FLEET CAPITAL CORPORATION
-with-
CFP HOLDINGS, INC.
CUSTOM FOOD PRODUCTS, INC.
QF ACQUISITION CORP.
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LOAN AND SECURITY AGREEMENT
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Dated: May 5, 1998
$40,000,000
TABLE OF CONTENTS
SECTION 1. GENERAL DEFINITIONS.............................................................................1
1.1. Defined Terms...................................................................................1
1.2. Accounting Terms...............................................................................18
1.3. Other Terms....................................................................................18
1.4. Certain Matters of Construction................................................................18
SECTION 2. CREDIT FACILITY................................................................................18
2.1. Revolving Credit Loans.........................................................................19
2.2. Term and Equipment Loans.......................................................................20
(A) Term Loan.............................................................................20
(B) Mandatory Prepayments.................................................................21
(C) Optional Prepayments..................................................................21
2.3. Manner of Borrowing Revolving Credit Loans.....................................................21
2.4. Eurodollar Loans...............................................................................22
2.5. All Loans to Constitute One Obligation.........................................................24
2.6. Loan Account...................................................................................25
2.7. Letters of Credit..............................................................................25
2.8. Issuance of Letters of Credit..................................................................25
2.9. Disbursements and Reimbursement Obligations....................................................26
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT.............................................................27
3.1. Interest, Fees and Charges.....................................................................27
(A) Interest..............................................................................27
(B) Letter of Credit Fees.....................................................................28
(C) Default Rate Applicable to Interest and Fees..........................................29
(D) Unused Line Fee.......................................................................29
(E) Closing Fee...........................................................................29
(F) Examination and Inspection Fees.......................................................29
(G) No Impact of Usury Laws; Limitation on Interest.......................................30
3.2. Term of Agreement..............................................................................30
3.3. Termination....................................................................................30
3.4. Payments.......................................................................................32
3.5. Application of Payments and Collections........................................................32
3.6. Statements of Account..........................................................................33
3.7. Increased Costs................................................................................33
3.8. Basis For Determining Interest Rate Inadequate or Unfair.......................................34
3.9. Capital Adequacy...............................................................................34
SECTION 4. COLLATERAL: GENERAL TERMS.....................................................................35
4.1. Security Interest in Collateral................................................................35
4.2. Lien on Realty.................................................................................36
(i)
4.3. Representations, Warranties and Covenants --Collateral.........................................36
4.4. Lien Perfection................................................................................37
4.5. Real Property Lien Documentation...............................................................37
4.6. Location of Collateral.........................................................................37
4.7. Insurance of Collateral........................................................................38
4.8. Protection of Collateral.......................................................................39
SECTION 5. PROVISIONS RELATING TO ACCOUNTS................................................................40
5.1. Representations, Warranties and Covenants......................................................40
5.2. Assignments, Records and Schedules of Accounts.................................................41
5.3. Administration of Accounts.....................................................................41
5.4. Collection of Accounts.........................................................................42
5.5. Notice Regarding Disputed Accounts.............................................................42
SECTION 6. PROVISIONS RELATING TO INVENTORY...............................................................42
6.1. Representations, Warranties and Covenants......................................................43
6.2. Inventory Reports..............................................................................43
6.3. Returns of Inventory...........................................................................43
SECTION 7. PROVISIONS RELATING TO EQUIPMENT...............................................................44
7.1. Representations, Warranties and Covenants......................................................44
7.2. Evidence of Ownership of Equipment.............................................................44
7.3. Records and Schedules of Equipment.............................................................44
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................44
8.1. General Representations and Warranties.........................................................44
(A) Organization and Qualification........................................................44
(B) Corporate Names.......................................................................44
(C) Corporate Power and Authority.........................................................45
(D) Legally Enforceable Agreement.........................................................45
(E) Use of Proceeds.......................................................................45
(F) Margin Stock..........................................................................45
(G) Governmental Consents.................................................................45
(H) Patents, Trademarks, Copyrights and Licenses..........................................45
(I) Capital Structure.....................................................................46
(J) Solvent Financial Condition...........................................................46
(K) Restrictions..........................................................................46
(L) Litigation............................................................................46
(M) Title to Properties...................................................................46
(N) Financial Statements; Fiscal Year; Pro Forma Financial Statements.....................47
(O) Full Disclosure.......................................................................47
(P) Pension Plans.........................................................................48
(Q) Taxes.................................................................................48
(R) Labor Relations.......................................................................48
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(S) Compliance With Laws..................................................................49
(T) Surety Obligations....................................................................49
(U) No Defaults...........................................................................49
(V) Brokers...............................................................................49
(W) Business Locations; Agent for Process.................................................49
(X) Trade Relations.......................................................................49
(Y) Leases................................................................................50
(Z) Investment Company Act................................................................50
(AA) OSHA and Environment Compliance.......................................................50
(BB) Senior Indebtedness...................................................................50
(CC) Indebtedness..........................................................................50
(DD) True Copies of Charter and Other Documents............................................50
(EE) Certain Transactions..................................................................50
8.2. Reaffirmation..................................................................................50
8.3. Survival of Representations and Warranties.....................................................51
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS...........................................................51
9.1. Affirmative Covenants.........................................................................51
(A) Taxes and Liens.......................................................................51
(B) Tax Returns...........................................................................51
(C) Payment of Bank Charges...............................................................51
(D) Business and Existence................................................................52
(E) Maintain Properties...................................................................52
(F) Compliance with Laws..................................................................52
(G) ERISA Compliance......................................................................52
(H) ERISA Events..........................................................................52
(I) Business Records......................................................................53
(J) Visits and Inspections................................................................53
(K) Financial Statements..................................................................53
(L) Notices to Lender.....................................................................54
(M) Landlord Agreements...................................................................55
(N) Subordinations........................................................................55
(O) Compliance Certificate................................................................55
(Q) Environmental Matters.................................................................55
(R) Further Assurances....................................................................58
(S) Conduct of Business...................................................................58
(T) Notice of Amendments to Certain Documents.............................................58
(T) Payment of Indebtedness for Money Borrowed............................................58
(U) Performance of Certain Obligations....................................................59
9.2. Negative Covenants.............................................................................59
(A) Mergers; Consolidations; Acquisitions.................................................59
(B) Loans.................................................................................59
(C) Indebtedness For Money Borrowed.......................................................60
(D) Affiliate Transactions................................................................60
(E) Partnerships or Joint Ventures........................................................60
(F) Adverse Transactions..................................................................60
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(G) Guaranties............................................................................61
(H) Limitation on Liens...................................................................61
(I) Subordinated Debt.....................................................................61
(J) Distributions.........................................................................62
(K) Subsidiaries..........................................................................62
(L) Capital Expenditures..................................................................62
(M) Business Locations....................................................................62
(N) Change of Business....................................................................63
(N) Disposition of Assets.................................................................63
(P) Name of Borrower......................................................................63
(Q) Use of Lender's Name..................................................................63
(R) Margin Securities.....................................................................63
(S) Restricted Investment.................................................................64
(T) Fiscal Year...........................................................................64
(U) Stock of Subsidiary, Etc..............................................................64
(V) Tax Consolidation.....................................................................64
(W) ERISA.................................................................................64
(X) Other Agreements......................................................................64
SECTION 10. CONDITIONS PRECEDENT...........................................................................64
10.1. Documentation..................................................................................64
10.2. Other Conditions...............................................................................66
10.3. Conditions to Each Loan........................................................................67
(A) Representations and Warranties........................................................67
(B) No Default............................................................................68
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT..............................................68
11.1. Events of Default..............................................................................68
(A) Payment of Loans......................................................................68
(B) Payment of Obligations................................................................68
(C) Misrepresentations....................................................................68
(D) Breach of Covenants...................................................................68
(F) Cancellation of Other Agreements......................................................68
(F) Insolvency, Etc.......................................................................69
(G) Bankruptcy Etc........................................................................69
(H) Other Defaults........................................................................69
(I) Uninsured Losses; Unauthorized Dispositions...........................................69
(J) Adverse Changes.......................................................................69
(K) Solvency..............................................................................69
(L) Business Disruption; Condemnation.....................................................70
(M) Change of Ownership...................................................................70
(N) ERISA.................................................................................70
(O) Litigation............................................................................70
(P) Criminal Forfeiture...................................................................70
(Q) Judgments.............................................................................70
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11.2. Acceleration of the Obligations................................................................70
11.3. Remedies.......................................................................................71
11.4. Remedies Cumulative; No Waiver.................................................................71
SECTION 12. MISCELLANEOUS..................................................................................72
12.1. Power of Attorney..............................................................................72
12.2. Indemnity......................................................................................72
12.3. Modification of Agreement; Sale of Interest....................................................73
12.4. Reimbursement of Expenses......................................................................73
12.5. Indulgences Not Waivers........................................................................74
12.6. Severability...................................................................................74
12.7. Successors and Assigns.........................................................................74
12.8. Cumulative Effect; Conflict of Terms...........................................................74
12.9. Execution in Counterparts......................................................................74
12.10. Notice.........................................................................................75
12.11. Demand Obligations.............................................................................76
12.12. Entire Agreement...............................................................................76
12.13. Interpretation.................................................................................76
12.14. GOVERNING LAW; CONSENT TO FORUM................................................................76
12.15. WAIVER OF TRIAL BY JURY AND OTHER WAIVERS BY BORROWER..........................................77
SECTION 13 BORROWING AGENCY PROVISIONS....................................................................78
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 5th day of May, 1998, by
and among FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation and
CFP HOLDINGS, INC. ("Holdings"), a Delaware corporation, CUSTOM FOOD PRODUCTS,
INC. ("Custom"), a California corporation and QF ACQUISITION CORP. (d/b/a
Quality Foods) ("Quality"), a Delaware corporation.
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms. When used herein, the following terms shall have
the following meanings (terms defined in the singular to have the same meaning
when used in the plural and vice versa):
Accountants - Deloitte & Touche, LLP and/or any other firm of
independent certified public accountants of recognized national standing or
otherwise acceptable to Lender.
Accounts - with respect to any Borrower, all of such Borrower's
accounts, contract rights, chattel paper, instruments and documents, whether now
owned or hereafter created or acquired by such Borrower or in which such
Borrower now has or hereafter acquires any interest.
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Additional Equipment Loans - any Equipment Loan made by Lender to a
Borrower pursuant to Section 2.2(B) of this Agreement that is secured by all
Collateral.
Adjusted Net Earnings From Operations - with respect to any fiscal
period, means the net income after provision for income taxes for such fiscal
period of Holdings on a Consolidated basis, all as reflected on the Consolidated
financial statement of Holdings supplied to Lender pursuant to Section 7.1(K)
hereof, but excluding: (i) any gain or loss arising from the sale of capital
assets; (ii) any gain arising from any write-up of assets; (iii) earnings and
losses of any Subsidiary accrued prior to the date it became a Subsidiary; (iv)
earnings and losses of any corporation, substantially all the assets of which
have been acquired in any manner by any Borrower, realized by such corporation
prior to the date of such acquisition; (v) earnings and losses of any business
entity (other than a Subsidiary) in which any Borrower has an ownership interest
except to the extent such earnings shall have actually been received by any
Borrower in the form of cash distributions; (vi) any portion of the earnings and
losses of any Subsidiary which is subject to any restriction as to the payment
of dividends to any Borrower, but only to the extent of earnings subject to such
restrictions; (vii) the earnings and losses of any Person to which any assets of
any Borrower shall have been sold, transferred or disposed of, or into which any
Borrower shall have merged, or been a party to any consolidation or other form
of reorganization, prior to the date of such transaction; (viii) any gain or
loss arising from the acquisition of any Securities of any Borrower; and (ix)
any
gain or loss arising from extraordinary or non-recurring items (except if
realized in respect of a previously recorded extraordinary or non-recurring
loss).
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Borrower; (ii) which beneficially owns or holds
10% or more of any class of the Voting Stock of a Borrower; or (iii) 10% or more
of the Voting Stock (or in the case of a Person which is not a corporation, 10%
or more of the equity interest) of which is beneficially owned or held by a
Borrower or a Subsidiary of a Borrower. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
Aggregate Adjusted Availability - at any date, an amount equal to (i)
the Borrowing Base minus (ii) the sum of (a) the aggregate unpaid balance of
Revolving Credit Loans plus (b) an amount equal to the excess of the aggregate
face amount of all outstanding Standby Letters of Credit over $6,000,000 plus
(c) an amount equal to 35% of the aggregate face amount of all outstanding
Commercial Letters of Credit plus (d) all sums due and owing by Borrowers to
their respective trade creditors which remain outstanding beyond normal business
practices.
Agreement - this Loan and Security Agreement.
Applicable Margin - with respect to Base Rate Loans and Eurodollar Rate
Loans, the percentages which, when added to or subtracted from the Base Rate or
Eurodollar Rate, as the case may be, comprises the Contract Rate and are
referenced in and are subject to adjustment as provided under Section 3.1
hereof.
Applicable Percentage - with respect to PMSI Equipment Loans, 80% and
with respect to Additional Equipment Loans, 85%.
Average Monthly Loan Balance - the amount obtained by adding (i) the
unpaid balance of Revolving Credit Loans, the Term Loan and the Equipment Loans
owing by Borrowers to Lender and (ii) the aggregate outstanding face amount of
Letters of Credit as at the end of each day for each day during the month in
question and by dividing such sum by the number of days in such month.
Bank - Fleet National Bank.
Base Rate - a variable rate of interest equal to the higher from time
to time of (A) the rate of interest announced publicly by Bank in Boston,
Massachusetts as its prime rate and (B) a rate equal to 1/2 of 1% per annum
above the weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds brokers, as
determined for any day by Bank.
Base Rate Loans - any Loans bearing interest computed by reference to
the Base Rate.
Borrower - any of Holdings, Custom or Quality, as the context requires;
Borrowers means collectively, Holdings, Custom and Quality.
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Borrowing Agent - Holdings.
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(i) the Maximum Revolving Amount; and
(ii) the aggregate sum of the Borrowers' Individual Borrowing
Bases.
Borrowing Base Certificate - a certificate, substantially in the form
of Exhibit 5.2 hereto, provided by Borrowers to Lender, showing the calculation,
semi-monthly (or more frequently, if requested by Lender in accordance with
Section 5.2 hereof) of each Individual Borrowing Base.
Business Day - with respect to Eurodollar Loans, any day on which
commercial banks are open for domestic and international business including
dealings in Dollar deposits in London, England and New York, New York and with
respect to all other Loans, any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are closed.
Capital Expenditures - expenditures made and liabilities incurred for
capital assets in accordance with GAAP but shall specifically exclude, in any
event, (i) to the extent otherwise permitted by the terms of this Agreement,
expenditures made with the proceeds received from any casualty insurance
policies, which proceeds are used to replace or repair lost, destroyed or
damaged assets, (ii) to the extent otherwise permitted by the terms of this
Agreement, expenditures made with the net proceeds derived from any sale or
other disposition of assets, which net proceeds are used to replace such assets,
(iii) payments on operating leases of fixed assets and (iv) expenditures made in
connection with Permitted Acquisitions.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
Cash Collateral Account - as defined in Section 2.9(C).
Cash Flow - with respect to Holdings on a Consolidated Basis for any
fiscal period, an amount equal to Adjusted Net Earnings from Operations, plus
depreciation and amortization, plus or minus non-cash losses or gains
respectively from fixed asset sales, plus non cash charges related to: changes
in GAAP, plus expenses related to effecting the refinancing of which this
Agreement is a part less the sum of, without duplication (i) non-financed
Capital Expenditures (ii) amortization of Standby Letters of Credit and (iii)
all scheduled principal payments made on any long term debt or capital leases.
CFP - CFP Group, Inc., a Delaware corporation.
3
Closing Date - the date on which all of the conditions precedent in
Section 10 are satisfied and the initial Loan or Letter of Credit issued is made
hereunder.
Closing Reserve - $5,000,000.
Code - the Uniform Commercial Code as adopted and in force in the State
of New York, as from time to time in effect.
Collateral - all of the Property described in Section 4 hereof, and all
other Property that now or hereafter secures the payment and performance of any
of the Obligations.
Commercial Letters of Credit - Letters of Credit issued for the account
of any Borrower which serve as security for the payment by a Borrower of
obligations incurred in connection with the purchase of Inventory or Equipment.
Consent Reserve - $3,664,390 provided, that such reserve shall be
reduced (i) $305,973 upon receipt by Lender of (a) a consent agreement
substantially in the form annexed hereto as Exhibit 1.1(A)(1) executed by
Quality and MELF and (b) an executed copy of the MELF Intercreditor Agreement
and (ii) $3,358,417 upon receipt by Lender of (a) a consent agreement
substantially in the form annexed hereto as Exhibits 1.1(B)(1) and 1.1(B)(2)
executed by PIDC, PIDA and Quality, (b) a first priority Mortgage in the
principal amount of $3,989,183 and a fourth priority Mortgage to secure all
Obligations (other than the PMSI Equipment Loans), each on the Real Property
located at 0000 Xxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx in form and substance
satisfactory to Lender, (c) the title insurance policies more fully described in
Section 10.2(H) hereof, (d) a current survey of the Real Property in form and
substance satisfactory to Lender and (e) the opinion of counsel of XxXxxxxxxx,
Keen & Xxxxxxx in form and substance satisfactory to Lender.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Contingent Reserves - such sums as Lender may, from time to time,
establish as a reserve in accordance with the provisions of Section 2.1(A) of
this Agreement including, without limitation, the Closing Reserve, the Consent
Reserve and the Term Loan Reserve.
Contract Rate - an interest rate per annum equal to the (i) sum of the
Base Rate plus the Applicable Margin with respect to Base Rate Loans and (ii)
sum of the Eurodollar Rate plus the Applicable Margin with respect to Eurodollar
Rate Loans.
Contract Year - the twelve month period beginning on the Closing Date
and on the anniversary of the Closing Date in any year.
Controlled Group - shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Sections 414(b) or (c) of the IRC.
4
Current Assets - at any date means the aggregate amount at which all of
the current assets of a Person would be properly classified as current assets on
a balance sheet at such date in accordance with GAAP except that amounts due
from Affiliates and investments in Affiliates shall be excluded therefrom.
Current Liabilities - at any date means the amount at which all of the
current liabilities of a Person would be properly classified as current
liabilities on a balance sheet at such date in accordance with GAAP (excluding
the Loans and current maturities of long-term Indebtedness), plus any insurance
claims accruals which are not so classified under GAAP.
Custom - Custom Food Products, Inc., a California corporation.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in Section 3.1(C) of this Agreement.
Distribution - in respect of any corporation means: (i) the payment of
any dividends or other distributions on capital stock of the corporation (except
distributions in any class of capital stock), (ii) the redemption or acquisition
of capital stock or Subordinated Debt unless made contemporaneously from the net
proceeds of (x) the sale of capital stock or (y) Subordinated Debt and (iii) any
payment on any Subordinated Repurchase Note.
Dollars - and the sign "$" shall mean lawful money of the United States
of America.
Dominion Account - a special account of Lender established by each
Borrower or any of its Subsidiaries pursuant to this Agreement at a bank
selected by each Borrower, but acceptable to Lender, in its commercially
reasonable discretion, and over which Lender shall have sole and exclusive
access and control for withdrawal purposes.
EBITDA - for any fiscal period, the sum of Adjusted Net Earnings from
Operations before Interest Expense, taxes, depreciation and amortization for
said period with respect to Holdings on a Consolidated basis as determined in
accordance with GAAP.
Eligible Account - an Account arising in the ordinary course of a
Borrower's business from the sale of goods or rendition of services which
Lender, in its commercially reasonable judgment, deems to be an Eligible
Account. Without limiting the generality of the foregoing, no Account shall be
an Eligible Account if: (i) it arises out of a sale made by a Borrower to a
Subsidiary or an Affiliate of any Borrower or to a Person controlled by an
Affiliate of any Borrower or any of its Subsidiaries; or (ii) it is unpaid more
than (a) seventy five (75) days after the invoice date with respect to Accounts
of Custom or (b) seventy five (75) days after the invoice date with respect to
Accounts of Quality provided, that such Accounts are reported to Lender in a
manner satisfactory in all respects to Lender; or (iii) fifty percent (50%) or
more of the Accounts from the Account Debtor are deemed not to be Eligible
Accounts hereunder because of the provisions of clause (ii) of this definition;
or (iv) the total unpaid Accounts of the Account Debtor exceeds twenty five
percent (25%) of the net amount of all Accounts, to the extent of such excess;
or (v) any covenant,
5
representation or warranty contained in this Agreement with respect to such
Account has been breached in any material respect; or (vi) the Account Debtor
has disputed liability with respect to such Account, or has made any claim with
respect to any other Account due from such Account Debtor to any Borrower, or
the Account otherwise is subject to any right of setoff by the Account Debtor,
to the extent of any offset, dispute or claim; or (vii) the Account Debtor has
commenced a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or made an assignment for the benefit of creditors, or a
decree or order for relief has been entered by a court having jurisdiction in
respect of the Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other petition
or other application for relief under the federal bankruptcy laws has been filed
against the Account Debtor, or if the Account Debtor has terminated its business
as a going concern, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or
a significant portion of its assets or affairs; or (viii) it arises from a sale
to an Account Debtor outside the United States of America, Canada or such other
jurisdictions as to which Lender has consented in writing, unless the sale is on
letter of credit, guaranty or acceptance terms, in each case acceptable to
Lender in its commercially reasonable credit judgment; or (ix) it arises from a
sale to the Account Debtor on a xxxx-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or return basis; or (x)
Lender concludes, upon the exercise of its commercially reasonable credit
judgment, that collection of such Account is insecure or that payment thereof is
doubtful or will be delayed seventy-five (75) days beyond the invoice date by
reason of the Account Debtor's financial condition; or (xi) the Account Debtor
is the United States of America or any department, agency or instrumentality
thereof, unless such Borrower assigns its right to payment of such Account to
Lender, in form and substance satisfactory to Lender, so as to comply with the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq.
and 41 U.S.C. Section 15); or (xii) the Account Debtor is located in either the
State of New Jersey, the State of Minnesota or the State of Indiana, unless such
Borrower has qualified as a foreign corporation in such state or filed a Notice
of Business Activities Report with the appropriate officials in such state for
the then current year; or (xiii) the Account is subject to a Lien other than a
Permitted Lien; or (xiv) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving rise to
such Account have not been performed by a Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; or (xv) the
Account is evidenced by chattel paper or an instrument of any kind unless such
chattel paper or instrument shall have been pledged and delivered to Lender, or
has been reduced to judgment; or (xvi) any Borrower has made any agreement with
the Account Debtor for any deduction therefrom, except for discounts or
allowances which are reflected in the calculation of the face amount of each
invoice related to such Account; or (xvii) any Borrower has made an agreement
with the Account Debtor to extend the time of payment thereof (a) seventy-five
(75) days beyond the invoice date with respect to Accounts of Custom or (b)
sixty (60) days beyond the invoice date with respect to Accounts of Quality; or
(xviii) the Account arises from a retail sale of goods to a Person who is
purchasing same primarily for personal, family or household purposes.
Eligible Inventory - such Inventory of each Borrower (other than
packaging materials and supplies) which Lender, in the exercise of its
commercially reasonable credit judgment, deems to be Eligible Inventory. Without
limiting the generality of the foregoing, no Inventory shall be Eligible
Inventory unless, in Lender's commercially reasonable credit judgment, it (i) is
raw materials, work-in-process, Mold-State Inventory or finished goods, (ii)
with respect to Inventory other than Mold-
6
State Inventory is in good, new and saleable condition, (iii) with respect to
Inventory other than Mold-State Inventory is not obsolete or unmerchantable,
(iv) in all material respects meets all standards imposed by any governmental
agency or authority, (v) conforms in all material respects to the warranties and
representations set forth in Section 6.1 hereof, (vi) is at all times subject to
Lender's duly perfected, first priority security interest and no other Lien
except a Permitted Lien and (vii) is situated at a location in compliance with
Section 4.6 hereof and is not in transit except for Eligible In Transit
Inventory.
Eligible In Transit Inventory - Eligible Inventory at any time having
an aggregate value not in excess of $2,500,000 and as to which any Borrower
shall have taken title but not possession but shall be entitled to receive
possession thereof upon payment of the purchase price attributable to the
specific goods.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters, as amended
including, but not limited to, the Resource Conservation and Recovery Act
("RCRA") ; the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"); the Toxic Substances Control Act, as amended; the Clean
Water Act; the River and Harbor Act; the Water Pollution Control Act; the Marine
Protection Research and Sanctuaries Act; the Deep-Water Act; the Superfund
Amendments and Reauthorization Act of 1986; the Federal Insecticide, Fungicide
and Rodenticide Act; the Mineral Lands and Leasing Act; the Surface Mining
Control and Reclamation Act; state and federal superlien and environmental
cleanup programs and laws; and U.S. Department of Transportation regulations.
Equipment - with respect to any Borrower, all of such Borrower's
machinery, apparatus, equipment, fittings, furniture, fixtures, motor vehicles
and other tangible personal Property (other than Inventory) of every kind and
description used in the operations of such Borrower or owned by such Borrower or
in which such Borrower has an interest, whether now owned or hereafter acquired
by such Borrower and wherever located, and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
Equipment Loans - as defined in Section 2.2(B) of this Agreement.
Equipment Note - the secured promissory notes to be executed by
Borrowers on or about the Closing Date in favor of Lender to evidence the PMSI
Equipment Loans and the Additional Equipment Loans, which shall be in the form
of Exhibit 2.2(b) attached hereto.
Equity Event - the receipt of cash proceeds by Holdings or CFP
resulting from an initial public offering of the capital stock of Holdings or
CFP.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated thereunder.
7
ERISA Affiliate - each trade or business (whether or not incorporated)
which, together with any Borrower, would be treated as a single employer under
Section 4001(a)(14) of ERISA or IRC Section 414(b), (c), (m), (n) or (o), as
applicable.
Eurodollar Loan - any Loan bearing interest computed by reference to
the Eurodollar Rate.
Eurodollar Rate - for any Eurodollar Loan, for the then current
Interest Period relating thereto, the rate per annum (such Eurodollar Rate to be
rounded, if necessary, to the next higher 1/16 of one (1%) percent) equal to the
quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate
of the rates (expressed as a decimal) of reserve requirements current on the day
that is two Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
over the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System.
Event of Default - as defined in Section 11.1 of this Agreement.
Expiration Date - the last day of the Original Term or, if this
Agreement shall have been renewed pursuant to Section 3.2, the last day of the
Final Renewal Term.
Fiscal Year - shall mean a 52 week accounting period commencing on the
first day after the last Saturday in March in each year.
Fixed Charge Coverage - for Holdings on a Consolidated Basis, for any
period, the ratio of (x) EBITDA for such period to (y) the sum of (i) Interest
Expense actually paid in cash for such period plus (ii) non-financed Capital
Expenditures made during such period plus (iii) scheduled principal payments on
all Indebtedness for Money Borrowed (other than Current Liabilities) for such
period plus (iv) taxes accrued and/or paid during such period.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
General Intangibles - with respect to any Borrower, all of such
Borrower's general intangibles, whether now owned or hereafter created or
acquired by such Borrower, including, without limitation, all choses in action,
causes of action, corporate or other business records, deposit accounts,
inventions, designs, patents, patent applications, trademarks, trade names,
trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Accounts by an Account Debtor, all
rights to indemnification and all other intangible property of every kind and
nature (other than Accounts).
8
Guarantors - Any hereafter created Subsidiary or other Affiliate of any
Borrower or other Person who may hereafter guarantee payment or performance of
the whole or any part of the Obligations.
Guaranty Agreement - the continuing Guaranty which is to be executed by
each Guarantor in form and substance satisfactory to Lender.
Guarantor Security Agreement - the agreement which is to be entered
into by each Guarantor pursuant to which Lender is granted a security interest
in each Guarantor's property as Collateral for the Obligations.
Hazardous Discharge - as defined in Section 9.1(O) hereof.
Hazardous Substance - any flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychorinated
byphenyls, petroleum and petroleum products, methane, hazardous materials,
hazardous wastes, hazardous or toxic substances as defined in CERCLA, the
Hazardous Materials Transportation Act, as amended, RCRA or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
Hazardous Wastes - all hazardous waste materials regulated under
Environmental Laws now in force or hereafter enacted relating to hazardous waste
disposal.
Holdings - CFP Holdings, Inc., a Delaware corporation.
Indebtedness - as applied to a Person means, without duplication (i)
all items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations, (ii) all obligations of other Persons
which such Person has guaranteed and (iii) in the case of Borrowers (without
duplication), the Obligations.
Indenture - Indenture dated as of January 28, 1997 among Holdings, as
Issuer, Custom, Quality and CFP, as guarantors, and United States Trust Company
of New York, as Trustee with respect to the Senior Guaranteed Notes.
Individual Borrowing Base - as at any date of determination thereof,
with respect to each Borrower an amount equal to:
(i) eighty-five percent (85%) of the net amount
of such Borrower's Eligible Accounts
outstanding at such date;
PLUS
(ii) sixty five percent (65%) of the value of
such Borrower's Eligible Inventory at such
date calculated on the basis of the lower of
cost or
9
market with the cost of raw materials
and finished goods calculated on a first-in,
first-out basis
MINUS
(iii) an amount equal to the sum of (A) the
difference between (x) the aggregate face amount of all
outstanding Standby Letters of Credit issued on behalf of such
Borrower and (y) $6,000,000, plus (B) thirty five percent
(35%) of the face amount of all Commercial Letters of Credit
issued on behalf of such Borrower plus (C) any amounts which
Lender may have paid pursuant to any of the Loan Documents for
the account of such Borrower such to the extent not treated as
Revolving Credit Loans hereunder plus (D) Contingent Reserves.
For purposes hereof, (a) the net amount of Eligible Accounts at such
time shall be (i) the face amount of such Eligible Accounts less (ii) to the
extent not otherwise deducted, any and all returns, discounts, credits,
allowances or excise taxes of any nature at any time issued, owing, claimed by
Account Debtors, granted, outstanding or payable in connection with such
Accounts at such time, and the net amount of any Eligible Account for which a
check or other payment instrument shall have been received but collected funds
shall not have been received by such Borrower shall be included notwithstanding
that the books of such Borrower shall show such Eligible Account as having been
paid.
Interest Expense - for any period, the interest expense of Borrowers on
a Consolidated basis during such period determined in accordance with GAAP
consistently applied, and shall in any event include, without limitation,
interest on Capitalized Lease Obligations and shall exclude (i) original issue
discount amortization to the extent it is required to be included in accordance
with GAAP, and (ii) amortization of deferred financing costs.
Interest Period - the period provided for any Eurodollar Loan pursuant
to Section 2.4.
Inventory - with respect to any Borrower, all of such Borrower's
inventory, whether now owned or hereafter acquired by such Borrower, including,
but not limited to, all goods intended for sale or lease by such Borrower, or
for display or demonstration; all work in process; all raw materials and other
materials and supplies of every nature and description used or which might be
used in connection with the manufacture, printing, packing, shipping,
advertising, selling, leasing or furnishing of such goods or otherwise used or
consumed in such Borrower's business; and all documents evidencing and General
Intangibles relating to any of the foregoing, whether now owned or hereafter
acquired by such Borrower.
Investment Property - all of each Borrower's now owned or hereafter
acquired securities (whether certificated or uncertificated), securities
entitlements, securities accounts, commodities accounts and commodities
contracts.
IRC - shall mean the Internal Revenue Code of 1986, as amended from
time to time, together with the regulations promulgated thereunder.
10
Issuing Bank - as defined in Section 2.7(D) hereof.
Lending Office - the lending office of Lender.
Letter of Credit - a Commercial Letter of Credit or a Standby Letter of
Credit.
LIBOR - for any Eurodollar Loan for the then current Interest Period,
the rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Bank in the London interbank
eurodollar market as at or about 11:00 a.m. (London time) two (2) Business Days
prior to the beginning of the applicable Interest Period, for delivery on the
first day of such Interest Period, and in an amount approximately equal to the
amount of such Eurodollar Loan for a period approximately equal to such Interest
Period.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and including, but not limited
to, the security interest, security title or lien arising from a security
agreement, mortgage, deed of trust, deed to secure debt, encumbrance, pledge,
conditional sale or trust receipt or a lease (other than operating leases under
which such Person is the lessee), consignment or bailment for security purposes.
The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purpose of this
Agreement, each Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Loan Account - the loan account established on the books of Lender
pursuant to Section 2.6 hereof with respect to each Borrower.
Loan Documents - this Agreement and the Other Agreements.
Loans - all loans and advances made by Lender pursuant to this
Agreement, including, without limitation, all Revolving Credit Loans, the Term
Loan, the Equipment Loans and the Letters of Credit.
Management Agreement - The Management Consulting Agreement dated as of
December 30, 1996, as amended through the date hereof, between First Atlantic
Capital, Ltd. and Holdings.
Material Adverse Effect - (a) with respect to any Person and relative
to any event or occurrence of whatever nature (including, without limitation,
any adverse determination in any litigation, arbitration or governmental
proceeding), a material adverse effect on (i) the financial condition,
operations, business, revenues, assets or Properties of such Person and its
Subsidiaries taken as a whole or (ii) the ability of such Person to timely and
fully perform any of its payment or other material Obligations under this
Agreement or any other Loan Document to which it is a party, and (b) with
respect to any material Collateral and relative to any condition, event or
occurrence of
11
whatever nature, a material adverse effect (in the context of such Person and
its Subsidiaries taken as a whole) on (i) the value thereof or (ii) any
Borrower's rights to or interest therein (for the benefit of the Lender).
Maximum Revolving Credit Amount - an amount at any time equal to (a)
Forty Million Dollars ($40,000,000) minus (b) the sum of (i) the aggregate face
amount of all Letters of Credit at such time and (ii) the outstanding principal
balance of the Term Loan and the Equipment Loans at such time.
MELF - the Commonwealth of Pennsylvania, acting through the Department
of Commerce Machinery and Equipment Loan Fund.
MELF Intercreditor Agreement - the Intercreditor Agreement to be
executed and delivered by Lender and MELF substantially in the form annexed
hereto as Exhibit 1.1(C), as such agreement may be amended, supplemented or
otherwise modified from time to time.
MELF Loans - the $500,000 loan made by MELF to Quality under and
pursuant to the terms of a loan agreement dated as of March 21, 1996 between
MELF and Quality.
Mold-State Inventory - Inventory of Quality consisting of raw uncooked
meat molded and frozen awaiting tempering and slicing.
Money Borrowed - as applied to Indebtedness, means (without
duplication), with respect to each Borrower, (i) Indebtedness for borrowed
money; (ii) Indebtedness, whether or not in any such case the same was for
borrowed money, (A) which is represented by notes payable or drafts accepted
that evidence extensions of credit (other than accounts payable), (B) which
constitutes obligations (other than accounts payable) evidenced by bonds,
debentures, notes or similar instruments, or (C) upon which interest charges are
customarily paid or that was issued or assumed as full or partial payment for
Property (in each case other than accounts payable); (iii) Indebtedness that
constitutes a Capitalized Lease Obligation; and (iv) Indebtedness under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof.
Mortgage - each mortgage or deed of trust to be executed by any
Borrower on or about the Closing Date in favor of Lender and by which such
Borrower shall grant and convey to Lender, as security for the Obligations, a
Lien upon the Real Property of the applicable Borrower located at the locations
set forth on Exhibit 4.2 attached hereto.
Multiemployer Plan - a plan described in Sections 3(37) and Section
4001(a)(3) of ERISA which covers employees of any Borrower or any ERISA
Affiliate.
Net Proceeds - with respect to any sale of Equipment or Real Property
or any condemnation or insurance recovery (i) the aggregate cash proceeds
received by any Borrower in respect thereof, less (ii) the direct costs relating
thereto (including without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits
12
or deductions any tax sharing arrangements), amounts required to be applied to
the repayment of indebtedness senior to, or on a parity with, Lender secured by
a lien on the asset or assets the subject thereof and any reserve for
indemnification or adjustment in respect of the sale price of such asset or
assets.
Notes - the Revolving Credit Note, the Term Note and the Equipment Note
and all amendments, modifications, substitutions and replacements thereof.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from any
Borrower to Lender of any kind or nature, present or future, including, without
limitation, liabilities with respect to Letters of Credit, whether or not
evidenced by any note, guaranty or other instrument, whether arising under this
Agreement or any of the Other Agreements or otherwise, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorney's fees and any other sums chargeable to any
Borrower or any Guarantor under any of the Loan Documents.
Original Term - as defined in Section 3.2 of this Agreement.
OSHA - the Occupational Safety and Health Act, and all rules and
regulations from time to time promulgated thereunder.
Other Agreements - any and all agreements, instruments and documents
(other than this Agreement), heretofore, now or hereafter executed by any
Borrower or any Guarantor and delivered to Lender for its benefit in respect to
the transactions with Lender contemplated by this Agreement, including, without
limitation, the Notes, the Guaranty Agreements, the Guarantor Security Agreement
and the Pledge Agreements.
Overadvance - as defined in Section 2.1(B).
PBGC - the Pension Benefit Guaranty Corporation or any successor
agency.
Participating Lender - each Person who shall be granted the right by
Lender to participate in any of the Loans in accordance with Section 12.3 of
this Agreement and who shall have entered into a participation agreement in form
and substance satisfactory to Lender.
PEDFA - the Pennsylvania Economic Development Financing Authority, a
public instrumentality and body corporate and politic of the Commonwealth of
Pennsylvania.
PEDFA Obligations - the indebtedness evidenced by the Taxable
Development Revenue Bonds, 1995 Series D issued by PEDFA on December 27, 1995 in
the original aggregate principal sum of $4,400,000.
Permitted Acquisitions - as defined in Section 9.2(A) hereof.
13
Permitted Liens - any Lien of a kind specified in subparagraphs (i)
through (x) of Section 9.2(H) of this Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrowers (other than PMSI Equipment Loans) incurred in any Fiscal Year which is
secured by a Purchase Money Lien and the principal amount of which, when
aggregated with the principal amount of all other Purchase Money Indebtedness
and Capitalized Lease Obligations of Borrowers incurred in such Fiscal Year,
does not exceed an amount equal to $5,000,000. For the purposes of this
definition, the principal amount of any Purchase Money Indebtedness consisting
of capitalized leases shall be computed as a Capitalized Lease Obligation only
to the extent that (a) the leased property does not constitute accessories,
attachments or additions to Equipment, (b) the leased property in identifiable
sufficiently to distinguish it from other Equipment and (c) any such capital
lease does not impair the then operational or liquidation value of all other
Equipment.
Permitted Purchase Money Lien - a Purchase Money Lien upon tangible
fixed assets provided that (a) such tangible fixed assets do not constitute
accessories, attachments or additions to other Collateral, (b) such tangible
fixed assets are identifiable sufficiently to distinguish them from the
Collateral and (c) any such Purchase Money Lien on tangible fixed assets do not
impair the then operational or liquidation value of the Collateral.
Permitted Refinancing - Refinancing Indebtedness if (a) the principal
amount of such Refinancing Indebtedness does not exceed the principal amount of
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums and reasonable expenses incurred in connection
therewith); (b) such Refinancing Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (c) if such Indebtedness is subordinated, such Refinancing
Indebtedness is subordinated in right of payment to the Obligations on terms at
least as favorable to the Lender as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
Person - an individual, partnership, corporation, joint stock company,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.
PIDA - Pennsylvania Industrial Development Authority.
PIDA Loan - the loans in the original aggregate principal amount of
$1,750,000 made by PIDA to PIDC on March 27, 1997, which loans are secured by
the PIDA Mortgage.
PIDA Mortgage - the mortgage on the Real Property located at 0000 Xxxxx
Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 dated as of March 27, 1997 issued by PIDC
to PIDA.
PIDC - Pennsylvania Industrial Development Corporation.
PIDC Loan - loans in the original aggregate principal amount of
$1,750,000 made by PIDC to Quality on May 25, 1995, which loans are secured by
the PIDC Mortgage.
14
PIDC Mortgage - the Open-End Mortgage and Security Agreement dated as
of May 25, 1995 made by Quality to PIDC.
Plan - any employee benefit plan within the meaning of Section 3(3) of
ERISA, maintained by any Borrower or any member of the Controlled Group or any
such employee benefit plan to which any Borrower or any member of the Controlled
Group is required to contribute on behalf of any of its employees.
Pledge Agreements - collectively, the Pledge Agreements dated the
Closing Date and executed and delivered to Lender by (i) Group with respect to
the stock of Holdings and (ii) Holdings with respect to the stock of Quality and
Custom.
PMSI Equipment Loans - any Equipment Loan made by Lender to Borrower
pursuant to Section 2.2(B) of this Agreement that is secured solely by the
Equipment being purchased with such Equipment Loan.
Prior Lenders - NationsBanc Capital Markets, Inc., NationsBank, N.A.,
NationsBank of Texas, N.A. and Fleet National Bank.
Pro Forma EBITDA - pro forma earnings before interest, taxes,
depreciation and amortization of the business or entity to be acquired
determined in accordance with GAAP. For purposes of this definition all expenses
which could reasonably be expected not to recur after the closing of each
applicable Acquisition shall be excluded from the calculation of Pro Forma
EBITDA.
Prohibited Transaction - shall mean any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 or ERISA, and
any transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Sections 4975(c)(2) or (d) of the IRC, and which could result in any
excise tax, fine, penalty or other liability being imposed on any Borrower.
Projections - Borrowers' forecasted Consolidated (a) balance sheets,
(b) profit and loss statements, (c) cash flow statements, and (d) capitalization
statements, all prepared on a consistent basis with Borrowers' historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means (i) Indebtedness for the payment of
all or any part of the purchase price of any fixed assets, (ii) any Indebtedness
(other than the Obligations) incurred at the time of or within one hundred
eighty (180) days prior to or after the acquisition of any fixed assets for the
purpose of financing all or any part of the purchase price thereof, and (iii)
any renewals, replacements, refundings, modifications, extensions or
refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time except in the amount of any premiums and reasonable
expenses incurred in connection therewith. Purchase Money Indebtedness shall not
include any obligation or liability of any Borrower under any operating lease.
15
Purchase Money Lien - a Lien upon fixed assets which secure Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the purchase price of which was financed (including any
renewals, replacements, refundings, modifications, extensions or refinancings
thereof) through the incurrence of the Purchase Money and other fixed assets
provided by the same financing source.
Quality - QF Acquisition Corp. (d/b/a Quality Foods), a Delaware
corporation.
Refinancing Indebtedness - Indebtedness issued in exchange for, or the
proceeds of which are used for, extending, renewing, replacing, defeasing or
refunding outstanding Indebtedness of Borrowers.
Real Property - all of Quality's right, title and interest in and to
the real property listed on Exhibit 4.2 hereto and any and all other real
property or leasehold interests which any Borrower may hereafter acquire.
Renewal Terms - as defined in Section 3.2 of this Agreement.
Reportable Event - any of the events set forth in Section 4043 of ERISA
or the regulations promulgated thereunder.
Restricted Investment - any investment in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following: (i) investments in any
Borrower by Holdings or in one or more Subsidiaries of any Borrower; (ii)
Property to be used in the conduct of its business; (iii) Current Assets arising
from the sale of goods and services in the ordinary course of business of any
Borrower; (iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United States of
America, provided that such obligations mature within one year from the date of
acquisition thereof; (v) investments in certificates of deposit maturing within
one year from the date of acquisition issued by a bank or trust company
organized under the laws of the United States or any state thereof having
capital surplus and undivided profits aggregating at least $100,000,000 or
liquid investment on other deposit accounts with such institutions; (vi)
investments in commercial paper rated A-1/P-1 by a national credit rating agency
and maturing not more than two hundred seventy (270) days from the date of
creation thereof; (vii) investments incurred in connection with Permitted
Acquisitions or as permitted by Section 9.2(E) of this Agreement; (viii) loans
and advances permitted by Section 9.2(B) hereof; and (ix) other investments in
an aggregate amount at any time not exceeding $1,000,000.
Revolving Credit Loan - a Loan made by Lender as provided in Section
2.1 of this Agreement.
Revolving Credit Note - the secured promissory note to be executed by
Borrowers on or about the Closing Date in favor of Lender to evidence the
Revolving Credit Loans, which shall be in the form of Exhibit 2.1 attached
hereto.
16
Security - shall have the same meaning as in Section 2(l) of the
Securities Act of 1933, as amended.
Senior Guaranteed Notes - Holdings' 11 5/8% senior guaranteed notes due
2004 in the original aggregate principal amount of $115,000,000 dated January
28, 1997 issued pursuant to, and governed by, the Indenture.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay the probable liability
of such Person on all of such Person's Indebtedness (including contingent
debts), (ii) is able to pay all of its Indebtedness as such Indebtedness matures
and (iii) has capital that is not unreasonably small to carry on its business
and transactions and all business and transactions in which it is about to
engage.
Standby Letters of Credit - Letters of Credit issued for the account of
any Borrower which serve as security for the performance or payment by any
Borrower of its obligations, except obligations incurred in connection with the
purchase of Inventory or Equipment and shall include, without limitation, the
Letter of Credit in the face amount of $1,610,000 issued on the Closing Date to
MationsBank of Texas, N.A.
Stockholders Agreement - the Stockholders Agreement dated December 30,
1996 between CFP and certain of its stockholders.
Subordinated Debt - Indebtedness of any Borrower that is expressly
subordinated to the Obligations on terms and conditions satisfactory to Lender
in all respects.
Subordinated Repurchase Notes - any notes issued by a Borrower to
repurchase equity held by management pursuant to the Stockholders Agreement
which notes shall be on terms and conditions satisfactory to Lender including,
without limitation, having a term not greater than three (3) years and shall
provide for the issuance of notes in payment of all interest accruing thereon.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting Stock
at the time of determination.
Term - the period comprising the Original Term and all Renewal Terms.
Term Loan - as defined in Section 2.2(A) of this Agreement.
Term Loan Reserve -$1,400,000 for each Fiscal Year (on a cumulative
basis) that EBITDA on any date below is less than the amount set forth opposite
the applicable date with respect to the four (4) fiscal quarters then ended:
Fiscal Quarter Ending Minimum EBITDA
--------------------- --------------
March 31, 1999 $16,500,000
June 30, 1999 $16,500,000
September 30, 1999 $16,500,000
17
Fiscal Quarter Ending Minimum EBITDA
--------------------- --------------
December 31, 2000 $17,500,000
March 31, 2000 $17,500,000
June 30, 2000 $17,500,000
September 30, 2000 $17,500,000
December 31, 2000 $17,500,000
March 31, 2001 $18,000,000
June 30, 2001 $18,000,000
September 30, 2001 $18,000,000
December 31, 2001 $18,000,000
March 31, 2002 and at the end of $19,000,000
each fiscal quarter thereafter
Term Note - the secured promissory notes to be executed by Borrowers on
or about the Closing Date in favor of Lender to evidence the Term Loan, which
shall be in the form of Exhibit 2.2(a) attached hereto.
Termination Amount - Average Monthly Loan Balance determined for the
twelve month period ending on the date of termination or, if such period is
shorter than twelve months, for the period from the Closing Date through the
date of termination.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the financial statements referred to in Section 9.1(K), and
all financial data pursuant to the Agreement shall be prepared in accordance
with such principles.
1.3. Other Terms. All other terms contained in this Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.
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. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to any of the Loan Documents shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
SECTION 2. CREDIT FACILITY
18
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to FORTY MILLION
DOLLARS ($40,000,000) available upon Borrowing Agent's request therefor, as
follows:
2.1. Revolving Credit Loans.
(A) Subject to all of the terms and conditions of this
Agreement, Lender agrees, to make Revolving Credit Loans to each Borrower from
time to time, as requested by Borrowing Agent on behalf of any Borrower in
accordance with the terms of Section 2.3 hereof, up to a maximum principal
amount at any time outstanding equal to the lesser of (a) such Borrower's
Individual Borrowing Base or (b) the lesser of (i) the Maximum Revolving Credit
Amount or (ii) the Borrowing Base at such time. It is expressly understood and
agreed that Lender may use the Borrowing Base as a maximum ceiling on Revolving
Credit Loans outstanding to Borrowers at any time and the Individual Borrowing
Base as a maximum ceiling on Revolving Credit Loans outstanding to the
applicable Borrower. If the unpaid balance of the Revolving Credit Loans should
exceed the Borrowing Base or the Maximum Revolving Credit Amount or any other
applicable limitation set forth in this Agreement including, without limitation,
a Borrower's Individual Borrowing Base, such Revolving Credit Loans shall
nevertheless constitute Obligations that are secured by the Collateral and
entitled to all the benefits thereof. In no event shall Borrowing Agent on
behalf of any Borrower be authorized to request a Loan at any time that there
exists an Event of Default. Notwithstanding the foregoing provisions of this
Section 2.1(A), Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender shall deem necessary or
appropriate in the exercise of its commercially reasonable judgment, against the
amount of Revolving Credit Loans which any Borrower may otherwise request under
this Section 2.1(A), including, without limitation, with respect to (i) price
adjustments, damages, unearned discounts or other matters for which credit
memoranda are issued in the ordinary course of any Borrower's business; (ii)
other sums chargeable against any Borrower's Loan Account as Revolving Credit
Loans under any section of this Agreement; (iii) the Term Loan Reserve, if any,
(iv) the Consent Reserve, and (v) such other matters, events, conditions or
contingencies as to which Lender, in the exercise of its commercially reasonable
judgment determines reserves should be established from time to time hereunder,
including but not limited to the Closing Reserve (collectively, the "Contingent
Reserves").
(B) Insofar as Borrowers may request and Lender may be willing
in its sole and absolute discretion to make Revolving Credit Loans to any
Borrower at a time when the unpaid balance of Revolving Credit Loans exceeds, or
would exceed with the making of any such Revolving Credit Loan, either the
Borrowing Base or the Maximum Revolving Credit Amount or such Borrower's
Individual Borrowing Base (any such Loan or Loans being herein referred to
individually as an "Overadvance" and collectively as "Overadvances"), Lender
shall enter such Overadvances as debits in the applicable Loan Account. All
Overadvances shall be payable on demand, shall be secured by the Collateral and
shall bear interest as provided in this Agreement for Revolving Credit Loans
generally.
19
(C) The Revolving Credit Loans shall be used solely for
Permitted Acquisitions, to repay Indebtedness on the Closing Date under the
Borrowers' existing credit facility, for general corporate purposes and for the
general working capital needs of Borrowers to the extent not inconsistent with
the provisions of this Agreement.
(D) Borrowers' obligation to repay the Revolving Credit Loans
shall be evidenced by the Revolving Credit Note.
(E) In no event shall the aggregate Revolving Credit Loans
with respect to Inventory of Borrowers exceed $20,000,000 outstanding at any
time or from time to time.
2.2. Term and Equipment Loans.
(A) Term Loan. Lender shall, subject to the terms and
conditions of this Agreement, make a Term Loan to Borrowers on the Closing Date
in the principal sum of $10,000,000 ("Term Loan"). The Term Loan shall be
advanced on the Closing Date and shall be, with respect to principal, due and
payable upon the last day of the Original Term of this Agreement (subject to
mandatory prepayments pursuant to Section 2.2(C) hereof or acceleration upon the
occurrence and during the continuation of an Event of Default under this
Agreement or termination of this Agreement). Notwithstanding anything herein to
the contrary, the entire unpaid principal balance of the Term Loan shall be
immediately due and payable upon the acceleration of the Obligations pursuant to
Section 11(g) of this Agreement. The Term Loan shall be evidenced by the Term
Note. Lender shall, subject to the terms and conditions of this Agreement, from
time to time, from and after the Closing Date through the last day of the
Original Term, make Loans to Borrowers to finance any Borrower's purchase of
Equipment for use in such Borrower's business (any such loan, an "Equipment
Loan"). All Equipment Loans shall be in such amounts as are requested by
Borrowing Agent on behalf of any Borrower, but in no event shall any Equipment
Loan (i) be in an amount less than Five Hundred Thousand Dollars ($500,000) or
(ii) exceed the Applicable Percentage of the cash purchase price set forth on
the invoice therefor (exclusive of fees, commissions, freight, taxes,
installation charges and other soft costs related to such Equipment) of the
Equipment then to be purchased. In no event shall the aggregate amount of all
(a) Equipment Loans made hereunder exceed $8,000,000 and (b) PMSI Equipment
Loans made hereunder exceed $5,000,000. In addition, Borrowers may not receive
more than $3,000,000 in Equipment Loans during any twelve (12) consecutive
months. Equipment Loans shall be advanced by Lender to Borrowers upon Borrowing
Agent's request for either an Additional Equipment Loan or a PMSI Equipment
Loan, as the case may be, on behalf of any Borrower together with such
information as Lender may reasonably require verifying that such Borrower has
made, or will make, during its then current Fiscal Year Capital Expenditures in
each case in amounts not less than the requested Equipment Loan. Borrowers, in
the aggregate, shall not be permitted to make more than four (4) requests, in
the aggregate, in any Fiscal Year but Borrowers shall be permitted to combine
two or more purchases of Equipment in order to satisfy the minimum size
requirement for an Equipment Loan and to avoid making more than the permitted
number of requests for Equipment Loans in any Fiscal Year. All Equipment Loans
shall amortize on a seven (7) year basis and shall be payable, with respect to
principal, in consecutive quarterly installments, commencing on the first
Business Day of the first fiscal quarter following the funding by Lender of the
applicable Equipment Loan and the final installment of each Equipment Loan shall
be in the amount of the balance thereof and
20
shall be due on the last day of the Original Term, subject to acceleration upon
the occurrence of a Default or Event of Default under this Agreement or
termination of this Agreement. Each Equipment Loan shall otherwise be evidenced
by, and repayable in accordance with the terms and conditions set forth in the
Equipment Note. All Equipment Loans shall be secured by all Collateral except,
notwithstanding anything to the contrary herein or in any other Loan Document,
each PMSI Equipment Loan shall be secured solely by the Equipment being
purchased with such PMSI Equipment Loan.
(B) Mandatory Prepayments. In addition to any other repayments
of the Term Loan, Revolving Credit Loan or Equipment Loan required or permitted
under the Term Note, the Revolving Credit Note, the Equipment Note and under
this Agreement:
(i) If (1) any Borrower sells any of the tangible
fixed assets, (2) any of the Collateral (other than Inventory
and Accounts) or any of the Collateral is taken by
condemnation or (3) any Borrower or Lender receives any
insurance recovery arising out of the theft, destruction or
other loss of any Collateral (other than Inventory and
Accounts) at a time when no Event of Default has occurred
which is then continuing, then, to the extent the total Net
Proceeds from (1), (2), and (3) exceeds in the aggregate the
sum of $500,000 during any Fiscal Year, in each such event
Borrowers shall have the option to either (a) pay to Lender,
as and when received by such Borrower, a sum equal to the Net
Proceeds of such sale, condemnation or insurance recovery
shall be applied (1) to Borrowers' outstanding Obligations
with respect to the Revolving Credit Loans if such Collateral
or asset was purchased with the proceeds of Revolving Credit
Loans and (2) in all other cases, to the installments of
principal due under the Term Note, in the order of the
maturity thereof until payment thereof in full and then to the
Equipment Loans and Revolving Credit Loans in accordance with
Borrowers' outstanding Obligations or (b) repair, restore or
replace such Collateral as contemplated by Section 9.2(O)
hereof. If Net Proceeds would otherwise be applied to repay
Loans at a time when there are no Loans outstanding, Lender
shall be entitled to establish a Contingency Reserve in an
amount equal to 50% of the amount of Net Proceeds that would
otherwise be applied to repay Loans pursuant to this Section
2.2(B).
(C) Optional Prepayments. Borrowers may prepay the Term Loans
in whole or in part at any time without premium or penalty except as provided in
Section 3.3(B) hereof, to be applied in accordance with Borrowers' written
instructions. Equipment Loans, once repaid, may not be reborrowed.
2.3. Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to Section 2.1 shall be as follows:
(A) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (i) Borrowing Agent on
behalf of any Borrower may give Lender notice of its intention to borrow, in
which notice Borrowing Agent on behalf of any Borrower shall specify the amount
of the proposed borrowing and the proposed borrowing date; (ii) the becoming due
of any amount required to be paid under this Agreement as interest shall be
21
deemed irrevocably to be a request for a Revolving Credit Loan on the due date
in the amount required to pay such interest; and (iii) the becoming due of any
other Obligation shall be deemed irrevocably to be a request for a Revolving
Credit Loan on the due date in the amount then so due;
(B) Borrowers hereby irrevocably authorize Lender to disburse
the proceeds of each Revolving Credit Loan requested, or deemed to be requested,
pursuant to this Section 2.3 as follows: (i) the proceeds of each Revolving
Credit Loan requested under Section 2.3(A)(i) shall be disbursed by Lender in
lawful money of the United States of America in immediately available funds, in
the case of any borrowing on the Closing Date, in accordance with the terms of
the written disbursement letter from Borrowing Agent on behalf of any Borrower,
and in the case of each subsequent borrowing, by wire transfer to such bank
account as may be agreed upon by each Borrower and Lender from time to time, if
such borrowing request is received by 11:00 a.m. New York time on the same
Business Day and if received later than 11:00 a.m. New York time on the next
succeeding Business Day; and (ii) the proceeds of each Revolving Credit Loan
requested under Section 2.3(A)(ii) or (iii) shall be disbursed by Lender by way
of direct payment of the relevant Obligation.
(C) On the terms and subject to the conditions of this
Agreement, Revolving Credit Loans may be repaid without premium or penalty and
may be reborrowed.
2.4. Eurodollar Loans.
(A) Notwithstanding the provisions of Section 2.3, (a) in the
event any Borrower desires to obtain a Eurodollar Loan, Borrowing Agent shall
give Lender prior written irrevocable notice no later than 11:00 a.m. New York
time on the third (3rd) Business Day prior to the requested borrowing date
specifying (i) its election to obtain a Eurodollar Loan, (ii) the date of the
proposed borrowing (which shall be a Business Day) and (iii) the amount to be
borrowed, which amount shall be an integral multiple of $1,000,000. In no event
shall Borrowers be permitted to have outstanding at any one time Eurodollar
Loans with more than five (5) different Interest Periods. In addition, and
notwithstanding any other provision of this Agreement, Borrowers shall have no
right to request or obtain a Eurodollar Loan at any time that an Event of
Default exists.
(B) Provided that no Event of Default has occurred which is
then continuing, each interest period of a Eurodollar Loan shall commence on the
date such Eurodollar Loan is made and shall end on the date which is one (1)
month, two (2) months, three (3) months or six (6) months later, as may then be
requested by Borrowers ("Interest Period") provided that:
(i) any Interest Period which would
otherwise end on a day which is not a Business Day shall
end on the next preceding or succeeding Business Day as is
the Bank's custom in the market to which such Eurodollar
Loan relates; and
(ii) there remains a minimum of one
(1) month in the Original Term (or if this Agreement has
been renewed, in the then applicable Renewal Term);
22
(iii) any Interest Period which
would otherwise end on a day which is not a Business Day
shall be the next preceding or succeeding Business Day as
is Lender's custom in the market to which such
Eurocurrency Loan relates;
(iv) all Interest Periods of the
same duration which commence on the same date shall end on
the same date; and
(v) each Interest Period which
commences before, and would otherwise end after the last
day of the Term shall end on the last day of the Term.
Notwithstanding the foregoing, Borrowers may obtain or convert
to Eurodollar Loans with Interest Periods of greater than one
(1) month but less than three (3) months in order to make
principal payments on the Term Loans, or as may otherwise be
agreeable to Lender.
(C) Provided that no Event of Default has occurred which is
then continuing, Borrower may, on any Business Day, convert any Base Rate Loan
into a Eurodollar Loan. If any Borrower desires to convert a Base Rate Loan,
Borrowing Agent on behalf of such Borrower shall give Lender not less than three
(3) Business Days' prior written notice (prior to 11:00 a.m. New York time on
such Business Day), specifying the date of such conversion and the amount to be
converted. Each conversion into or conversion of a Eurodollar Loan shall be an
integral multiple of $1,000,000. After giving effect to any conversion of Base
Rate Loans to Eurodollar Loans, Borrowers, in the aggregate, shall not be
permitted to have outstanding at any one time Eurodollar Loans with more than
five (5) different Interest Periods.
(D) Each Borrower shall have the right on three (3) Business
Days' prior irrevocable written notice by Borrowing Agent on behalf of such
Borrower to Lender to (i) subject to the provisions of Section 2.4(E) continue
any Eurodollar Loan into a subsequent Interest Period of the same or a different
permitted duration, in each case subject to the satisfaction of the following
conditions:
(i) in the case of a continuation of
less than all Loans, the Loans continued shall each be in
a minimum principal amount of $100,000 and in integral
multiples thereof;
(ii) accrued interest on a Loan (or
portion thereof) being continued shall be paid by
Borrowers at the time of continuation; and
(iii) no Loan (or portion thereof)
may be continued as a Eurodollar Loan if an Event of
Default has occurred which is then continuing or if, after
giving effect to such continuation, more than five (5)
separate Eurodollar Loans in the aggregate would be
outstanding hereunder.
23
If Borrowing Agent on behalf of any Borrower shall fail to give timely
notice of such Borrower's election to continue any Eurodollar Loan or portion
thereof as provided above, or if such continuation shall not be permitted, such
Eurodollar Loan or portion thereof, unless such Loan shall be repaid, shall
automatically be converted into a Base Rate Loan at the end of the Interest
Period then in effect with respect to such Eurodollar Loan.
(E) Subject to the provisions of Section 3.3, Borrowers may
prepay any Loan in whole at any time or in part from time to time, without
premium or penalty provided that a Eurodollar Loan may only be prepaid on the
last Business Day of the then current Interest Period with respect thereto.
Borrowing Agent on behalf of any Borrower shall specify the date of prepayment
of Loans which are Eurodollar Loans and the amount of Loans to be prepaid. In
the event that any prepayment of a Eurodollar Loan is made on a date other than
the last Business Day of the then current Interest Period with respect thereto,
Borrowers shall indemnify Lender therefor in accordance with Section 2.4(F)
hereof.
(F) Each Borrower shall indemnify Lender and hold Lender
harmless from and against any and all losses or expenses that Lender may sustain
or incur as a consequence of any prepayment or any default by such Borrower in
the payment of the principal of or interest on any Eurodollar Loan or failure by
such Borrower to complete a borrowing of, a prepayment of or conversion of or to
a Eurodollar Loan after notice thereof has been given, including (but not
limited to) any interest payable by Lender to lenders of funds obtained by it in
order to make or maintain its Eurodollar Loans hereunder, and any other loss or
expense incurred by Lender by reason of the liquidation or reemployment of
deposits or other funds acquired by Lender to make, continue, convert into or
maintain, a Eurodollar Loan.
(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 Lender (for
purposes of this subsection (G), the term "Lender" shall include Lender and the
office or branch where Lender or any corporation or bank controlling Lender
makes or maintains any Eurodollar Loans) to make or maintain its Eurodollar
Loans, or if with respect to any Interest Period, Lender is unable to determine
the Eurodollar Rate relating thereto, or adverse or unusual conditions in or
changes in applicable law relating to the London Eurodollar interbank market
make it, in the reasonable good faith judgment of Lender, impracticable, to fund
therein any of the Eurodollar Loans or make the projected Eurodollar Rate
unreflective of the actual costs of funds therefor to Lender, the obligation of
Lender to make Eurodollar Loans hereunder shall forthwith be suspended during
the pendency of such circumstances and Borrowers shall, if any affected
Eurodollar Loans are then outstanding, promptly upon request from Lender,
convert such affected Eurodollar Loans into Base Rate Loans.
2.5. All Loans to Constitute One Obligation. All Loans and Letters of
Credit shall constitute one general obligation of each Borrower, and (except for
PMSI Equipment Loans which are secured by the Equipment financed thereby) shall
be secured by Lender's security interest in and Lien upon all of the Collateral,
and by all other security interests and Liens now or at any time or times
hereafter granted by each Borrower to Lender in respect thereof.
24
2.6. Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in Borrowers' Loan Account all payments made by
each Borrower on such Loans and all proceeds of Collateral which are finally
paid to Lender, and may record therein, in accordance with customary accounting
practice, all charges and expenses properly chargeable to Borrowers hereunder.
2.7. Letters of Credit. Subject to the terms and conditions hereof,
Lender shall issue, or cause the issuance by the Issuing Bank of, Letters of
Credit from time to time during the Term; provided, however, that Lender will
not be required to issue or cause to be issued any Letters of Credit to the
extent the sum of the outstanding Revolving Credit Loans plus the face amount of
outstanding Letters of Credit (with the requested Letter of Credit being deemed
to be outstanding) to exceed the Maximum Revolving Credit Amount (calculated
without duplication with respect to the requested Letter of Credit) or to cause
the outstanding amount of Revolving Credit Loans to exceed the Borrowing Base.
The maximum principal amount of outstanding Standby Letters of Credit shall not
exceed Seven Million Dollars ($7,000,000) in the aggregate at any time. The
maximum principal amount of Commercial Letters of Credit shall be determined by
Lender and Borrowers. All disbursements or payments by Lender related to Letters
of Credit shall be deemed to be Revolving Credit Loans and shall bear interest
at the rate then applicable to Base Rate Loans.
2.8. Issuance of Letters of Credit.
(A) Borrowing Agent may request Lender to issue or cause to be
issued by Bank (or such other financial institution as may be acceptable to
Lender) a Letter of Credit by delivering to Lender the applicable commercial
letter of credit application (the "Letter of Credit Application"), completed to
the reasonable satisfaction of Lender and such other certificates, documents and
other papers and information as Lender may reasonably request.
(B) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight or time 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 occurring not later
than the earlier of (1) the Expiration Date or (2) twelve months after such
Letter of Credit's date of issuance. Each Letter of Credit Application and 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 and, to the extent
not inconsistent therewith, the laws of the State of New York.
(C) In connection with the issuance or creation of any Letter
of Credit, each Borrower hereby indemnifies, saves and holds Lender harmless
from any loss, cost, expense or liability, including, without limitation,
payments made by Lender, and expenses and reasonable attorneys' fees incurred by
Lender arising out of, or in connection with any Letter of Credit to be issued
or created for any Borrower except to the extent any loss, cost, expense or
liability is attributable to Lender's or the Bank's gross negligence or willful
misconduct or that of its correspondents. Each Borrower shall be bound by
Lender's or any Issuing Bank's regulations and good faith interpretations of any
Letter of Credit issued or created for such Borrower's account, although this
interpretation may be different from such Borrower's own, and neither Lender,
nor the Issuing Bank, nor any of its correspondents shall be liable for any
error, negligence and/or mistakes, whether of omission or commission, in
following any Borrower's instructions or those contained in any Letter of Credit
of any
25
modifications, amendments or supplements thereto or in creating or paying any
Letter of Credit, except for Lender's or the Issuing Bank's gross negligence or
willful misconduct or that of its correspondents.
(D) Each Borrower shall authorize and direct Bank or any other
bank or financial institution which issues a Letter of Credit (an "Issuing
Bank") to name such Borrower as the "Account Party" therein and to deliver to
Lender, with a copy to such Borrower, all instruments, documents, and other
writings and property received by the Issuing Bank pursuant to the Letter of
Credit or in connection with any acceptance and to accept and rely upon Lender's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit, the Letter of Credit Application therefor or any
acceptance thereof.
2.9. Disbursements and Reimbursement Obligations.
(A) Lender will notify Borrowing Agent promptly of the
presentment for payment under a Letter of Credit, following receipt by it of
notification from the Issuing Bank of such presentment, together with notice of
the date such payment was made. All disbursements shall be deemed irrevocably to
be a request by the applicable Borrower for a Revolving Credit Loan on the date
such disbursement was made.
(B) Each Borrower's obligation to reimburse Lender under
Section 2.9(A) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which any Borrower may have against, Lender, the Issuing Bank or the beneficiary
of the Letter of Credit, including, without limitation, any defense based upon
any draft, demand or certificate or other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient, the failure of
any disbursement or payment by the Issuing Bank under the Letter of Credit
("Bank Payment") to conform to the terms of the Letter of Credit (if, in the
Issuing Bank's good faith opinion such disbursement or Bank Payment is
determined to be appropriate and other than as a consequence of Lender's or the
Bank's gross negligence or willful misconduct) or any non-application or
misapplication by the beneficiary of the proceeds of such disbursement or Bank
Payment or the legality, validity, form, regularity or enforceability of the
Letter of Credit.
(C) Upon the occurrence and during the continuation of any
Event of Default, at the option of Lender, Borrowers will pay to Lender, for the
account of Lender, cash in an amount equal to the undrawn face amount of the
Letters of Credit. Such cash shall be held by Lender in a cash collateral
account (the "Cash Collateral Account"). The Cash Collateral Account shall be
maintained at a bank designated by Lender, which shall be (i) any domestic
commercial bank having capital and surplus in excess of $100,000,000 or (ii) an
Affiliate of Lender, if an Affiliate of Lender then maintains a presence as a
bank in the United States of America, in the name of Lender as secured party,
and shall be under the sole dominion and control of Lender and subject to the
terms of this Section 2.9. Borrowers hereby pledge, and grant to Lender a
security interest in, all such cash and other amounts held in the Cash
Collateral Account from time to time and all earnings thereof and proceeds
thereon, as security for the payment of all Obligations. Interest and earnings
on the Cash Collateral Account shall be the property of Borrowers but shall be
held in the Cash Collateral Account as Collateral, provided that the Lender
shall release from the Cash Collateral Account and return to Borrowers any funds
remaining in the Cash Collateral Account upon satisfaction in full of the
Obligations. At such time
26
when all Events of Default shall have been cured or waived, Lender shall return
any monies then remaining in the Cash Collateral Account. If at any time, and
from time to time, the aggregate amount of the Cash Collateral Account exceeds
the maximum liability, fixed or contingent, of Lender with respect to the
aggregate face amount of all Letters of Credit then issued and outstanding,
Lender shall return any excess to Borrowers.
(D) Borrowers shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. Lender and any
Issuing Bank (except in the event of its own gross negligence or willful
misconduct) shall not be responsible for:
(i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of the Letter of Credit
or any document submitted by any party in connection with the
application for and issuance of the Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(ii) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any instrument
transferring or assigning or purporting to transfer or assign
the Letter of Credit or the rights or benefits thereunder or
proceeds thereof in whole or in part, which may prove to be
invalid or ineffective for any reason;
(iii) errors, omissions, interruptions or
delays in transmission or delivery of any messages by mail,
cable, telegraph, telex or otherwise; or
(iv) any loss or delay in the transmission
or otherwise of any document or draft required in order to
make a disbursement.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted Lender hereunder. In furtherance, and not in limitation
or derogation of any of the foregoing, any action taken or omitted to be taken
by the Issuing Bank and Lender in good faith in the absence of gross negligence
or willful misconduct, shall be binding upon Borrowers and shall not put the
Issuing Bank or Lender, as the case may be, under any resulting liability
therefor.
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1. Interest, Fees and Charges.
(A) Interest. Interest shall accrue on the principal amount of
Base Rate Loans outstanding at the end of each day (computed on the actual days
elapsed over a year of 360 days) at a fluctuating rate per annum equal to the
Base Rate plus the Applicable Margin. The Applicable Margin shall be (a) zero
percent (0%) with respect to Base Rate Loans and (b) two and one-quarter percent
(2.25%) with respect to Eurodollar Rate Loans, provided that the Applicable
Margin shall be adjusted as set forth below (subject to imposition of the
Default Rate as provided herein) based upon the Fixed Charge Coverage Ratio for
the four quarter period immediately preceding the date of determination as set
forth below and as reflected in the most recent financial statements delivered
pursuant to Section 9.1(K)(ii) hereof (commencing with the financial statements
for the fiscal quarter ending
27
September 30, 1998 and for each fiscal quarter ended thereafter). Each such
adjustment shall take effect (if at all) as of the first day of the first month
following the date that the applicable financial statements were received by
Lender and shall remain in effect until the date that delivery of such financial
statement demonstrates a change in Fixed Charge Coverage whereupon, subject to
the imposition of the Default Rate as provided herein, the Applicable Margin
shall be decreased or increased, as the case may be, to the applicable
percentages set forth below:
Applicable Margin With Applicable Margin With
Fixed Charge Coverage Respect to Base Rate Loans Respect to Eurodollar Rate Loans
---------------------- -------------------------- --------------------------------
Less than 1:00 to 1:00 +0% +2.25%
1:00 to 1:00 through and including -.25% +2.00%
1:24 to 1:00
1:25 to 1:00 through and including -.50% +1.75%
1:49 to 1:00
Greater than or equal to 1:50 to 1:00 -.75% +1.50%
After the date hereof, the foregoing rate of interest shall be increased or
decreased, as the case may be, by an amount equal to any increase or decrease in
the Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective. The
Base Rate in effect on the date hereof shall be the Base Rate effective as of
the opening of business on the date hereof, but if this Agreement is executed on
a day that is not a Business Day, the Base Rate in effect on the date hereof
shall be the Base Rate effective as of the opening of business on the last
Business Day immediately preceding the date hereof. Eurodollar Loans shall bear
interest on the principal amount thereof owing, at a rate per annum equal to the
Eurodollar Rate plus the Applicable Margin.
(B) Letter of Credit Fees. Borrowers shall pay Lender for
issuing or causing the issuance of each Letter of Credit, (i) a letter of credit
opening charge of Two Hundred Fifty Dollars ($250.00) ("L/C Opening Charge") and
(ii) a fee computed at a rate per annum of one and one-half percent (1.50%) on
the outstanding amount of each such Letter of Credit from time to time ("Letter
of Credit Fee") and (iii) Issuing Bank's other customary charges payable in
connection with Letters of Credit as in effect from time to time (the amount of
which charges shall be furnished to Borrowing Agent by Lender upon request). The
L/C Opening Charge shall be payable on the opening of each Letter of Credit and
the Letter of Credit Fee shall be payable monthly in arrears on the first
Business Day of each month, computed through the last calendar day of the
preceding month. All other charges in respect of any Letter of Credit issued
hereunder shall be payable on demand. Any charge in effect at the time of a
particular transaction shall be the charge for that transaction, notwithstanding
any subsequent change in Issuing Bank's prevailing charges for that type of
transaction. All fees and charges 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.
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(C) Default Rate Applicable to Interest and Fees. Upon and
after the occurrence of an Event of Default under Section 11.1(A), and during
the continuation thereof, the Obligations shall bear interest and Letter of
Credit Fees shall be calculated daily (computed on the actual days elapsed over
a year of 360 days), at (i) a fluctuating rate per annum with respect to
interest equal to two percent (2.0%) above the respective rates of interest then
in effect with respect to outstanding Base Rate Loans and Eurodollar Loans, as
the case may be, and (ii) a per annum fee with respect to Letters of Credit
equal to two (2.0%) percent above the applicable Letter of Credit Fee (the
"Default Rate").
(D) Unused Line Fee. Borrowers acknowledge that the
administrative costs associated with the financing to be extended by Lender
under this Agreement are such that Lender cannot continue to finance Borrowers
at a level of profitability sufficient to justify Lender's maintaining the
Maximum Revolving Credit Amount for Borrowers' use in the event that the Average
Monthly Loan Balance outstanding during each month or portion thereof for which
this Agreement shall be effective is less than the Maximum Revolving Credit
Amount. In order to compensate Lender for agreeing to make funds available to
Borrowers, in the event that Borrowers should fail to fully utilize the Maximum
Revolving Credit Amount, and to compensate Lender for any loss of profitability
as a result thereof, Borrowers agree that if the Average Monthly Loan Balance
outstanding for any month shall be less than the Maximum Revolving Credit
Amount, then there shall be a charge for such month, in addition to any interest
due under this Agreement and under the Notes, in an amount equal to the product
of (a) the excess, if any of (x) the Maximum Revolving Credit Amount over (y)
the actual amount of the Average Monthly Loan Balance so calculated; times (b)
one-quarter of one percent (0.25%); times (c) that fraction, the numerator of
which shall be the actual number of days in such month and the denominator of
which shall be 360, payable monthly, in arrears, on the first Business Day of
each month, computed through the last calendar day of the preceding month, or
upon the termination of this Agreement, whichever first occurs. Without
prejudice to Lender's obligation to make Revolving Credit Loans under this
Agreement, in no event, however, shall any charge be payable for any month for
which the Average Monthly Loan Balance was less than the Maximum Revolving
Credit Amount by reason of Lender's declining to extend Revolving Credit Loans
to Borrowers in amounts equal to the Borrowing Base, nor shall any charge be
payable for any month during which or after Lender accelerates the maturity or
demands payment of the Obligations by reason of the occurrence of any Event of
Default.
(E) Closing Fee. Borrowers shall pay to Lender a closing fee
of $200,000, which shall be deemed fully earned and nonrefundable at the closing
of the transactions contemplated hereby and shall be paid concurrently with the
initial Loan hereunder. Such fee shall compensate Lender for the costs
associated with the origination, structuring, processing, approving and closing
of the transactions contemplated by this Agreement, including, but not limited
to, administrative, out-of-pocket, general overhead and lost opportunity costs,
but not including any expenses for which Borrowers have agreed to reimburse
Lender pursuant to any other provision of this Agreement or any of the other
Loan Documents, such as, by way of example, legal fees and expenses.
(F) Examination and Inspection Fees. Borrowers shall pay to
Lender on demand an examination and inspection fee in connection with Lender's
examinations and inspections of Borrowers' books and records in an amount equal
to Lender's out-of-pocket expenses for loan analysts and loan administrators
conducting such examinations and inspections; provided, however, that so long as
no Default or Event of Default has occurred and is continuing, Borrowers shall
only be obligated to
29
pay for two such examinations and inspections during any Contract Year,
provided, further, that such provision shall not in any way limit Lender's right
to perform additional examinations and inspections during any Contract Year at
its own cost and expense.
(G) No Impact of Usury Laws; Limitation on Interest.
(i) Notwithstanding anything to the contrary
contained in this Agreement, each Borrower agrees (to the
extent that such Borrower may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereof in
force, which may affect the covenants or the performance of
this Agreement; and each Borrower (to the extent that such
Borrower may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that they
will not hinder, by resort to any such law, delay or impede
the execution of any power herein granted to Lender, but will
suffer and permit the execution of every such power as though
no such law had been enacted.
(ii) No provision of this Agreement shall
require the payment or permit the collection of interest in
excess of the rate then permitted by applicable law; provided
that if any provision is so limited by such applicable law,
the interest shall be the maximum amount permitted thereunder.
In the event that a court of competent jurisdiction determines
that Lender has charged or received interest hereunder in
excess of the maximum permitted rate, Lender shall promptly
refund to Borrowers any interest received by Lender in excess
of the maximum permitted rate or, if so requested by Borrower,
shall apply such excess to the principal balance of the
Obligations.
3.2. Term of Agreement. Subject to Lender's right to terminate this
Agreement upon or after the occurrence of an Event of Default, this Agreement
shall be in effect for a period of four (4) years from the date hereof, through
and including May 4, 2002 (the "Original Term"), and this Agreement shall
automatically renew itself for one (l) year periods thereafter (the "Renewal
Terms"), unless terminated as provided in Section 3.3 hereof provided, that (i)
the Original Term shall be automatically extended to five (5) years through and
including May 4, 2003 in the event that the executed consent agreements referred
to on Exhibits 1.1(B)(1) and 1.1(B)2 hereof received by Fleet evidence consent
of PIDC, PIDA and Quality to this Agreement and the Mortgages each having a term
of five (5) years and (ii) if the foregoing shall not occur, this Agreement
shall be automatically renewed for a Renewal Term for the fifth year if at such
time Borrowers have sufficient Aggregate Adjusted Availability to meet their day
to day operating expenses after the imposition of a reserve in an amount equal
to the unpaid balance of all sums due and owing by Quality to PIDA and PIDC.
3.3. Termination.
(A) Upon at least thirty (30) days prior written notice to
Lender, Borrowers may, at their option, terminate this Agreement; provided,
however, no such termination shall be effective until Borrowers have paid all of
the Obligations in immediately available funds and all Letters of Credit issued
by Lender or Issuing Bank have expired or been terminated or Borrower shall have
deposited an
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amount equal to the undrawn face amount of all outstanding Letters of Credit in
a Cash Collateral Account.
(B) At the effective date of any such termination (the
"Termination Date") by Borrowers, Borrowers shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other charges owing under
the terms of this Agreement and any of the other Loan Documents), as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to (a)
one-half of one percent (.50%) of the Termination Amount if such Termination
Date occurs during the first or second Contract Year; and (b) one quarter of one
percent (.25%) of the Termination Amount if the Termination Date occurs during
the third Contract Year. If the Termination Date occurs any time during or after
the fourth Contract Year, no termination charge shall be payable. Further, no
termination charge shall be payable if Borrowers shall terminate this Agreement
in connection with: (a) the sale of all or substantially all of the assets of
the Borrowers in a bona fide arms length transaction; (b) an Equity Event; or
(c) the refinancing of the Loans with another senior secured credit facility
pursuant to a signed commitment letter by such replacement lender, provided that
prior to termination, Borrowers shall have delivered a copy of such signed
commitment letter to Lender, and provided Lender a good faith opportunity to
match the terms of the proposed replacement financing with respect to interest
rate, principal amount, maturity date and borrowing base availability and Lender
shall have determined not to match the aforementioned terms. Notwithstanding the
foregoing, if Lender shall match the aforementioned terms of such replacement
financing and Borrower decides not to terminate this Agreement, Lender and
Borrower shall agree to amend this Agreement to reflect such revised provisions
and Lender shall have the option of adopting the financial covenants contained
in such replacement financing. Thereafter, if Borrowers decide to terminate this
Agreement, all applicable termination charges shall apply to such subsequent
termination.
(C) Lender may terminate this Agreement effective upon written
notice to Borrowing Agent provided no later than (a) 365 days prior to the end
of the Original Term and (b) 180 days prior to the end of any Renewal Term or
without notice upon the occurrence of an Event of Default and during the
continuance thereof.
(D) All of the Obligations shall be due and payable upon any
termination of this Agreement. Except as otherwise expressly provided for in
this Agreement or the other Loan Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement or any of the other Loan
Documents shall in any way affect or impair the rights, powers, or privileges of
Lender or obligations, duties, rights, and liabilities of Borrowers or Lender in
any way relating to (i) any transaction or event occurring prior to such
termination or cancellation or (ii) any of the undertakings, agreements,
covenants, warranties or representations of Borrowers contained in this
Agreement or any of the other Loan Documents. All such undertakings, agreements,
covenants, warranties and representations of Borrowers shall survive such
termination or cancellation and Lender shall retain its Liens in the Collateral
and all of its rights and remedies under this Agreement and the other Loan
Documents notwithstanding such termination or cancellation, until all of the
Obligations have been paid in full, in immediately available funds.
(E) It is understood that Borrowers may elect to terminate
this Agreement in its entirety only, no section or lending facility may be
terminated singly.
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3.4. Payments. All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements, shall be made to
Lender at its Lending Office on the due date therefor not later than 1:00 p.m.
(New York time) in Dollars in Federal or other funds immediately available to
Lender. Lender shall have the right to effectuate payment on any and all
Obligations due and owing hereunder by charging Borrowers' accounts or by making
Loans as provided in Section 2.3 hereof and Lender shall provide the Borrowing
Agent with written notice of such Loans. Except where evidenced by notes or
other instruments issued or made by Borrowers to Lender specifically containing
payment provisions which are in conflict with this Section 3.4 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of:
(A) Principal, payable on account of Loans made by Lender to
Borrowers pursuant to this Agreement, shall be payable by Borrowers to Lender
immediately upon the earliest of (i) the receipt by Lender or Borrowers of any
proceeds of any of the Collateral referred to in Section 2.2(B), to the extent
required in accordance with Section 2.2(B), (ii) the occurrence of an Event of
Default if Lender elects to accelerate the maturity and payment of such Loans,
or (iii) termination of this Agreement pursuant to Section 3.3 hereof; provided,
however, that if the principal balance of Revolving Credit Loans outstanding at
any time shall exceed the Borrowing Base at such time, Borrower shall, on
demand, repay the Revolving Credit Loans in an amount sufficient to reduce the
aggregate unpaid principal amount of such Revolving Credit Loans by an amount
equal to such excess;
(B) Interest accrued on the Loans shall be due on the earliest
of (i) the first Business Day of each month (for the immediately preceding
month), computed through the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default if Lender elects to accelerate the maturity
and payment of the Obligations or (iii) termination of this Agreement pursuant
to Section 3.3 hereof; provided, however, that with respect to Eurodollar Loans,
interest shall only be payable at the end of each Interest Period, except that
with respect to Eurodollar Loans having an Interest Period of 180 days, interest
due on each such Eurodollar Loan shall be due at the end of 90 days and 180
days;
(C) Costs, fees and expenses payable pursuant to this
Agreement shall be payable by Borrowers, on demand, to Lender or to any other
Person designated by Lender in writing; and
(D) The balance of the Obligations requiring the payment of
money, if any, shall be payable by Borrowers to Lender as and when provided in
this Agreement or the Loan Documents.
3.5. Application of Payments and Collections. Upon the occurrence of an
Event of Default and during the continuation thereof, each Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Lender from or on behalf
of any Borrower, and each Borrower does hereby irrevocably agree that Lender
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender or
its agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. If as the
result of collections of Accounts as authorized by Section 5.4 hereof a credit
balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrowers, but so long as no Event of Default shall then
exist, Lender shall remit such credit balance (to the extent of the actual
collected portion thereof) to Borrowers in immediately available funds not later
than one
32
Business Day following the creation of such credit balance. In no event shall
such credit balance be applied or be deemed to have been applied as a prepayment
of the Term Loan or the Equipment Loans unless so requested by Borrowing Agent,
but Lender may offset such credit balance against the Obligations upon or after
the occurrence of an Event of Default.
3.6. Statements of Account. Lender will account to Borrowers monthly
with a statement of Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrowers unless Lender is notified by Borrowing Agent in
writing to the contrary within thirty (30) days after the date each account is
mailed to Borrowers. Such notice shall only be deemed an objection to those
items specifically objected to therein.
3.7. Increased Costs. In the event that any change, after the date of
this Agreement, in any applicable law or treaty, or in the interpretation or
application thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other regulatory authority, shall:
(A) (i) subject Lender to any tax with respect to this
Agreement (other than (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without limitation, any
franchise tax or any similar tax based on capital, net worth or comparable basis
for measurement and (b) any tax collected by a withholding on payments and which
neither is computed by reference to the net income of the payee nor is in the
nature of an advance collection of a tax based on or measured by the net income
of the payee) or (ii) change the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable hereunder or under any
Loan Documents (other than in respect of (a) any tax based on or measured by net
income or otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital, net worth or
comparable basis for measurement and (b) any tax collected by a withholding on
payments and which neither is computed by reference to the net income of the
payee nor is in the nature of an advance collection of a tax based on or
measured by the net income of the payee);
(B) impose, modify or hold applicable any reserve (except any
reserve taken into account in the determination of the applicable Eurodollar
Rate), 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 Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(C) impose on Lender or the London interbank eurodollar market
any other condition with respect to any Loan Document;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Loans hereunder by an amount that Lender
deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respects of any of the Loans by an amount
that Lender deems to be material, then, in any such case, Borrowers shall
promptly pay Lender, upon its demand and certification, such additional amount
as will compensate Lender for such additional cost or such reduction, as the
case may be, to the extent Lender has not otherwise been
33
compensated, with respect to a particular Loan, for such increased cost as a
result of an increase in the Base Rate. An officer of Lender shall certify the
amount of such additional cost or reduced amount to Borrowers, and provide a
written explanation of such additional cost or reduction to Borrowers. Such
certification shall be conclusive absent manifest error. If Lender claims any
additional cost or reduced amount pursuant to this Section 3.7, then Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to designate a different Lending Office or to file any certificate or document
reasonably requested by Borrowers if the making of such designation or filing
would avoid the need for, or reduce the amount of, any such additional cost or
reduced amount and would not, in the sole discretion of Lender, be otherwise
disadvantageous to Lender.
3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Lender shall have determined that:
(A) reasonable means do not exist for ascertaining the
Eurodollar Rate for any Interest Period; or
(B) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank eurodollar market
with respect to an outstanding Eurodollar Loan, a proposed Eurodollar Loan, or a
proposed conversion of a Base Rate Loan into a Eurodollar Loan;
Lender shall give Borrowers prompt written, telephonic or telegraphic notice of
its determination of such effect. If such notice is given, (i) any such
requested Eurodollar Loan shall be made as a Base Rate Loan, unless Borrowers
shall notify Lender no later than 10:00 a.m. (New York City time) three (3)
Business Days prior to the date of such proposed borrowing, that the request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Loan, and (ii) any Base Rate Loan which was to have been converted to an
affected type of Eurodollar Loan shall be continued as or converted into a Base
Rate Loan, or, if Borrowers shall notify Lender, no later than 10:00 a.m. (New
York City time) three (3) Business Days prior to the proposed conversion, shall
be maintained as an unaffected type of Eurodollar Loan.
3.9. Capital Adequacy.
(A) In the event that Lender shall have determined that any
applicable law 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 Lender 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 Lender's capital as a
consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender's policies with respect to capital adequacy) by an amount
deemed by Lender to be material, then, from time to time, upon written demand by
Lender, Borrowers shall pay to Lender such additional amount or amounts as will
compensate Lender for such reduction. In determining such amount or amounts,
Lender may use any reasonable averaging or attribution methods. The protection
of this Section 3.9 shall be available to Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law
or condition.
34
(B) A certificate of an officer of Lender setting forth such
amount or amounts as shall be necessary to compensate Lender pursuant to Section
3.9 hereof and the reasons therefor when delivered to Borrowers shall be
conclusive absent manifest error.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations (except PMSI Loans which are secured by
the Equipment financed thereby), each Borrower hereby grants to Lender a
continuing security interest in and Lien upon all of the following Property of
such Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) General Intangibles;
(E) Investment Property;
(F) All monies and other Property of any kind, now or at any
time or times hereafter, in the possession or under the control of Lender or a
bailee of Lender;
(G) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D), (E) and (F)
above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(H) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of such Borrower pertaining to any of (A), (B), (C), (D),
(E), (F) or (G) above.
provided, however, that the foregoing grant of a security interest and Lien
shall not include any rights or interests in the Property listed on Exhibit 4.1
and any other comparable General Intangibles or contract rights or any Property
of such Borrower that is the subject of a Permitted Purchase Money Lien securing
Permitted Purchase Money Indebtedness if and to the extent that (a) the terms of
the document or documents creating or evidencing such General Intangibles or
contract rights or Permitted Purchase Money Lien or Permitted Purchase Money
Indebtedness, as the case may be, prohibit such grant or encumbrance thereof and
(b) the term prohibiting such assignment or encumbrance is effective as a matter
of law and (c) the term prohibiting such grant or encumbrance has not been
waived or the consent of the necessary party to the grant of a security interest
or Lien to Lender has not been obtained following commercially reasonable effort
on the part of such Borrower to obtain such waiver or consent if the seeking
thereof would be commercially reasonable; provided further, however, that (i)
35
if any such prohibition is subsequently lifted, terminated or is otherwise no
longer effective as a matter of law or is waived or the consent of the necessary
party is obtained, the security interest granted hereby shall automatically
include such rights or interests in General Intangibles or contract rights
formerly subject to such prohibition without any further action on the part of
such Borrower or Lender and (ii) the exclusion in the foregoing proviso shall
not limit, impair or otherwise affect Lender's security interest in any rights
or interests of such Borrower in or to monies due or to become due under any
such General Intangibles or contract rights (including, without limitation, any
Accounts).
4.2. Lien on Realty. The due and punctual payment and performance of
the Obligations shall also be secured by the Lien created by the Mortgage upon
all Real Property of Borrowers described therein. If any Borrower shall acquire
at any time or times hereafter any interest in other Real Property, then such
Borrower shall promptly notify Lender of such acquisition and upon Lender's
request, which request may be made by Lender in its sole discretion, such
Borrower shall promptly execute and deliver to Lender, as additional security
and Collateral for the Obligations, deeds of trust, security deeds, mortgages or
other collateral assignments satisfactory in form and substance to Lender and
its counsel (herein collectively referred to as "New Mortgages") covering such
Real Property. The Mortgage and each New Mortgage shall be duly recorded in each
office where such recording is required to constitute a valid Lien on the Real
Property covered thereby. Borrowers shall deliver to Lender, at Borrowers'
expense, mortgagee title insurance policies issued by a title insurance company
reasonably satisfactory to Lender insuring Lender as mortgagee; such policies
shall be in form and substance reasonably satisfactory to Lender and shall
insure a valid first Lien in favor of Lender on the Property covered thereby,
subject only to those exceptions reasonably acceptable to Lender and its
counsel. Borrowers shall deliver to Lender such other documents, including,
without limitation, as-built survey prints of the Real Property, as Lender and
its counsel may reasonably request relating to the Real Property subject to the
Mortgages and any such New Mortgages.
4.3. Representations, Warranties and Covenants --Collateral. To induce
Lender to enter into this Agreement, each Borrower represents, warrants, and
covenants to Lender:
(A) The Collateral is now and, so long as any Obligations are
outstanding, will continue to be owned solely by Borrowers. No other Person has
or will have any right, title, interest, claim, or Lien therein, thereon or
thereto other than a Permitted Lien.
(B) Except as otherwise described on Exhibit 4.3(B) attached
hereto and made a part hereof, the Liens granted to Lender shall be first and
prior on the Collateral and as to the Accounts and proceeds, including insurance
proceeds resulting from the sale, disposition or loss thereof. No further action
need be taken to perfect the Liens granted to Lender, other than the filing of
continuation statements under the Code or other applicable law, continued
possession by Lender of that portion of the Collateral constituting instruments
or documents, the filing or recording in the United States Patent and Trademark
Office of appropriate instruments with respect to Liens on patents and
trademarks and the processing of Lien notations on motor vehicle title
certificates and the recording of the Mortgages.
(C) All goods evidenced by the Collateral constituting chattel
paper, documents or instruments, the possession of which has been given to
Lender, are owned by each Borrower and the same are free and clear of any prior
Lien. Borrowers further warrant and guarantee the value, quantities, sound
condition, grades and qualities of the goods and services described therein.
36
Borrowers shall pay and discharge all taxes, levies and other charges upon said
Collateral and upon the goods evidenced by any documents constituting Collateral
and shall defend Lender against and save it harmless from all claims of any
Person with respect to the Collateral. This indemnity shall include reasonable
attorneys' fees and legal expenses.
4.4. Lien Perfection. At Lender's request, Borrower agrees to execute
the financing statements provided for by the Code together with any and all
other instruments, assignments or documents, and shall take such other action,
in each case, as may be required to perfect or to continue the perfection of
Lender's security interest in the Collateral, including, without limitation, the
execution at Lender's request for all documents reasonably deemed necessary by
Lender to cause Lender's Lien to be noted on any motor vehicle title
certificates for motor vehicles forming a material part of the Collateral.
Unless prohibited by applicable law, each Borrower hereby authorizes Lender to
execute and file any such financing statement on such Borrower's behalf.
Subsequent to Lender's execution and filing of the aforementioned financing
statements, Lender shall provide Borrowing Agent with notice of the same. The
parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.
4.5. Real Property Lien Documentation. Each Borrower agrees to execute
and cause to be executed for Lender's benefit the Mortgages and such leasehold
mortgages, deeds of trust or other documents evidencing a collateral assignment
of such Borrower's interest in the Real Property and any additional Real
Property owned by such Borrower ("Additional Real Property") as Lender may
reasonably request other than Additional Real Property, the purchase of which is
otherwise permitted hereunder and is subject to a Permitted Purchase Money Lien
and as to which, if and to the extent any Collateral is located at any such
Additional Real Property, Lender has received a mortgagee waiver in form and
substance reasonably satisfactory to Lender. Such documents shall be recorded,
at the expense of such Borrower, with such filing offices as may be required to
evidence Lender's Lien upon the Real Property owned or hereafter acquired by
such Borrower. Notwithstanding the foregoing, to the extent any of the
aforementioned real property documentation is required to be executed or
consented to by a Person other than or in addition to any Borrower or Lender,
each Borrower shall use its good faith efforts to cause such Person to execute,
or consent to, any such documentation. Each Borrower acknowledges that its
failure to cause any such Person to execute such documentation may result in
Lender's establishment of a Contingency Reserve in the exercise of its
commercially reasonable judgment.
4.6. Location of Collateral. All Collateral, other than Inventory in
transit and motor vehicles, will at all times be kept by Borrowers at one or
more of the business locations set forth in Exhibit 4.6 and shall not, without
the prior written approval of Lender, be moved therefrom except, prior to an
Event of Default and subsequent to an Event of Default except to the extent
Lender has provided Borrowers with written notice to the contrary, for (A) sales
of Inventory in the ordinary course of business; (B) the storage of Inventory at
locations within the continental United States other than those shown on Exhibit
4.6 if (i) any Borrower gives Lender written notice of the new storage location
at least thirty (30) days prior to storing Inventory at such location, (ii)
Lender's security interest in such Inventory is and continues to be a duly
perfected, first priority Lien thereon, (iii) neither the applicable Borrower's
nor Lender's right of entry upon the premises where such Inventory is stored, or
its right to remove the Inventory therefrom, is unreasonably restricted, (iv)
the
37
owner of such premises agrees with Lender to subordinate or not to assert any
landlord's, bailee's or other Lien in respect of the Inventory for unpaid rent
or storage charges and (v) all negotiable documents and receipts in respect of
any Collateral maintained at such premises are promptly delivered to Lender;
provided, however, if any Borrower fails to meet requirements of clauses (i)
through (v) but the amount of Inventory stored at any such location is less than
$500,000 in the aggregate for all such locations, then the sole consequence of
such failure shall be the exclusion of such Inventory from the determination of
the Borrowing Base; (C) removals in connection with dispositions of tangible
fixed assets that are authorized by Section 9.2(N) hereof; (D) removal of
Equipment for purposes of repair or maintenance; (E) location of Equipment at
sites other than referred to above in connection with the leasing thereof to
customers, the use thereof by subcontractors in connection with performing of
production or other activities for the benefit of Borrowers or for other
purposes related to the conduct of the business of Borrowers, provided that (i)
the aggregate fair market value thereof does not exceed $250,000 and (ii)
Borrowers has taken steps satisfactory to Lender to maintain the priority and
perfection of Lender's security interest therein and (F) to the extent not
covered by the foregoing subsections (B), (C), (D) and (E) Equipment at
locations other than as set forth in Exhibit 4.6 having an aggregate fair market
value of not more than $250,000.
4.7. Insurance of Collateral. Borrowers shall bear the full risk of any
loss of any nature whatsoever with respect to the Collateral. Each Borrower
agrees to maintain and pay for insurance upon all Collateral (other than
Accounts) wherever located, in storage or in transit in vehicles, including
goods evidenced by documents, covering casualty, hazard, public liability and
other risks and in such amounts as are described in this Section 4.7 and with
such insurance companies as shall be reasonably satisfactory to Lender to insure
Lender's interest in the Collateral. Borrowers shall deliver copies of such
policies with satisfactory Lender's loss payable endorsements naming Lender Loss
Payee to Lender as requested by Lender. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than thirty (30)
days prior written notice to Lender in the event of cancellation of the policy
for any reason whatsoever and a clause that the interest of Lender in the
Collateral owned by Borrowers shall not be impaired or invalidated by an act or
neglect of Borrowers or owner of the Property nor by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrowers fail to provide and pay for such insurance, Lender may, at Borrowers'
expense, procure the same, but shall not be required to do so. Borrowers agree
to deliver to Lender, promptly as rendered, true copies of all reports made in
any reporting forms to insurance companies. Each Borrower shall (a) keep all of
its insurable properties in which such Borrower has an interest insured against
the hazards of fire, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to such Borrower's
including, but not limited to, business interruption insurance; (b) maintain a
bond in such amounts, if any, as is customary in the case of companies engaged
in businesses similar to such Borrower's insuring against larceny, embezzlement
or other criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of such Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such workmen's compensation
or similar insurance as may be required under the laws of any jurisdiction in
which such Borrower is engaged in business; and (e) furnish Lender with (i)
copies, as requested by Lender, of all policies and evidence of the maintenance
of such policies by the renewal thereof at least fifteen (15) days before any
expiration
38
date, and (ii) appropriate loss payable endorsements in form and substance
reasonably satisfactory to Lender, naming Lender as loss payee (and a mortgagee
with respect to the Real Property) as its interest may appear with respect to
the property coverage described in clause 4.7(a) above and the property coverage
shall provide (A) that, except as provided below, all proceeds thereunder
otherwise payable to any Borrower shall be payable to Lender, (B) no such
insurance shall be affected by any act or neglect of the insured or owner of the
property described in such policy or by the occupation of the premises for
purposes more hazardous than are permitted by said 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 Lender and
(i) a certificate of insurance or other endorsement indicating, among other
things, the Lender has been named as an additional or co-insured with respect to
each Borrower's liability insurance policies. In the event of any loss
thereunder, except as provided below, the property coverage carriers named
therein hereby are directed by Lender and each Borrower to make payment for such
loss to Lender and not to such Borrower and Lender jointly. If any such
insurance losses are paid by check, draft or other instrument payable to any
Borrower and Lender jointly, Lender may endorse such Borrower's name thereon and
do such other things as Lender may deem advisable to reduce the same to cash. If
an Event of Default shall have occurred and is continuing, (x) Lender is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above and (y) all insurance recoveries received by Lender
upon any such insurance shall be applied to the Obligations, in such order as
Lender in its sole discretion shall determine. If an Event of Default shall not
exist, then any insurance recovery arising out of any theft, destruction or
other loss of any property of Borrowers shall be applied in accordance with the
applicable provisions in Section 2.2(B). If Borrowers elect to apply such
insurance proceeds to the replacement, restoration or repair of such property,
then, pending such application, such proceeds shall be held by Lender in an
interest-bearing cash collateral account until disbursed as directed by such
Borrower. At any Borrower's option, any proceeds held for application to
replacement, restoration or repair of property may be applied to repay Revolving
Credit Loans and, upon the terms and subject to the conditions of this
Agreement, such Borrower shall be entitled to reborrow the amount so repaid for
purposes of such replacement, restoration or repair. Insurance recoveries
received by Lender arising out of theft, destruction or other loss of any
property of such Borrower for which specific application is not provided as
aforesaid shall be paid by Lender to such Borrower. Any surplus in insurance
recoveries, in excess of the then outstanding Obligations, shall be paid by
Lender to Borrowers or applied as may be otherwise required by law. If all
Obligations hereunder are required to be repaid as a result of any casualty, any
deficiency thereon shall be paid by Borrowers to Lender, on demand.
4.8. Protection of Collateral. All insurance expenses and all expenses
of protecting, storing, warehousing, insuring, handling, maintaining and
shipping the Collateral, any and all excise, property, sales, and use taxes
imposed by any state, federal, or local authority on any of the Collateral or in
respect of the sale thereof shall be borne and paid by Borrowers. If Borrowers
fail to promptly pay any portion thereof when due (except if being contested as
permitted by Section 9.1(A) hereof), Lender may, at its option, but shall not be
required to, pay the same and charge the Loan Account therefor. Each Borrower
agrees to reimburse Lender promptly therefor with interest as provided in this
Agreement. All sums so paid or incurred by Lender for any of the foregoing and
all costs and expenses (including attorneys' fees, legal expenses and court
costs) which Lender may incur in enforcing or protecting its Lien on or rights
and interest in the Collateral or any of its rights or remedies under this or
any other agreement between the parties hereto or in respect of any of the
transactions to be had hereunder until paid by Borrowers to Lender with
interest, shall be considered
39
Obligations owing by Borrowers to Lender hereunder. Such Obligations shall be
secured by all Collateral and by any and all other collateral, security, assets,
reserves, or funds of Borrowers in or coming into the hands or inuring to the
benefit of Lender. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrowers' sole risk.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. Representations, Warranties and Covenants. Each Borrower
represents and warrants to Lender that Lender may rely, in determining which
Accounts are Eligible Accounts, on all statements and representations made by
such Borrower on its own behalf with respect to any Account or Accounts, and,
unless otherwise indicated in writing to Lender, that with respect to each
Account included by any Borrower within any calculation of the Borrowing Base:
(A) It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(B) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by such Borrower in the ordinary course of its
business and in accordance in all material respects with the terms and
conditions of all purchase orders, contracts or other documents relating thereto
and forming a part of the contract between such Borrower and the Account Debtor;
(C) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender;
(D) Such Account, and Lender's security interest therein, is
not, and will not, to Borrower's knowledge, be in the future, subject to any
offset, Lien, deduction, defense, dispute, counterclaim or any other adverse
condition except for disputes resulting in returned goods where the amount in
controversy is deemed by Lender to be immaterial, and, to such Borrower's
knowledge, each such Account is absolutely owing to such Borrower and is not
contingent in any respect or for any reason;
(E) No Borrower has made any agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances which are
reflected in the calculation of the net amount of each respective invoice
related thereto;
(F) To each Borrower's knowledge, there are no facts, events
or occurrences which in any way impair the validity or enforceability thereof or
tend to reduce the amount payable thereunder from the face amount of the invoice
and statements delivered to Lender with respect thereto;
40
(G) To each Borrower's knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor is
Solvent; and
(H) No Borrower has knowledge of any fact or circumstance
which would impair the validity or collectability of the Account, and to each
Borrower's knowledge there are no proceedings or actions which are threatened or
pending against any Account Debtor thereunder which could reasonably be expected
to result in any material adverse change in such Account Debtor's financial
condition or the collectability of such Account.
5.2. Assignments, Records and Schedules of Accounts. If so requested by
Lender, each Borrower shall execute and deliver to Lender a Borrowing Base
Certificate and formal written assignments of all Accounts weekly or, if
requested by Lender, daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of invoices
or invoice registers related thereto. On or before the fifteenth day of each
month ("Delivery Date") from and after the date hereof, each Borrower shall
deliver to Lender, in form reasonably acceptable to Lender, a detailed aged
trial balance of all Accounts existing as of the last day of the preceding
month, specifying the names, addresses, face value, dates of invoices and due
dates for each Account Debtor obligated on an Account so listed ("Schedule of
Accounts"), and, upon Lender's reasonable request therefor, copies of proof of
delivery and the original copy of all documents, including, without limitation,
repayment histories and present status reports relating to the Accounts so
scheduled and such other matters and information relating to the status of then
existing Accounts as Lender shall reasonably request. Notwithstanding the
foregoing, if any Borrower has sent to Lender a Schedule of Accounts on or prior
to the Delivery Date but Lender has not received such Schedule of Accounts by
the Delivery Date, then such Borrower shall have an additional five days to
deliver such Schedule of Accounts following notice by Lender of its failure to
receive any such Schedule of Accounts which notice may be given as provided in
Section 12.10 hereof or by telephone.
5.3. Administration of Accounts.
(A) Upon the granting of any discounts, allowances or credits
by any Borrower that are not shown on the face of the invoice for the Account
involved, each Borrower shall promptly report such discounts, allowances or
credits, as the case may be, to Lender and in no event later than the time of
its submission to Lender of the next Schedule of Accounts as provided in Section
5.2. Upon and after the occurrence of an Event of Default, Lender shall have the
right to settle or adjust all disputes and claims directly with the Account
Debtor and to compromise the amount or extend the time for payment of the
Accounts upon such terms and conditions as Lender may deem advisable, and to
charge the costs and expenses thereof, including attorney's fees, to Borrowers.
Borrowers shall remain liable for any deficiency.
(B) If an Account includes a charge for any tax payable to any
governmental taxing authority, Lender is authorized, if any Borrower does not do
so in a timely manner, to pay the amount thereof to the proper taxing authority
for the account of such Borrower and to charge the Loan Account therefor.
Borrowers shall notify Lender if any Account includes any tax due to any
governmental taxing authority and, in the absence of such notice, Lender except
as otherwise provided herein shall
41
not be liable for any taxes to any governmental taxing authority that may be due
by Borrowers by reason of the sale and delivery creating the Account.
(C) Whether or not a Default or an Event of Default has
occurred, any of Lender's officers, employees or agents shall have the right, at
any time or times hereafter, in the name of Lender, any designee of Lender or
Borrowers, to verify the validity, amount or any other matter relating to any
Account by mail, telephone, telegraph or otherwise. At Borrowing Agent's
request, Lender will provide Borrowing Agent with reasonable general information
about the manner in which Lender intends to conduct its verifications during
periods when an Event of Default does not exist. Borrowers shall cooperate fully
with Lender in an effort to facilitate and promptly conclude any such
verification process.
5.4. Collection of Accounts.
(A) To expedite collection, Borrowers shall endeavor in the
first instance to make collection of their Accounts for Lender. All remittances
received by Borrowers on account of Accounts shall be held by Borrowers as
trustee of an express trust for Lender's benefit and Borrowers shall immediately
deposit the same in the Dominion Account. Such express trust shall cease with
respect to any funds transferred by the Dominion Account Bank to the applicable
Borrower in accordance with the Dominion Account Agreement. Lender retains the
right after an Event of Default to notify Account Debtors that Accounts have
been assigned to Lender and to collect Accounts directly in its own name and to
charge the collection costs and expenses, including attorneys' fees, to the
applicable Borrower. Lender has no duty to protect, insure, collect or realize
upon the Accounts or preserve rights in them.
(B) Each Borrower shall deposit all proceeds of Collateral or
cause the same to be deposited in kind in a Dominion Account pursuant to a
lockbox arrangement reasonably acceptable to Lender. Each Borrower shall issue
to any such banks an irrevocable letter of instruction directing such banks to
deposit all payments or other remittances received in the lockbox to the
Dominion Account for application in accordance with this Agreement. All funds
deposited in the Dominion Account shall immediately become Collateral and
Borrowers shall obtain the agreement by such banks to waive any offset rights
against the funds so deposited. Lender assumes no responsibility for such
lockbox arrangement, including, without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder.
(C) All funds on deposit in the Dominion Account shall be
subject to the provisions of the Dominion Account Agreement.
5.5. Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $100,000 are in dispute between any Borrower and any
Account Debtor, such Borrower shall provide Lender with written notice thereof
at the time of submission of the next Schedule of Accounts, explaining in detail
the reason for the dispute, all claims related thereto and the amount in
controversy.
SECTION 6. PROVISIONS RELATING TO INVENTORY
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6.1. Representations, Warranties and Covenants. With respect to
Inventory, each Borrower represents and warrants to Lender that Lender may rely,
in determining which items of Inventory constitute Eligible Inventory, on all
statements and representations made by such Borrower with respect to any
Inventory and, unless otherwise indicated in writing to Lender, that:
(A) All Inventory is presently and will continue to be located
at Borrowers' places of business listed on Exhibit 6.1A or at public warehouses
listed thereon and will not be removed therefrom except as authorized by Section
4.6 of this Agreement;
(B) Except as referred to in Section 6.1(A) and as provided in
Section 4.6, no Inventory is now, nor shall any Inventory at any time or times
hereafter be, stored with a bailee, warehouseman or similar party without
Lender's prior written consent not to be unreasonably withheld or delayed and,
if Lender gives such consent, each Borrower will concurrently therewith, at
Lender's request, cause any such bailee, warehouseman, or similar party to issue
and deliver to Lender, in form and substance reasonably acceptable to Lender,
warehouse receipts therefor in Lender's name, to the extent such warehouse
receipts are negotiable;
(C) No Inventory is or will be consigned to any Person without
Lender's prior written consent not to be unreasonably withheld or delayed, and,
if such consent is given, Borrowers shall, prior to the delivery of any
Inventory on consignment, (i) provide Lender with all consignment agreements to
be used in connection with such consignment, all of which shall be reasonably
acceptable to Lender, (ii) prepare, execute and file appropriate financing
statements with respect to any consigned Inventory, showing Lender as assignee,
(iii) conduct a search of all filings made against the consignee in all
jurisdictions in which any consigned Inventory is to be located and deliver to
Lender copies of the results of all such searches and (iv) notify, in writing,
all the creditors of the consignee which are or may be holders of Liens in the
Inventory to be consigned (as indicated by such search) that such Borrower
expects to deliver certain Inventory to the consignee, all of which Inventory
shall be described in such notice by item or type; and
(D) No Inventory is or will be produced in violation in any
material respect of the Fair Labor Standards Act.
6.2. Inventory Reports. Borrowers agree to furnish Lender with
Inventory reports at such times as Lender may reasonably request, but at least
once each month. Such reports shall be in form and detail reasonably
satisfactory to Lender. Borrowers shall conduct a physical inventory no less
frequently than annually and shall provide to Lender a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Lender shall in its reasonable discretion request.
6.3. Returns of Inventory. If at any time or times hereafter any
Account Debtor returns any Inventory to any Borrower the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$500,000 such Borrower shall notify Lender of the same immediately, specifying
the reason for such return and the location and condition of the returned
Inventory. After the occurrence of an Event of Default, each Borrower shall hold
all returned Inventory in trust for Lender, and shall conspicuously label such
Inventory as the Property of Lender.
43
SECTION 7. PROVISIONS RELATING TO EQUIPMENT
7.1. Representations, Warranties and Covenants. With respect to the
Equipment, each Borrower represents, warrants and covenants to and with Lender
that:
(A) The Equipment is in adequate operating condition and
repair, except for such Equipment which is not materially necessary to the
operation of each Borrower's business, 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, reasonable wear and tear excepted;
and
(B) No Borrower will permit any of the Equipment to become
affixed to any Real Property leased to such Borrower so that an interest arises
therein under the real estate laws of the applicable jurisdiction unless the
landlord of such Real Property has executed a landlord waiver or leasehold
mortgage in favor of Lender, and no Borrower will permit any of the Equipment to
become an accession to any personal Property other than Equipment subject to
first priority Liens in favor of Lender or subject to Permitted Liens.
7.2. Evidence of Ownership of Equipment. Promptly upon a reasonable
request therefor by Lender, each Borrower shall deliver to Lender evidence of
ownership, if any, of any of the Equipment (including, without limitation,
certificates of title and applications for title).
7.3. Records and Schedules of Equipment. Each Borrower shall maintain
accurate records itemizing and describing the type, quantity and book value of
the Equipment and all dispositions made in accordance with Section 9.2(N)
hereof, and shall make available to Lender a current schedule containing the
foregoing information on at least an annual basis and more often if reasonably
requested by Lender.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. General Representations and Warranties. To induce Lender to enter
into this Agreement and to make advances hereunder, each Borrower warrants,
represents and covenants to Lender that:
(A) Organization and Qualification. Each Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation listed on Exhibit 8.1(A) attached
hereto and made a part hereof. Each Borrower has duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
each state or jurisdiction listed on Exhibit 8.1(A) which includes all states
and jurisdictions where the character of its Properties or the nature of its
activities make such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect.
(B) Corporate Names. During the preceding five (5) years, no
Borrower has been known as or used any corporate, fictitious or trade names
except as disclosed on Exhibit 8.1(B) attached hereto and made a part hereof.
Except as set forth on Exhibit 8.1(B), no Borrower has, during
44
the preceding five (5) years, been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
(C) Corporate Power and Authority. Each Borrower has the right
and power and is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the shareholders
of any Borrower; (ii) contravene any Borrower's charter, certificate of
incorporation or by-laws; (iii) violate, or cause any Borrower to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to any
Borrower; (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
such Borrower is a party or by which it or its Properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by any Borrower.
(D) Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each Borrower and enforceable against it
in accordance with their respective terms, except to the extent limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally or by general principles of equity.
(E) Use of Proceeds. Borrowers' uses of the proceeds of any
Loans pursuant to this Agreement are, and will continue to be, legal and proper
corporate uses, duly authorized by its respective Board of Directors, and such
uses will not violate in any material respect any applicable laws including,
without limitation, the Foreign Assets Control Regulations, the Foreign Funds
Control Regulations and the Transaction Control Regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended).
(F) Margin Stock. No Borrower is engaged principally, or as
one of its important activities, in the business of purchasing or carrying
"margin stock" (within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Loans will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock, or be used
for any purpose which violates or is inconsistent with the provisions of
Regulation X of said Board of Governors.
(G) Governmental Consents. Each Borrower has, and is in good
standing with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary in any material
respect to continue to conduct its business as heretofore or proposed to be
conducted by it and to own or lease and operate its Properties as now owned or
leased by such Borrower.
(H) Patents, Trademarks, Copyrights and Licenses. Each
Borrower owns or possesses all the patents, trademarks, service marks, trade
names, copyrights and licenses necessary for the present conduct of its business
without any conflict known on the Closing Date with the rights of
45
others. All such patents, trademarks, service marks, tradenames, copyrights,
licenses and other similar rights are listed on Exhibit 8.1(H) attached hereto
and made a part hereof.
(I) Capital Structure. Exhibit 8.1(I) attached hereto and made
a part hereof states (a) the correct name of each of the Subsidiaries of each
Borrower, the jurisdiction of incorporation and the percentage of its Voting
Stock owned by such Borrower, (b) the name of each Borrower's Affiliates and the
nature of the affiliation, (c) the number, nature and holder of all outstanding
Securities of Borrowers, and (d) the number of authorized, issued and treasury
shares of each Borrower. Holdings has good title to all of the shares of stock
it purports to own of Custom and Quality and each Borrower has good title to all
of the shares it purports to own of the stock of each of its respective
Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. Except as set forth on Exhibit 8.1(I), there are not outstanding
any options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any capital stock, Securities or
obligations convertible into, or any powers of attorney relating to, shares of
the capital stock of any Borrower. Except as set forth on Exhibit 8.1(I), there
are not outstanding any agreements or instruments binding upon any of any
Borrower's shareholders relating to the ownership of its shares of capital
stock.
(J) Solvent Financial Condition. (i) Each Borrower, on an
individual basis, and (ii) Holdings and its Subsidiaries on a Consolidated
basis, are now and, after giving effect to initial extensions of credit to be
made hereunder, at all times will be, Solvent.
(K) Restrictions. No Borrower is a party or subject to any
contract, agreement, or charter or other corporate restriction, which materially
and adversely affects its business or the use or ownership of any of its
Properties. No Borrower is a party or subject to any contract or agreement which
restricts its right or ability to incur Indebtedness, other than as set forth on
Exhibit 8.1(K) attached hereto, none of which prohibit the execution of or
compliance with this Agreement by any Borrower. No Borrower has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its Property, whether now owned or hereafter acquired, to
be subject to a Lien that is not a Permitted Lien.
(L) Litigation. Except as set forth on Exhibit 8.1(L) attached
hereto and made a part hereof, there are no actions, suits, proceedings or, to
the knowledge of each Borrower, investigations pending, or to the knowledge of
each Borrower, any of the foregoing threatened, against or affecting any
Borrower, or the business, operations, Properties, profits or condition of any
Borrower, in any court or before any governmental authority or arbitration board
or tribunal, that could reasonably be expected to have a Material Adverse Effect
on any Borrower or the ability of any Borrower to perform this Agreement. No
Borrower is in default in any material respect with respect to any order, writ,
injunction, judgment, decree or rule of any court, governmental authority or
arbitration board or tribunal.
(M) Title to Properties. Each Borrower has good, indefeasible
and marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its Real Property, and good title to all of its
other Property, in each case, free and clear of all Liens except Permitted
Liens.
46
(N) Financial Statements; Fiscal Year; Pro Forma Financial
Statements.
(i) The audited Consolidated balance sheets
of Holdings and such other Persons described therein
(including the accounts of all Subsidiaries for the respective
periods during which a Subsidiary relationship existed) as at
March 31, 1997, and the related statements of income, changes
in stockholder's equity, and cash flow for the periods ended
on such dates, have been prepared in accordance with GAAP, and
present fairly in all material respects the financial position
of Holdings on a Consolidated basis at such dates and the
results of Borrowers' operations for such periods. Since
December 31, 1997, there has been no material adverse change
in the condition, financial or otherwise, of any Borrower and
such other Persons as shown on the Consolidated balance sheet
as of such date. The Fiscal Year of each Borrower ends on the
last Saturday of March of each year.
(ii) The pro forma balance sheet of Holdings
on a Consolidated basis, copies of which have been delivered
to Lender ("Pro Forma Balance Sheet"), is the unaudited
Consolidated balance sheet of Holdings as of March 31, 1998
adjusted to give effect (as if such events had occurred on
such date) to (a) the Letters of Credit to be issued and Loans
to be advanced on the Closing Date, (b) repayment of all
outstanding loans and other obligations of Borrowers to Prior
Lenders, and (c) the payment of all legal, accounting and
other fees related to the foregoing transactions to the extent
known at such date. Such Pro Forma Balance Sheet fairly
reflects the pro forma capitalization of Holdings and its
Subsidiaries as of March 31, 1998 after giving effect to the
foregoing transactions. The Pro Forma Balance Sheet has been
certified by the chief financial officer of Holdings.
(iii) The five (5) year cash flow
projections of Holdings and its Subsidiaries, the projected
balance sheets and profit and loss statements of each as of
the Closing Date, copies of which have been delivered to
Lender (the "Projections") were prepared by the chief
financial officer of Holdings. Such Projections represent
projections of future events that may or may not occur and are
based on assumptions that may or may not prove to be accurate
and should not be relied upon as indicative of the actual
results that may be obtained by each Borrower; provided,
however, such projections and assumptions have been made by
the management of Holdings based on its good faith belief in
the reasonableness thereof in light of (i) the financial and
operating condition of Holdings and each Borrower and plus
their Subsidiaries existing at the time such projections were
prepared and (ii) the prospects for the industry in which
Holdings and Borrowers and their Subsidiaries compete existing
at the time such projections were prepared.
(O) Full Disclosure. The financial statements referred to in
Section 8.1(N) above, do not, nor does this Agreement or any other written
statement of any Borrower to Lender (including, without limitation, any
Borrower's filings, if any, with the Securities and Exchange Commission),
contain any untrue statement of a material fact or omit a material fact known to
any Borrower necessary to make the statements contained therein or herein not
misleading. There is no fact known to any Borrower which such Borrower has
failed to disclose to Lender in writing which materially
47
affects adversely or, so far as such Borrower can now reasonably foresee, will
materially affect adversely the Properties, business, prospects, profits, or
condition (financial or otherwise) of any Borrower or the ability of any
Borrower to perform this Agreement.
(P) Pension Plans. Exhibit 8.1(P) identifies each Plan
maintained, sponsored or contributed to by any Borrower. With respect to each
Plan, no Borrower, nor any ERISA Affiliate of Borrower is, in any material
respect, in violation of the applicable provisions of ERISA, the IRC, or other
applicable laws. Except as set forth on Exhibit 8.1(P), within the six (6) years
prior to the date of this Agreement, (a) no Prohibited Transaction with respect
to which any Borrower or any ERISA Affiliate of any Borrower may incur any
liability or Reportable Event has occurred with respect to any Plan, nor has any
Plan been the subject of a waiver of the minimum funding standard under Section
412 of the IRC (other than with respect to a Multiemployer Plan (of which such
deficiency such Borrower has no knowledge)); (b) no Plan has experienced an
accumulated funding deficiency under Section 412 of the IRC; (c) no Lien has
been imposed upon any Borrower or any ERISA Affiliate of any Borrower under
Section 412(n) of the IRC; (d) no Plan has been amended in such a way that the
security requirements of Section 401(a)(29) of the IRC apply; (e) no notice of
intent to terminate a Plan has been distributed to affected parties or filed
with the PBGC under Section 4041 of ERISA, nor has any Plan been terminated
under Section 4041(e) of ERISA; (f) the PBGC has not instituted proceedings to
terminate, or appoint a trustee to administer, a Plan and no event has occurred
or condition exists which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan;
(g) neither any Borrower nor any ERISA Affiliate of any Borrower would be liable
for any amount pursuant to Sections 4062, 4063 or 4064 of ERISA if all Plans
terminated as of the most recent valuation dates of such Plans; (h) neither any
Borrower nor any ERISA Affiliate of any Borrower maintains any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, which provides any benefits
to an employee or the employee's dependents with respect to claims incurred
after the employee separates from service other than is required by applicable
law; (i) neither any Borrower nor any ERISA Affiliate of any Borrower has
incurred any material liability for any excise tax arising under Section 4972 or
4980B of the IRC and no fact or event exists which would give rise to any such
material liability; and (j) except as disclosed on Exhibit 8.1(P), neither any
Borrower nor any ERISA Affiliate of any Borrower has incurred or expects to
incur any withdrawal liability to any Multiemployer Plan.
(Q) Taxes. The federal tax identification numbers for each
Borrower set forth on Exhibit 8.1(Q). Each Borrower has filed all federal, state
and local tax returns and other reports it is required by law to file and has
paid, or made provision for the payment of, all taxes, assessments, fees and
other governmental, charges that are due and payable, except such taxes, if any,
as are being actively contested in good faith and as to which adequate reserves
in accordance with GAAP have been provided. The provision for taxes on the books
of each Borrower is adequate in accordance with GAAP for all years not closed by
applicable statutes, and for its current Fiscal Year.
(R) Labor Relations. Except as described on Exhibit 8.1(R)
attached hereto and made a part hereof, no Borrower is a party to any collective
bargaining agreement, and there are no grievances, disputes or controversies
with any union or any other organization of any Borrower's employees, or threats
of strikes, work stoppages or any asserted pending demands for collective
bargaining by any union or organization in any case which could reasonably be
expected to have a Material Adverse Effect.
48
(S) Compliance With Laws. Except as set forth on Exhibit
8.1(S), each Borrower has duly complied in all material respects with, and its
Properties, business operations and leaseholds are in compliance in all material
respects with, the provisions of all federal, state and local laws, rules and
regulations materially applicable to such Borrower, its Properties or the
conduct of its business, including, without limitation, OSHA, the Securities Act
of 1933, the Securities Exchange Act of 1934, the Fair Labor Standards Act,
Environmental Laws, laws relating to income, unemployment, payroll or social
security taxes and Plans under ERISA, the Flood Disaster Protection Act of 1973,
the Consumer Credit Protection Act, the Federal Trade Commission Act, statutes
creating and governing the Bureau of Alcohol, Tobacco and Firearms, and any and
all similar state statutes or regulations addressing, or related to, the same
subjects as or comparable to those covered by such enumerated federal statutes,
and there have been no material citations, notices or orders of noncompliance
issued to any Borrower under any such law, rule or regulation which have not
been duly complied with in all material respects by such Borrower.
(T) Surety Obligations. Except as set forth on Exhibit 8.1(T),
no Borrower is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
(U) No Defaults. No event has occurred and no condition exists
which would, upon the execution and delivery of this Agreement or any Borrower's
performance hereunder, constitute a Default or an Event of Default. No Borrower
is in default, and no event has occurred and no condition exists which
constitutes, or which with the passage of time or the giving of notice or both
would constitute, a default in the payment of any Indebtedness to any Person for
Money Borrowed. No Borrower is in default in any respect under any contract,
agreement or instrument to which it is a party or by which it or any of its
property is bound which default could reasonably be expected to have a Material
Adverse Effect.
(V) Brokers. Except as set forth on Exhibit 8.1(V), there are
no claims for brokerage commissions, finder's fees or investment banking fees in
connection with the transactions contemplated by this Agreement.
(W) Business Locations; Agent for Process. During the
preceding five (5) year period, no Borrower has had no office, place of business
or agent for service of process located in any state or county other than as
shown on Exhibit 8.1(W).
(X) Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of the Borrowers taken as a whole, or with any material supplier, and
there exists no present condition or state of facts or circumstances which would
have a Material Adverse Effect on any Borrower or prevent any Borrower to any
material extent from conducting their business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
49
(Y) Leases. Exhibit 8.1(Y)(i) attached hereto is a complete
listing of all capitalized leases of each Borrower and Exhibit 8.1(Y)(ii)
attached hereto is a complete listing of all operating leases of each Borrower.
(Z) Investment Company Act. No Borrower is an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(AA) OSHA and Environment Compliance. There are no material
outstanding unresolved citations, notices or orders of non-compliance issued to
any Borrower relating to their respective business, assets, Property, leaseholds
or Equipment under any Environmental Laws, rules or regulations. Each Borrower
has been issued all material applicable federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws.
(BB) Senior Indebtedness. Each Borrower's Obligations under
this Agreement and the obligations of each Borrower under the Other Agreements
are, and will continue to constitute, Senior Debt or Senior Indebtedness under
the terms of any agreement or instrument evidencing Subordinated Debt.
(CC) Indebtedness. No Borrower has Indebtedness for Money
Borrowed other than Indebtedness expressly permitted by the provisions contained
in Section 9.2(C) hereof, after giving effect to the transactions contemplated
by this Agreement, the Indenture, and the payments being made on the Closing
Date.
(DD) True Copies of Charter and Other Documents. Each Borrower
has furnished or caused to be furnished to Lender true and complete copies of
(a) all charter and other incorporation documents (together with any amendments
thereto), with respect to each Borrower and (b) their respective by-laws
(together with any amendments thereto).
(EE) Certain Transactions. Except as listed and described on
Exhibit 8.1(EE) hereto, none of the officers, directors, or employees of any
Borrower, or any of Borrower's Subsidiaries is, as of the date hereof, a party
to any transaction with Borrower, such Subsidiary or Affiliate (other than for
services as employees, officers and directors), including, without limitation,
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal Property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(FF) No Borrower maintains, as of the Closing Date, any bank
accounts except as set forth on Exhibit 8.1(FF).
8.2. Reaffirmation. Each request for a Loan made by Borrowing Agent
pursuant to this Agreement or any of the other Loan Documents shall constitute
(i) an automatic representation and warranty by Borrowers to Lender that there
does not then exist any Default or Event of Default and (ii) a reaffirmation as
of the date of said request of all of the representations and warranties in all
material respects of Borrowers contained in this Agreement and the other Loan
Documents.
50
8.3. Survival of Representations and Warranties. Each Borrower
covenants, warrants and represents to Lender that all representations and
warranties of such Borrower contained in this Agreement or any of the other Loan
Documents shall be true in all material respects at the time of such Borrower's
execution of this Agreement and the other Loan Documents and shall survive the
execution, delivery and acceptance thereof by Lender and the parties thereto and
the closing of the transactions described therein or related thereto except for
representations and warranties which, by their nature, speak of a particular
date which shall be deemed to have been made as of such particular date. Any
Borrower may, at any time and from time to time (and subject to subsection
9.2(M)), amend any one or more of the Schedules referred in this Section 8 or
add a Schedule to this Section 8 and any representation or warranty contained
herein which refers to any such Schedule shall from and after the date of any
such amendment refer to such Schedule as so amended; provided, however, that in
no event may any Borrower amend any such Schedule if the existence of the
information contained in such amendment would reflect or evidence a Default or
Event of Default.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. Affirmative Covenants. During the Term and thereafter for so long
as there are any Obligations to Lender, each Borrower covenants that, unless
otherwise consented to by Lender in writing, it shall:
(A) Taxes and Liens. Pay and discharge, all material taxes,
assessments and governmental charges upon it, its income and Properties and upon
the goods evidenced by any documents constituting Collateral as and when such
taxes, assessments and charges are due and payable, except and to the extent
only that such taxes, assessments and charges are being actively contested in
good faith and by appropriate proceedings, the applicable Borrower maintains
adequate reserves on its books therefor in accordance with GAAP and the
nonpayment of such taxes, assessments and charges does not result in a Lien upon
any material Properties of such Borrower other than a Permitted Lien. Each
Borrower shall also pay and discharge any material lawful claims which, if
unpaid, could reasonably be expected to become a Lien against any of such
Borrower's material Properties except for Permitted Liens.
(B) Tax Returns. File all material federal, state and local
tax returns and other reports each Borrower is required by law to file and
maintain adequate reserves in accordance with GAAP for the payment of all taxes,
assessments, governmental charges, and levies imposed upon it, its income, or
its profits, or upon any Property belonging to it.
(C) Payment of Bank Charges. Pay to Lender, on demand, any and
all fees, costs or expenses which Lender or any Participating Lender pays to a
bank or other similar institution (including, without limitation, any fees paid
by the Lender to any Participating Lender) arising out of or in connection with
(i) the forwarding to any Borrower or any other Person on behalf of any
Borrower, or by Lender or any Participating Lender, proceeds of loans made by
Lender to any Borrower pursuant to this Agreement and (ii) the depositing for
collection by Lender or any Participating Lender of any check or item of payment
received or delivered to Lender or any Participating Lender on account of the
Obligations.
51
(D) Business and Existence. Except as permitted by Section
9.2(A), preserve and maintain its separate corporate existence and all material
rights, privileges, and franchises in connection therewith, and maintain its
qualification and good standing in all states in which the failure to be so
qualified could reasonably be expected to have a Material Adverse Effect on any
Borrower.
(E) Maintain Properties. Maintain its Properties in adequate
condition, except for such Equipment which is not materially necessary to the
operation of such Borrower's business, reasonable wear and tear excepted, and
make all necessary renewals, repairs, replacements, additions and improvements
thereto.
(F) Compliance with Laws. Comply in all material respects with
all laws, ordinances, governmental rules and regulations to which it is subject,
including, without limitation, all Environmental Laws, and obtain and keep in
force any and all material licenses, permits, franchises, or other governmental
authorizations from, give all such notices promptly to, register, enroll or file
promptly all such agreements, instruments or documents required by applicable
laws with, and promptly take all such other legally required action with respect
to, any governmental or regulatory authority, agency or official, including,
without limitation, any state or federal agency or subdivision that regulates
environmental activities or is otherwise involved in monitoring or enforcing
Environmental Laws as is required under any provision of any applicable law,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect on any Borrower.
(G) ERISA Compliance. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
to the extent applicable with respect to each Plan; (ii) promptly after the
filing thereof, furnish to Lender copies of any annual report required to be
filed pursuant to ERISA in connection with each Plan and its Affiliates; (iii)
notify Lender as soon as practicable of any Reportable Event and of any
additional act or condition arising in connection with any Plan which any
Borrower believes might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States district court of a trustee to administer the Plan; and (iv)
furnish to Lender, promptly upon Lender's request therefor, such additional
information concerning any Plan as may be reasonably requested.
(H) ERISA Events. Furnish to Lender: (a) as soon as possible,
but in no event later than thirty (30) days after any Borrower knows or has
reason to know that any Reportable Event with respect to any Plan has occurred,
a statement of the Chief Financial Officer of such Borrower setting forth the
details concerning such Reportable Event and the action which such Borrower
proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event given to the PBGC, if a copy of such notice is available
to such Borrower; (b) promptly after receipt thereof, a copy of any notice of
any potential material liability, adverse determination letter, ruling or
opinion any Borrower may receive from the PBGC or the Internal Revenue Service
with respect to any Plan; (c) when the same is made available to participants in
a Plan, all notices of a significant reduction in the rate of benefit accrual or
plan termination to the participants by the administrator of such Plan; and (d)
promptly after receipt thereof, any notice from any Multiemployer Plan to which
any Borrower or any ERISA Affiliate of any Borrower contributes which quantifies
any actual or potential withdrawal
52
liability which will or may be imposed upon the withdrawal of Borrower or any
ERISA Affiliate of any Borrower from such Multiemployer Plan.
(I) Business Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are made
in accordance with GAAP reflecting all its financial transactions.
(J) Visits and Inspections. Permit representatives of Lender,
from time to time, as often as may be reasonably requested, but only during
normal business hours without undue disruption of the normal business operations
of Borrower, to visit and inspect the Properties or Borrower, inspect and make
extracts from its books and records, and discuss with its officers, its
employees and the Accountants, each Borrower's business, assets, liabilities,
financial condition, business prospects and results of operations.
(K) Financial Statements. Cause to be prepared and furnished
to Lender the following (all to be prepared in accordance with GAAP applied on a
consistent basis, unless the Accountants concur in any change therein and such
change is disclosed to Lender and is consistent with GAAP):
(i) as soon as practicable, but not later than ninety
(90) days after the close of each Fiscal Year of Borrowers,
unqualified audited financial statements of Holdings on a
Consolidated basis as of the end of such year including, but
not limited to, statements of income and stockholders' equity
and cash flow from the beginning of the current year to the
end of the current year and the balance sheet as at the end of
such year together with consolidating statements for each
Borrower, setting forth in comparative form the corresponding
figures for the preceding year, reported on without
qualification as to the scope of the audit or as to the "going
concern" status of each Borrower and its Subsidiaries by the
Accountants;
(ii) as soon as practicable, but not later than
forty-five (45) days after the end of each month hereafter,
unaudited interim Consolidated financial statements of
Holdings as of the end of such month and of the portion of
Holdings Fiscal Year then elapsed, on a Consolidated basis, an
unaudited 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
year to the end of such month and for such month, setting
forth in comparative form the corresponding figures for the
comparable period in the preceding year together with
consolidated statements for each Borrower, certified by the
chief financial officer of Holdings as prepared in accordance
with GAAP and fairly presenting in all material respects the
Consolidated financial position and results of operations of
Holdings and its Subsidiaries for such month and period
subject only to changes from audit and year-end adjustments
and except that such statements need not contain notes;
(iii) promptly after the sending or filing thereof,
as the case may be, copies of any proxy statements, financial
statements or reports which any Borrower has made available to
its shareholders, the Trustee under the Indenture or the
holders of the Senior
53
Guaranteed Notes and copies of any regular, periodic and
special reports or registration statements which any Borrower
files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or
any national securities exchange; and
(iv) promptly after receipt thereof, copies of all
management letters and other material reports delivered by the
Accountants in connection with any annual or interim audit of
any Borrower;
(v) at delivery of each annual financial statement, a
computation in reasonable detail showing compliance by each
Borrower with the covenants set forth in Sections 9.2(L)
hereof, certified by the chief financial officer of each
Borrower;
(vi) as soon as available, and in any event no later
than forty-five (45) days after the end of each Fiscal Year,
deliver to Lender Consolidated Projections of Holdings for the
immediately succeeding Fiscal Year, on a month-by-month basis;
and
(vii) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral, Borrower's
financial condition or results of operations, including,
without limitation, consolidating financial statements for
Holdings, Borrowers and their Subsidiaries, federal income tax
returns of Holdings, Borrowers and their Subsidiaries,
accounts payable ledgers, and bank statements.
Concurrently with the delivery of the financial statements described in
clause (i) of this Section 9.1(K), Borrowing Agent shall forward to Lender a
copy of the Accountants' letter to Holdings' management that is prepared in
connection with such financial statements. Concurrently with the delivery of the
financial statements described in clauses (i) and (ii) of this Section 9.1(K),
each Borrower shall cause to be prepared and furnished to Lender a certificate,
in the form of the Compliance Certificate referenced in Section 9.1(O) hereof,
from the chief financial officer of each Borrower certifying to Lender that, to
the best of his knowledge, Borrowers have kept, observed, performed and
fulfilled each and every covenant, obligation and agreement binding upon each
Borrower in this Agreement and the Other Agreements and that no Default or Event
of Default has occurred during the most recently concluded fiscal year, or, if
such Default or Event of Default has occurred, specifying the nature thereof.
Notwithstanding the foregoing, if any Borrower has sent to Lender the financial
statements described in subsections (i) and (ii) of this Section 9.1(K) on or
prior to the date such Borrower is required to deliver the same to Lender, but
Lender has not received such financial statements by such date, then such
Borrower shall have an additional five (5) days to deliver such financial
statements following notice by Lender of its failure to receive the same which
notice may be given as provided in Section 12.1 hereof or by telephone.
(L) Notices to Lender. Notify Lender in writing: (i) promptly
after learning thereof, of the commencement of any material litigation affecting
any Borrower or any of its Properties, whether or not the claim is considered by
such Borrower to be covered by insurance, and of the institution of any
administrative proceeding which could reasonably be expected to have a Material
Adverse Effect on such Borrower and its Subsidiaries, and their properties or
Lender's Lien upon any
54
of the Collateral; (ii) at least thirty (30) days prior thereto, of such
Borrower's opening of any new material office or place of business or any
Borrower's closing of any material existing office or place of business; (iii)
promptly after any Borrower's learning thereof, of any labor dispute to which
such Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which it
is a party or by which it is bound if any such event could reasonably be
expected to have a Material Adverse Effect on such Borrower; (iv) promptly after
any Borrower's learning thereof, of any material default by Borrower under any
note, indenture, loan agreement, mortgage, lease, deed, guaranty or other
similar agreement relating to any Indebtedness for Money Borrowed of Borrower or
any of its Subsidiaries exceeding $500,000; (v) promptly after any Borrower's
learning thereof, of any Default or Event of Default; (vi) promptly after any
Borrower's learning thereof, of any default by any obligor under any note or
other evidence of Indebtedness for Money Borrowed payable to Borrower in an
amount exceeding $500,000; (vii) promptly after the rendition thereof, of any
judgment rendered against any Borrower in an amount in excess of $500,000;
(viii) at least ten (10) days prior thereto, of any Borrower's opening of any
Dominion Account not identified in Exhibit 8.1(AF) and (ix) at least ten (10)
days prior thereto, of any Borrower's opening of any bank account (other than a
Dominion Account) not identified in Exhibit 8.1(AF).
(M) Landlord Agreements. Provide Lender with copies of all
agreements between any Borrower and any landlord which owns any premises at
which any books or records relating to Accounts may, from time to time, be kept.
(N) Subordinations. Provide Lender with debt subordination
agreements, in form and substance satisfactory to Lender, from any Person who is
an officer, director or Affiliate of any Borrower to whom such Borrower is or
hereafter becomes indebted for Money Borrowed, subordinating in right of payment
and claim all of such Indebtedness and any future advances thereon to the full
and final payment and performance of the Obligations.
(O) Compliance Certificate. Within ninety (90) days after the
end of each Fiscal Year, or more frequently if requested by Lender, cause the
chief financial officer of each Borrower to prepare and deliver to Lender a
Compliance Certificate in the form of Exhibit 9.1(O) attached hereto, with
appropriate insertions.
(P) Environmental Matters.
(i) Each Borrower will ensure that the Real
Property remains in compliance with all Environmental Laws and
it will not place or permit to be placed any Hazardous
Substances on any Real Property except as not prohibited by
applicable Law; except for such non-compliance which would not
have a Material Adverse Effect.
(ii) Each Borrower will establish and
maintain a system to assure and monitor continued compliance
by it in all material respects with all applicable
Environmental Laws which system shall include periodic reviews
of such compliance and shall be appropriate to the nature of
such Borrower's and any of its subsidiaries business.
55
(iii) Each Borrower will use reasonable
efforts to (a) employ in connection with use of the Real
Property appropriate technology necessary to maintain
compliance in all material respects with any applicable
Environmental Laws and (b) 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. To the extent required by
applicable Environmental Laws, the applicable Borrower shall
obtain certificates of disposal, such as hazardous waste
manifest receipts, from all treatment, transport, storage or
disposal facilities or operators in connection with the
transport or disposal of any Hazardous Waste generated at the
Real Property.
(iv) In the event any Borrower obtains,
gives or receives written 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
written 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
Borrower's interest therein (any of the foregoing is referred
to herein as an "Environmental Complaint") from any Person or
entity, 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"), which Hazardous Discharge or Environmental
Complaint could reasonably be expected to (a) have a Material
Adverse Effect, or (b) result in the imposition of a Lien in
excess of $200,000, then such Borrower shall, within five (5)
Business Days, give written notice of same to Lender setting
forth facts and circumstances giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to
be provided to allow Lender to protect its security interest
in the Real Property and is not intended to create nor shall
it create any obligation upon Lender with respect thereto.
(v) Each Borrower shall promptly forward to
Lender 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 Borrower to dispose of Hazardous Substances which
notice, potential liability or potential responsibility could
reasonably be expected to (a) have a Material Adverse Effect,
or (b) result in the imposition of a Lien in excess of
$200,000 and shall continue to forward copies of
correspondence between such Borrower and the Authority
regarding such claims to Lender until the claim is settled.
Each Borrower shall promptly forward to Lender copies of all
documents and reports concerning a Hazardous Discharge at the
Real Property (which Hazardous Discharge could reasonably be
expected to have a Material Adverse Effect), that such
Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Lender to
protect Lender's security interest in the Real Property and
the Collateral.
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(vi) Each Borrower shall respond promptly to
any Hazardous Discharge or Environmental Complaint and take
all action required under Environmental Laws in order to
safeguard the health of any Person and to avoid subjecting the
Collateral or Real Property to any Lien. If any Borrower shall
fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or any Borrower shall fail to comply
with any of the requirements of any Environmental Laws which
failure would in Lender's reasonable judgment after due
inquiry could reasonably be expected to (a) have a Material
Adverse Effect or (b) result in the imposition of a Lien in
excess of $200,000 Lender may, but without the obligation to
do so, for the sole purpose of protecting Lender's interest in
Collateral and on five (5) Business Days prior written notice
to such Borrower (except in instances when Lender reasonably
determines after due inquiry that an emergency situation
exists in which event only one (1) day's notice which may be
telephonic) shall be required: (A) give such notices (if such
Borrower has failed to do so) or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real
Property) and take such actions as Lender (or such third
parties as directed by Lender) deem reasonably necessary or
advisable after due inquiry, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or
Environmental Complaint if such Borrower has failed to take
each of the foregoing actions prior to the expiration of the
five (5) day or one (1) day notice period, whichever is
applicable. All reasonable costs and expenses incurred by
Lender (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 Loans constituting Base Rate
Loans shall be paid upon demand by Borrowers, and until paid
shall be added to and become a part of the Obligations secured
by the Liens created by the terms of this Agreement or any
other agreement between Lender and Borrowers.
(vii) Promptly upon the written request of
Lender, which request shall be made only when Lender
reasonably believes after due inquiry that a Hazardous
Discharge which can reasonably be expected to have a Material
Adverse Effect has occurred, each Borrower shall provide
Lender, at the Borrowers' expense, with an environmental site
assessment or environmental audit report prepared by an
environmental engineering firm acceptable to Lender to assess
with a reasonable degree of certainty the existence of such
Hazardous Discharge and the potential costs in connection with
abatement, cleanup and removal of 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 Lender.
(viii) Each Borrower shall defend and
indemnify Lender and hold Lender, and its respective
employees, agents, directors and officers harmless from and
against all loss, liability, damage, claims, fines, penalties,
and reasonable costs and expenses, including reasonable
attorney's fees, suffered or incurred by Lender under or on
account of the application of any Environmental Laws to any
Borrower or any of its Property, including, without
limitation, the assertion of any lien thereunder, with respect
57
to any Hazardous Discharge, the presence of any Hazardous
Substances affecting the Real Property, whether or not the
same originates or emerges from the Real Property or any
contiguous real estate (except to the extent such loss,
liability, damage and expense, claims, costs, fines and
penalties are caused by the gross negligence, (but not mere
negligence) or willful misconduct of Lender, its employees,
agents, directors or officers), including any material loss of
value of the Real Property as a result of the foregoing.
Borrowers' obligations under this Section 9.1(Q) shall arise
upon the discovery of the presence of any Hazardous Substances
at the Real Property in violation of any Environmental Laws,
whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with
the presence of any Hazardous Substances. Borrowers'
indemnifications hereunder shall survive the termination of
this Agreement.
(ix) For purposes of this Section 9.1(Q) all
references to Real Property shall be deemed to include all of
each Borrower's right, title and interest in and to leased
premises.
(Q) Further Assurances. At Lender's request, promptly execute
or cause to be executed and deliver to Lender any and all documents, instruments
and agreements reasonably deemed necessary by Lender to give effect to or carry
out the terms or intent of this Agreement or any of the Other Agreements.
Without limiting the generality of the foregoing, if any of the Accounts arises
out of a contract with the United States of America, or any department, agency,
subdivision or instrumentality thereof, the applicable Borrower shall promptly
notify Lender thereof in writing and execute, or cause its applicable Subsidiary
to execute, any instruments and take any other action reasonably required or
requested by Lender to comply with the provisions of the Federal Assignment of
Claims Act.
(R) Conduct of Business. Continue to engage, and cause each of
its Subsidiaries to continue to engage, primarily in the businesses engaged in
by it on the day prior to the Closing Date and such other businesses as shall be
reasonably related thereto.
(S) Notice of Amendments to Certain Documents. If (and on each
occasion that): (a) any Borrower's Certificate of Incorporation or any of the
charter or other incorporation documents of any Borrower shall at any time be
modified or amended in any material respect or if any new filings of such
documents shall at any time take place; or (b) any Borrowers' by-laws shall at
any time be modified or amended in any material respect; then such Borrower
will, not later than ten (10) Business Days prior to the date on which any such
modification, amendment, supplement, new agreement or new filing shall first
become effective, furnish to the Lender a true and complete copy of such
modification, amendment, supplement or new filing.
(T) Payment of Indebtedness for Money Borrowed. Pay all of its
Indebtedness for Money Borrowed (whether existing on the date hereof or arising
at any time thereafter) punctually when and as the same shall become due and
payable by it unless prohibited from doing so pursuant to the terms hereof or
the terms of any agreement related to Subordinated Debt.
58
(U) Performance of Certain Obligations. Duly and properly
perform, observe and comply in all respects with all of its agreements,
covenants and obligations under each of the Other Agreements to which such
Borrower is or becomes a party or by which such Borrower is bound.
9.2. Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
(A) Mergers; Consolidations; Acquisitions. Merge or
consolidate with any Person, nor acquire all or any substantial part of the
Properties of any Person, except (i) a consolidation or merger solely involving
a Borrower and one or more of its wholly owned Subsidiaries or (ii) if, after
giving effect to any consolidation, merger, or acquisition ("Acquisition"), (1)
a Borrower is the surviving entity of any such merger or consolidation or (2)
such Borrower has acquired not less than sixty-six and two-thirds percent (66
2/3%) of the issued and outstanding capital stock of such Person and such Person
becomes a Guarantor or a Borrower hereunder and (3) (a) Borrower is Solvent, (b)
no Default or Event of Default has occurred which is then continuing or could
reasonably be anticipated to result therefrom, (c) the Acquisition is of a
Person or assets in the same business as such Borrower or another business
reasonably related thereto, (d) Lender has been given no less than thirty (30)
days prior written notice of any such Acquisition and shall be provided with all
information which it may reasonably request in connection with such Acquisition,
(e) such Borrower shall have delivered to Lender no later thirty (30) days prior
to closing of the Acquisition a pro forma balance sheet and cash flow
projections (which shall be based on reasonable assumptions) giving effect to
the Acquisition and with respect to such cash flow projections, cover the next
succeeding twelve month period which shall reflect the continuing compliance
with all financial covenants over such period, (f) after giving effect to the
Acquisition, no more than $10,000,000 of Loans and Letters of Credit shall have
been used in connection with the financing of the payment of the purchase price
of such Acquisition and all other Acquisitions, (g) the cash portion of the
total consideration paid to the sellers in connection with all such Acquisitions
which has been financed through the incurrence of indebtedness shall not exceed
the product of (I) five (5) multiplied by (II) an amount equal to (x) the
aggregate amount of Pro Forma EBITDA for the acquired businesses or entities in
all such Acquisitions, calculated for each acquired business or entity as at the
time of the Acquisition thereof based upon the then most recently available
twelve months' financial statements for such business or entity, (h) after
giving effect to any such Acquisition, Aggregate Adjusted Availability shall not
be less than an amount equal to $5,000,000, (i) the terms and conditions of all
third party financing related to such Acquisitions must be satisfactory to
Lender in its reasonable discretion and (j) Lender shall have received, prior to
or simultaneously with the closing of each such Acquisition, an opinion of
counsel reasonably satisfactory to Lender in all respects covering such
Borrower's due incorporation, valid existence, good standing and power and
authority to enter into the documents contemplated by the Acquisition (the
"Acquisition Documents"), the due authorization, execution, delivery and
enforceability of the Acquisition Documents, and such other matters as shall be
covered in any opinion rendered in favor of such Borrower in connection which
such Acquisition ("Permitted Acquisition").
(B) Loans. Make any loans or other advances of money (other
than for salary, bonuses, stock options, relocation, travel and entertainment
advances, advances against commissions and other similar advances in the
ordinary course of business) to any Person, including, without limitation, any
of Borrower's Affiliates, officers or employees, except that Borrowers may make
loans
59
or other advances to (i) its employees, suppliers and customers in an amount not
to exceed One Million Dollars ($1,000,000) in the aggregate at any one time
outstanding and (ii) the other Borrowers, their Subsidiaries and CFP.
(C) Indebtedness For Money Borrowed. Create, incur, assume, or
suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to
exist, any Indebtedness for Money Borrowed, except: (i) Obligations owing to
Lender; (ii) Indebtedness of any of its Subsidiaries to Borrower; (iii)
Indebtedness evidenced by the Senior Guaranteed Notes (which such Indebtedness
may be paid only in accordance with the terms of the Indenture as originally
executed or modified with the prior written consent of Lender but may not be
voluntarily prepaid; in whole or in part except as permitted pursuant to Section
9.2(I); (iv) Permitted Purchase Money Indebtedness; (v) liabilities arising out
of endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business; (vi) Indebtedness issued in
connection with a Permitted Refinancing; (vii) Indebtedness set forth on Exhibit
9.2(C); (viii) Indebtedness in connection with sale and leaseback transactions
otherwise permitted under Section 9.2(L); (ix) Indebtedness arising from the
issuance of Subordinated Repurchase Notes up to an aggregate principal amount of
$3,000,000; and (x) other Indebtedness for Money Borrowed in the aggregate not
to exceed the sum of Five Million Dollars ($5,000,000) at any one time
outstanding.
(D) Affiliate Transactions. Enter into, or be a party to any
transaction with any Affiliate or stockholder, except in the ordinary course of
or pursuant to the reasonable requirements of, any Borrower's business and upon
fair and reasonable terms which are fully disclosed to Lender and which are no
less favorable to such Borrower than such Borrower would obtain in a comparable
arm's length transaction with a Person not an Affiliate or stockholder of such
Borrower. The foregoing provision shall not restrict (i) any employment
agreement entered into by any Borrower in the ordinary course of business and
consistent with the past practices of such Borrower, (ii) transactions between
or among any of the Borrowers and the Borrowers' Subsidiaries, (iii) payments
and transactions pursuant to the Management Agreement as in effect on the
Closing Date and (iv) transactions permitted by Section 9.2(J) hereof.
(E) Partnerships or Joint Ventures. Become or agree to become
a general or limited partner in any general or limited partnership or a joint
venture in any joint venture which would require an aggregate investment by any
Borrower of greater than $1,000,000 if funded with Loans and $5,000,000 if
funded from other sources provided that such Borrower provides Lender with prior
written notice of any such investment and such investment is made at a time when
no Event of Default exists.
(F) Adverse Transactions. (i) Enter into any transaction the
performance of which would result in a material violation of this Agreement or
any Other Document, (ii) enter into any transaction, which would, at the time
such transaction is entered into, reasonably be anticipated to have a Material
Adverse Effect, or (iii) permit or agree to any material extension, compromise
or settlement or make any change or modification of any kind or nature with
respect to any Account, including any of the terms relating thereto, other than
any of the foregoing in the ordinary course of business, all of which shall be
reflected in the Schedules of Accounts submitted to Lender pursuant to Section
5.2 of this Agreement.
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(G) Guaranties. Guarantee, assume, endorse or otherwise, in
any way, become directly or contingently liable with respect to the Indebtedness
of any Person except (i) for endorsement of instruments or items of payment for
deposit or collection, (ii) one or more guarantees for the benefit of any
Borrower with respect to the Obligations and the Senior Guaranteed Notes, (iii)
guarantees by Borrower or any of its Subsidiaries in lieu of any loans permitted
by the provisions of Section 9.2(B); (iv) guarantees existing on the date
hereof; (v) Borrowers and their Subsidiaries may become and remain liable with
respect to guarantees in respect of obligations to pay purchase price, customary
indemnification and purchase price adjustment obligations incurred pursuant to
any Permitted Acquisitions or in connection with sales of assets; (vi) Borrowers
and their Subsidiaries may become and remain liable under guarantees in the
ordinary course of business to or of the obligations of suppliers, customers,
franchisees and licensees of Borrowers and their Subsidiaries; (vii) Borrowers
and their Subsidiaries may become and remain liable with respect to other
guarantees that are expressly subordinated by their terms to the Obligations;
provided that the maximum aggregate liability, contingent or otherwise, of
Borrowers and their Subsidiaries in respect of all such guarantees shall at no
time exceed $2,000,000.
(H) Limitation on Liens. Create or suffer to exist any Lien
upon any of its property, income or profits whether now owned or hereafter
acquired except: (i) Liens at any time granted in favor of Lender; (ii) Liens
for taxes (excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due or being contested as permitted by Section 9.1(A) hereof, but
only if in Lender's commercially reasonable judgment such Lien does not
materially affect adversely Lender's rights or the priority of Lender's Lien in
the Collateral; (iii) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons for labor,
materials, supplies or rentals incurred in the ordinary course of any Borrower's
business, but only if the payment thereof is not at the time required and only
if such Liens are junior to the Liens in favor of Lender; (iv) Liens resulting
from deposits made in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, social security and other like
Laws; (v) attachment, judgment and other similar non-tax Liens arising in
connection with court proceedings, but only if and for so long as the execution
or other enforcement of such Liens is and continues to be effectively stayed and
bonded on appeal in a manner satisfactory to Lender for the full amount thereof
the validity and amount of the claims secured thereby are being contested in
good faith and by appropriate lawful proceedings, and such Liens do not, in the
aggregate, materially detract from the value of the Property of such Borrower or
materially impair the use thereof in the operation of such Borrower's business;
(vi) Purchase Money Liens securing Permitted Purchase Money Indebtedness; (vii)
reservations, exceptions, easements, rights of way, and other similar
encumbrances affecting Real Property, provided that, in Lender's commercially
reasonable judgment, they do not in the aggregate materially detract from the
value of said Properties or materially interfere with their use in the ordinary
conduct of such Borrower's business; (viii) Liens securing Indebtedness of a
Subsidiary of any Borrower to any Borrower; (ix) such other Liens as appear on
Exhibit 9.2(H) attached hereto; and (x) such other Liens as Lender may hereafter
approve in writing.
(I) Subordinated Debt. Make, or take any action to authorize
or effect, any payment of principal, interest, fees or charges on or in respect
of any payment of any part or all of any Subordinated Debt in violation of the
subordination provisions relating to such Subordinated Debt or voluntarily
prepay any Subordinated Debt; or otherwise repurchase, redeem or retire any
instrument evidencing any such Subordinated Debt prior to maturity; or enter
into any agreement (oral or written)
61
to amend, modify, alter (in any manner materially adverse to Lender) or
terminate any one or more instruments or agreements evidencing or relating to
any Subordinated Debt, except that any Borrower may prepay, repurchase, redeem
or retire any Subordinated Debt prior to maturity out of the proceeds of the
issuance of capital stock, any other equity contribution permitted by this
Agreement or the issuance of Indebtedness in a Permitted Refinancing of the
Subordinated Debt so prepaid, repurchased, redeemed or retired.
(J) Distributions. Declare or make any (i) Distributions
required to allow repurchase of equity held by management pursuant to the
Stockholders Agreement not to exceed (x) in any Fiscal Year an amount equal to
the Cash Flow for the immediately preceding Fiscal Year so long as after giving
effect to such Distribution, Borrowers shall have not less than $5,000,000 of
Aggregate Adjusted Availability (including payments on Subordinated Debt issued
to such investors in lieu of cash) or (y) in any twelve (12) month period an
amount not to exceed $500,000 so long as after giving effect to such
Distribution Borrowers shall have not less than $7,500,000 of Aggregate Adjusted
Availability (including payments on Subordinated Debt issued to such investors
in lieu of cash), (ii) Distributions to CFP and Holdings required to pay their
franchise taxes and other fees and expenses related to maintenance of their
respective corporate existences, (iii) Distributions to make interest payments
to the holders of the Senior Guaranteed notes, (iv) Distributions to First
Atlantic Capital, Ltd. pursuant to the terms of the Management Agreement, (v)
Distributions to First Atlantic Capital, Ltd. for investment banking advisory
fees for each Permitted Acquisition and/or any other financing transaction in an
amount not to exceed, with respect to each Permitted Acquisition 2% of the
transaction value and, with respect to each other financing transaction, 2% of
the gross proceeds of such transaction (as determined in good faith by senior
management of the Borrowers) and (vi) Distributions by Quality and Custom to
Holdings.
(K) Subsidiaries. Hereafter create any Subsidiary of any
Borrower without giving Lender advance notice of the name of such Subsidiary and
the nature of its intended business and such Subsidiary has become a Guarantor
or divest itself of any material assets by transferring them to any other
Subsidiary of Borrower which has not become a Guarantor and to whose existence
Lender has not consented; provided, however, that (i) subject to Section 9.2(A),
any Borrower may create a Subsidiary for purposes of effecting the acquisition
of another corporation through a merger, a stock purchase transaction or an
asset purchase transaction and may transfer to such Subsidiary cash or other
property for purposes of paying the purchase price in such acquisition as well
as related fees and expenses, (ii) subject to Section 9.2(A), any Borrower may
acquire another corporation that becomes a Subsidiary pursuant to a stock
purchase transaction or a merger and (iii) any Borrower may create a Subsidiary
and transfer property to such Subsidiary to the extent permitted by Section
9.2(E).
(L) Capital Expenditures. Make Capital Expenditures
(including, without limitation, by way of capitalized leases) in the aggregate,
as to all Borrowers, in excess of the sum Seven Million Dollars ($7,000,000)
("Annual Amounts") for any Fiscal Year, provided, however, the unused portion of
any Annual Amount in any Fiscal Year not to exceed Five Million Dollars
($5,000,000) may be used by Borrowers in the immediately succeeding Fiscal Year
in addition to the Annual Amount for such succeeding year.
(M) Business Locations. Transfer their respective principal
place of business or chief executive office, or open new locations or transfer
existing locations, or maintain warehouses or
62
records with respect to Accounts, to or at any locations other than those at
which the same are presently kept or maintained, except upon at least thirty
(30) days prior written notice to Lender and after the delivery to Lender of
financing statements, if required by Lender, in form satisfactory to Lender to
perfect or continue the perfection of Lender's Lien and security interest
hereunder.
(N) Change of Business. Enter into any new business unrelated
to the business conducted as of the Closing Date or make any material change in
any Borrowers business objectives, purposes and operations.
(O) Disposition of Assets. Sell, lease or otherwise dispose of
or transfer any of its respective Properties, including any disposition of
Property as part of a sale and leaseback transaction, to or in favor of any
Person, except (i) sales of inventory in the ordinary course of business, (ii) a
transfer of Property to a Borrower by a Subsidiary of such Borrower or another
Borrower or Guarantor, (iii) if an Event of Default shall not have occurred and
be continuing, dispositions of tangible fixed assets ("Disposed Asset") to the
extent such fixed assets are replaced with fixed assets of similar kind,
function and value, provided the replacement asset shall be ordered or
construction commenced no later than one hundred eighty (180) days following any
disposition of the asset to be replaced, the replacement asset (which shall
constitute Collateral provided that the Disposed Asset constituted Collateral)
shall be free and clear of Liens other than Permitted Liens that are not
Purchase Money Liens and Borrowers shall give Lender at least five (5) days
prior written notice of such disposition, (iv) if any Event of Default shall not
have occurred and be continuing, dispositions of tangible fixed assets which, in
the aggregate during any consecutive twelve month period, have a fair market
value or book value, whichever is less, of $500,000, provided that the Net
Proceeds thereof are applied as provided in Section 2.2(C), and (v) any sale and
leaseback transaction where the lease is an operating lease, and any sale and
leaseback transaction otherwise permitted by Section 9.2(L).
(P) Name of Borrower. Use any corporate name (other than its
own) or any fictitious name, tradestyle or "d/b/a" other than the names
disclosed on Exhibit 9.2(P) attached hereto except after at least thirty (30)
days prior written notice has been provided to Lender and Lender has been
provided with a tradestyle letter relating thereto in form and substance
reasonably satisfactory to Lender.
(Q) Use of Lender's Name. Without the prior written consent of
Lender, use the name of Lender or the name of any Affiliates of Lender in
connection with any Borrower's business or activities, except (i) as required by
law, (ii) in connection with the enforcement of its rights under this Agreement,
(iii) in connection with internal business matters, (iv) as required in dealings
with governmental agencies and financial institutions, (v) in filings with
governmental agencies under the federal and state securities laws, (vi) in its
financial statements, and (vii) in other statements to the extent that such
statements include information previously known to the Persons to which such
statements are addressed or generally known to the public and to trade creditors
of Borrowers solely for credit reference purposes.
(R) Margin Securities. Own, purchase or acquire (or enter into
any contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Lender shall have received an opinion of
counsel
63
satisfactory to Lender to the effect that such purchase or acquisition will not
cause this Agreement to violate Regulations G or U or any other regulation of
the Federal Reserve Board then in effect.
(S) Restricted Investment. Except as otherwise provided in
Section 9.2(E) hereof, make or have, or permit any of its Subsidiaries to make
or have, any Restricted Investment.
(T) Fiscal Year. Change its Fiscal Year from a Fiscal Year
ending on the last Saturday of each March of each year.
(U) Stock of Subsidiary, Etc. Sell or otherwise dispose of any
shares of capital stock of any of its Subsidiaries, except in connection with a
transaction permitted under Section 9.2(A).
(V) Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than its Subsidiaries.
(W) ERISA. Adopt or agree to contribute to any Plan which is
subject to Title IV of ERISA except for any Plan set forth on Exhibit 9.2(W)
provided that Lender has been provided with satisfactory evidence indicating
that Borrower does not have any material withdrawal liability in excess of
$500,000 with respect to such Plan.
(X) Other Agreements. Enter into any material amendment,
waiver or modification of any material agreements or its respective Certificate
of Incorporation, By-Laws or shareholders agreements the result of which would
have a Material Adverse Effect on any Borrower.
SECTION 10. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
Other Agreements, and without affecting in any manner the rights of Lender under
the other Sections of this Agreement, it is understood and agreed that Lender
will not make the initial Loans or cause the issuance of the initial Letters of
Credit under Section 2 of this Agreement unless and until each of the following
conditions has been, and at the time of such initial extension of credit
continues to be, satisfied, all in form and substance reasonably satisfactory to
Lender and its counsel:
10.1. Documentation. Lender shall have received the following
documents, each to be in form and substance reasonably satisfactory to Lender
and its counsel:
(A) Certified copies of each Borrower's casualty insurance
policies, together with loss payable endorsements on Lender's standard form of
loss payee endorsement naming Lender as loss payee, and certified copies of each
Borrower's liability insurance policies, together with endorsements naming
Lender as a co-insured;
(B) Copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing under the Uniform Commercial
Code in applicable jurisdictions necessary to perfect the Liens of Lender in the
Collateral, and the Liens of Lender in the collateral granted to Lender pursuant
to each Subsidiary Security Agreement which Liens are subject to the
64
Uniform Commercial Code, and evidence in a form acceptable to Lender that such
Liens constitute valid and perfected security interests and Liens, having the
Lien priority specified in Section 4.2(B) hereof;
(C) A copy of the Certificate of Incorporation of each
Borrower and each Guarantor, and all amendments thereto, certified by the
Secretary of State or other appropriate official of its jurisdiction of
incorporation and a true and accurate copy of the By-Laws of each Borrower and
each Guarantor in effect as of the Closing Date, certified by such corporation's
secretary;
(D) Good standing certificates for each Borrower and each
Guarantor, issued by the Secretary of State or other appropriate official of
each Borrower's or such Guarantor's jurisdiction of incorporation and each
jurisdiction where such Borrower or such Guarantor is qualified as a foreign
corporation;
(E) A closing certificate signed by the President and Chief
Financial Officer of each Borrower and each Guarantor dated as of the Closing
Date, stating that (i) the representations and warranties set forth in Section 8
hereof are true and correct in all material respects on and as of such date,
(ii) each Borrower is on such date in compliance in all material respects with
all the terms and provisions set forth in this Agreement and (iii) on such date
no Default or Event of Default has occurred or is continuing;
(F) Landlord waivers or access agreements duly executed,
accepted and acknowledged by or on behalf of each of the landlords with respect
to locations where a material amount of Collateral is located;
(G) The Other Agreements duly executed and delivered by each
required signatory thereto;
(H) the favorable written opinion of (i) X'Xxxxxxxx Graev &
Karabell, counsel to Borrowers, substantially in the form of Exhibit 10.1(I)(i),
(ii) Xxxx & Sharp and (iii) XxXxxxxxxx, Keen & Xxxxxxx.
(I) Written instructions from Borrowing Agent on behalf of
Borrowers directing the application of proceeds of any Loan to be made pursuant
to this Agreement on the Closing Date, and an initial Borrowing Base Certificate
from Borrowers reflecting that Borrowers have Eligible Accounts and Inventory in
amounts sufficient in value and amount to support Revolving Credit Loans in the
amount requested by Borrowers on the date of such certificate;
(J) Duly executed agreements from each Borrower establishing
the Dominion Account for the collection or servicing of the Accounts;
(K) Copies of any and all domestic and foreign governmental
consents, authorizations, orders or approvals necessary to permit the
effectuation of the transactions contemplated by this Agreement and the Other
Agreements and such consents and waivers of third parties that have claims
against the Collateral, as Lender and its counsel shall reasonably deem
necessary;
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(L) Copies of the resolutions in form and substance reasonably
satisfactory to it, of the Board of Directors of each Borrower authorizing the
execution, delivery and performance of this Agreement, the Loans, Notes, and the
Other Agreements on behalf of each Borrower which is a party thereto;
(M) Evidence reasonably satisfactory to Lender that (i) no
litigation, investigation or proceeding before or by any arbitrator or
governmental authority shall be continuing or threatened against any Guarantor
or any Borrower or against the officers or directors of any Guarantor or any
Borrower (A) in connection with the Loan Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Lender, is deemed
material or (B) which could reasonably be expected to have a Material Adverse
Effect on any Borrower; and (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to any Borrower or the conduct of its
business or inconsistent with the due consummation of the transactions
contemplated hereby shall have been issued by any governmental authority;
(N) Any Borrower shall have discharged, or simultaneously with
(or from the proceeds of) the initial Revolving Credit Loan and Term Loan shall
discharge, all of its obligations under its existing financing arrangements with
Prior Lender, including, without limitation, costs, fees and expenses in
connection therewith; and
(O) Such other documents, instruments and agreements as Lender
may reasonably request.
10.2. Other Conditions. The following conditions have been, and at the
time of the initial extension of credit hereunder shall continue to be,
satisfied, in the sole discretion of Lender:
(A) No Default or Event of Default shall exist;
(B) Each of the conditions precedent set forth in the Other
Agreements shall have been satisfied;
(C) Since December 31, 1997 there shall not have occurred any
material adverse change in the business, financial condition or results of
operations of any Guarantor or any Borrower, or the existence or value of any
material Collateral, or any event, condition or state of facts which would
reasonably be expected to have a Material Adverse Effect on any Borrower or any
Guarantor;
(D) No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of Borrowers'
prior credit facility, this Agreement, the Other Agreements, or the consummation
of the transactions contemplated hereby or which would be reasonably likely to
result in a Material Adverse Effect on any Borrower or any Guarantor;
(E) Lender shall have received such certificates and documents
reflecting the Solvency of each Borrower and each Guarantor, as Lender shall
find acceptable, including, without
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limitation, Consolidated pro-forma balance sheets, forecasted financial
statements consisting of balance sheets, income statements and cash flow
statements for Holdings on a Consolidated basis covering at least the three-year
period commencing on the Closing Date, prepared by Holdings and a fair valuation
balance sheet for Holdings on a Consolidated basis showing that each Borrower
and Guarantor is Solvent;
(F) All instruments and documents required hereby or relating
to each Borrower's capacity and authority to execute the Other Agreements and
such other agreements, instruments, certificates, opinions and assurances as
Lender may reasonably request, and all procedures in connection herewith would
be subject to Lender's approval and the approval of Lender's counsel as to form
and substance.
(G) Each of the representations and warranties made by each
Borrower in or pursuant to this Agreement and any of the Other Agreements and
each of the representations and warranties contained in any certificate,
document or financial or other statement furnished any time under or in
connection with this Agreement or any Other 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.
(H) Receipt by Lender of fully paid mortgagee title insurance
policies (or binding commitments to issue title insurance policies, marked to
Lender's satisfaction to evidence the form of such policies to be delivered
after the Closing Date), in standard ALTA form, issued by Chicago Title
Insurance Company or another title insurance company satisfactory to Lender,
containing such endorsements as shall be required by Lender in an amount equal
to not less than $4,000,000 insuring the Mortgages to create a valid first
priority and fourth priority Lien on all Real Property located at 0000 Xxxxx
Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx and valid Liens on the leasehold interest
described therein with no exceptions which Lender shall not have approved in
writing and no survey exceptions.
(I) Aggregate Adjusted Availability on the Closing Date shall
exceed Eight Million Dollars ($8,000,000), calculated after (1) giving effect to
payment of all Indebtedness of Borrower to Prior Lender, and (2) payment of all
out-of-pocket fees and costs incurred in connection with the Closing.
10.3. Conditions to Each Loan. The agreement of Lender to make any Loan
requested to be made on any date (including, without limitation, the initial
Loans), is subject to the satisfaction of the following conditions precedent as
of the date such Loan is made:
(A) Representations and Warranties. Each of the
representations and warranties made by each Borrower in or pursuant to this
Agreement and by each Borrower in any of the Other Agreements to which it is a
party, and each of the representations and warranties of each Borrower contained
in any certificate, or other written statement furnished at any time pursuant to
this Agreement or any of the Other Agreements 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 for representations and warranties which, by their nature, speak of a
particular date which shall be true and correct in all material respects as of
such particular date; and
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(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 Loans requested to be made, on such date; provided, however that Lender, in
its sole discretion, may continue to make Loans notwithstanding the existence of
an Event of Default or Default and that any Loans so made shall not be deemed a
waiver of any such Event of Default or Default.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. Events of Default. The occurrence of any one or more of the
following events shall constitute, after giving effect to any applicable notice
or grace period set forth below, an "Event of Default":
(A) Payment of Loans. Any failure to pay any installment of
principal, interest or premium, if any, owing on any Loan on the due date
thereof (whether due at stated maturity, upon acceleration or otherwise).
(B) Payment of Obligations. Any failure to pay any of the
Obligations that are not evidenced by a Note on the due date thereof (whether
due at stated maturity, on demand, upon acceleration or otherwise).
(C) Misrepresentations. Any representation or warranty made by
any Borrower in this Agreement or by any Borrower or any Guarantor in any of the
Other Agreements to which it is a party, or any representation or warranty of
any Borrower or any Guarantor contained in any certificate or other written
statement furnished at any time pursuant to this Agreement or any of the Other
Agreements proves to have been false or misleading in any material respect when
made.
(D) Breach of Covenants. Any Borrower shall breach (i) any
covenant contained in Sections 4.4, 4.5, 4.6, 5.2, 9.1(A), 9.1(F), 9.1(J),
9.1(K), 9.1(L)(viii), 9.2 (other than subsection (P) thereof) or 9.3 of this
Agreement, or (ii) any other covenant contained in this Agreement or any other
Agreement (other than a covenant a default in the performance or observance of
which is dealt with specifically elsewhere in this Section 11.1) and the breach
of such other covenant is not cured to Lender's satisfaction within thirty (30)
days after the sooner to occur of any Borrower's receipt of notice of such
breach from Lender or the date on which such breach becomes known to any officer
of such Borrower.
(E) Cancellation of Other Agreements. Any of the Other
Agreements shall be cancelled, terminated, revoked or rescinded otherwise than
in accordance with the express terms thereof or with the prior written
agreement, consent or approval of Lender; or any action at law, suit in equity
or other legal proceeding to cancel, revoke or rescind any of the Other
Agreements shall be commenced by or on behalf of any Borrower, any Guarantor or
any other Person or Persons bound thereby, or by any governmental or regulatory
authority or agency of competent jurisdiction; or any court or any other
governmental or regulatory authority or agency of competent jurisdiction shall
make a determination that, or shall issue a judgment, order, decree or ruling to
the effect that, any one or more of the Other Agreements or any one or more of
the obligations of any Borrower, any Guarantor
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or of any other Person or Persons under any one or more of the Other Agreements
are illegal, invalid or unenforceable in accordance with the terms thereof.
(F) Insolvency, Etc. Any resolution shall be passed or any
action shall be taken by any Borrower or any Guarantor for the termination,
winding up, liquidation or dissolution of such Person or its debts, or any
Borrower shall make an assignment for the benefit of creditors, or any Borrower
shall file a petition in voluntary liquidation or bankruptcy, or any Borrower or
any Guarantor shall file a petition or answer or consent seeking the
reorganization of such Person or the readjustment of any of the Indebtedness of
such person under applicable insolvency or bankruptcy laws now or hereafter
existing, or any Borrower or any Guarantor shall consent to the appointment of
any receiver, administrator, liquidator, custodian or trustee of all or any part
of its property or assets, or corporate action shall be taken by any Borrower or
any Guarantor or personal action taken by any Borrower or any Guarantor, in
either case for the purpose of effecting any of the foregoing.
(G) Bankruptcy Etc. By order or decree of any court of
competent jurisdiction, any Borrower or any Guarantor shall be adjudicated a
bankrupt or insolvent, or a petition for proceedings in bankruptcy or
liquidation or for the reorganization or the readjustment of its Indebtedness
under applicable bankruptcy or insolvency laws now or hereafter existing shall
be filed against any Borrower or any Guarantor, and any Borrower or Guarantor
shall admit the material allegations thereof, or any order, judgment or decree
shall be made approving such petition and such order, judgment or decree shall
not be vacated, set aside or stayed within sixty (60) days of their commencement
or any receiver, administrator, liquidator or trustee shall be appointed for any
Borrower or any Guarantor or for all or any part of the property of such Person
and such receiver, administrator, liquidator or trustee shall not be discharged
or his jurisdiction shall not be relinquished, vacated or stayed, on appeal or
otherwise, within sixty (60) days after his appointment.
(H) Other Defaults. There shall occur and be continuing any
event of default on the part of any Borrower or any Guarantor (including
specifically, but without limitation, due to non-payment) under any agreement,
document or instrument to which any Borrower or any Guarantor is a party or by
which any Borrower or any of its Property is bound, creating or relating to any
Indebtedness for Money Borrowed (including, but not limited to, the Senior
Guaranteed Notes) in excess of $1,000,000 the occurrence and continuation of
which event of default gives the holders of such Indebtedness the right to
accelerate the same.
(I) Uninsured Losses; Unauthorized Dispositions. Any loss,
theft, damage or destruction not fully covered by insurance (as required by this
Agreement and subject to such deductibles as Lender shall have agreed to in
writing), or sale, lease or encumbrance of any of the Collateral or the making
of any levy, seizure, or attachment thereof or thereon which could reasonably be
expected to have a Material Adverse Effect on any Borrower and its Subsidiaries,
except in all cases as may be specifically permitted by other provisions of this
Agreement.
(J) Adverse Changes. There shall occur any event or condition
which, in Lender's reasonable discretion, would have a Material Adverse Effect
on any Borrower and the Guarantors taken as a whole.
(K) Solvency. Any Borrower or any Guarantor shall cease to be
Solvent.
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(L) Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of any Borrower or any Guarantor
for a period which significantly affects such Borrower's or such Guarantor's
capacity to continue its business, on a profitable basis, the occurrence of
which could reasonably be expected to have a Material Adverse Effect on such
Borrower or such Guarantor; or any Borrower or any Guarantor shall suffer the
loss or revocation of any material license or permit now held or hereafter
acquired by any Borrower or any Guarantor which is necessary to the continued or
lawful operation of its business, the occurrence of which could reasonably be
expected to have a Material Adverse Effect on any Borrower or any Guarantor; or
any Borrower or any Guarantor shall be enjoined, restrained or in any way
prevented by court, governmental or administrative order from conducting all or
any material part of its business affairs, the occurrence of which could
reasonably be expected to have a Material Adverse Effect on any Borrower or any
Guarantor.
(M) Change of Ownership. (1) Any Borrower shall cease to own
and control, beneficially and of record, at least fifty one percent (51%) of the
issued and outstanding capital stock of its Subsidiaries; (2) Holdings shall
cease to own and control, beneficially and of record, at least one hundred
percent (100%) of the issued and outstanding capital stock of Custom and
Quality; or (3) any Person other than CFP Group, Inc. shall own and control,
beneficially and of record one hundred percent (100%) or more of the issued and
outstanding capital stock of Holdings.
(N) ERISA. A Reportable Event shall occur which Lender, in its
sole reasonable discretion, shall determine in good faith constitutes grounds
for the termination by the PBGC of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated by the PBGC or any such trustee shall be requested or
appointed, or if any Borrower is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from such
Borrower's complete or partial withdrawal from such Plan.
(O) Litigation. Any Borrower or any Guarantor, or any
Affiliate of either, shall challenge or contest in any action, suit or
proceeding the validity or enforceability of this Agreement or any of the Other
Agreements, the legality or enforceability of any of the Obligations or the
perfection or priority of any Lien granted to Lender.
(P) Criminal Forfeiture. Any Borrower or any Guarantor shall
be criminally indicted or convicted under any law that could lead to a
forfeiture of any material Property of any Borrower or any Guarantor.
(Q) Judgments. Any final, unappealable money judgment, writ of
attachment or similar process is entered or filed against any Borrower or any
Guarantor or any of its Property ("Judgment") and results in the creation or
imposition of any Lien that is not a Permitted Lien if (i) any Judgment exceeds
$500,000 or the aggregate amount of all outstanding Judgments for all Borrowers
and the Guarantors at such time is in excess of $1,000,000, and (ii) such
Judgments are not discharged or stayed within forty (40) days.
11.2. Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.4
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hereof, upon or at any time after the occurrence of an Event of Default and
during the continuance thereof as above provided, all or any portion of the
Obligations due or to become due from Borrowers to Lender, whether under this
Agreement, or any of the Other Agreements or otherwise, shall, at the option of
Lender and without notice or demand by Lender, become at once due and payable
and Borrowers shall forthwith pay to Lender, in addition to any and all sums and
charges due, the entire principal of and interest accrued on the Obligations.
11.3. Remedies. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
(A) All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable rights
to which Lender may be entitled, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, and shall be in addition to
any other rights or remedies contained in this Agreement or any of the Other
Agreements.
(B) The right to take immediate possession of the Collateral,
and (i) to require Borrowers and the Guarantors to assemble the Collateral, at
Borrower's expense, and make it available to Lender at a place designated by
Lender which is reasonably convenient to both parties, and (ii) to enter any of
the premises of any Borrower and the Guarantors or wherever any of the
Collateral shall be located.
(C) The proceeds realized from the sale of any Collateral may
be applied, upon collection, first to the costs, expenses and attorneys' fees
incurred by Lender in collecting the Obligations, in enforcing the rights of
Lender under the Other Agreements and in collecting, retaking, completing,
protecting, removing, storing, advertising for sale, selling and delivery any of
the Collateral; secondly, to interest due upon any of the Obligations; and
thirdly, to the principal of the Obligations. If any deficiency shall arise,
each Borrower and each Guarantor shall remain jointly and severally liable to
Lender therefor.
11.4. Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrowers contained in this Agreement and of Borrowers and each Guarantor in the
Other Agreements, or in any document referred to herein or contained in any
agreement supplementary hereto or in any schedule or contained in any other
agreement between Lender and any Guarantor or any Borrower, heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and not,
except as expressly provided thereby, in derogation or substitution of any of
the terms, covenants, conditions, or agreements of Borrowers herein contained.
The failure or delay of Lender to exercise or enforce any rights, Liens, powers,
or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such Liens,
rights, powers and remedies, but all such Liens, rights, powers, and remedies
shall continue in full force and effect until all Loans and all other
Obligations owing or to become owing from Borrowers to Lender shall have been
fully satisfied, and all Liens, rights, powers, and remedies herein provided for
are cumulative and none are exclusive.
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SECTION 12. MISCELLANEOUS
12.1. Power of Attorney. Borrowers hereby irrevocably designate, make,
constitute and appoint Lender (and all Persons designated by Lender) as
Borrowers' true and lawful agent (and attorney-in-fact) and Lender, or Lender's
agent, may, without notice to any Borrower and in any Borrower's or Lender's
name, but at the cost and expense of Borrower:
(A) At such time or times hereafter as Lender or said agent,
in its sole discretion, may determine, endorse any Borrower's name on any
checks, notes, acceptances, drafts, money orders or any other evidence of
payment or proceeds of the Collateral which come into the possession of Lender
or under Lender's control pursuant to the terms of this Guarantor Security
Agreement; and
(B) At such time or times upon or after the occurrence of an
Event of Default and during the continuance thereof as Lender or its agent in
its sole discretion may determine: (i) demand payment of the Accounts from the
Account Debtors, enforce payment of the Accounts by legal proceedings or
otherwise, and generally exercise all of Borrowers' rights and remedies with
respect to the collection of the Accounts; (ii) settle, adjust, compromise,
discharge or release any of the Accounts or other Collateral or any legal
proceedings brought to collect any of the Accounts or other Collateral; (iii)
sell or assign any of the Accounts and other Collateral upon such terms, for
such amounts and at such time or times as Lender deems advisable; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign any Borrower's name to a proof of claim
in bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and, unless any Borrower requests
delivery thereof to such Borrower after opening, dispose of all mail addressed
to such Borrower and to notify postal authorities to change the address for
delivery thereof to such address as Lender may designate; (vii) endorse the name
of any Borrower upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Lender on account of the
Obligations; (viii) endorse the name of any Borrower upon any chattel paper,
document, instrument, invoice, freight xxxx, xxxx of lading or similar document
or agreement relating to the Accounts and any other Collateral; (ix) use any
Borrower's stationery and sign the name of any Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) subject to any applicable
license agreements, use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the Accounts
and any other Collateral and to which any Borrower has access; (xi) make and
adjust claims under policies of insurance; and (xii) do all other acts and
things necessary, in Lender's reasonable determination, to fulfill any
Borrower's obligations under this Agreement.
12.2. Indemnity. Each Borrower hereby agrees to indemnify Lender and
hold Lender harmless from and against any liability, loss, damage, suit, action
or proceeding ever suffered or incurred by Lender as the result of any
Borrower's failure to observe, perform or discharge such Borrower's duties
hereunder. Without limiting the generality of the foregoing, this indemnity
shall extend to any claims asserted against Lender by any Person under any
Environmental Laws or similar laws by reason of any Borrower's or any other
Person's failure to comply with laws applicable to solid or hazardous waste
materials or other toxic substances. Notwithstanding any contrary provision of
this Agreement, the obligation of any Borrower under this Section 12.2 shall
survive the payment in full of
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the Obligations and the termination of this Agreement. This indemnity shall
include reasonable attorneys' fees and legal expenses.
12.3. Modification of Agreement; Sale of Interest. This Agreement may
not be modified, altered or amended, except by an agreement in writing signed by
each Borrower and Lender. No Borrower may sell, assign or transfer any interest
in this Agreement or any of the Other Agreements, or any portion thereof,
including, without limitation, such Borrower's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. Lender shall not assign
any of its rights or interests in any of the Loan Documents without the prior
written consent of Borrowers. Notwithstanding the foregoing, if the transfer is
part of a transfer by Lender to a single assignee that is a reputable and
financially responsible financial institution that is in the business of
providing financing facilities of the types contemplated by this Agreement of a
significant portion of its portfolio of loans, Borrowers' consent is not
required. Lender may sell participations to one or more Participating Lenders in
or to all or any ratable portion of its rights and obligations under the Loan
Documents (including, without limitation, all or any ratable portion of the
Loans or the Letters of Credit); provided, however, that (a) Lender's
obligations under the Loan Documents shall remain unchanged, (b) Lender shall
remain solely responsible to the other parties to the Loan Documents for the
performance of such obligations, and (c) the other parties to the Loan Documents
shall continue to deal solely and directly with Lender in connection with
Lender's rights and obligations under this Agreement.
12.4. Reimbursement of Expenses. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of Default
then exists or any of the transactions contemplated hereunder are concluded,
Lender employs counsel for advice or other representation, or incurs legal
expenses or other costs or out-of-pocket expenses in connection with: (A) the
negotiation and preparation of this Agreement or any of the Other Agreements,
any amendment of or modification of this Agreement or any of the Other
Agreements (except in the event such modification or amendment is required
solely to correct any error contained in this Agreement or any of the Other
Agreements, which such error existed on the Closing Date); (B) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by Lender, any
Borrower or any other Person) in any way relating to the Collateral, this
Agreement or any of the Other Agreements or any Borrower's affairs; (C) any
attempt to enforce any rights of Lender or any Participating Lender against any
Borrower or any other Person which may be obligated to Lender by virtue of this
Agreement or any of the Other Agreements, including, without limitation, the
Account Debtors; or (D) any attempt to inspect (subject to the limitations set
forth in Section 3.1(F) hereof), verify, protect, preserve, restore, collect,
sell, liquidate or otherwise dispose of or realize upon the Collateral; then, in
any such event, the reasonable attorneys' fees arising from such services and
all reasonable out-of-pocket expenses, costs and charges of Lender relating to
any of the events or actions described in this Section shall be payable, on
demand, by Borrowers to Lender and shall be additional Obligations hereunder
secured by the Collateral. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include reasonable accountants' fees,
costs and expenses; court costs and expenses; photocopying and duplicating
expenses; court reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges; secretarial over-time charges;
and reasonable expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal services. Additionally, if any
taxes (excluding (i) taxes imposed upon or measured by the net income of Lender
or otherwise in the nature of a net income tax, including, without limitation,
any franchise tax or any similar tax based on capital, net worth or comparable
basis for measurement and (ii) taxes collected by
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a withholding on payments and which neither are computed by reference to the net
income of the Payee nor are in the nature of an advance collection of a tax
based on or measured by the net income of the payee) shall be payable on account
of the execution or delivery of this Agreement, or the execution, delivery,
issuance or recording of any of the Other Agreements, or the creation of any of
the Obligations hereunder, by reason of any existing federal or state statute,
Borrowers will pay all such taxes, including, but not limited to, any interest
and penalties thereon, and will indemnify and hold Lender harmless from and
against liability in connection therewith. Notwithstanding the foregoing,
Borrowers shall not be obligated to pay or reimburse Lender to the extent any
amount otherwise payable by Borrowers resulted from the gross negligence or
willful misconduct of Lender or Bank.
12.5. Indulgences Not Waivers. Lender's failure, at any time or times
hereafter, to require strict performance by any Borrower of any provision of
this Agreement shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance therewith and performance thereof. Any
suspension or waiver by Lender of an Event of Default by any Borrower under this
Agreement or any of the Other Agreements shall not suspend, waive or affect any
other Event of Default by any Borrower under this Agreement or by any Borrower
or any Guarantor under any of the Other Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of any
Borrower contained in this Agreement or any of the Other Agreements and no Event
of Default by any Borrower under this Agreement or by any Borrower or any
Guarantor under any of the Other Agreements shall be deemed to have been
suspended or waived by Lender, unless such suspension or waiver is by an
instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to such Borrower.
12.6. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.7. Successors and Assigns. This Agreement and the Other Agreements
shall be binding upon and inure to the benefit of the successors and permitted
assigns of each Borrower and Lender. This provision, however, shall not be
deemed to modify Section 12.3 hereof.
12.8. Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements are hereby made cumulative with the provisions of this Agreement.
Except as otherwise provided in any of the Other Agreements by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the Other Agreements, the provision contained in this
Agreement shall govern and control.
12.9. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
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12.10. Notice. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto whether under this Agreement or
any Other Agreement shall be in writing and shall be sent by certified or
registered mail, return receipt requested, recognized overnight courier or by
telecopy and, unless otherwise expressly provided herein, shall be deemed to
have been validly served, given or delivered when delivered (or, if such day is
not a Business Day, the immediately succeeding Business Day) against receipt or
five (5) days after deposit in the mail, postage prepaid, or, in the case of
telecopy notice, when receipt has been confirmed by the telecopy transmitter
(or, if such day is not a Business Day, the immediately succeeding Business
Day), addressed as follows:
(A) If to Lender: Fleet Capital Corporation
000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Northeast Loan
Administration Manager
and Fleet Capital Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx Xxxxx
With a copy to: Xxxx & Hessen LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(B) If to Borrowers: c/o CFP Holdings, Inc.
0000 Xxxx Xxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
With a copy to: X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
75
and First Atlantic Capital
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxx
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 12.12; provided, however, that any notice,
request or demand to or upon Lender pursuant to Sections 2.3 or 3.3 shall not be
effective until received by Lender. Any written notice that is not sent in
conformity with the provisions hereof shall nevertheless be effective on the
date such notice is actually received by the noticed party.
12.11. Demand Obligations. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Lender's requiring payment of such Obligations.
12.12. Entire Agreement. This Agreement and the Other Agreements,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
12.13. Interpretation. No provision of this Agreement or any of the
Other Agreements shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured, drafted or
dictated such provision.
12.14. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
NEW YORK, NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE
LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF SUCH JURISDICTION
SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN
UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT
OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE
DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER OR LENDER, EACH
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPREME COURT OF NEW YORK COUNTY,
NEW YORK OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
76
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY BORROWER AND LENDER PERTAINING TO
THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES
ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH BORROWER HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S ACTUAL RECEIPT
THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
12.15. WAIVER OF TRIAL BY JURY AND OTHER WAIVERS BY BORROWERS. EACH
BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES)
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii)
PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON
PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY
OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,
CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN
ANY WAY BE LIABLE; (iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE
COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (v) ANY RIGHT ANY BORROWER MAY HAVE
UPON PAYMENT IN FULL OF THE OBLIGATIONS TO REQUIRE LENDER TO TERMINATE ITS
SECURITY INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF ANY BORROWER
UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS OR WITH
LENDER'S CONSENT AND THE EXECUTION BY ANY BORROWER, AND BY ANY PERSON WHOSE
LOANS TO BORROWER IS USED IN WHOLE OR IN PART TO SATISFY THE OBLIGATIONS, OF AN
AGREEMENT INDEMNIFYING LENDER FROM ANY LOSS OR DAMAGE LENDER MAY INCUR AS THE
RESULT OF DISHONORED CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY LENDER FROM
ANY BORROWER OR ANY ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS; AND (vi)
NOTICE OF ACCEPTANCE HEREOF. EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND
THAT LENDER IS RELYING
77
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH ANY BORROWER. EACH
BORROWER WARRANTS AND REPRESENTS THAT IT HAS KNOWINGLY AND VOLUNTARILY WAIVED
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
12.16. Confidentiality. Lender shall hold all non-public information
obtained by Lender pursuant to the requirements of this Agreement in accordance
with Lender's customary procedures for handling confidential information of this
nature; provided, however, Lender may disclose such confidential information (a)
to its examiners, affiliates, outside auditors, counsel and other professional
advisors, (b) to any Participating Lenders and (c) as required by any
governmental agency or representative thereof or pursuant to legal process
SECTION 13. BORROWING AGENCY PROVISIONS.
13.1. Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
13.2. The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Lender shall not
incur any liability to Borrowers as a result thereof. To induce Lender to do so
and in consideration thereof, each Borrower hereby indemnifies Lender and holds
Lender harmless from and against any and all Obligations, expenses, losses,
damages and claims of damage or injury asserted against Lender by any Person
arising from or incurred by reason of the handling of the financing arrangements
of Borrowers as provided herein, reliance by Lender on any request or
instruction from Borrowing Agent or any other action taken by Lender with
respect to this Section 13 except due to willful misconduct or gross (not mere)
negligence by the indemnified party.
13.3. All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations, by
acceleration or otherwise, and such obligation and liability on the part of each
Borrower shall in no way be affected by any extensions, renewals and forbearance
granted by Lender to any Borrower, failure of Lender to give any Borrower notice
of borrowing or any other notice, any failure of Lender to pursue or preserve
its rights against any Borrower, the release by Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to
pay upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by Lender to the other Borrower or any Collateral for such
Borrower's Obligations or the lack thereof.
13.4. Each Borrower expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Borrower may now or hereafter have against the other Borrower
or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrower's property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence
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or performance of this Agreement, until all Obligations have been paid in full
and the irrevocable termination of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed in New York,
New York on the day and year specified at the beginning hereof.
CFP HOLDINGS, INC.
ATTEST:
???????????? By: /s/ Xxxx Ek
--------------------- ----------------------------
Name: Xxxx Ek
Title: Vice President and CFO
CUSTOM FOOD PRODUCTS, INC.
ATTEST:
??????????? By: /s/ Xxxx Ek
--------------------- ----------------------------
Name: Xxxx Ek
Title: Vice President and CFO
QF ACQUISITION CORP.
ATTEST:
??????????? By: /s/ Xxxx Ek
--------------------- ----------------------------
Name: Xxxx Ek
Title: Vice President and CFO
FLEET CAPITAL CORPORATION
ATTEST:
??????????? By: /s/ Xxxxxx Xxxxxx
--------------------- ----------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
