Credit Party and each Lender hereby authorizes Agent
to make appropriate announcements of the financial arrangement entered into
among the Credit Parties, Agent and Lenders, including, without limitation,
announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem
appropriate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]
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Each of the parties has signed this Agreement as of the day and year first
above written.
Borrower: EASY GARDENER, INC.
---------
ATTEST:
By:____________________________
__________________________ Name:__________________________
Title:_________________________
PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
By:____________________________
Name:__________________________
Title:_________________________
PNC Bank, National Association
0 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
Commitment Percentage: ____%
U.S. HOME & GARDEN INC.,
as Guarantor
By:____________________________
Name:__________________________
Title:_________________________
_______________________________
Address
XXXXXXXXX CONSUMER PRODUCTS GROUP, INC.,
as Guarantor
By:____________________________
Name:__________________________
Title:_________________________
_______________________________
Address
72
XXXXXXXXX CONSUMER PRODUCTS, INC.,
as Guarantor
By:____________________________
Name:__________________________
Title:_________________________
_______________________________
Address
GOLDEN WEST AGRI-PRODUCTS, INC.,
as Guarantor
By:____________________________
Name:__________________________
Title:_________________________
_______________________________
Address
WEED WIZARD ACQUISITION CORP.,
as Guarantor
By:____________________________
Name:__________________________
Title:_________________________
_______________________________
Address
AMPRO INDUSTRIES, INC.,
as Guarantor
By:____________________________
Name:__________________________
Title:_________________________
_______________________________
Address
00
XXXXX XX XXX XXXX )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 200_, before me personally came
____________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
__________________________
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 200_, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of PNC BANK, NATIONAL
ASSOCIATION, and that he was authorized to sign his name thereto.
__________________________
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 200_, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
__________________________
Notary Public
74
List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 5.5(b) Financial Projections
Exhibit 7.8 Intercompany Note
Exhibit 8.1(k) Financial Condition Certificate
Exhibit 14.7 Instrument of Joinder
Exhibit 16.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.4 Preservation of Collateral
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Credit Parties
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries of Borrower
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, Source Code, Escrow
Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 7.3 Guarantees
Schedule 7.8 Indebtedness
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