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EXHIBIT 10.1
FIFTH AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of June 23, 1997
THIS FIFTH AMENDED AND RESTATED LOAN AGREEMENT ("Agreement")
is entered into by and between Xxxxxxxx Incorporated, a Delaware corporation
("Borrower"), and Bank of America National Trust and Savings Association
("Bank").
This Agreement is an amendment and restatement in full of that
certain Fourth Amended and Restated Loan Agreement, dated as of May 16, 1996,
by and among Borrower and Bank (as heretofore amended, the "Original Loan
Agreement"). The parties wish to amend and restate the Original Loan
Agreement, which otherwise continues in full force and effect from the date
thereof to the Restatement Date.
WHEREFORE, the parties hereto covenant and agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth respectively after each:
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower and/or any of its Subsidiaries
directly or indirectly, either prior to or, subject to the terms
hereof, after the Restatement Date (i) acquires any going business or
all or substantially all of the assets of any firm, partnership, joint
venture, limited liability company, or corporation or division or
product line thereof, whether through purchase of assets, merger or
otherwise, or (ii) acquires (in one transaction or as the most recent
transaction in a series of transactions) control of at least a
majority in ordinary voting power of the securities of a corporation
which have
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ordinary voting power for the election of directors, or (iii) acquires
control of a 50% or more ownership interest in any partnership, joint
venture, or limited liability company.
"Additional Unsecured Debt" means the original principal
amount of any Indebtedness described in Subparagraph 6.6(o) of this
Agreement that is incurred by Borrower during the Term of this
Agreement.
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or
is controlled by, such Person. As used in this definition, "control"
(and "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person that owns,
directly or indirectly, 50% or more of the securities having ordinary
voting power for the election of directors or other governing body of
a corporation (other than securities having such power only by reason
of the happening of a contingency), or 50% or more of the general
partnership or other ownership interests of any other Person, will be
deemed to control such corporation or other Person.
"Applicable Fee Percentage" means the percentages set forth in
the Leverage Table in the column entitled "Fee."
"Applicable Spread" means either the Reference Rate Spread or
the IBOR Rate Spread.
"Availability" means at any time the Line Commitment at such
time, minus the Total Outstandings at such time.
"Banking Day" means a day other than a Saturday or a Sunday on
which the Bank is open for business in California. For provisions
relating to IBOR Rate Loans, a Banking Day is a day other than a
Saturday or a Sunday on which Bank is open for business in California
and is dealing in offshore dollars.
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"Capital Expenditure" means any expenditure (including any
capitalized lease expenditure) that is considered a capital
expenditure under GAAP, including, without limitation, any amount that
is required to be treated as a capitalized asset pursuant to Financial
Accounting Standards Board Statement No. 13.
"Cash" means, when used in connection with any Person, all
monetary and non-monetary items belonging to such Person that are
treated as cash in accordance with GAAP.
"Cash Equivalents" means, when used in connection with any
Person, such Person's investments in:
(a) Government Securities due within one year after
the date of the making of the Investment;
(b) certificates of deposit issued by, bank deposits
in, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by, Bank or any other
bank doing business in and incorporated under the laws of the
United States of America or any state thereof and having on
the date of such Investment combined capital, surplus and
undivided profits of at least $500,000,000, in each case due
within one year after the date of the Investment; and/or
(c) readily marketable commercial paper of
corporations doing business in and incorporated under the laws
of the United States of America or any state thereof given on
the date of such Investment the highest credit rating by
NCO/Moody's Commercial Paper Division of Xxxxx'x Investors
Service, Inc. or Standard & Poor's Corporation, in each case
due within six months after the date of the making of the
Investment.
"Cash Flow" means, without duplication, for any fiscal period
of Borrower and its Subsidiaries, in each case determined on a
consolidated basis in accordance with GAAP, EBITDA for that fiscal
period, plus any loss (or
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minus any gain) on the sale of any fixed assets in excess of an
aggregate of $100,000 during that fiscal period, plus Non-Cash
Extraordinary Losses, minus extraordinary non-operating income, minus
cash income taxes paid during that fiscal period, and minus Capital
Expenditures net of purchase money financing.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq.
"Certificate of a Responsible Official" means a certificate
signed by a Responsible Official of the Person providing the
certificate.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation" means salary, bonuses, the amount of operating
lease payments that is in excess of market rates, license fees, and
(with respect to any Target of any Acquisition that is a product line
or a Subsidiary of such Target) corporate expense allocations (to the
extent that the corporate expense allocations exceed the actual costs
or projected costs for necessary services and expenses covered by such
allocations).
"Consideration" means, with respect to any single Acquisition
by Borrower during the Term of this Agreement, the sum of Cash paid at
closing, the then-current value in excess of $5,000,000 of Borrower's
stock issued in connection with such Acquisition, all funded
Indebtedness of the Target assumed by Borrower (excluding liabilities
under operating leases, trade payables, accruals, and other contracts
evidencing liabilities that are not Indebtedness, all arising in the
normal course of the Target's business), all Indebtedness incurred by
Borrower to the seller of such Target, actual amounts paid and the
value of payments that Borrower is obligated to make in the future
(discounted to present value using the Reference Rate) under any
covenants not to compete executed in connection with such Acquisition,
and all Earn-Out Payments associated with such Acquisition.
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"Contingent Obligation" means, as to any Person, any (a)
direct or indirect guarantee of Indebtedness of, or other obligation
performable by, any other Person, including any endorsement (other
than for collection or deposit in the ordinary course of business),
co-making or sale with recourse of the obligations of any other Person
or (b) assurance given to an obligee with respect to the performance
of an obligation by, or the financial condition of, any other Person,
whether direct, indirect or contingent, including any purchase or
repurchase agreement covering such obligation or any collateral
security therefor, any agreement to provide funds (by means of loans,
capital contributions or otherwise) to such other Person, any
agreement to support the solvency or level of any balance sheet item
to such other Person, or any "keep-well", "take-or-pay", "through put"
or other arrangement of whatever nature having the effect of assuring
or holding harmless any obligee against loss with respect to any
obligation of such other Person. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation (unless the
Contingent Obligation is limited by its terms to a lesser amount, in
which case to the extent of such amount) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Person in good faith.
"Default" means any Event of Default and/or any event that,
with the giving of notice or passage of time or both, would be an
Event of Default.
"Designated Deposit Account" means any account maintained by
Borrower at Bank's office and designated in writing by Borrower to
Bank.
"Disposition" means the sale, transfer or other disposition in
any single transaction or series of related transactions of (i) any
Subsidiary of Borrower, (ii) all or substantially all of the assets of
any Subsidiary of Borrower, (iii) all or substantially all of the
assets of a division or comparable business segment of Borrower, or
(iv) any other asset, or group of related assets, of
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Borrower or any of its Subsidiaries that has or have at the date of
the Disposition a book value or fair market value of $1,000,000 or
more, other than inventory sold, returned to vendors or otherwise
disposed of in the ordinary course of business, and other than any
such sale, transfer or other disposition for which the proceeds
thereof are reinvested in Borrower or any Subsidiary or the
replacement of assets of Borrower or any Subsidiary.
"Earnings Before Interest, Taxes, and Amortization" or "EBITA"
means, for any fiscal period of Borrower and its Subsidiaries, Net
Income (excluding the income of any Target earned before the closing
of the Permitted Acquisition of such Target), plus Interest Expense
for such fiscal period, plus non-cash amortization for such period,
plus income tax expense for such fiscal period, plus amounts expensed
for covenants not to compete, minus any extraordinary non-operating
income, plus losses (or minus gains) in excess of $100,000 on fixed
asset sales during that fiscal period, plus Non-Cash Extraordinary
Losses.
"Earnings Before Interest, Taxes, Depreciation and
Amortization" or "EBITDA" means, for any fiscal period of Borrower and
its Subsidiaries, on a consolidated basis, Net Income for such fiscal
period (excluding net income of any Target earned before the
consummation of the Permitted Acquisition of such Target), plus the
Interest Expense for such fiscal period, plus income tax expense for
that fiscal period, and plus depreciation and non-cash amortization
for such fiscal period.
"Earn-Out Payments" means, with respect to any Acquisition,
the aggregate amount of all payments that Borrower has paid or is
obligated to pay in connection with such Acquisition, and that are
based upon Borrower's achievement of, or the occurrence of, any
criteria specified in the agreements entered into in connection with
such Acquisition. The amount of any given Earn-Out Payment as of any
date is the amount thereof paid by Borrower or that Borrower is
obligated to pay after such date, but has not yet paid. For purposes
of calculating Consideration and Prior Earn-Out Payments under this
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Agreement, the amount of any future payment that Borrower is obligated
to pay but has not yet paid as of the date of calculation may be
estimated by Borrower, applying reasonable assumptions and facts known
to Borrower at the time of calculation, discounted to present value
using the Reference Rate.
"Environmental Laws" means any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any
Governmental Agency pertaining to health or the environment in effect
in any and all jurisdictions in which Borrower is or at any time may
be doing business, or where the real property of Borrower is located,
including without limitation the Clean Air Act, as amended, CERCLA,
the Federal Water Pollution Control Act Amendments, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as
amended, California Health and Safety Code Section Section 25100 et
seq., California Water Code Section Section 313000 et seq., and the
Toxic Substances Control Act, as amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, and any regulations issued pursuant thereto, as amended or
replaced and as in effect from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the
meaning of Section 414(b) or (c) of the Code.
"Event of Default" shall have the meaning provided in
Paragraph 9.1.
"Fiscal Quarter" means each of four periods of thirteen weeks
ending on or about the last day of each calendar quarter in each of
Borrower's Fiscal Years.
"Fiscal Year" shall have the meaning provided in Paragraph
4.15.
"Fixed Charge Coverage Ratio" means, for any fiscal period,
the ratio of Cash Flow to Fixed Charges.
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"Fixed Charges" means, for any fiscal period of Borrower and
its Subsidiaries, the sum of Interest Expense payable in cash for that
fiscal period, scheduled principal payments with respect to all
Indebtedness for that fiscal period, scheduled payments for that
fiscal period in respect of capital leases, scheduled capitalized
non-compete payments for that fiscal period due under any agreement
executed by Borrower in connection with any Acquisition, scheduled
payments due for that period under all promissory notes executed in
favor of the sellers in connection with Acquisitions, and the lesser
of (a) the sum of 10% of the outstanding balance of all Loans in
excess of $10,000,000 as of the end of the current quarterly fiscal
period and 10% of such outstanding balance in excess of $10,000,000 as
of the end of the preceding quarterly fiscal period, or (b) 20% of the
outstanding balance of all Loans in excess of $10,000,000 as of the
end of the current quarterly fiscal period.
"GAAP" means generally accepted accounting principles
consistently applied.
"Government Securities" means readily marketable direct
obligations of the United States of America or obligations fully
guarantied by the United States of America.
"Governmental Agency" means (a) any international, foreign,
federal, state, county or municipal government, or political
subdivision thereof, (b) any governmental or quasi-governmental
agency, authority, board, bureau, commission, department,
instrumentality or public body, or (c) any court, administrative
tribunal or public utility.
"Guaranty" means the Continuing Guaranty dated as of the date
hereof, executed by the Subsidiaries of Borrower, in form and
substance substantially similar to the guaranty delivered by such
Subsidiaries pursuant to the Original Loan Agreement, either as
originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.
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"IBOR Loan" means a Loan that bears interest determined in
relation to the IBOR Rate, which shall be in a minimum amount of
$500,000.
"IBOR Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of
the first day of the interest period.)
IBOR Rate = IBOR Base Rate
----------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "IBOR Base Rate" means the interest rate
at which Bank's Grand Cayman Branch, Grand Cayman, British
West Indies, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the
offshore dollar inter-bank market.
(ii) "Reserve Percentage" means the total of
the maximum reserve percentages for determining the reserves
to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
"IBOR Rate Spread" means, with respect to any IBOR Loan, the
percentage set forth in the column entitled "IBOR Rate Spread" in the
Leverage Table opposite Borrower's Leverage Ratio as of the end of the
Fiscal Quarter most recently ended for the related Spread Period.
"Indebtedness" means, as to any Person, (a) all indebtedness
for borrowed money, or any other extension of credit (other than trade
or other accounts payable in the ordinary course of business), (b)
that Person's
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obligations under capital leases that are properly recorded as a
liability on a balance sheet prepared in accordance with GAAP, (c) any
obligation of such Person for the deferred purchase price of property
or services (other than trade or other accounts payable in the
ordinary course of business), (d) any obligation of such Person that
is secured by a Lien on assets of such Person, whether or not such
obligation is non-recourse to the credit of such Person, but only to
the extent of the fair market value of the assets so subject to the
Lien, (e) any direct or contingent obligations of such Person under
Letters of Credit issued for the account of such Person, and (f) any
obligations of such Person under a swap agreement or similar interest
rate protection arrangement.
"Interest Expense" means, with respect to any fiscal period of
Borrower and its Subsidiaries, on a consolidated basis, the aggregate
amount of interest, fees, charges and related expenses paid or payable
to a lender in connection with borrowed money that is treated as
interest (other than accretion of original issue discount on long-term
debt) in accordance with GAAP, and that is charged against Net Income
for that fiscal period.
"Interest Period" means, for any IBOR Loan, the period
commencing on the date such Loan is made or is converted into or
continued as an IBOR Loan, and ending on the date 30, 60, 90 or 180
days thereafter, as selected by Borrower. The last day of each
Interest Period will be determined by Bank using the practices of the
offshore dollar inter-bank market. No Interest Period may expire
later than the Termination Date.
"Letter of Credit" means any standby letter of credit issued
by Bank pursuant to Paragraph 2.2 of this Agreement, either as
originally issued or as the same may from time to time be
supplemented, modified, amended, renewed or extended.
"Letter of Credit Obligations" means at any time the sum of
(a) the Outstanding Letters of Credit, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit.
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"Leverage Ratio" means, for any fiscal period, the ratio of
Total Funded Debt to EBITA.
"Leverage Table" means the following chart:
IBOR Reference Unused
---- --------- ------
Leverage Rate Rate Commitment
-------- ---- ---- ----------
Ratio Spread Spread Fee
----- ------ ------ ---
<1.75:1.0 1.00% -0.25% .125%
-
>1.75:1.0 and
<2.25:1.0 1.25% 0.00% .150%
-
>2.25:1.0 1.50% 0.25% .200%
Solely for purposes of calculating the IBOR Rate Spread, Reference
Rate Spread, and the unused commitment fee set forth in the foregoing
table, Borrower's EBITA used to calculate Borrower's Leverage Ratio
may include, as at the end of each of the four Fiscal Quarters
immediately following the closing of any Permitted Acquisition, the
"Target EBITA" of the Target of such Acquisition that is earned prior
to the closing of the Acquisition and during the four Fiscal Quarters
most recently ended. "Target EBITA" means all Net Income, plus
Interest Expense, plus non-cash amortization, plus income tax expense,
plus non-recurring Compensation paid to the owners of the Target,
minus any extraordinary non-operating income, plus losses (or minus
gains) on fixed asset sales, plus any Fixed Asset Losses of the
Target. Target EBITA must be certified in writing by Borrower's chief
financial officer and supported by financial information deemed
reasonable by Bank. Such certification and information must be
delivered to Bank no later than 10 Banking Days prior to the
commencement of the Spread Period for which the appropriate Leverage
Ratio will be calculated.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, security interest, encumbrance, lien or charge of any
kind, whether voluntarily incurred or arising by operation of law or
otherwise.
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"Line Commitment" means $40,000,000, subject to any adjustment
thereto pursuant to Paragraph 2.4 of this Agreement.
"Line of Credit" means the credit facility for Loans and
Letters of Credit described in Article 2 of this Agreement.
"Liquidity" means, as of any date of determination, the sum of
Borrower's Availability and Cash.
"Loan" or "Loans" means the Loans to be made by Bank to
Borrower pursuant to this Agreement.
"Loan Documents" means, collectively, this Agreement, the
Guaranty, the Letters of Credit, and any other certificates,
documents, or agreements or applications of any type or nature
heretofore or hereafter executed or delivered by Borrower and/or any
one or more of its Subsidiaries or Affiliates to Bank in any way
relating to or in furtherance of this Agreement, in each case either
as originally executed or as the same may from time to time to be
supplemented, modified, amended, restated or extended.
"Maximum Amount" means, as of any date of determination
thereof, the Line Commitment minus the Letter of Credit Obligations.
"Multiemployer Plan" means any employee benefit plan of the
type described in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means, with respect to any sale or
Disposition, the gross Cash consideration (a) paid to or for the
account of Borrower or one of its Subsidiaries by reason of that sale
or Disposition, (b) paid as a principal installment on or to retire
the principal of any evidence of indebtedness which forms all or a
portion of the consideration paid by reason of that sale or
Disposition, or (c) paid in consideration of the sale or assignment by
Borrower or one its Subsidiaries of any property other than Cash
forming all or a portion of the consideration paid by reason of that
sale of Disposition
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minus (i) any amount paid or payable by the transferor to retire
existing obligations of or relating to the property sold or to retire
existing Liens on the property sold to the extent that the transferor
is contractually obligated to do so, and (ii) the reasonable out-
of-pocket expenses of the transferor incident to that sale of
Disposition, including brokerage commissions, investment banking fees,
attorneys' fees and other similar expenses.
"Net Income" means, with respect to any fiscal period of
Borrower and its Subsidiaries, on a consolidated basis, the
consolidated net income of Borrower and its Subsidiaries for that
period, determined in accordance with GAAP.
"Non-Cash Extraordinary Losses" means non-cash extra-ordinary
losses attributable to the write-down in the book value of any fixed
asset ("Fixed Asset Losses") and all other non-cash extraordinary
losses that Bank determines do not and will not have an adverse effect
on Borrower's Cash Flow during the Term of this Agreement.
"Obligations" means all present and/or future obligations of
every kind or nature of Borrower or any party at any time and/or from
time to time owed to Bank under any one or more of the Loan Documents,
whether due or to become due, matured or unmatured, liquidated or
unliquidated, or contingent or noncontingent, including obligations of
performance as well as obligations of payment, and includinginterest
that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Borrower or any Subsidiary or Affiliate of
Borrower.
"Outstanding Letters of Credit" means, as of any date of
determination, the aggregate face amount of all Letters of Credit
outstanding on such date minus the aggregate amount, if any, paid in
cash by Bank under such Letters of Credit that has been reimbursed by
Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereof established under ERISA.
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"Permitted Acquisition" means any Acquisition by Borrower:
(i) with respect to which Bank has received copies
of drafts of the following documents no later than 10 Banking
Days prior to closing, and of final versions no later than 1
Banking Day prior to closing:
(A) if the Target of such Acquisition
will be a Subsidiary of Borrower following the
Acquisition, an Instrument of Joinder in the form
made a part of the Guaranty, to be executed by such
Target and all of its Subsidiaries with respect to
Borrower's indebtedness to be incurred in connection
with such Acquisition; and
(B) the purchase agreement executed or
to be executed in connection with such Acquisition,
and all other material related documents and
agreements that the Bank may reasonably request,
including without limitation documentation relating
to secured indebtedness, direct or contingent, that
Borrower will assume in connection with such
Acquisition.
(ii) that is undertaken only with the prior,
effective written consent or approval to such Acquisition of
either the Target's board of directors, an equivalent
governing body of the Target, or any other Person or group of
Persons authorized to give such consent by the Target;
(iii) with respect to which Borrower has obtained
all licenses, permits, consents, and approvals (collectively,
"Permits") necessary to enable Borrower to operate and own the
Target of such Acquisition, except for any Permit the lack of
which would not materially adversely affect the Borrower's
ownership or operation of such Target;
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(iv) of a Target whose assets are free and clear of
all Liens except for Liens permitted under Subparagraph
6.6(l);
(v) of a Target with respect to which Bank has
received, at least 15 Banking Days prior to the Acquisition of
such Target, any written information reasonably required by
Bank, in both form and substance acceptable to Bank, from such
Target with respect to its compliance with and any potential
liability for violation of Environmental Laws;
(vi) of a Target which, if the Consideration for the
Acquisition of such Target is greater than $10,000,000,
obtains at least 75% of its revenue from one or more lines of
business that are the same as or very similar to one or more
lines of business in which Borrower or one of its Subsidiaries
is engaged; if the Consideration for the Acquisition of such
Target is less than or equal to $10,000,000, such percentage
is reduced to 50%;
(vii) which requires Consideration in an amount that
does not exceed the difference between $25,000,000 and Total
Consideration immediately prior to such Acquisition;
(viii) with respect to which, if the Consideration
for such Acquisition is not less than $10,000,000:
(A) Borrower has delivered all of the
following to Bank:
(1) no later than 10 Banking Days
prior to the closing of such Acquisition,
financial statements of the Target for its
most recently-ended fiscal year, and
evidence acceptable to Bank, which shall
include supporting financial information and
shall be certified in writing by Borrower's
Chief Financial Officer, that demonstrates
that, for the four-quarter period of the
Target most recently ended,
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its earnings before interest, taxes, and
amortization (as defined in accordance with
GAAP), plus non-recurring Compensation paid
to its owners, is not less than zero; and
(2) no later than 5 Banking Days prior
to the closing of such Acquisition, a
statement showing Borrower's sources and uses
of funds for such Acquisition;
(B) such Consideration does not exceed ten
times the amount of the Target's earnings before
interest, taxes, depreciation, and amortization (as
defined in accordance with GAAP), adjusted for
non-recurring Compensation paid to its owners, for
the four-quarter period of the Target most recently
ended, all as set forth in written information
acceptable to Bank and certified in writing by
Borrower's Chief Financial Officer;
(ix) with respect to which Borrower has delivered to
Bank, no later than 5 Banking Days prior to the closing of the
proposed Acquisition, a Certificate of a Responsible Officer
of Borrower in the form of Exhibit A attached hereto to the
effect that: (a) no Defaults or Events of Default exist or
could reasonably be expected to occur as a result of the
proposed Acquisition; (b) giving pro forma effect to the
financing of such Acquisition, Borrower would be in compliance
with all of the provisions of Paragraphs 6.10 and 6.11 of this
Agreement as of Borrower's most recently-ended Fiscal Quarter,
with computations demonstrating such compliance; and (c) the
proposed Acquisition conforms to all of the requirements of
subparagraphs (ii), (iii), (iv), (vi), (vii), (viii), (x),
(xi), and (xii);
(x) of a Target whose Contingent Obligations being
assumed by Borrower that are required to be accrued in
accordance with GAAP (excluding such obligations under any
contracts, leases, and warranties executed or incurred in the
normal course
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of the Target's business) have been identified and quantified
to Bank's satisfaction;
(xi) with respect to which, if the Consideration for
such Acquisition includes obligations of Borrower to the
seller of the Target of such Acquisition that are payable
after the closing thereof, such obligations are unsecured and
may not be accelerated or in default solely because any
Default or Event of Default occurs under this Agreement; and
(xii) which, giving effect to the amount of the
Consideration and all transaction costs related to such
Acquisition, does not cause Borrower's Liquidity to be less
than $5,000,000. Such calculation will be based upon
Borrower's most recent monthly financial statement, giving pro
forma effect to the Acquisition.
"Person" means any entity, whether an individual, trustee,
corporation, general partnership, limited partnership, joint stock
company, trust, unincorporated organization, bank, business
association, firm, joint venture, Governmental Agency, or otherwise.
"Plan" means any employee benefit plan subject to ERISA and
maintained by Borrower and/or any Subsidiary of Borrower or to which
Borrower and/or any Subsidiary of Borrower is required to contribute
on behalf of its employees.
"Prior Earn-Out Payments" means, as of any date, the sum of
all Earn-Out Payments that are paid after January 1, 1997, or that
Borrower is obligated to pay after that date, and that are required
under the terms of any Acquisition that occurred before the
Restatement Date, minus $1,000,000.
"RCRA" means the Resources Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq. and the regulations thereto, 40 CFR Part
261.
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"Reference Rate" means the rate of interest publicly announced
from time to time by Bank in San Francisco, California, as its
Reference Rate. The Reference Rate is set by the Bank based on
various factors, including Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference
point for pricing some loans. Bank may price loans to its customers
at, above, or below the Reference Rate. Any change in the Reference
Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in Bank's Reference Rate.
"Reference Rate Loan" means a Loan that bears interest based
on the Reference Rate.
"Reference Rate Spread" means, with respect to any Reference
Rate Loan, the percentage set forth in the column entitled "Reference
Rate Spread" in the Leverage Table opposite Borrower's Leverage Ratio
as of the end of the Fiscal Quarter most recently ended for the
related Spread Period.
"Responsible Official" means any corporate officer, general
partner, or other responsible official of any specified non-
individual Person who is acting on behalf of such Person.
"Restatement Date" means the Banking Day on which the
conditions in Article 8 of this Agreement are met or waived by Bank.
"Spread Period" means, with respect to the last day of any
Fiscal Quarter, the period consisting of the three months that
commences on the date that is forty-five (45) calendar days after the
last day of such Fiscal Quarter.
"Subsidiary" means, as of any date of determination thereof
and with respect to any person, any corporation, partnership or joint
venture, whether now existing or hereafter organized or acquired: (a)
in the case of a corporation, of which a majority of the securities
having ordinary voting power for the election of directors or other
governing body (other than securities having such
19
power only by reason of the happening of a contingency) are at the
time owned by such Person and/or one or more Subsidiaries of such
Person, (b) in the case of a partnership, joint venture, or limited
liability company, of which such Person or a Subsidiary of such Person
is a general partner, joint venturer, or member, or of which a
majority of the partnership or other ownership interests are at the
time owned by such Person and/or one or more of its Subsidiaries.
"Target" means any business (including the assets and/or the
ownership interest of such business) acquired by any means in the
course of Acquisition.
"Term of this Agreement" means the period commencing on the
Restatement Date and ending on the last date upon which no Loan or
other Obligation of Borrower to Bank remains unpaid, no Letter of
Credit remains outstanding, and Bank has no further commitment
hereunder to make the Line of Credit available to Borrower.
"Termination Date" means July 1, 1999.
"to the best knowledge of" means, when modifying a
representation, warranty or other statement of any Person, that the
fact or situation described therein is known by the Person (or, in the
case of a Person other than a natural Person, known by a Responsible
Official of that Person) making the representation, warranty or other
statement, or with the exercise of reasonable due diligence under the
circumstances (in accordance with the standard of what a reasonable
Person in similar circumstances would have done and consistent with
Borrower's normal business practices) should have been known by the
Person (or, in the case of Person other than a natural Person, should
have been know by a Responsible Official of the Person).
"Total Consideration" means at any time the sum of (a) the
aggregate amount of the Consideration for all Acquisitions that have
occurred during the Term of this Agreement, (b) the Prior Earn-Out
Payments, and (c) the aggregate amount of the Consideration that
Borrower is
20
obligated to pay under all Acquisitions that Borrower has already
committed to make at such time, but that have not yet occurred.
"Total Funded Debt" means, for any fiscal period of Borrower
and its Subsidiaries, the sum of all of their funded Indebtedness
(including the outstanding principal balance of all Loans under the
Line of Credit), Indebtedness owed to the seller of any Target
acquired by Borrower in any Acquisition, the value of unpaid
non-compete payments due by Borrower under any agreements not to
compete executed in connection with any Acquisition (discounted to
present value using the Reference Rate), Earn-Out Payments accrued in
accordance with GAAP that are unpaid as of the date of calculation,
Contingent Obligations under any guaranties of the obligations of any
Person other than Borrower's Subsidiaries or Affiliates, Outstanding
Letters of Credit (minus Cash and Cash Equivalents of Borrower and its
Subsidiaries), liabilities assumed in connection with any Acquisition
(excluding liabilities under operating leases, trade payables,
accruals, and other contracts evidencing liabilities that are not
Indebtedness, all arising in the normal course of the business of the
Target of such Acquisition), and all Contingent Obligations in excess
of an aggregate of $1,000,000 that are required to be accrued in
accordance with GAAP that arose in connection with any Acquisition.
"Total Outstandings" means, as of any date of determination,
the sum of (a) all outstanding Loans and (b) the Letter of Credit
Obligations.
1.2 Use of Defined Terms. Any defined term used in the plural shall
refer to al members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined
in this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity
with, GAAP. In the event that GAAP changes during the term of this Agreement
such that the financial covenants contained
21
herein would then be calculated in a different manner or with different
components, Borrower and Bank agree to amend this Agreement in such respects as
are necessary to conform those covenants as criteria for evaluating Borrower's
financial condition, or limiting the aggregate Loans hereunder, to
substantially the same criteria as were effective prior to such change in GAAP.
Without limiting the foregoing, and unless otherwise expressly stated to the
contrary, all financial covenants set forth in this Agreement and all
calculations required thereby shall be applied and calculated with respect to
the performance of Borrower and its Subsidiaries on a consolidated basis.
ARTICLE 2.
LOANS AND LETTERS OF CREDIT
2.1 Loans. Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Restatement Date through
the Termination Date, Bank shall make Loans to Borrower in such amounts as
Borrower may request with an aggregate outstanding principal amount at any time
not exceeding Maximum Amount at such time; provided that, except to the extent
otherwise provided in Subparagraph 2.2(g), Bank shall not be obligated to make
a Loan if, after giving effect to such Loan, Total Outstandings would exceed
the Line Commitment. Subject to the limitations set forth herein, Borrower may
borrow, repay and reborrow under the Line Commitment, without penalty or
premium.
With respect to IBOR Loans, Borrower agrees:
(a) If, upon the expiration of the Interest Period for an IBOR
Loan, Borrower has failed to select timely a new Interest Period for a
refinancing IBOR Loan or if any Default or Event of Default then exists,
Borrower shall be deemed to have elected to convert such IBOR Loan into a
Reference Rate Loan effective as of the expiration date of such Interest
Period.
(b) During the existence of a Default or Event of Default,
Borrower may not elect to have a Loan converted into or continued as an IBOR
Loan.
22
(c) After giving effect to any redesignation of a Loan, there
may not be more than ten different Interest Periods in effect with respect to
IBOR Loans.
2.2 Letters of Credit. Subject to the terms and conditions hereof,
at any time and from time to time from the Restatement Date through the Banking
Day immediately preceding the Termination Date, Bank shall issue such Letters
of Credit as Borrower may request, provided that, upon giving effect to such
Letter of Credit, (i) Total Outstandings shall not exceed the Line Commitment,
and (ii) the Letter of Credit Obligations shall not exceed $1,000,000. Unless
Bank otherwise consents in writing, the term of any Letter of Credit shall not
exceed 18 months and shall in no event extend beyond the Termination Date. No
Letter of Credit shall be issued except to the extent reasonably necessary in
the ordinary course of the business of Borrower or its Subsidiaries, and no
Letter of Credit shall be issued in any event to support any workers'
compensation obligation of Borrower or its Subsidiaries. A Letter of Credit
may include a provision providing that the expiry date thereof will be
automatically extended each year for an additional year unless Bank gives
written notice to the contrary; provided, however, that each such Letter of
Credit shall include a final expiry date no later than the Termination Date
which shall not be subject to any further automatic extension. Unless
otherwise agreed to by Bank, the face amount of any Letter of Credit shall not
be less than $100,000.
Borrower agrees:
(a) if there is a default under this Agreement, to
immediately prepay and make Bank whole for any outstanding Letters of Credit.
(b) the issuance of any Letter of Credit and any amendment to
a Letter of Credit is subject to Bank's written approval and must be in form
and content satisfactory to Bank and in favor of a beneficiary acceptable to
Bank.
(c) to sign Bank's form Application and Agreement for Standby
Letter of Credit with respect to each Letter of Credit.
23
(d) to pay any issuance and/or other fees that the Bank
notifies the Borrower will be charged for issuing and processing Letters of
Credit.
(e) to allow Bank to automatically charge its checking
account for applicable fees, discounts, and other charges.
(f) to pay Bank a non-refundable fee equal to 1.50% per annum
of the outstanding undrawn amount of each Letter of Credit, payable annually in
advance, calculated on the basis of the face amount outstanding on the day the
fee is calculated.
(g) to pay to Bank the amount of any payment made or to be
made by Bank under any Letter of Credit, upon Bank's demand; and, if Borrower
fails to make any such payment, Bank may, but is not required to, without
notice to or the consent of Borrower, make a Loan in an aggregate amount equal
to the amount paid by Bank on the relevant Letter of Credit, whether or not the
same would cause Total Outstandings to exceed the Line Commitment (without
waiving the obligation of Borrower to reduce Total Outstandings to an amount
less than or equal to the Line Commitment) and, for this purpose, the
conditions precedent set forth in Article 8 and the amount limitations set
forth in Paragraph 2.1 shall not apply. The proceeds of such Loan shall be
paid to Bank to reimburse it for the payment made by it under the Letter of
Credit.
(h) Subject to the next sentence, a Letter of Credit may be
requested pursuant to this Paragraph 2.2 for the account of Borrower or for the
account of any Subsidiary of Borrower. To the extent that a Subsidiary of
Borrower is the account party under any Letter of Credit, Borrower hereby
guarantees the payment and performance of such Subsidiary with respect to any
Obligation of such Subsidiary relating to such Letter of Credit, and agrees to
deliver to Bank, duly executed and in form and content acceptable to Bank, a
duly executed continuing guaranty further evidencing the foregoing guaranty,
together with a resolution or other evidence of the corporate authority of
Borrower to execute, perform and deliver such continuing guaranty.
24
2.3 Voluntary Reduction of Line Commitment. Borrower shall have the
right, at any time and from time to time, without penalty or charge, upon at
least two (2) Banking Days prior written notice to Bank, voluntarily to reduce,
permanently and irrevocably, in aggregate principal amounts of an integral
multiple of $50,000 (but not less than $250,000 or, if less, the Availability
at such time), or to terminate the Availability; provided that any such
reduction or termination shall be accompanied by all accrued and unpaid
commitment fees, if any, with respect to the portion of the Line Commitment
being reduced or terminated; and provided further that the Line Commitment
shall not be reduced to an amount less than the Total Outstandings.
2.4 Automatic Reduction of the Line Commitment. The Line Commitment
shall be automatically reduced: (a) concurrently with the incurring of any new
Additional Unsecured Debt, by an amount equal to the amount, if any, by which
the sum of the new Additional Unsecured Debt that is being incurred plus the
aggregate then-existing Additional Unsecured Debt exceeds $10,000,000; and (b)
concurrently with the closing of any Disposition, by an amount equal to 80% of
the Net Cash Proceeds thereof.
ARTICLE 3.
DISBURSEMENTS, PAYMENTS, AND FEES
3.1 Principal.
(a) Borrower will repay in full all principal and any
unpaid interest or other charges outstanding under the Line of Credit no later
than the Termination Date.
(b) Borrower will also repay principal in any amount
necessary to reduce Total Outstandings to an amount not exceeding the Line
Commitment, including, without limitation, any amounts necessary to reduce
Total Outstandings to an amount not exceeding any reduced Line Commitment
required under Paragraph 2.4.
3.2 Interest. Interest on each Reference Rate Loan will be payable
monthly, on the first Banking Day of each month.
25
Interest on each IBOR Loan will be payable on the last day of the Interest
Period for such Loan, and, if the Interest Period exceeds 90 days, on the 90th
day of such Interest Period. Interest on each Loan shall be payable at the
IBOR Rate or the Reference Rate, plus the Applicable Spread in effect during
each Spread Period in which such Loan is outstanding.
3.3 Prepayments. Borrower may prepay any Reference Rate Loan at any
time in any amount, and any IBOR Loan in a minimum amount of $500,000. Each
prepayment of an IBOR Loan, whether voluntary, by reason of acceleration or
otherwise, will be accompanied by the amount of accrued interest on the amount
prepaid, and a prepayment fee as described below. A "prepayment" is a payment
before the end of the applicable Interest Period. The prepayment fee shall be
equal to the amount (if any) by which:
(i) the additional interest which would have been
payable during the Interest Period on the amount prepaid had
it not been prepaid, exceeds
(ii) the interest which would have been recoverable
by Bank by placing the amount prepaid on deposit in the
domestic certificate of deposit market, the eurodollar deposit
market, or other appropriate money market selected by Bank for
a period starting on the date on which it was prepaid and
ending on the last day of the applicable Interest Period.
3.4 Date of Payments. All payments and disbursements which would
be due on a day that is not a Banking Day will be due on the next Banking Day.
All payments received on a day that is not a Banking Day will be applied to the
Line of Credit on the next Banking Day. Interest shall accrue at the rates
required hereunder until the actual date on which a payment is applied to any
Obligation.
3.5 Fees.
(a) Loan fee. Borrower agrees to pay a Thirty-Five Thousand
Dollar ($35,000) fee on the Restatement Date.
26
(b) Unused Commitment fee. Borrower agrees to pay a per
annum fee based upon the average daily Availability during each calendar
quarter. The fee will be calculated at the Applicable Fee Percentage in effect
during each Spread Period during such quarter. Such fee shall be payable
quarterly in arrears within 10 Banking Days after the end of each calendar
quarter. Bank shall use its best efforts to notify Borrower of the amount of
the commitment fee so payable prior to each fee payment date, but failure of
Bank to do so shall not excuse payment of such fee when payable.
3.6 Requests for Credit. Each request for an extension of credit
will be made in a manner acceptable to Bank.
3.7 Telephone and Telefax Authorization.
(a) Bank may honor telephone or telefax instructions for
Loans, repayments, designation of an Interest Period, and the issuance,
amendment, or renewal of Letters of Credit given by any one of the individuals
authorized to sign loan agreements on behalf of Borrower, or any other
individual designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will be
withdrawn from the Designated Deposit Account.
(c) Borrower indemnifies and excuses Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by Borrower to give
such instructions. This indemnity and excuse will survive this Agreement's
termination.
3.8 Default Rate/Late Payments. Upon the occurrence and during the
continuation of any Event of Default, Loans shall, at the option of Bank, bear
interest at a rate per annum which is 2.5 percentage points higher than the
highest rate of interest otherwise provided under this Agreement. In addition,
should any installment of principal or interest or any fee or cost or other
amount payable under any Loan Document to Bank not be paid when due, it shall
thereafter bear interest at a fluctuating interest rate per annum at all times
equal to the
27
highest rate of interest otherwise provided under this Agreement plus the then
applicable Reference Rate Spread plus 2.00% per annum, to the fullest extent
permitted by applicable law. Accrued and unpaid interest on past due amounts
(including, without limitation, interest on past due interest) shall be
compounded monthly, on the last day of each calendar month, to the fullest
extent permitted by applicable law. No provision of this Paragraph will
constitute a waiver of any Default by Bank.
3.9 Computation of Interest and Fees. All computations of interest
and fees under any Loan Document shall be calculated on the basis of a year of
360 days and the actual number of days elapsed, which results in more interest
and fees than if a 365-day year were used.
3.10 Funding Sources. Nothing in this Agreement shall be deemed to
obligate Bank to obtain the funds for any Loan in any particular place or
manner or to constitute a representation by Bank that it has obtained or will
obtain the funds for any Loan in any particular place or manner.
3.11 Failure to Charge Not Subsequent Waiver. Any decision by Bank
not to require payment of any interest (including default interest), fee, cost
or other amount payable under any Loan Document on any occasion shall in no way
limit or be deemed a waiver of Bank's right to require full payment of any
interest (including default interest), fee, cost or other amount payable under
any Loan Document on any other or subsequent occasion.
3.12 Direct Debit (Pre-Billing).
(a) Borrower agrees that Bank will debit the Designated
Deposit Account on the date each payment of principal and interest and any fees
from Borrower becomes due (the "Due Date"). If the Due Date is not a Banking
Day, the Designated Deposit Account will be debited on the next Banking Day.
(b) Approximately 10 days prior to each Due Date, Bank will
mail to Borrower a statement of the amounts that will be due on that Due Date
(the "Billed Amount"). The calculation
28
will be made on the assumption that no new extensions of credit or payments
will be made between the date of the billing statement and the Due Date, and
that there will be no changes in the applicable interest rate.
(c) Bank will debit the Designated Deposit Account for the
Billed Amount, regardless of the actual amount due on that date (the "Accrued
Amount"). If the Billed Amount debited to the Designated Deposit Account
differs from the Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued
Amount, the Billed Amount for the following Due Date will be increased
by the amount of the discrepancy. Borrower will not be in default by
reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued
Amount, the Billed Amount for the following Due Date will be decreased
by the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue based on
the actual amount of principal outstanding without compounding. Bank will not
pay Borrower interest on any overpayment.
(d) Borrower will maintain sufficient funds in the Designated
Deposit Account to cover each debit. If there are insufficient funds in the
Designated Deposit Account on the date Bank enters any debit authorized by this
Agreement, the debit will be reversed.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank, as of the
Restatement Date, that:
4.1 Existence and Qualification; Power; Compliance With Laws.
Borrower is a corporation duly formed, validly existing and in good standing
under the laws of Delaware. The chief executive offices of Borrower are in
Carson, California.
29
Borrower and each of its Subsidiaries are duly qualified or registered to
transact business and are in good standing in each jurisdiction in which the
conduct of their business or the ownership or leasing of their properties makes
such qualification or registration necessary, except where the failure so to
qualify or register and to be in good standing would not have a material
adverse effect on the business, operations or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole. Borrower and
each of its Subsidiaries have all requisite power and authority to conduct
their business, to own and lease their properties and to execute, deliver and
perform all of their Obligations under any of the Loan Documents. All
outstanding shares of capital stock of Borrower are duly authorized, validly
issued, fully paid, non-assessable and issued in compliance with all applicable
state and federal securities and other laws. Borrower and each of its
Subsidiaries (subject to the matters referred to in Schedule 4.17) are in
compliance with all laws and other legal requirements applicable to their
business, have obtained all authorizations, consents, approvals, orders,
licenses and permits from, and have accomplished all filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing from, any
Governmental Agency that are necessary for the transaction of their business,
except where the failure so to comply, file, register, qualify or obtain
exemptions would not have a material adverse effect on the business, operations
or condition (financial or otherwise) of Borrower and its Subsidiaries, taken
as a whole.
4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations. The execution, delivery and performance by each of
Borrower and its Subsidiaries of the Loan Documents to which it is a party have
been duly authorized by all necessary action, and do not and will not:
(a) Require any consent or approval not heretofore
obtained of any partner, director, stockholder, security holder or creditor;
(b) Violate or conflict with any provision of such party's
partnership agreement, certificate of limited
30
partnership, charter, articles of incorporation or bylaws, or amendments
thereto, as applicable;
(c) Result in or require the creation or imposition of
any Lien (other than as provided under the Loan Documents) upon or with respect
to any property now owned or leased or hereafter acquired by such party;
(d) Violate any provision of any law (including, without
limitation, Regulations G, T, U and/or X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award presently in effect and having applicability to such
party; or
(e) Result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any indenture or
loan or credit agreement or any other material agreement, lease or instrument
to which such party is a party or by which such party or any of its property is
bound or affected;
and neither Borrower nor any Subsidiary is in default under any law, order,
writ, judgment, injunction, decree, determination or award, or any indenture,
agreement, lease or instrument described in Subparagraph 4.2(e), in any respect
that is materially adverse to the interests of Bank or that would have any
material adverse effect on the business, operations or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole.
4.3 No Governmental Approvals Required. No authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, or exemption from any of the foregoing from, any
Governmental Agency is or will be required to authorize or permit under
applicable law the execution, delivery and performance by Borrower or any
Subsidiary thereof of the Loan Documents to which it is a party.
4.4 Subsidiaries.
(a) Schedule 4.4 hereto correctly sets forth the names, forms
of legal entity and jurisdictions of formation of
31
all Subsidiaries of Borrower. Except as described in Schedule 4.4, Borrower
does not own any capital stock, partnership interest, joint venture interest,
limited liability company member interest, or other equity interest in any
Person. Unless otherwise indicated in Schedule 4.4, all of the outstanding
shares of capital stock, partnership or joint venture interests, or member
interests of each Subsidiary of Borrower are owned of record and beneficially
by Borrower, and all securities and interests so owned are duly authorized,
validly issued, fully paid, non-assessable and issued in compliance with all
applicable state and federal securities and other laws, and are free and clear
of all Liens.
(b) Each Subsidiary of Borrower is a legal entity of the form
described for that Subsidiary in Schedule 4.4, duly formed, validly existing
and in good standing under the laws of its jurisdiction of formation
4.5 Financial Statements. Borrower has furnished to Bank (a) the
audited consolidated balance sheet of Borrower and its Subsidiaries as at
December 31, 1996, and audited consolidated statements of profit and loss and
of changes in financial position of Borrower and its Subsidiaries for their
fiscal year then ended, and (b) the unaudited consolidated and consolidating
balance sheets of Borrower and its Subsidiaries as at February 22, 1997, and
unaudited consolidated and consolidating statements of profit and loss and of
changes in financial position of Borrower and its Subsidiaries for such quarter
and for the portion of their fiscal year ended with such quarter. Such
financial statements fairly present in all material respects the financial
condition, results of operations and changes in financial position of Borrower
and its Subsidiaries as at such dates and for such periods, in conformity with
GAAP, provided that the balance sheets and statements referred to in (b) above
are subject to normal year-end audit adjustments.
4.6 No Other Liabilities; No Material Adverse Changes. Borrower and
its Subsidiaries do not have any material liability or material contingent
liability not reflected or disclosed in the financial statements or notes
thereto described in Paragraph 4.5. There has been no material adverse change
in the business, operations or condition (financial or otherwise) of Borrower
and its Subsidiaries, taken as a whole, since the
32
date of the financial statements described in Subparagraph 4.5(b).
4.7 Title to and Location of Property. Borrower and its Subsidiaries
have good and valid title to all the property reflected in the financial
statements described in Paragraph 4.5, other than property subsequently sold in
the ordinary course of business, free and clear of all Liens other than Liens
permitted pursuant to Paragraph 6.6.
4.8 Intangible Assets. Borrower and its Subsidiaries own, or possess
the unrestricted right to use, all trademarks, trade names, copyrights,
patents, patent rights, licenses and other intangible assets that are used in
the conduct of their businesses as now operated, and no such intangible asset,
to the best knowledge of Borrower, conflicts with the valid trademark, trade
name, copyright, patent, patent right or intangible asset of any other Person
to the extent that such conflict would have a material adverse effect on the
business, operations or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole.
4.9 Litigation. Except for (i) any matter fully covered (subject to
usual deductibles and retentions) by insurance for which the insurance carrier
has assumed full responsibility, (ii) any matter, or series of related or
similar matters, involving a claim against Borrower or any of its Subsidiaries
of less than $500,000, and (iii) matters set forth in Schedule 4.9 and in the
financial statements (or the notes thereto) described in Paragraph 4.5, there
are no actions, suits or proceedings pending or, to the best knowledge of
Borrower, threatened against or affecting Borrower or any of its Subsidiaries
or any property of any of them in any court of law or before any Governmental
Agency that would impair Borrower's or any Subsidiary's financial condition or
ability to repay the Loans.
4.10 Binding Obligations. Each of the Loan Documents to which
Borrower or any Subsidiary thereof is a party will, when executed and delivered
by such party, constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
33
arrangement, moratorium or other similar laws relating to or affecting
creditors' rights generally or equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of judicial
discretion.
4.11 No Default. No event has occurred and is continuing that is a
Default.
4.12 ERISA Plans.
(a) Each Plan (other than a multiemployer plan) is in
compliance in all material respects with the applicable provisions of ERISA,
the Code and other federal or state law. Each Plan has received a favorable
determination letter from the IRS and to the best knowledge of Borrower,
nothing has occurred which would cause the loss of such qualification.
Borrower has fulfilled its obligations, if any, under the minimum funding
standards of ERISA and the Code with respect to each Plan, and has not incurred
any liability with respect to any Plan under Title IV of ERISA.
(b) There are no claims, lawsuits or actions (including
by any governmental authority), and there has been no prohibited transaction or
violation of the fiduciary responsibility rules, with respect to any Plan which
has resulted or could reasonably be expected to result in a material adverse
effect.
(c) With respect to any Plan subject to Title IV of
ERISA:
(i) No reportable event has occurred under Section
4043(c) of ERISA for which the PBGC requires 30 day notice.
(ii) No action by Borrower or any ERISA Affiliate to
terminate or withdraw from any Plan has been taken and no notice of
intent to terminate a Plan has been filed under Section 4041 of ERISA.
(iii) No termination proceeding has been commenced
with respect to a Plan under Section 4042 of ERISA, and no event has
occurred or condition exists which
34
might constitute grounds for the commencement of such a proceeding.
4.13 Disclosure. No written statement made by Borrower or any
Subsidiary thereof to Bank in connection with this Agreement, or in connection
with any Loan, or in connection with the issuance of any Letter of Credit,
contains any untrue statement of a material fact or omits a material fact
necessary to make the statement made not misleading. To the best knowledge of
Borrower, there is no fact which Borrower has not disclosed to Bank in writing
which materially and adversely affects nor, so far as Borrower can now foresee,
is reasonably likely to prove to affect materially and adversely the business,
operations, properties, prospects, profits or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole, or the ability
of Borrower and its Subsidiaries to perform their Obligations under the Loan
Documents.
4.14 Tax Liability. Borrower and its Subsidiaries have filed all
income tax returns which are required (including any extensions obtained
pursuant to applicable law) to be filed, and have paid, or made provision for
the payment of, all taxes with respect to the periods, property or transactions
covered by said returns, or pursuant to any assessment received by Borrower or
any Subsidiary thereof, except (a) such taxes, if any, as are being contested
in good faith by appropriate proceedings and as to which adequate reserves have
been established and maintained and (b) miscellaneous taxes not willfully
unpaid in an aggregate amount not greater than $200,000.
4.15 Fiscal Year. Borrower and its Subsidiaries each operate on a
fiscal year ("Fiscal Year") ending on December 31, with four fiscal quarters of
thirteen weeks ending on or about March 31, June 30, September 30 and December
31.
4.16 Employee Matters. There is no strike, work stoppage or labor
dispute with any union or group of employees pending or overtly threatened
involving Borrower or any of its Subsidiaries.
4.17 Environmental Matters. Except as disclosed on Schedule 4.17 and
in the financial statements (or the notes
35
thereto) described in Paragraph 4.5, (i) the real property of Borrower and the
operations conducted thereon do not violate any applicable law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority or any restrictive covenant or deed restriction (recorded or
otherwise), including without limitation all applicable zoning ordinances and
building codes, flood disaster laws and Environmental Laws and regulations, in
any respect which could have a material adverse effect on the business,
operations or condition (financial or otherwise) of Borrower; (ii) without
limitation of clause (i) above, Borrower's real property and the operations
conducted by Borrower or any current or prior owner or operator of such real
property or operation, are not in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding by any
governmental authority or to any remedial obligations under any Environmental
Laws which, if determined adversely to Borrower, could have a material adverse
effect on the business, operations or condition (financial or otherwise) of
Borrower; (iii) all notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation or use
of the real property of Borrower, including without limitation past or present
treatment, storage, disposal or release of a hazardous substance or solid waste
into the environment, have been duly obtained or filed, except where the
failure to obtain or file same would not have a material adverse effect on the
business, operations or condition (financial or otherwise) of Borrower; (iv)
all significant amounts of hazardous waste generated at the real property of
Borrower have in the past been and shall continue to be transported, treated
and disposed of only by carriers maintaining valid permits under RCRA and any
other Environmental Laws and only at treatment, storage and disposal facilities
maintaining valid permits under RCRA and any other Environmental Law, which
carriers and facilities have been and are, to the best of Borrower's knowledge,
operating in compliance with such permits or are exempt from obtaining such
permits; (v) Borrower has no actual or constructive knowledge of the disposal
or other release of any hazardous substance or solid waste, or the threatened
release of hazardous substances, on or to the real property of Borrower except
in compliance with Environmental Laws, and that it has not been notified of
same by any Governmental Agency; (vi) Borrower has no material
36
contingent liability in connection with any release or threatened release of
any hazardous substance or solid waste into the environment; and (vii) the use
which Borrower makes or intends to make of Borrower's real property will not
result in the unlawful or unauthorized disposal or other release of any
hazardous substance or solid waste on or to the real property of Borrower. The
terms "hazardous substance," "release" and "threatened release" have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, in the
event either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment, and provided further that, to the extent the laws of
any state in which any of the real property of Borrower is located establish a
meaning for "hazardous substance," "release," "solid waste" or "disposal" which
is broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply with regard to the real property of Borrower located in such state.
ARTICLE 5.
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
During the Term of this Agreement, Borrower shall, and shall cause
each of its Subsidiaries to, unless Bank otherwise consents in writing:
5.1 Payment of Taxes and Other Potential Liens. Pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed upon
any of them, upon their respective property or any part thereof, upon their
respective income or profits or any part thereof or upon any right or interest
of Bank under any Loan Document, except that Borrower and its Subsidiaries
shall not be required to pay or cause to be paid (a) any income or gross
receipts tax generally applicable to banks or (b) any tax, assessment, charge
or levy that is not yet past due, or is being contested in good faith by
appropriate proceedings, so long as the relevant entity has established and
maintains adequate reserves for the payment of the same and by reason of such
nonpayment and contest no mate-
37
rial item or portion of property of Borrower and its Subsidiaries, taken as a
whole, is in jeopardy of being seized, levied upon or forfeited, or (c)
miscellaneous taxes not willfully unpaid in an aggregate amount not greater
than $200,000 so long as by reason of such nonpayment no material item or
portion of property of Borrower and its Subsidiaries, taken as a whole, is in
jeopardy of being seized, levied upon or forfeited.
5.2 Preservation of Existence. Preserve and maintain their
respective existences, licenses, rights, franchises and privileges in the
jurisdiction of their formation and all authorizations, consents, approvals,
orders, licenses, permits, or exemptions from, or registrations with, any
Governmental Agency that are necessary for the transaction of their respective
business, and qualify and remain qualified to transact business in each
jurisdiction in which such qualification is necessary in view of their
respective business or the ownership or leasing of their respective properties,
except that Borrower's or any Subsidiaries' failure to comply with the
foregoing shall not constitute a violation of this covenant to the extent that
such failure does not cause Borrower and its Subsidiaries, taken as a whole, to
expend more than $100,000 in the aggregate.
5.3 Maintenance of Properties. Maintain, preserve and protect all of
their respective properties and equipment in good order and condition, subject
to wear and tear in the ordinary course of business, and not permit any waste
of their respective properties, except that the failure to maintain, preserve
and protect a particular item of property or equipment that is not of
significant value, either intrinsically or to the operations of Borrower and
its Subsidiaries, taken as a whole, shall not constitute a violation of this
covenant.
5.4 Maintenance of Insurance. Maintain liability and casualty
insurance with responsible insurance companies in such amounts and against such
risks as is usually carried by responsible companies engaged in similar
businesses and owning similar properties in the general areas in which Borrower
and its Subsidiaries operate.
38
5.5 Compliance With Laws. Comply with the requirements of all
applicable laws and orders of any Governmental Agency, noncompliance with which
could materially adversely affect the business, operations or condition
(financial or otherwise) of Borrower and its Subsidiaries, taken as a whole,
except that Borrower and its Subsidiaries need not comply with a requirement
then being contested by any of them in good faith by appropriate proceedings so
long as no interest of Bank would be materially impaired thereby.
5.6 Inspection Rights. At any time during regular business hours and
as often as requested, permit the Bank, or any employee, agent or
representative thereof, to examine, audit and make copies and abstracts from
the records and books of account of, and to visit and inspect the properties
of, Borrower and its Subsidiaries and to discuss the affairs, finances and
accounts of Borrower and its Subsidiaries with any of their officers and key
employees, customers or vendors, and, upon request, furnish promptly to Bank
true copies of all financial information and internal management reports made
available to the senior management of Borrower or any of its Subsidiaries.
5.7 Keeping of Records and Books of Account. Keep adequate records
and books of account reflecting all financial transactions in conformity with
GAAP, and in material conformity with all applicable requirements of any
Governmental Agency having regulatory jurisdiction over Borrower or any of its
Subsidiaries.
5.8 Compliance With Agreements, Duties and Obligations. Promptly and
fully comply with all their respective agreements, duties and obligations under
the Loan Documents, and under any other agreements, indentures, leases and/or
instruments to which any one or more of them is a party, whether such other
agreements, indentures, leases and/or instruments are with Bank or another
Person, except where failure to comply with any such agreement, indenture,
lease or instrument (other than any Loan Document) would not have a material
adverse effect on the condition of the Borrower or any Subsidiaries.
39
5.9 Use of Proceeds. Use the proceeds of the Line of Credit for the
following purposes only: (i) working capital purposes of Borrower and its
Subsidiaries, (ii) to provide standby letters of credit required in the
ordinary course of Borrower's business (other than to satisfy workers'
compensation requirements), (iii) other lawful corporate purposes in the
ordinary course of business, and (iv) to finance Permitted Acquisitions.
5.10 Subsidiary Guaranty. Cause each of its Subsidiaries, hereafter
formed or acquired, to execute and deliver a joinder of the Guaranty.
5.11 Notice of Location Change. Promptly notify Bank, in writing, of
the occurrence of any change in the location of, or the addition of, any branch
office, any field office, any warehouse or any other place of business of
Borrower or any Subsidiary; provided, however, that no such notification shall
be required if the change, together with any other change since the Restatement
Date, would not in the aggregate involve property with a book value or fair
market value, whichever is higher, in excess of $200,000.
ARTICLE 6.
NEGATIVE COVENANTS
During the Term of this Agreement, Borrower shall not, and shall cause
each of its Subsidiaries to not, unless Bank otherwise consents in writing:
6.1 Disposition of Property. Conduct, permit, or agree to enter into
any Disposition, any of their respective properties, whether now owned or
hereafter acquired, and whether to an Affiliate or otherwise, except properties
sold, assigned, exchanged, transferred, leased or otherwise disposed of (a) in
the ordinary course of business for full fair market value, (b) as permitted
by Paragraph 6.2, or (c) other Dispositions that do not materially adversely
affect the condition of Borrower and its Subsidiaries, taken as a whole,
provided, however, that such other Dispositions will reduce the Line
Commitment, pursuant to Paragraph 2.4 of this Agreement.
40
6.2 Mergers. Merge, consolidate or amalgamate with or into any
Person, except mergers, consolidations or amalgamations (a) of a Subsidiary of
Borrower into any other Subsidiary of Borrower, (b) of a Subsidiary of Borrower
into Borrower (provided that Borrower is the surviving entity), or (c) in
connection with any Permitted Acquisition, of Borrower or any Subsidiary of
Borrower into any other Subsidiary of Borrower or any other entity (provided
that Borrower is the surviving entity of any such merger, consolidation, or
amalgamation to which it is a party).
6.3 Redemption, Dividends and Distributions. Redeem or repurchase
stock, partnership interests, or member's interests, declare or pay any
dividends or make any other distribution, whether of capital, income or
otherwise, and whether in Cash or other property, except that (a) any of the
Subsidiaries of Borrower may declare and pay dividends or make distributions
directly or indirectly to Borrower or to another Subsidiary of Borrower, and
(b) Borrower may repurchase shares of its common stock held by employees or
former employees pursuant to employee stock ownership plans in existence on the
Restatement Date in any aggregate amount not to exceed $100,000 in any Fiscal
Year.
6.4 ERISA.
(a) At any time, maintain, or be or become obligated to
contribute on behalf of its employees to, any pension Plan, other than those
Plans in existence as of the Restatement Date.
(b) At any time, permit any Plan to:
(1) engage in any "prohibited transaction", as such
term is defined in Section 4975 of the Code;
(2) incur any material "accumulated funding
deficiency", as that term is defined in Section 302 of ERISA; or
(3) terminate in a manner which could result in
liability of Borrower or any Subsidiary thereof to the Plan or to the
PBGC or the imposition of a Lien on the
41
property of Borrower or any Subsidiary thereof pursuant to Section
4068 of ERISA.
(c) At any time, assume any obligation to contribute to
any Multiemployer Plan, nor shall Borrower or any Subsidiary thereof acquire
any Person or assets of any Person which has, or has had at any time from and
after January 2, 1974, an obligation to contribute to any Multiemployer Plan.
(d) Fail immediately to notify Bank of the occurrence of any
"reportable event" (as defined in Section 4043 of ERISA) or of any "prohibited
transaction" (as defined in Section 4975 of the Code) with respect to any Plan
or any trust created thereunder that may have a material adverse impact on the
condition of Borrower and/or its Subsidiaries, financial or otherwise. Upon
request by Bank, Borrower promptly shall furnish to Bank copies of any reports
or other documents filed by Borrower or any Subsidiary thereof with the United
States Secretary of Labor, the PBGC and/or the Internal Revenue Service, with
respect to any Plan.
(e) At any time, permit any Plan to fail to comply with ERISA
or other applicable law in any material respect.
6.5 Change in Nature of Business. Make any material change in the
nature of the business of Borrower and its Subsidiaries, as conducted and
presently proposed to be conducted.
6.6 Indebtedness, Guaranties and Liens. Create, incur, assume or
suffer to exist any Lien of any nature upon or with respect to any of their
respective properties, whether now owned or hereafter acquired; create, incur
or assume any indebtedness for borrowed money or in connection with the
purchase of property or any liability to the issuer of any letter of credit;
guaranty, incur a Contingent Obligation, or otherwise become responsible
(including, but not limited to, any agreement to purchase any obligations,
stock, property, goods or services or to supply or advance any funds, property,
goods or services) for the indebtedness or obligations of any other Person; or
incur any lease obligation that is required to be capitalized under GAAP,
except:
42
(a) Liens securing taxes, assessments or governmental charges
or levies, or in connection with workers' compensation, unemployment insurance
or social security obligations, or the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons not yet
delinquent or which are being contested in good faith by appropriate
proceedings with adequate reserves set aside;
(b) Attachment, judgment or other similar Liens arising in
connection with court proceedings that do not, in the aggregate, materially
detract from the value of their property, materially impair the use thereof in
the operation of their businesses, or materially impair their ability to
perform the Obligations and (1) that are discharged or stayed within thirty
(30) days of attachment or levy, or (2) payment of which is covered in full
(subject to customary and reasonable deductibles) by surety bond;
(c) Easements, rights of ways, restrictions and other similar
charges or encumbrances on real property that do not interfere with the orderly
conduct of their businesses or materially detract from the value of the
affected real property;
(d) Minor defects and irregularities in the title of real
properties existing on the Restatement Date that do not materially detract from
the value or impair the use of such properties for the purposes for which they
are held;
(e) Liens existing or arising by virtue of the leasing or
rental of their property to the extent leases and rentals are permitted by this
Agreement, whether the same are capital leases or operating leases or rentals;
(f) Indebtedness, liabilities, guaranties or Liens in favor
of Bank under the Loan Documents;
(g) Existing indebtedness and Liens listed on Schedule 6.6;
(h) Guaranties arising from endorsement, in the ordinary
course of collection, of negotiable instruments;
43
(i) Indebtedness incurred to vendors in the ordinary course
of business;
(j) Agreements to provide credit assurance for the
obligations of customers of Borrower or any of its Subsidiaries that consist
solely of an agreement to repurchase salable inventory of such customers
purchased from Borrower or any of its Subsidiaries during the past 12 months at
a purchase price not in excess of the sales price paid therefor by such
customers;
(k) Existing and future Indebtedness not exceeding an
aggregate outstanding balance of $15,000,000 at any time incurred to finance
the purchase or lease of fixed assets or real property or any interest therein,
or that is incurred solely to repay Indebtedness that originally financed such
a purchase or lease (including any such Indebtedness assumed in the course of
any Permitted Acquisition).
(l) Purchase money Liens securing Indebtedness permitted
under Subparagraph 6.6(k); provided that such Liens shall be limited to the
real or personal property whose acquisition was or is being financed by such
permitted Indebtedness;
(m) Guaranties of any of Borrower's Subsidiaries' obligations
under operating leases, or, with the written consent of Bank, which consent
will not be unreasonably withheld, guaranties of any other obligations of such
Subsidiaries, or the guaranty by Borrower or any of its Subsidiaries of any
obligation owed to Bank;
(n) Indebtedness evidenced by that certain promissory note in
the principal amount of $750,000 made by Borrower in favor of MechTronics of
Arizona, Inc.; and
(o) Additional unsecured Indebtedness, including all
Indebtedness incurred or assumed by Borrower in connection with any Permitted
Acquisition ("Seller Debt"); provided that:
(i) any additional unsecured Indebtedness may be
incurred only after delivery to Bank of a Certificate of a Responsible
Official of Borrower, which, for additional
44
Indebtedness that is not Seller Debt, is in the form of Exhibit B
attached hereto, certifying that, giving pro forma effect to the new
additional unsecured Indebtedness being incurred: (A) no Defaults or
Events of Default exist or could reasonably be expected to occur as a
result of the proposed Indebtedness; and (B) Borrower would be in
compliance with all of the provisions of Paragraphs 6.10 and 6.11of
this Agreement as of Borrower's most recently-ended Fiscal Quarter,
with computations demonstrating such compliance; and which, for
additional Indebtedness that is Seller Debt, is in the form required
under subparagraph (ix) of the definition of "Permitted Acquisition"
in Paragraph 1.1 of this Agreement; and
(ii) if additional unsecured Indebtedness incurred by
Borrower under this subparagraph 6.6(o) exceeds $10,000,000 at any
time, an amount of such additional Indebtedness at least equal to the
amount of that excess may not be subject to covenants or events of
default that are more stringent than similar provisions of this
Agreement, may not require principal payments in any year prior to the
Termination Date that are in excess of 10% of the original principal
amount of such Indebtedness, and may not finally mature until after
the Termination Date.
6.7 Transactions with Affiliates. Enter into any transaction of any
kind with any Affiliate of Borrower other than (a) transactions between or
among Borrower and its Subsidiaries, and (b) arms-length transactions with
Affiliates which are permitted with non-Affiliates pursuant this Agreement.
6.8 Change in Fiscal Year. Change its Fiscal Year.
6.9 Intercompany Indebtedness. Incur or cause to exist any
intercompany indebtedness between Borrower and any of its Subsidiaries or
divisions, or between any such division or Subsidiary and any other division or
Subsidiary, to be evidenced in any manner other than by a book entry in the
financial records of the parties thereto.
45
6.10 Leverage Ratio. Permit the Leverage Ratio as at the end of each
of the Fiscal Quarters of Borrower and its Subsidiaries specified below to
exceed the designated ratio for each such Fiscal Quarter:
Period Maximum Ratio
------ -------------
Restatement Date
through the first Fiscal
Quarter, 1997 2.75:1.0
Second Fiscal Quarter, 1997
through December 31, 1997 2.50:1.0
First Fiscal Quarter, 1998
through December 31, 1998 2.25:1.0
First Fiscal Quarter, 1999
and each Fiscal Quarter
thereafter 2.00:1.0
6.11 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage
Ratio as at the end of each of the Fiscal Quarters of Borrower and its
Subsidiaries specified below to be less than the designated ratio for each such
Fiscal Quarter:
Period Maximum Ratio
------ -------------
December 31, 1996
through first Fiscal
Quarter, 1997 1.20:1.00
Second Fiscal Quarter, 1997
through First Fiscal
Quarter, 1998 1.25:1.00
Second Fiscal Quarter, 1998
and each Fiscal Quarter
thereafter 1.30:1.00
Such Ratio shall be measured as of the last day of each Fiscal Quarter for the
four-quarter period then ending, except that the calculations for the Fiscal
Quarters ending December 31,
46
1996 and March 31, 1997 shall be for the two Fiscal Quarters and the three
Fiscal Quarters, respectively, ending on or about those dates.
6.12 Losses/Earnings. Permit consolidated pre-tax Net Income to be
less than zero for Borrower and its Subsidiaries for any Fiscal Quarter.
6.13 Acquisitions. Borrower shall not, and shall not suffer or
permit any of its Subsidiaries to, make any Acquisition that is not a Permitted
Acquisition.
ARTICLE 7.
INFORMATION AND REPORTING REQUIREMENTS
7.1 Financial and Business Information. During the Term of this
Agreement, Borrower shall, unless Bank otherwise consents in writing, deliver
to Bank, at Borrower's sole expense:
(a) As soon as practicable, and in any event within 45 days
after the end of each Fiscal Quarter of Borrower (including the last Fiscal
Quarter of each fiscal year, provided that with respect to such last quarter
the financial statements required hereby may be in preliminary form, prior to
year-end audit adjustments), (i) consolidated and consolidating balance sheets
of Borrower and its Subsidiaries as at the end of such quarter, setting forth
in comparative form the corresponding figures as at the end of the
corresponding quarter of their preceding fiscal year, (ii) consolidated and
consolidating statements of profit and loss and of changes in financial
position of Borrower and its Subsidiaries for such quarter and for the portion
of their fiscal year ended with such quarter, setting forth in comparative form
the corresponding figures for the corresponding periods of their preceding
fiscal year, all in reasonable detail, and (iii) a variance report comparing
Borrower's actual performance for such Fiscal Quarter as indicated in the
projections delivered to Bank pursuant to Paragraph 7.1(g).
(b) As soon as practicable, and in any event within 90 days
after the close of each Fiscal Year of Borrower,
47
(i) consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as at the end of such fiscal year, setting forth in comparative
form the corresponding figures as at the end of their preceding fiscal year,
and (ii) consolidated and consolidating statements of profit and loss,
statements of cash flows, and changes in shareholders' equity of Borrower and
its Subsidiaries for such fiscal year, setting forth in comparative form the
corresponding figures for their previous fiscal year, all in reasonable detail.
Such balance sheets and statements shall be prepared in accordance with GAAP,
and such consolidated balance sheet and consolidated statements shall be
accompanied by a report and opinion of independent public accountants of
recognized standing selected by Borrower and reasonably satisfactory to Bank,
which report and opinion shall be prepared in accordance with GAAP as at such
date, and shall be subject only to such qualifications and exceptions as are
acceptable to Bank.
(c) Within 45 days after the end of each Fiscal Quarter of
Borrower (or more frequently, if requested by the Bank), a consolidated and
consolidating project backlog (with work in progress information on major
projects, if requested by Bank) of Borrower and its Subsidiaries;
(d) Promptly after request by Bank, copies of any detailed
audit reports or recommendations submitted to Borrower or any of its
Subsidiaries by independent accountants in connection with the accounts or
books of Borrower or any of its Subsidiaries, or any audit of any of them.
(e) Promptly after request by Bank, copies of any report or
other document filed by Borrower or any of its Subsidiaries with any
Governmental Agency.
(f) Within ten days of the filing or sending thereof, copies
of each annual report, proxy or financial statement or other report or
communication sent to the shareholders of Borrower, and copies of all annual,
regular, periodic and special reports and registration statements which
Borrower may file or be required to file with the Securities and Exchange
Commission or any similar or corresponding Governmental Agency or with any
securities exchange.
48
(g) As soon as practicable, and in any event within 2 Banking
Days after a corporate officer of Borrower becomes aware of the existence of
any condition or event which constitutes a Default, of the nature and period of
existence thereof and what action Borrower or its Subsidiaries are taking or
propose to take with respect thereto;
(h) Promptly upon a corporate officer of Borrower becoming
aware that (i) a dispute exists between Borrower or any of its Subsidiaries and
any Governmental Agency or law enforcement authority which, if determined
adversely to Borrower or its Subsidiary, would have a material adverse effect
on Borrower or its Subsidiary, together with written notice describing the
pertinent facts relating thereto and what action Borrower or its Subsidiary is
taking or proposes to take with respect thereto, (ii) any Person commenced a
legal proceeding with respect to a claim against Borrower or any of its
Subsidiaries in excess of $500,000 that is not fully covered by insurance or
(iii) any creditor or lessor under a written credit agreement or material lease
has asserted a default thereunder on the part of Borrower or any of its
Subsidiaries or (iv) any Person commenced a legal proceeding with respect to a
claim against Borrower or any of its Subsidiaries under a contract that is not
a credit agreement or material lease in excess of $500,000 or which otherwise
may reasonably be expected to result in a material adverse effect on Borrower
and its Subsidiaries, taken as a whole, or (v) any breach or default under any
agreement between Borrower or any of its Subsidiaries and any customer of
Borrower or such Subsidiary, which agreement produces annual revenues for
Borrower or such Subsidiary in excess of $5,000,000, a written notice
describing the pertinent facts relating thereto and what action Borrower or its
Subsidiaries are taking or propose to take with respect thereto.
(i) Updated projections for Borrower and its Subsidiaries
(prepared on a consolidated and consolidating basis), as follows: (1) within 45
days prior to the end of each Fiscal Year, the strategic/long range plan on an
annual basis for the Fiscal Years from present through December 31, 1999, and
(2) within 45 days after the end of each Fiscal Year, the annual operating plan
for the current Fiscal Year, on a monthly basis; such projections required by
(1) and (2) above
49
each to be in form and detail satisfactory to Bank, and each to be submitted
together with the certification of Borrower's chief financial officer stating
that the projections are based on facts known to Borrower and on assumptions
that are reasonable and consistent with such facts, that no material (in amount
and likelihood) fact or assumption has been omitted as a basis for such
projections which, in Borrower's reasonable business judgment, should be
included, and that such projections are reasonably based on such facts and
assumptions.
(j) No more than 60 days after the consummation of each
Permitted Acquisition, post-closing consolidated and consolidating balance
sheets for Borrower (detailing the assets acquired in such Acquisition),
together with a written certification from Borrower's Chief Financial Officer
to the effect that he or she has reviewed such balance sheets, and, to the best
of his or her knowledge, they have been prepared in accordance with GAAP.
(k) Promptly upon request, such other information, financial
or otherwise, as Bank may reasonably request, including but not limited to,
accounts receivable agings, a breakdown of the fixed assets of Borrower and its
Subsidiaries.
7.2 Compliance Certificates. During the Term of this Agreement,
Borrower shall, unless Bank otherwise consents in writing, deliver to Bank, at
Borrower's sole expense, not later than 45 days after the end of each Fiscal
Quarter of Borrower, a Certificate of a Responsible Official of Borrower in the
form of Exhibit C attached hereto, which shall contain, among the other
provisions set forth in such Exhibit, computations showing, in detail
satisfactory to Bank, whether Borrower and its Subsidiaries were in compliance
with their obligations under Paragraphs 6.10 through 6.12 of this Agreement,
during the relevant Fiscal Quarter.
7.3 Revisions or Updates to Schedules. Should any of the information
or disclosures provided on any of the Schedules originally attached hereto
become outdated or incorrect in any material respect, Borrower promptly shall
provide to Bank such revisions or updates to such Schedule(s) as may be
necessary or appropriate to update or correct such Schedule(s); provided that
no such revisions or updates to any Schedule(s) shall be
50
deemed to have amended, modified or superseded such Schedule(s) as originally
attached hereto, or to have cured any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule(s), unless
and until Bank, in its sole and absolute discretion, shall have accepted in
writing such revisions or updates to such Schedule(s).
ARTICLE 8.
CONDITIONS
8.1 Initial Loan, Etc. The obligations of Bank to make the initial
Loan and to issue the initial Letter of Credit following the Restatement Date
are subject to the following conditions precedent (in addition to any
applicable conditions precedent set forth elsewhere in this Article 8), (unless
Bank, in its sole and absolute discretion, shall agree otherwise):
(a) Bank shall have received all of the following, each of
which shall be originals unless otherwise specified, each properly executed by
a Responsible Official of each party thereto, each dated as of the Restatement
Date and each in form and substance satisfactory to Bank (unless Bank otherwise
agrees or directs):
(1) executed counterparts of this Agreement,
sufficient in number for distribution to Bank, Borrower and Borrower's
counsel;
(2) with respect to Borrower and any and each
Subsidiary of Borrower, such documentation as Bank may require to
establish the due organization, valid existence and good standing of
Borrower and each such Subsidiary, its qualification to engage in
business in each jurisdiction in which it is engaged in business or
required to be so qualified, its authority to execute, deliver and
perform any Loan Documents to which it is a party, and the identity,
authority and capacity of each Responsible Official thereof authorized
to act on its behalf, including, without limitation, certified copies
of articles of incorporation and amendments thereto, bylaws and
amendments thereto, certificates of good standing and/or qualification
to engage in business, tax clearance
51
certificates, certificates of corporate resolutions, incumbency
certificates, Certificates of Responsible Officials, and the like;
(3) the Continuing Guaranty executed by all
Subsidiaries of Borrower; and
(4) any other documents or agreements reasonably
required by Bank.
8.2 Any Increasing Loan, Etc. In addition to any applicable
conditions precedent set forth elsewhere in this Article 8, Borrower's request
to Bank to make any Loan, or to issue any Letter of Credit that would increase
the Total Outstandings, shall be deemed to be a representation by Borrower that
(a) on the date of that request, the representations and warranties contained
in Article 4, other than Paragraphs 4.4(a), 4.6, 4.9, 4.12 and 4.17, are true
and correct as though made on and as of that date; (b) there are no actions,
suits or proceedings pending against or affecting Borrower or any of its
Subsidiaries or any property of any of them that might reasonably be expected
adversely to affect materially the business, operations or condition (financial
or otherwise) of Borrower and its Subsidiaries, taken as a whole; (c) no
material adverse change shall have occurred in the business, operations or
condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a
whole, since the Restatement Date; and (d) no Default shall have occurred and
be continuing.
ARTICLE 9.
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
9.1 Events of Default. The existence or occurrence of any one or
more of the following events, whatever the reason therefor, shall constitute an
Event of Default:
(a) Borrower fails to pay any installment of principal when
due, or Borrower fails to pay any installment of interest on any indebtedness
hereunder, or to reimburse, or to pay any fee or any other amount due Bank
under any Loan Document within five (5) days after the date when due; or
52
(b) Any failure to comply with Subparagraph 7.1(g) that is
materially adverse to the interest of Bank; or
(c) Borrower or any of its Subsidiaries fails to perform or
observe any other term, covenant or agreement contained in any Loan Document on
its part to be performed or observed; or
(d) Any representation or warranty made in any Loan Document
or in any certificate, agreement, instrument or other document made or
delivered pursuant to or in connection with any Loan Document proves to have
been incorrect when made in any respect that is materially adverse to the
interests of Bank; or
(e) Borrower or any of its Subsidiaries (i) fails to pay the
principal, or any principal installment, of any present or future Specific
Indebtedness (as defined below), on its part to be paid, when due (or within
any stated grace period), whether at the stated maturity, upon acceleration, by
reason of required prepayment or otherwise, or (ii) fails to perform or observe
any other term, covenant or agreement on its part to be performed or observed
in connection with any present or future Specific Indebtedness, if as a result
of such failure any holder or holders thereof (or an agent or trustee on its or
their behalf) has the right to declare such Indebtedness due before the date on
which it otherwise would become due, or has commenced judicial or nonjudicial
action to collect such Indebtedness or to foreclose or otherwise realize upon
security held therefor, or has taken or is taking such other actions as might
materially adversely affect the interests of Bank under the Loan Documents or
the ability of Borrower or its Subsidiaries to pay and perform their
Obligations under the Loan Documents; as used in this Subparagraph 9.1(e),
"Specific Indebtedness" means indebtedness for borrowed money or in connection
with the purchase or lease of property, or any guaranty of present or future
indebtedness for borrowed money or that is issued in connection with the
purchase or lease of property, which indebtedness equals or exceeds, in the
aggregate, $500,000; or
(f) Any Loan Document, at any time after its execution and
delivery and for any reason other than the
53
agreement of Bank or satisfaction in full of all the Obligations, ceases to be
in full force and effect or is declared by a court of competent jurisdiction to
be null and void, invalid or unenforceable in any respect which, in the
reasonable opinion of Bank, is materially adverse to the interests of Bank; or
any party thereto denies that it has any or further liability or obligation
under any Loan Document, or purports to revoke, terminate or rescind same; or
(g) A final judgment against Borrower or any of its
Subsidiaries is entered for the payment of money in excess of $500,000 and such
judgment remains unsatisfied without procurement of a stay of execution within
thirty (30) calendar days after the date of entry of judgment, or in any event
later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Borrower or any of its Subsidiaries is the subject of an
order for relief in a bankruptcy case, or is unable or admits in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors; or applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer for it or for all or any part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
is appointed without the application or consent of that Person and the
appointment continues undischarged or unstayed for forty-five (45) calendar
days; or institutes or consents to any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, rehabilitation or similar case or proceedings relating to it or to
all or any part of its property under the laws of any jurisdiction; or any
similar case or proceeding is instituted without the consent of that Person and
continues undismissed or unstayed for forty-five (45) calendar days; or any
judgment, writ, warrant of attachment or execution or similar process is issued
or levied against all or any material part of the property of any such Person
and is not released, vacated or fully bonded within forty-five (45) calendar
days after its issue or levy; or
54
(i) Borrower or any Subsidiary thereof is dissolved or
liquidated or all or substantially all of the assets of Borrower or any
Subsidiary of Borrower are sold or otherwise transferred in violation of the
provisions of this Agreement without the written consent of Bank; or
(j) An event or set of events occurs which has or could
reasonably be expected to have a material adverse effect on (i) the validity or
enforceability of this Agreement, any other agreement or document executed in
connection with this Agreement, or the ability of the Bank to enforce its legal
remedies thereunder; or (ii) the condition (financial or otherwise), business
operations or prospects of Borrower and its Subsidiaries, taken as a whole,
which could in turn reasonably be expected to impair the ability of Borrower
and its Subsidiaries, taken as a whole, to perform their obligations under this
Agreement and all such other documents and agreements; or
(k) A default or defined Event of Default occurs under any
other agreement Borrower or any Subsidiary has with Bank or any affiliate of
Bank, and is not cured within any applicable cure period; or
(l) The occurrence of any one or more of the following events
with respect to Borrower or any Subsidiary, provided such event or events could
reasonably be expected, in the judgment of Bank, to subject the Borrower to any
tax, penalty or liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial condition of
Borrower with respect to a Plan:
(1) A reportable event shall occur with respect to a
Plan which is, in the reasonable judgment of Bank likely to result in
the termination of such Plan for purposes of Title IV of ERISA.
(2) Any Plan termination (or commencement of
proceedings to terminate a Plan) or Borrower's full or partial
withdrawal from a Plan.
9.2 Remedies Upon Event of Default. Without limiting any other
rights or remedies of Bank provided for elsewhere in this
55
Agreement, or the Loan Documents, or by applicable law, or in equity, or
otherwise:
(a) Upon the occurrence of any Event of Default other than an
Event of Default described in Paragraph 9.1(h):
(1) the commitment to make Loans and issue
Letters of Credit and all other obligations of Bank and all rights of
Borrower and any other parties under the Loan Documents shall
terminate without notice to or demand upon Borrower, which are
expressly waived by Borrower, except that Bank may waive the Event of
Default or, without waiving, determine, upon terms and conditions
satisfactory to Bank, to make further Loans or to issue further
Letters of Credit; and
(2) Bank may declare all or any part of the unpaid
principal of the Line of Credit, all interest accrued and unpaid
thereon and all other amounts payable under the Loan Documents to be
forthwith due and payable, whereupon the same shall become and be
forthwith due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of which are
expressly waived by Borrower.
Despite the foregoing, if, in Bank's opinion, a breach of any provision of this
Agreement (other than any provision specifically referred to in Paragraph 9.1
or Article 6), is capable of being remedied, and Borrower submits a written
request for a cure period along with its plan to remedy the default, then the
breach will not be considered an Event of Default under this Agreement for a
period of thirty (30) days after the date such breach first occurs; provided,
however, that Bank will not be obligated to make further Loans to Borrower or
to issue or renew any Letters of Credit during that period.
(b) Upon the occurrence of any Event of Default described in
Subparagraph 9.1(h):
(1) the Commitment to make Loans and issue Letters
of Credit and all other obligations of Bank and all rights of Borrower
and any other parties under the Loan Documents shall terminate without
notice to or demand
56
upon Borrower, which are expressly waived by Borrower, except that
Bank may waive the Event of Default or, without waiving, determine,
upon terms and conditions satisfactory to Bank, to make further Loans
or to issue further Letters of Credit, which determination shall apply
equally to, and shall be binding upon, Bank; and
(2) the unpaid principal of the Line of Credit, all
interest accrued and unpaid thereon and all other amounts payable
under the Loan Documents shall be forthwith due and payable, without
protest, presentment, notice of dishonor, demand or further notice of
any kind, all of which are expressly waived by Borrower.
(c) Upon the occurrence of any Event of Default, Bank,
without notice to or demand upon Borrower, which are expressly waived by
Borrower, may proceed to protect, exercise and enforce their rights and
remedies under the Loan Documents against Borrower and such other rights and
remedies as are provided by law or equity.
(d) The order and manner in which the Bank's rights and
remedies are to be exercised shall be determined by Bank in its sole
discretion, and all payments received by Bank shall be applied first to the
costs and expenses (including attorneys' fees and disbursements) of Bank, and
thereafter to the Obligations in such order as Bank may determine. For the
purpose of computing Borrower's Obligations hereunder and under the Letters of
Credit, payments shall be applied, first, to the costs and expenses of Bank, as
set forth above, second, to the payment of accrued and unpaid interest due
under any Loan Documents to and including the date of such application
(ratably, and without duplication, according to the accrued and unpaid interest
due under each of the Loan Documents), third, to the ratable payment of all
unpaid principal amounts due under any Loan Documents (including, for the
purposes hereof, principal due under the Line of Credit, and reimbursement due
for payments made under Letters of Credit) and fourth, to the payment of all
other amounts (including fees) then owing to Bank under the Loan Documents. No
application of payments will cure any Event of Default, or prevent
acceleration, or continued acceleration, of amounts payable under the Loan
Documents, or prevent the exercise, or continued exercise, of
57
rights or remedies of Bank hereunder or thereunder or at law or in equity. The
term "attorneys' fees" as used in this Agreement shall include the allocated
costs of in-house counsel.
(e) Upon the occurrence of any event that would be an Event
of Default under Section 9.1(h) with the passage of time, Bank may take such
action as Bank deems necessary to protect the interests of Bank under the Loan
Documents.
ARTICLE 10.
MISCELLANEOUS
10.1 Cumulative Remedies; No Waiver. The rights, powers, privileges
and remedies of Bank provided herein or in any other Loan Document are
cumulative and not exclusive of any right, power, privilege or remedy provided
by law or equity. No failure or delay on the part of Bank in exercising any
right, power, privilege or remedy may be, or may be deemed to be, a waiver
thereof; nor may any single or partial exercise of any right, power, privilege
or remedy preclude any other or further exercise of the same or any other
right, power, privilege or remedy. The terms and conditions of Article 8
hereof are inserted for the sole benefit of Bank and Bank may waive them in
whole or in part, with or without terms or conditions, in respect of any Loan
or Standby Letter of Credit, without prejudicing the Bank's rights to assert
them in whole or in part in respect of any other Loan or Letter of Credit.
10.2 Amendments; Consents. No amendment, modification, supplement,
extension, termination or waiver of any provision of any Loan Document, no
approval or consent thereunder, and no consent to any departure by Borrower or
any other party therefrom, may in any event be effective unless in writing
signed by Bank (and, in the case of amendments, modifications or supplements of
or to any Loan Document to which Borrower is a party, the approval in writing
of Borrower), and then only in the specific instance and for the specific
purpose given.
10.3 Costs, Expenses and Taxes. Borrower shall pay on demand the
reasonable costs and expenses of Bank in connection with the negotiation,
preparation, execution and delivery of
58
the Loan Documents (not to exceed $5,000), and of Bank in connection with the
amendment, waiver, refinancing, restructuring, reorganization (including a
bankruptcy reorganization) and enforcement or attempted enforcement of the Loan
Documents, and any matter related thereto, including, without limitation,
filing fees, recording fees, title insurance fees, appraisal fees, search fees
and other out-of-pocket expenses and the reasonable fees and out-of-pocket
expenses of any legal counsel (including, without limitation, costs and fees of
Bank's in-house counsel), independent public accountants and other outside
experts retained by Bank, and including, without limitation, any costs,
expenses or fees incurred or suffered by Bank in connection with or during the
course of any bankruptcy or insolvency proceedings of Borrower or any
Subsidiary thereof. Borrower shall pay any and all documentary and other taxes
(other than income or gross receipts taxes generally applicable to banks) and
all costs, expenses, fees and charges payable or determined to be payable in
connection with the filing or recording of this Agreement, any other Loan
Document or any other instrument or writing to be delivered hereunder or
thereunder, or in connection with any transaction pursuant hereto or thereto,
and shall reimburse, hold harmless and indemnify Bank from and against any and
all loss, liability or legal or other expense with respect to or resulting from
any delay in paying or failure to pay any tax, cost, expense, fee or charge or
that any of them may suffer or incur by reason of the failure of any party to
perform any of its Obligations. Any amount payable to Bank under this
Paragraph 10.3 shall bear interest from the second Banking Day following the
date of demand for payment at the rate provided for in Paragraph 3.8.
10.4 Survival of Representations and Warranties. All representations
and warranties contained herein, in any other Loan Document, or in any
certificate required hereunder, will survive the making and repayment of all
Obligations hereunder, and have been or will be relied upon by Bank,
notwithstanding any investigation made by Bank or on its behalf.
10.5 Notices. Except as otherwise expressly provided in the Loan
Documents: (a) All notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must be
in writing and must be
59
mailed, telecopied, or delivered to the appropriate party at the address set
forth on the signature pages of this Agreement or other applicable Loan
Document or, as to any party to any Loan Document, at any other address as may
be designated by it in a written notice sent to all other parties to such Loan
Document in accordance with this Paragraph 10.5; and (b) Any notice, request,
demand, direction or other communication given by telegram or telecopier must
be confirmed within 48 hours by letter mailed or delivered to the appropriate
party at its respective address. Except as otherwise expressly provided in any
Loan Document, if any notice, request, demand, direction or other communication
required or permitted by any Loan Document is given by mail it will be
effective on the earlier of receipt or the third calendar day after deposit in
the United States mail with first class or airmail postage prepaid; if given by
telex or telecopier, when sent; or if given by personal delivery, when
delivered.
10.6 Execution of Loan Documents. Unless Bank otherwise specifies
with respect to any Loan Document, this Agreement and any other Loan Document
may be executed in any number of counterparts and any party hereto or thereto
may execute any counterpart, each of which when executed and delivered will be
deemed to be an original and all of which counterparts of this Agreement or any
other Loan Document, as the case may be, when taken together will be deemed to
be but one and the same instrument. The execution of this Agreement or any
other Loan Document by any party hereto or thereto will not become effective
until counterparts hereof or thereof, as the case may be, have been executed by
all the parties hereto or thereto.
10.7 Binding Effect; Assignment. This Agreement and the other Loan
Documents shall be binding upon and shall inure to the benefit of the parties
hereto and thereto and their respective successors and assigns, except that
Borrower and/or its Affiliates may not assign their rights hereunder or
there-under or any interest herein or therein without the prior written consent
of Bank. Bank may, at any time and from time to time, sell, assign, pledge or
transfer participations in its rights hereunder or any interest herein provided
that any actual or potential participants, assignees, pledge holders or
transferees shall agree to treat all financial information exchanged as
confidential, and provided further that Borrower
60
has given its prior consent with respect to any proposed participant, or
assignee. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against Borrower.
10.8 Indemnity by Borrower. Borrower agrees to indemnify, save and
hold harmless Bank and its directors, officers, agents, attorneys and employees
(collectively the "Indemnitees") from and against: (a) Any and all claims,
demands, actions or causes of action that are asserted against any Indemnitee
by any person (other than Bank) if the claim, demand, action or cause of action
directly or indirectly relates to a claim, demand, action or cause of action
that such person asserts or may assert against Borrower or any Affiliate of
Borrower or any officer, director or shareholder of Borrower relating to the
Line of Credit, the use or contemplated use of proceeds of any Loan or Letter
of Credit, or the relationship of Borrower and Bank under this Agreement; (b)
Any and all claims, demands, actions or causes of action if the claim, demand,
action or cause of action arises out of or relates to any action or inaction by
Borrower or its Subsidiaries in connection with the Line of Credit or the use
or contemplated use of proceeds of any Loan or Letter of Credit; (c) Any
administrative or investigative proceeding by any Governmental Agency arising
out of or related to a claim, demand, action or cause of action described in
clauses (a) or (b) above; and (d) Any and all liabilities, losses, costs or
expenses (including attorneys' fees (including the allocated cost of in-house
counsel) and disbursements and other professional services) that any Indemnitee
suffers or incurs as a result of the assertion of any foregoing claim, demand,
action or cause of action; provided that no Indemnitee shall be entitled to
indemnification of or any loss caused by its own gross negligence or willful
misconduct. Promptly after receipt by Bank of notice of any third-party claim
to which the indemnification obligations hereunder would apply, Bank shall give
notice thereof to Borrower in writing, stating the information then available
to Bank regarding the amount and nature of such claim, but the failure to do so
promptly notify Borrower shall not affect Borrower's obligations under this
Paragraph 10.8 unless such failure materially prejudices Borrower's right to
participate in the contest of such claim, demand, action or cause of action.
Borrower shall have the
61
right to defend against all such claims, demands, actions or causes of action,
at Borrower's cost and expense, with counsel selected by Borrower and
reasonably satisfactory to Bank. The Borrower shall regularly keep Bank
informed as to the status of, and any material developments relating to, any
claim subject to this Paragraph 10.8, and shall respond promptly in writing to
any reasonable requests by Bank for information or other data concerning such
claim. Any obligation or liability of Borrower to any Indemnitee under this
Paragraph 10.8 shall survive the expiration or termination of this Agreement
and the repayment of all Loans and the payment and performance of all other
Obligations owed to Bank.
10.9 Hazardous Waste Indemnification. Borrower will indemnify and
hold harmless Indemnitees from any loss or liability directly or indirectly
arising out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of a hazardous substance.
This indemnity will apply whether the hazardous substance is on, under or about
Borrower's property or operations or property leased to Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff).
"Hazardous substances" means any substance, material or waste that is or
becomes designated or regulated as "toxic," "hazardous," "pollutant," or
"contaminant" or a similar designation or regulation under any federal, state
or local law (whether under common law, statute, regulation or otherwise) or
judicial or administrative interpretation of such, including without limitation
petroleum or natural gas. This indemnity will survive repayment of Borrower's
and its Subsidiaries' Obligations to Bank.
10.10 Confidentiality. Bank agrees to hold any confidential
information that it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure: (a) To legal counsel, accountants and other
professional advisors to Borrower or Bank; (b) To regulatory officials having
jurisdiction over that Bank; (c) As required by law or legal process or in
connection with any legal proceeding to which Bank is a party; and (d) To
another financial institution in connection with a disposition or proposed
disposition of all or part of Bank's interests hereunder; provided that nothing
in this
62
Paragraph shall be construed to create or give rise to any fiduciary duty on
the part of Bank to Borrower or to create or give rise to any relationship of
confidence or trust between Bank and Borrower.
10.11 Further Assurances. Borrower and its Subsidiaries shall, at
their expense and without expense to the Bank, do, execute and deliver such
further acts and documents as any Bank from time to time reasonably requires
for the assuring and confirming unto Bank of the rights hereby created or
intended now or hereafter so to be, or for carrying out the intention or
facilitating the performance of the terms of any Loan Document.
10.12 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and supersedes all prior agreements, written or oral,
on the subject matter hereof. In the event of any conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control and govern; provided that the
inclusion of supplemental rights or remedies in favor of Bank in any other Loan
Document shall not be deemed a conflict with this Agreement. Each Loan
Document was drafted with the joint participation of the respective parties
thereto and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.
10.13 Governing Law. Except to the extent otherwise provided
therein, each Loan Document shall be governed by, and construed and enforced in
accordance with, the local laws of California.
10.14 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable or invalid as to any party or in
any jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party
or in any other jurisdiction, and to this end the provisions of all Loan
Documents are declared to be severable.
63
10.15 Headings. Article and Paragraph headings in this Agreement and
the other Loan Documents are included for convenience of reference only and are
not part of this Agreement or the other Loan Documents for any other purpose.
10.16 Arbitration.
(a) This Paragraph concerns the resolution of any
controversies or claims between Borrower and Bank, including but not limited to
those that arise from:
(i) This Agreement (including any renewals,
extensions or modifications of this Agreement);
(ii) Any document, agreement or procedure related to
or delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any
business conducted between Borrower and Bank, including claims for
injury to persons, property or business interests (torts).
(b) At the request of Borrower or Bank, any such
controversies or claims will be settled by arbitration in accordance with the
United States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California law.
(c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial rules of
arbitration.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this Paragraph is the
equivalent of the filing of a lawsuit, and any claim or controversy which may
be arbitrated under this Paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether any
such claim or controversy is barred by the statute of limitations and, if so,
to dismiss the arbitration on that basis.
64
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration proceeding
may be submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to arbitration,
arises from or relates to an obligation to Bank secured by real property
located in California. In this case, both Borrower and Bank must consent to
submission of the claim or controversy to arbitration. If both parties do not
consent to arbitration, the controversy or claim will be settled as follows:
(i) Borrower and Bank will designate a referee (or a
panel of referees) selected under the auspices of the American
Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored proceedings;
(ii) The designated referee (or the panel of
referees) will be appointed by a court as provided in California Code
of Civil Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the
panel) will be an active attorney or a retired judge; and
(iv) The award that results from the decision of the
referee (or the panel) will be entered as a judgment in the court that
appointed the referee, in accordance with the provisions of California
Code of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of Borrower or
Bank to:
(i) exercise self-help remedies such as setoff;
65
(ii) foreclose against or sell any real or personal
property collateral; or
(iii) act in a court of law, before, during or after
the arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Borrower or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other party
contests the lawsuit.
However, if the controversy or claim arises from or relates to an obligation to
Bank which is secured by real property located in California at the time of the
proposed submission to arbitration, this right is limited according to the
provision above requiring the consent of both Borrower and Bank to seek
resolution through arbitration.
(j) If Bank forecloses against any real property securing
this Agreement, Bank has the option to exercise the power of sale under the
deed of trust or mortgage, or to proceed by judicial foreclosure.
10.17 Personal Liability of Responsible Officials. In the absence of
actual fraud, no Certificate of a Responsible Official delivered to the Bank
hereunder shall create personal liability to the Bank on the part of such
Responsible Official for payment or performance of any of the Obligations or
otherwise under the Loan Documents.
66
10.18 Prior Agreement Superseded. This Agreement supersedes the
Original Loan Agreement, and any credit outstanding thereunder shall be deemed
to be outstanding under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
BANK OF AMERICA NATIONAL XXXXXXXX INCORPORATED
TRUST AND SAVINGS ASSOCIATION
By ____________________________ By ____________________________
J. Xxxxxx Xxxxx Xxxxxx X. Xxxxxxxx
Vice President Vice President - Controller
and Assistant Treasurer
By ____________________________
Xxxxx X. Xxxxxx
Vice President,
Treasurer, Secretary,
and Chief Financial Officer
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
South Bay Commercial Banking 00000 X. Xxxxxxxxxx Xxxxxx
Xxxxxx, #0000 Xxxxxx, XX 00000
000 Xxxx Xxxxx Xxxx., 0xx Xx. Attention: Xxxxx X. Xxxxxx
Xxxx Xxxxx, XX 00000 Telecopy No.: (000) 000-0000
Attention: J. Xxxxxx Xxxxx
Telecopy No.: (000) 000-0000
