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FLEET CAPITAL CORPORATION, AS ADMINISTRATIVE AND
COLLATERAL AGENT
AND
FLEET CAPITAL CORPORATION, AS LENDER
AND
CARPET BARN, INC., AS BORROWER
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LOAN AND SECURITY AGREEMENT
Dated: As of May 19, 1998
$10,000,000
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TABLE OF CONTENTS
SECTION 1. CREDIT FACILITY...................................................................................1
1.1. REVOLVING CREDIT LOANS......................................................................................1
1.1.1. Loans and Reserves....................................................................................1
1.1.2. Use of Proceeds.......................................................................................1
1.2. LETTERS OF CREDIT; LC GUARANTIES............................................................................2
1.2.1. Request for Letter of Credit..........................................................................2
1.2.2. Description of Letters of Credit......................................................................2
1.2.3. Indemnification.......................................................................................2
1.2.4. Agent's Instructions..................................................................................3
1.2.5. Disbursements.........................................................................................3
1.2.6. Reimbursement Obligation..............................................................................3
1.2.7. Lender's Reimbursement Obligations....................................................................3
1.2.8. Cash Collateral.......................................................................................4
1.2.9. Waiver of Liability...................................................................................4
1.3. TERM LOAN...................................................................................................5
SECTION 2. INTEREST, FEES AND CHARGES......................................................................5
2.1. INTEREST....................................................................................................5
2.1.1. Rates of Interest.....................................................................................5
2.1.2. Default Rate..........................................................................................6
2.1.3. Maximum Interest......................................................................................6
2.2. COMPUTATION OF INTEREST AND FEES............................................................................6
2.3. UNDERWRITING FEE............................................................................................6
2.4. LETTER OF CREDIT AND LC GUARANTY FEES.......................................................................6
2.5. UNUSED LINE FEE.............................................................................................7
2.6. REIMBURSEMENT OF EXPENSES...................................................................................7
2.7. BANK CHARGES................................................................................................7
2.8. SPECIAL ADVANCE FEE.........................................................................................7
SECTION 3. LOAN ADMINISTRATION...............................................................................8
3.1. MANNER OF BORROWING REVOLVING CREDIT LOANS..................................................................8
3.1.1. Loan Requests; Payment................................................................................8
3.1.2. Disbursement.........................................................................................11
3.1.3. Authorization........................................................................................11
3.1.4. Eurodollar Loans.....................................................................................11
3.1.5. Interest Periods.....................................................................................11
3.1.6. Conversion of Base Rate Loans........................................................................12
3.1.7. Continuation of Eurodollar Loans.....................................................................12
3.1.8. Prepayment of Eurodollar Loans.......................................................................12
3.1.9. Indemnification......................................................................................13
3.1.10. Inability to Make Eurodollar Loans...................................................................13
3.2. PAYMENTS...................................................................................................13
3.2.1. Principal............................................................................................13
3.2.2. Interest.............................................................................................14
3.2.3. Costs, Fees and Charges..............................................................................14
3.2.4. Other Obligations....................................................................................14
3.2.5. Voluntary Prepayments................................................................................14
3.3. MANDATORY PREPAYMENTS......................................................................................14
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of Collateral; Extraordinary Receipts............14
3.3.2. Excess Cash Flow.....................................................................................15
3.3.3. Debt and Equity Offering.............................................................................15
3.4. APPLICATION OF PAYMENTS AND COLLECTIONS....................................................................16
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3.5. ALL LOANS TO CONSTITUTE ONE OBLIGATION.....................................................................16
3.6. LOAN ACCOUNT...............................................................................................16
3.7. STATEMENTS OF ACCOUNT......................................................................................16
3.8. INCREASED COSTS............................................................................................16
3.9. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR...................................................18
3.10. CAPITAL ADEQUACY........................................................................................18
3.10.1. Certificate..........................................................................................18
SECTION 4. TERM AND TERMINATION............................................................................19
4.1. TERM OF AGREEMENT..........................................................................................19
4.2. TERMINATION................................................................................................19
4.2.1. Termination by Lenders...............................................................................19
4.2.2. Termination by Borrower..............................................................................19
4.2.3. Termination Charges..................................................................................19
4.2.4. Effect of Termination................................................................................19
SECTION 5. SECURITY INTERESTS...............................................................................20
5.1. SECURITY INTEREST IN COLLATERAL............................................................................20
5.2. LIEN PERFECTION; FURTHER ASSURANCES........................................................................21
SECTION 6. COLLATERAL ADMINISTRATION........................................................................21
6.1. GENERAL....................................................................................................21
6.1.1. Location of Collateral...............................................................................21
6.1.2. Insurance of Collateral..............................................................................21
6.1.3. Protection of Collateral.............................................................................21
6.2. ADMINISTRATION OF ACCOUNTS.................................................................................22
6.2.1. Records, Schedules and Assignments of Accounts.......................................................22
6.2.2. Discounts, Allowances, Disputes......................................................................22
6.2.3. Taxes................................................................................................23
6.2.4. Account Verification.................................................................................23
6.2.5. Maintenance of Dominion Account......................................................................23
6.2.6. Collection of Accounts, Proceeds of Collateral.......................................................23
6.3. ADMINISTRATION OF INVENTORY................................................................................23
6.3.1. Records and Reports of Inventory.....................................................................23
6.3.2. Returns of Inventory.................................................................................23
6.4. ADMINISTRATION OF EQUIPMENT................................................................................24
6.4.1. Records and Schedules of Equipment...................................................................24
6.4.2. Dispositions of Equipment............................................................................24
6.5. PAYMENT OF CHARGES.........................................................................................24
6.6. ADDITIONAL PAYMENTS........................................................................................24
SECTION 7. REPRESENTATIONS AND WARRANTIES..................................................................24
7.1. GENERAL REPRESENTATIONS AND WARRANTIES.....................................................................24
7.1.1. Organization and Qualification.......................................................................24
7.1.2. Power and Authority..................................................................................25
7.1.3. Legally Enforceable Agreement........................................................................25
7.1.4. Capital Structure....................................................................................25
7.1.5. Corporate Names......................................................................................25
7.1.6. Business Locations; Agent for Process................................................................26
7.1.7. Title to Properties; Priority of Liens...............................................................26
7.1.8. Accounts.............................................................................................26
7.1.9. Equipment............................................................................................27
7.1.10. Financial Statements; Fiscal Year....................................................................27
7.1.11. Full Disclosure......................................................................................28
7.1.12. Solvent Financial Condition..........................................................................28
7.1.13. Surety Obligations...................................................................................28
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7.1.14. Taxes................................................................................................28
7.1.15. Brokers..............................................................................................28
7.1.16. Patents, Trademarks, Copyrights and Licenses.........................................................28
7.1.17. Governmental Consents................................................................................29
7.1.18. Compliance with Laws.................................................................................29
7.1.19. Restrictions.........................................................................................29
7.1.20. Litigation...........................................................................................29
7.1.21. No Defaults..........................................................................................29
7.1.22. Leases...............................................................................................30
7.1.23. Pension Plans........................................................................................30
7.1.24. Trade Relations......................................................................................30
7.1.25. Labor Relations......................................................................................30
7.1.26. O.S.H.A. and Environmental Compliance................................................................30
7.2. CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES........................................................31
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................................................31
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS............................................................31
8.1. AFFIRMATIVE COVENANTS......................................................................................31
8.1.1. Visits and Inspections...............................................................................31
8.1.2. Notices..............................................................................................31
8.1.3. Financial Statements.................................................................................32
8.1.4. Landlord and Storage Agreements......................................................................33
8.1.5. Credit Memoranda.....................................................................................33
8.1.6. Projections..........................................................................................33
8.1.7. Environmental Matters................................................................................33
8.2. NEGATIVE COVENANTS.........................................................................................35
8.2.1. Mergers; Consolidations; Acquisitions................................................................35
8.2.2. Loans................................................................................................36
8.2.3. Total Indebtedness...................................................................................36
8.2.4. Affiliate Transactions...............................................................................36
8.2.5. Limitation on Liens..................................................................................37
8.2.6. Subordinated Debt....................................................................................37
8.2.7. Distributions........................................................................................37
8.2.8. Capital Expenditures.................................................................................38
8.2.9. Disposition of Assets................................................................................38
8.2.10. Xxxx-and-Hold Sales, Etc.............................................................................38
8.2.11. Restricted Investment................................................................................38
8.2.12. Leases...............................................................................................38
8.2.13. Tax Consolidation....................................................................................38
8.2.14. Stock of Subsidiaries................................................................................38
8.2.15. Management Fee.......................................................................................38
8.3. SPECIFIC FINANCIAL COVENANTS...............................................................................39
8.3.1. Minimum Net Worth....................................................................................39
8.3.2. Funded Debt Coverage.................................................................................39
8.3.3. Fixed Charge Coverage................................................................................40
SECTION 9. CONDITIONS PRECEDENT.............................................................................40
9.1. DOCUMENTATION..............................................................................................40
9.2. NO DEFAULT.................................................................................................40
9.3. OTHER LOAN DOCUMENTS.......................................................................................40
9.4. FILINGS, REGISTRATIONS AND RECORDINGS......................................................................40
9.5. PROCEEDINGS OF CORPORATE PARTIES...........................................................................40
9.6. INCUMBENCY CERTIFICATES OF EACH CORPORATE PARTY............................................................41
9.7. CERTIFICATES...............................................................................................41
9.8. GOOD STANDING CERTIFICATES.................................................................................41
9.9. LEGAL OPINION..............................................................................................41
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9.10. NO LITIGATION...........................................................................................41
9.11. INFORMATION; COLLATERAL EXAMINATION.....................................................................42
9.12. FEES....................................................................................................42
9.13. INSURANCE...............................................................................................42
9.14. PLEDGE AGREEMENT........................................................................................42
9.15. PAYMENT INSTRUCTIONS....................................................................................42
9.16. NO ADVERSE MATERIAL CHANGE..............................................................................42
9.17. CONTRACT REVIEW.........................................................................................42
9.18. ENVIRONMENTAL REPORTS...................................................................................42
9.19. LEASEHOLD AGREEMENTS....................................................................................43
9.20. CONSENTS................................................................................................43
9.21. FINANCIAL CONDITION CERTIFICATES........................................................................43
9.22. CLOSING CERTIFICATE.....................................................................................43
9.23. SUBSIDIARY STOCK........................................................................................43
9.24. CORPORATE STRUCTURE.....................................................................................43
9.25. ERISA...................................................................................................43
9.26. AVAILABILITY............................................................................................44
9.27. LEASES .................................................................................................44
9.28. SUBORDINATED DEBT.......................................................................................44
9.29. OTHER...................................................................................................44
9.30. CONDITIONS TO EACH LOAN.................................................................................44
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT..........................................45
10.1. EVENTS OF DEFAULT.......................................................................................45
10.1.1. Payment of Obligations...............................................................................45
10.1.2. Misrepresentations...................................................................................45
10.1.3. Breach of Specific Covenants.........................................................................45
10.1.4. Breach of Other Covenants............................................................................45
10.1.5. Default Under Security Documents/Other Agreements....................................................45
10.1.6. Other Defaults.......................................................................................46
10.1.7. Insolvency and Related Proceedings...................................................................46
10.1.8. Business Disruption; Condemnation....................................................................46
10.1.9. Change of Ownership..................................................................................46
10.1.10. ERISA.............................................................................................46
10.1.11. Challenge to Agreement............................................................................46
10.1.12. Criminal Forfeiture...............................................................................47
10.1.13. Judgments.........................................................................................47
10.1.14. Repudiation of or Default Under Guaranty Agreement................................................47
10.2. ACCELERATION OF THE OBLIGATIONS.........................................................................47
10.3. OTHER REMEDIES..........................................................................................47
10.4. REMEDIES CUMULATIVE; NO WAIVER..........................................................................48
SECTION 11. REGARDING AGENT...................................................................................49
11.1. APPOINTMENT.............................................................................................49
11.2. NATURE OF DUTIES........................................................................................49
11.3. LACK OF RELIANCE ON AGENT AND RESIGNATION...............................................................50
11.4. CERTAIN RIGHTS OF AGENT.................................................................................50
11.5. RELIANCE................................................................................................50
11.6. NOTICE OF DEFAULT.......................................................................................51
11.7. INDEMNIFICATION.........................................................................................51
11.8. AGENT IN ITS INDIVIDUAL CAPACITY........................................................................51
11.9. DELIVERY OF DOCUMENTS...................................................................................51
11.10. BORROWER'S UNDERTAKING TO AGENT.........................................................................51
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SECTION 12. MISCELLANEOUS.....................................................................................52
12.1. POWER OF ATTORNEY.......................................................................................52
12.2. INDEMNITY...............................................................................................53
12.3. MODIFICATION OF AGREEMENT...............................................................................53
12.4. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.....................................................54
12.5. SEVERABILITY............................................................................................56
12.6. SUCCESSORS AND ASSIGNS..................................................................................56
12.7. CUMULATIVE EFFECT; CONFLICT OF TERMS....................................................................56
12.8. EXECUTION IN COUNTERPARTS...............................................................................56
12.9. NOTICE..................................................................................................56
12.10. LENDERS' CONSENT........................................................................................57
12.11. CREDIT INQUIRIES........................................................................................57
12.12. TIME OF ESSENCE.........................................................................................58
12.13. ENTIRE AGREEMENT........................................................................................58
12.14. INTERPRETATION..........................................................................................58
12.15. GOVERNING LAW; CONSENT TO FORUM.........................................................................58
12.16. WAIVERS BY BORROWER...................................................................................59
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LIST OF EXHIBITS AND SCHEDULES
Exhibit 1.1 Revolving Note
Exhibit 1.3 Term Note
Exhibit 6.1.1 Location of Collateral
Exhibit 7.1.1 Authorization To Do Business Jurisdictions
Exhibit 7.1.4 Capital Structure of Borrower
Exhibit 7.1.5 Corporate Names
Exhibit 7.1.6 Business Locations of Borrower and
Subsidiaries
Exhibit 7.1.10(c) Financial Projections
Exhibit 7.1.13 Surety Obligations
Exhibit 7.1.14 Tax Identification Numbers of Subsidiaries
Exhibit 7.1.15 Broker Commissions and Fees
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19 Contracts Restricting Borrower's Right to
Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.22(A) Capitalized Leases
Exhibit 7.1.22(B) Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.25 Labor Contracts
Exhibit 7.1.26 Environmental Compliance
Exhibit 8.1.3 Compliance Certificate
Exhibit 8.2.4 Affiliate Transactions
Exhibit 8.2.5 Permitted Liens
Exhibit 9.10 Litigation
Exhibit 12.4 Commitment Transfer Supplement
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made as of the 19 day of
May, 1998, by and among the undersigned financial institutions and the various
financial institutions which in accordance with the provisions of Section
12.4(iii) become Purchasing Lenders (collectively, "Lenders" and individually, a
"Lender") and FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island corporation
with an office at 000 Xxxxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxxxxxx 00000, as
administrative and collateral agent for Lenders (Fleet, in such capacity,
"Agent") and CARPET BARN, INC. ("Borrower"), a Delaware corporation. Capitalized
terms used in this Agreement have the meanings assigned to them in Appendix A,
General Definitions. Accounting terms not otherwise specifically defined herein
shall be construed in accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon
the representations and warranties made in, this Agreement and the other Loan
Documents, each Lender severally and not jointly agrees to make a Total Credit
Facility in an amount equal to such Lender's Commitment Percentage of up to
$10,000,000.00 available to Borrower upon request therefor, as follows:
1.1. Revolving Credit Loans.
1.1.1. Loans and Reserves. Each Lender severally and not
jointly agrees, for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Borrower from time to time, as requested by Borrower
in the manner set forth in subsections 3.1.1 and 3.1.4 hereof, up to a maximum
principal amount at any time outstanding equal to such Lender's Commitment
Percentage of the Borrowing Base. Notwithstanding the foregoing, Agent shall
have the right to establish reserves in such amounts and with respect to such
matters, as Agent shall deem necessary or appropriate in the exercise of its
commercially reasonable judgment, against the amount of Revolving Credit Loans
which Borrower may otherwise request hereunder (any such sums, the "Reserves").
Amounts paid by Borrower in repayment of principal of Revolving Credit Loans
shall be available to be reborrowed by Borrower as subsequent Revolving Credit
Loans, subject to all of the terms and conditions hereof. The Revolving Credit
Loans shall be evidenced by and subject to the terms and conditions set forth in
those certain secured promissory notes (each, a "Revolving Note" and
collectively, the "Revolving Notes"), a copy of the form of which is attached
hereto as Exhibit 1.1.
1.1.2. Use of Proceeds. The Revolving Credit Loans and the
Term Loan shall be used to provide for (a) ongoing working capital requirements
of Borrower in a manner consistent with the provisions of this Agreement and all
applicable laws, (b) the general corporate purposes of Borrower in a manner
consistent with the provisions of this Agreement and all applicable laws and (c)
the payment of transaction expenses in connection herewith.
1.2. Letters of Credit; LC Guaranties. Agent agrees, for so long as no
Default or Event of Default exists and if requested by Borrower to (i) issue
its, or cause to be issued its Affiliate's, Letters of Credit for the account of
Borrower or (ii) execute LC Guaranties by which Agent or its Affiliate shall
guaranty the payment or performance by Borrower of its reimbursement obligations
with respect to Letters of Credit and letters of credit issued for Borrower's
account by other Persons in support of Borrower's obligations (other than
obligations for the repayment of Money Borrowed), provided that the Aggregate LC
Amount at any time shall not exceed $1,000,000. Any amounts paid by Agent or
Lenders under any LC Guaranty or in connection with any Letter of Credit shall
be treated as Revolving Credit Loans, shall be secured by all of the Collateral
and shall bear interest and be payable at the same rate and in the same manner
as Revolving Credit Loans.
1.2.1. Request for Letter of Credit. Borrower may request
Agent to issue or cause to be issued by Bank (or such other financial
institution as may be acceptable to Agent) a Letter of Credit by delivering to
Agent the applicable commercial letter of credit application (the "Letter of
Credit Application"), completed to the reasonable satisfaction of Agent and such
other certificates, documents and other papers and information as Agent may
reasonably request.
1.2.2. Description of Letters of Credit. Each Letter of Credit
shall, among other things, (i) provide for the payment of sight or time drafts
when presented for honor thereunder in accordance with the terms thereof and
when accompanied by the documents described therein and (ii) have an expiry date
occurring not later than the earlier of (1) sixty days prior to the last day of
the Original Term or (2) (a) for standby Letters of Credit, 12 months after such
Letter of Credit's date of issuance (subject to 12 month renewal periods) and
(b) for any Letter of Credit that is not a standby Letter of Credit, 180 days
after such Letter of Credit's date of issuance. Each Letter of Credit
Application and each Letter of Credit shall be subject to the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revision thereof and, to the
extent not inconsistent therewith, the laws of the State of New York.
1.2.3. Indemnification. In connection with the issuance or
creation of the LC Guaranties and any Letter of Credit, Borrower hereby
indemnifies, saves and holds Agent and each Lender harmless from any loss, cost,
expense or liability, including, without limitation, payments made by Agent and
each Lender, and expenses and reasonable attorneys' fees incurred by Agent and
each Lender arising out of, or in connection with the LC Guaranties and any
Letter of Credit to be issued or created for Borrower except to the extent any
loss, cost, expense or liability is attributable to Agent's or any Lender's or
the Bank's gross negligence or willful misconduct or that of its correspondents.
Borrower shall be bound by Agent's or any Lender's or any Issuing Bank's
regulations and good faith interpretations of any Letter of Credit issued or
created for Borrower's account, although this interpretation may be different
from Borrower's own, and neither Agent, any Lender, nor the Issuing Bank, nor
any of its correspondents shall be liable for any error, negligence and/or
mistakes, whether of omission or commission, in following Borrower's
instructions or those contained in the LC Guaranties or any Letter of Credit of
any modifications, amendments or supplements thereto or in creating or paying
any Letter of Credit or the LC Guaranties, except for Agent's or any Lender's
gross negligence or willful misconduct or that of its correspondents.
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1.2.4. Agent's Instructions. Borrower shall authorize and
direct Bank or any other bank or financial institution which issues a Letter of
Credit (an "Issuing Bank") to name Borrower as the "Account Party" therein and
to deliver to Agent, with a copy to Borrower, all instruments, documents, and
other writings and property received by the Issuing Bank pursuant to the Letter
of Credit and to accept and rely upon Agent's instructions and agreements with
respect to all matters arising in connection with the Letter of Credit, the
Letter of Credit Application therefor or any acceptance thereof.
1.2.5. Disbursements. Agent will notify Borrower promptly of
any demand for payment under the LC Guaranties and the presentment for payment
under a Letter of Credit, following receipt by it of notification from the
Issuing Bank of such presentment, together with notice of the date such payment
was made. All disbursements shall be deemed irrevocably to be a request by the
applicable Borrower for a Revolving Credit Loan on the date such disbursement
was made.
1.2.6. Reimbursement Obligation. Borrower's obligation to
reimburse Agent for disbursements described in subsection 1.2.5 shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which Borrower may have against
Agent, any Lender, the Issuing Bank or the beneficiary of the Letter of Credit
(except in the event of such party's gross negligence or willful misconduct),
including, without limitation, any defense based upon any draft, demand or
certificate or other document presented under the Letter of Credit proving to be
forged, fraudulent, invalid or insufficient, the failure of any disbursement or
payment by the Issuing Bank under the Letter of Credit ("Bank Payment") to
conform to the terms of the Letter of Credit (if, in the Issuing Bank's good
faith opinion such disbursement or Bank Payment is determined to be appropriate
and other than as a consequence of Agent's or the Issuing Bank's gross
negligence or willful misconduct) or any non-application or misapplication by
the beneficiary of the proceeds of such disbursement or Bank Payment or the
legality, validity, form, regularity or enforceability of the Letter of Credit.
1.2.7. Lender's Reimbursement Obligations. Each Lender shall
to the extent of the percentage amount equal to the product of such Lender's
Commitment Percentage times the aggregate amount of all disbursements made with
respect to the Letters of Credit and LC Guaranties be deemed to have irrevocably
purchased an undivided participation in each Revolving Credit Loan made as a
consequence of such disbursement. In the event that at the time a disbursement
is made the unpaid balance of Revolving Credit Loans plus the Aggregate LC
Amount exceeds or would exceed, with the making of such disbursement, the
Maximum Revolving Amount, and the amount in excess of the Maximum Revolving
Amount is not reimbursed by Borrower within two (2) Business Days, Agent shall
promptly notify each Lender and upon Agent's demand each Lender shall pay to
Agent such Lender's Commitment Percentage of such unreimbursed disbursement
together with such Lender's Commitment Percentage of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from Borrower of any amount disbursed by Agent for which Agent
had already been reimbursed by Lenders, Agent shall deliver to each Lender that
Lender's Commitment Percentage of such repayment. Each Lender's participation
commitment with respect to Letters of Credit and LC Guaranties shall continue
until the last to occur of the following events: (A) Agent ceases to be
obligated to issue or cause the issuance of Letters of Credit and LC Guaranties;
(B) no Letter of Credit or LC Guaranty
3
issued hereunder remains outstanding and uncancelled and (C) all Persons
including Agent (other than Borrower) have been fully reimbursed for all
payments made under or relating to Letters of Credit or LC Guaranties.
1.2.8. Cash Collateral. Upon the occurrence and during the
continuation of any Event of Default, at the option of Agent, Borrower will pay
to Agent, for the ratable benefit of Lenders, cash in an amount equal to the
undrawn face amount of the Letters of Credit. Such cash shall be held by Agent
in a cash collateral account (the "Cash Collateral Account"). The Cash
Collateral Account shall be maintained at a bank designated by Agent, which
shall be (i) any domestic commercial bank having capital and surplus in excess
of $100,000,000 or (ii) an Affiliate of Agent, if an Affiliate of Agent then
maintains a presence as a bank in the United States of America, in the name of
Agent as secured party, and shall be under the sole dominion and control of
Agent and subject to the terms of this subsection 1.2.8. Borrower hereby
pledges, and grants to Agent a security interest in, all such cash and other
amounts held in the Cash Collateral Account from time to time and all earnings
thereof and proceeds thereon, as security for the payment of all Obligations.
Amounts in the Cash Collateral Account shall be invested in securities of the
type described in clauses (iii), (iv) and (v) of the definition of Restricted
Investments, and interest and earnings on the Cash Collateral Account shall be
the property of Borrower but shall be held in the Cash Collateral Account as
Collateral, provided that Agent shall release from the Cash Collateral Account
and return to Borrower any funds remaining in the Cash Collateral Account upon
satisfaction in full of the Obligations. At such time when all Events of Default
shall have been cured or waived, Agent shall return any monies then remaining in
the Cash Collateral Account. If at any time, and from time to time, the
aggregate amount of the Cash Collateral Account exceeds the maximum liability,
fixed or contingent, of Agent with respect to the aggregate face amount of all
Letters of Credit then issued and outstanding, Agent shall return any excess to
Borrower.
1.2.9. Waiver of Liability. Borrower shall assume all risks of
the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. None of Agent, any Lender or any Issuing Bank (except in the event of
its own gross negligence or willful misconduct) shall be responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of the Letter of Credit or any document
submitted by any party in connection with the application for and
issuance of any Letter of Credit, even if it should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged;
(ii) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring or assigning
or purporting to transfer or assign the Letter of Credit or the rights
or benefits thereunder or proceeds thereof in whole or in part, which
may prove to be invalid or ineffective for any reason;
(iii) errors, omissions, interruptions or delays
in transmission or delivery of any messages by mail, cable, telegraph,
telex or otherwise; or
(iv) any loss or delay in the transmission or
otherwise of any document or draft required in order to make a
disbursement.
4
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted Agent hereunder. In furtherance, and not in limitation
or derogation of any of the foregoing, any action taken or omitted to be taken
by the Issuing Bank, Agent or any Lender in good faith in the absence of gross
negligence or willful misconduct, shall be binding upon Borrower and shall not
put the Issuing Bank, Agent or any Lender, as the case may be, under any
resulting liability therefor.
1.3. Term Loan. Subject to the terms and conditions of this Agreement, each
Lender, severally and not jointly, will make a Term Loan to Borrower in the sum
equal to such Lender's Commitment Percentage of $5,000,000 ("Term Loan"). The
Term Loan shall be advanced on the Closing Date and shall be, with respect to
principal, payable as follows (subject to mandatory prepayments pursuant to
subsection 3.3.2 hereof or acceleration upon the occurrence of an Event of
Default under this Agreement or termination of this Agreement): consecutive
quarterly payments of $175,000 commencing on September 1, 1998 and on each
December 1, March 1, June 1 and September 1 thereafter during the Original Term
with a final installment in the amount of the entire unpaid principal balance of
the Term Loan due and payable in full on the last day of the Original Term of
this Agreement. Notwithstanding anything hereinabove to the contrary, the entire
unpaid principal balance of the Term Loan, and all accrued and unpaid interest
thereon, shall be immediately due and payable upon the earlier to occur of (i)
the last day of the Original Term and (ii) the acceleration of the Obligations
pursuant to Section 10.2 of this Agreement. The Term Loan shall be evidenced by
and subject to the terms and conditions set forth in those certain secured
promissory notes (each, a "Term Note" and collectively, the "Term Notes"), a
copy of the form of which is attached hereto as Exhibit 1.3.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
2.1.1. Rates of Interest. Interest shall accrue on the
principal amount of Base Rate Loans outstanding at the end of each day (computed
on the actual days elapsed over a year of 360 days) at a fluctuating rate per
annum equal to the Base Rate plus the applicable Margin. After the date hereof,
the foregoing rate of interest shall be increased or decreased, as the case may
be, by an amount equal to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the day that any
such change in the Base Rate becomes effective. The Base Rate in effect on the
date hereof shall be the Base Rate effective as of the opening of business on
the date hereof, but if this Agreement is executed on a day that is not a
Business Day, the Base Rate in effect on the date hereof shall be the Base Rate
effective as of the opening of business on the last Business Day immediately
preceding the date hereof. Interest shall accrue on the principal amount of the
Eurodollar Loans outstanding at the end of each day (computed on the actual days
elapsed over a year of 360 days) at a fluctuating rate per annum equal to the
Eurodollar Rate plus the applicable Margin.
5
2.1.2. Default Rate. Upon the occurrence of an Event of
Default and during the continuation thereof, the applicable interest rate on the
principal amount of all Loans and all Letter of Credit Fees shall increase by
2.0% per annum (the "Default Rate").
2.1.3. Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If any provisions of this Agreement are
in contravention of any such law, such provisions shall be deemed amended to
conform thereto.
2.2. Computation of Interest and Fees. Letter of Credit and LC Guaranty
fees and unused line fees and collection charges hereunder shall be calculated
daily and shall be computed on the actual number of days elapsed over a year of
360 days. For the purpose of computing interest hereunder, all items of payment
received by Agent shall be deemed applied by Agent on account of the Obligations
(subject to final payment of such items) on the first Business Day Agent
receives such items in Agent's account located at Fleet National Bank, Hartford,
Connecticut, ABA #000000000, Account #000-000-0000, Reference: Carpet Barn.
2.3. Underwriting Fee. Borrower shall pay to Agent for its own account and
not for the benefit of Lenders an underwriting and arrangement fee of $125,000,
which shall be fully earned and nonrefundable on the Closing Date and shall be
paid (a) $62,500 concurrently with the initial Loan hereunder and (b) $62,500 on
the six month anniversary date of the Closing Date.
2.4. Letter of Credit and LC Guaranty Fees. (a) Borrower shall pay to
Agent, for the account of Lenders, a letter of credit commission with respect to
each Letter of Credit (including those for which an LC Guaranty has been issued)
computed for the period from and including the date of issuance of such Letter
of Credit to the date such Letter of Credit is no longer outstanding, computed
at a rate per annum equal to (i) with respect to standby Letters of Credit, one
and three-quarters percent (1.75%) and (ii) with respect to documentary Letters
of Credit, one percent (1.0%), in each case on the average aggregate daily
amount available to be drawn under such Letter of Credit for the period as to
which payment of such commission is made, payable quarterly in arrears on each
Letter of Credit Fee Payment Date to occur while such Letter of Credit remains
outstanding and on the date such Letter of Credit expires or is cancelled.
(b) In addition to the foregoing fees and
commissions, Borrower shall pay to Agent all such normal and customary costs and
expenses as are incurred by Agent for issuing, causing the issuance of,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit or LC Guaranty.
2.5. Unused Line Fee. Borrower shall pay to Agent for the ratable benefit
of Lenders a fee equal to .50% per annum of the average monthly amount by which
the Maximum Revolving Amount exceeds the sum of the outstanding principal
balance of the Revolving Credit Loans and the Aggregate LC Amount. The unused
line fee shall be payable on the Closing Date, and thereafter, quarterly in
arrears on the first day of each Fiscal Quarter hereafter and on the last day
of the Original Term or upon earlier termination of the Agreement.
6
2.6. Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Agent (in its capacity as Agent)
incurs legal or accounting expenses or any other costs or out-of-pocket expenses
in connection with (i)(a) the negotiation and preparation of this Agreement or
any of the other Loan Documents, (b) any amendment of or modification of this
Agreement or any of the other Loan Documents, or (c) any sale or attempted sale
of any interest herein by any Lender to a Purchasing Lender; (ii) the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Agent, any Lender,
Borrower or any other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrower's affairs; (iv) any
attempt to enforce any rights of Agent or any Lender against Borrower or any
other Person which may be obligated to Agent or any Lender by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; or (v) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such legal and accounting expenses, other costs and out of
pocket expenses of Agent shall be charged to Borrower provided, that Borrower
shall not be liable under clause (iii) hereof for any costs or expenses which
are determined by a court of competent jurisdiction in a final non-appealable
decision to have resulted directly from Agent's own gross negligence or willful
misconduct. All amounts chargeable to Borrower under this Section 2.6 shall be
Obligations secured by all of the Collateral, shall be payable on demand to
Agent and shall bear interest from the date such demand is made until paid in
full at the rate applicable to Base Rate Loans from time to time. Borrower shall
also reimburse Agent for expenses incurred by Agent in its administration of the
Collateral to the extent and in the manner provided in Section 6 hereof.
2.7. Bank Charges. Borrower shall pay to Agent, on demand, any and all
fees, costs or expenses which Agent pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower, by Agent, of proceeds of Loans made by Agent on
behalf of Lenders to Borrower pursuant to this Agreement and (ii) the depositing
for collection, by Agent, of any check or item of payment received or delivered
to Agent on account of the Obligations.
2.8. Special Advance Fee. Borrower shall pay to Agent for the ratable
benefit of the Lenders, a special advance fee of $15,000 payable semi-annually,
in advance, commencing on the Closing Date and on each six month anniversary
thereof until the Special Advance Amount and the outstanding Special Advances
shall have been permanently and irrevocably reduced to $0. Such fee shall be
fully earned and non-refundable on each date of payment
SECTION 3. LOAN ADMINISTRATION.
3.1. Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1. Loan Requests; Payment.
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(i) A request for Revolving Credit Loans that are
Base Rate Loans shall be made, or shall be deemed to be made, in the following
manner: (1) Borrower may give Agent notice of its intention to borrow, in which
notice Borrower shall specify to Agent, the amount of the proposed borrowing and
the proposed borrowing date, no later than 11:00 A.M. New York time on the first
Business Day prior to the requested borrowing date with respect to Revolving
Credit Loans that are Base Rate Loans; provided, however, that no such request
may be made at a time when there exists an Event of Default; and (2) the
becoming due of any amount required to be paid under this Agreement, whether as
interest or for any other Obligation, shall be deemed irrevocably to be a
request by Borrower for a Revolving Credit Loan on the due date in the amount
required to pay such interest or other Obligation. Eurodollar Rate Loans shall
be requested in accordance with subsection 3.1.4 hereof. As an accommodation to
Borrower, Agent may permit telephonic requests for Loans and electronic
transmittal of instructions, authorizations, agreements or reports to Agent by
Borrower. Unless Borrower specifically directs Agent in writing not to accept or
act upon telephonic or electronic communications from Borrower, Agent shall have
no liability to Borrower for any loss or damage suffered by Borrower as a result
of Agent's good faith honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Agent by
Borrower and Agent shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
(ii) Each borrowing of Revolving Credit Loans shall be
advanced according to the Commitment Percentages of Lenders.
(iii) Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Revolving Credit
Loans shall be applied first, to Base Rate Loans consisting of Special Advances
pro rata according to the applicable Commitment Percentages of Lenders, second,
to Base Rate Loans other than Special Advances pro rata according to the
applicable Commitment Percentages of Lenders, third, to Eurodollar Loans
consisting of Special Advances pro rata according to the applicable Commitment
Percentages of Lenders and fourth, to Eurodollar Loans other than Special
Advances pro rata according to the applicable Commitment Percentages of Lenders.
(1) Notwithstanding anything to the
contrary contained in the immediately preceding clauses (ii) and (iii),
commencing with the first Business Day following the Closing Date, each
borrowing of Revolving Credit Loans shall be advanced by Agent and each payment
by Borrower on account of Revolving Credit Loans shall be applied first to those
Revolving Credit Loans made by Agent. On or before 11:00 A.M., New York time, on
each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (I) if
the aggregate amount of new Revolving Credit Loans made by Agent during the
preceding Week exceeds the aggregate amount of repayments applied to outstanding
Revolving Credit Loans during such preceding Week, then each Lender shall
provide Agent with funds in an amount equal to its Commitment Percentage of the
difference between (w) such Revolving Credit Loans and (x) such repayments and
(II) if the aggregate amount of repayments applied to outstanding Revolving
Credit Loans during such Week exceeds the aggregate amount of new Revolving
Credit Loans made during such Week, then Agent shall provide each Lender with
its Commitment Percentage of the difference between (y) such repayments and
(z) such Revolving Credit Loans.
8
(2) Each Lender shall be entitled to
receive disbursements of interest from Agent at the applicable rates of interest
set forth in Section 2.1. relating to outstanding Loans which it has funded.
(3) Promptly following each Settlement
Date, Agent shall submit to each Lender a certificate with respect to payments
received and Loans made during the Week immediately preceding such Settlement
Date.
(iv) If any Lender or Participating Lender (a "Benefited
Lender") shall at any time receive any payment of all or part of its Loans, or
interest thereon, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily or by set-off) in a greater proportion than any
such payment to and Collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such Benefited Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Loans, or shall provide such other
Lender with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such Benefited Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Loans may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(v) Unless Agent shall have been notified by
telephone, confirmed in writing, by any Lender that such Lender will not make
the amount which would constitute its Commitment Percentage of the Loans
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent and, in reliance upon such
assumption, make available to Borrower a corresponding amount. Agent will
promptly notify Borrower of its receipt of any such notice from a Lender. If
such amount is made available to Agent on a date after a Settlement Date, such
Lender shall pay to Agent on demand an amount equal to the product of (i) the
daily average Federal Funds Rate (computed on the basis of a year of 360 days)
during such period as quoted by Agent, times (ii) such amount, times (iii) the
number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of Agent submitted
to any Lender with respect to any amounts owing under this paragraph (vi) shall
be conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Revolving Credit
Loans hereunder, on demand from Borrower; provided, however, that Agent's right
to such recovery shall not prejudice or otherwise adversely affect Borrower's
rights (if any) against such Lender.
(vi) (a) Notwithstanding anything to the
contrary contained herein, in the event any Lender (x) has refused (which
refusal constitutes a breach by such Lender of its obligations under this
Agreement) to make available its portion of any Loan or (y) notifies either
Agent
9
or Borrower that it does not intend to make available its portion of any Loan
(if the actual refusal would constitute a breach by such Lender of its
obligations under this Agreement) (each, a "Lender Default"), all rights and
obligations hereunder of such Lender (a "Defaulting Lender") as to which a
Lender Default is in effect and of the other parties hereto shall be modified to
the extent of the express provisions of this subsection 3.1.1 (vii) while such
Lender Default remains in effect.
(b) Loans shall be incurred pro rata from
Lenders (the "Non-Defaulting Lenders") which are not Defaulting Lenders based on
their respective Commitment Percentages, and no Commitment Percentage of any
Lender or any pro rata share of any Loans required to be advanced by any Lender
shall be increased as a result of such Lender Default. Amounts received in
respect of principal of any type of Loans shall be applied to reduce the
applicable Loans of each Lender pro rata based on the aggregate of the
outstanding Loans of that type of all Lenders at the time of such application;
provided that, such amount shall not be applied to any Loans of a Defaulting
Lender at any time when, and to the extent that, the aggregate amount of Loans
of any Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment
Percentage of all Loans then outstanding.
(c) A Defaulting Lender shall not be
entitled to give instructions to Agent or to approve, disapprove, consent to or
vote on any matters relating to this Agreement and the Loan Documents. All
amendments, waivers and other modifications of this Agreement and the Loan
Documents may be made without regard to a Defaulting Lender and, solely for
purposes of the definition of "Required Lenders", a Defaulting Lender shall be
deemed not to be a Lender and not to have Loans outstanding.
(d) Other than as expressly set forth in
this subsection 3.1.1.(vii), the rights and obligations of a Defaulting Lender
(including the obligation to indemnify Agent) and the other parties hereto shall
remain unchanged. Nothing in this subsection 3.1.1(vii) shall be deemed to
release any Defaulting Lender from its obligations under this Agreement and the
Loan Documents, shall alter such obligations, shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights which
Borrower, Agent or any other Lender may have against any Defaulting Lender as a
result of any default by such Defaulting Lender hereunder.
(e) In the event a Defaulting Lender
retroactively cures to the satisfaction of Agent the breach which caused a
Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be
a Defaulting Lender and shall be treated as a Lender under this Agreement.
3.1.2. Disbursement. Borrower hereby irrevocably authorizes
Agent to disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this subsection 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under subsection 3.1.1(i)(1)
and subsection 3.1.4 shall be disbursed by Agent in lawful money of the United
States of America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
Borrower, and in the case of each subsequent borrowing, by wire transfer to such
bank account as may be agreed upon by Borrower and Agent from time to time or
elsewhere if pursuant to a written direction from Borrower and (ii) the proceeds
of each Revolving Credit Loan requested under subsection 3.1.1(i)(2) shall be
disbursed by Agent by way of direct payment of the relevant interest or other
Obligation.
10
3.1.3. Authorization. Borrower hereby irrevocably authorizes
Agent, in Agent's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum sufficient
to pay all interest accrued on the Obligations and all principal coming due on
the Obligations during the immediately preceding month and to pay all costs,
fees and expenses at any time owed by Borrower to Agent and Lenders hereunder to
the extent such amounts are not paid when due.
3.1.4. Eurodollar Loans. Notwithstanding the provisions of
subsection 3.1.1, in the event Borrower desires to obtain a Eurodollar Loan,
Borrower shall give Agent prior written irrevocable notice no later than 11:00
A.M. New York time on the 3rd Business Day prior to the requested borrowing date
specifying (i) Borrower's election to obtain a Eurodollar Loan, (ii) the date of
the proposed borrowing (which shall be a Business Day) and (iii) the amount to
be borrowed, which amount shall be in a minimum principal amount of $500,000 and
may increase in integral multiples of $100,000. In no event shall Borrower be
permitted to have outstanding at any one time Eurodollar Loans with more than 4
different Interest Periods.
3.1.5. Interest Periods. Each interest period of a Eurodollar
Loan shall commence on the date such Eurodollar Loan is made and shall end on
the date which is 1 month, 2 months, 3 months or 6 months later, as may then be
requested by Borrower ("Interest Period") provided that:
(i) any Interest Period which would
otherwise end on a day which is not a Business Day shall end
on the next preceding or succeeding Business Day as is the
Bank's custom in the market to which such Eurodollar Loan
relates;
(ii) there remains a minimum of 1 month in
the Original Term;
(iii) all Interest Periods of the same
duration which commence on the same date shall end on the same
date; and
(iv) each Interest Period which commences
before, and would otherwise end after the last day of the
Original Term shall end on the last day of the Original Term.
3.1.6. Conversion of Base Rate Loans. Provided that no Event
of Default has occurred which is then continuing, Borrower may, on any Business
Day, convert any Base Rate Loan into a Eurodollar Loan. If Borrower desires to
convert a Base Rate Loan, Borrower shall give Agent not less than three (3)
Business Days' prior written notice (prior to 11:00 A.M. New York time on such
Business Day), specifying the date of such conversion and the amount to be
converted. Each conversion into or conversion of a Eurodollar Loan shall be in a
minimum principal amount of $500,000 and may increase in integral multiples of
$100,000 in excess thereof. After giving effect to any conversion of Base Rate
Loans to Eurodollar Loans, Borrower shall not be permitted to have outstanding
at any one time Eurodollar Loans with more than 4 different Interest Periods.
11
3.1.7. Continuation of Eurodollar Loans. Borrower shall have
the right on 3 Business Days' prior irrevocable written notice given to Agent,
subject to the provisions of subsection 3.1.8, to continue any Eurodollar Loan
into a subsequent Interest Period of the same or a different permitted duration,
in each case subject to the satisfaction of the following conditions:
(i) in the case of a continuation of less
than all Eurodollar Loans, the Eurodollar Loans continued
shall each be in a minimum principal amount of $500,000 and
may increase in integral multiples of $100,000;
(ii) accrued interest on a Eurodollar Loan
(or portion thereof) being continued shall be paid by Borrower
at the time of continuation; and
(iii) no Eurodollar Loan (or portion
thereof) may be continued as a Eurodollar Loan if an Event of
Default has occurred which is then continuing or if, after
giving effect to such continuation, Borrower shall have
outstanding more than 4 separate Eurodollar Loans in the
aggregate.
If Borrower shall fail to give timely notice of its election
to continue any Eurodollar Loan or portion thereof as provided above, or if such
continuation shall not be permitted, such Eurodollar Loan or portion thereof,
unless such Eurodollar Loan shall be repaid, shall automatically be converted
into a Base Rate Loan at the end of the Interest Period then in effect with
respect to such Eurodollar Loan.
3.1.8. Prepayment of Eurodollar Loans. Subject to the
provisions of subsection 3.1.9 and Section 4.2, Borrower may prepay any Loan in
whole at any time or in part from time to time, without premium or penalty
provided that a Eurodollar Loan not prepaid, continued or converted on the last
Business Day of the then current Interest Period with respect thereto shall be
subject to subsection 3.1.9. Borrower shall specify the date of prepayment of
Loans which are Eurodollar Loans and the amount of Loans to be prepaid. In the
event that any prepayment of a Eurodollar Loan is made on a date other than the
last Business Day of the then current Interest Period with respect thereto,
Borrower shall indemnify Agent and Lenders therefor in accordance with
subsection 3.1.9 hereof.
3.1.9. Indemnification. Borrower shall indemnify Agent and
Lenders and hold Agent and Lenders harmless from and against any and all losses
or expenses that Agent and Lenders may sustain or incur as a consequence of any
prepayment on any date other than the last Business Day of the then current
Interest Period or any default by Borrower in the payment of the principal of or
interest on any Eurodollar Loan or failure by Borrower to complete a borrowing
of, a prepayment of or conversion of or to a Eurodollar Loan after notice
thereof has been given, including (but not limited to) any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Loans hereunder, and any other loss or expense incurred by Agent
and Lenders by reason of the liquidation or reemployment of deposits or other
funds acquired by Agent and Lenders to make, continue, convert into or maintain,
a Eurodollar Loan.
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3.1.10. Inability to Make Eurodollar Loans. Notwithstanding
any other provision hereof, if any applicable law, treaty, regulation or
directive, or any change therein or in the interpretation or application
thereof, shall make it unlawful for any Lender (for purposes of this subsection
3.1.10, the term "Lender" shall include any Lender and the office or branch
where any Lender or any corporation or bank controlling any Lender makes or
maintains any Eurodollar Loans) to make or maintain its Eurodollar Loans, or if
with respect to any Interest Period, any Lender is unable to determine the
Eurodollar Rate relating thereto, or adverse or unusual conditions in or changes
in applicable law relating to the London interbank Eurodollar market make it, in
the reasonable judgment of any Lender, impracticable to fund therein any of the
Eurodollar Loans or make the projected Eurodollar Rate unreflective of the
actual costs of funds therefor to any Lender, the obligation of any Lender to
make Eurodollar Loans hereunder shall forthwith be suspended during the pendency
of such circumstances and Borrower shall, if any affected Eurodollar Loans are
then outstanding, promptly upon request from any such Lender, convert such
affected Eurodollar Loans into Base Rate Loans in which case the provisions of
subsection 3.1.9 shall not apply.
3.2. Payments. Except where evidenced by notes or other instruments issued
or made by Borrower to Agent or any Lender specifically containing payment
provisions which are in conflict with this Section 3.2 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
3.2.1. Principal. Subject to the terms of subsections 3.2.5
and 3.3 hereof, principal payable on account of (i) Revolving Credit Loans shall
be payable by Borrower to Agent immediately upon the earliest of (a) the
occurrence of an Event of Default in consequence of which Agent elects to
accelerate the maturity and payment of the Obligations, or (b) termination of
this Agreement pursuant to Section 4 hereof; provided, however, that if an
Overadvance shall exist at any time, with respect to Borrower, Borrower shall,
on demand by Agent, repay the Overadvance and (ii) the Term Loan shall be
payable in accordance with Section 1.3 hereof.
3.2.2. Interest. Interest accrued on the Loans shall be due on
the earliest of (i) (a) for Base Rate Loans, the first calendar day of each
month (for the immediately preceding month), computed through the last calendar
day of the preceding month and (b) for Eurodollar Loans, on the earlier of (x)
the first day of each quarter for the immediately preceding quarter or (y) at
the end of each Interest Period, (ii) the occurrence of an Event of Default in
consequence of which Agent elects to accelerate the maturity and payment of the
Obligations or (iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges
payable pursuant to this Agreement shall be payable by Borrower as and when
provided in Section 2 hereof, to Agent or to any other Person designated by
Agent in writing.
3.2.4. Other Obligations. The balance of the
Obligations requiring the payment of money, if any, shall be payable by Borrower
to Agent as and when provided in this Agreement, the Other Agreements or the
Security Documents, or on demand, whichever is later.
3.2.5. Voluntary Prepayments. Borrower shall have the right to
prepay Loans in whole or in part, without penalty or fee except as otherwise
provided in this Agreement, at any time
13
and from time to time on the following terms and conditions: (i) Borrower shall
give Agent written notice (or telephonic notice promptly confirmed in writing)
(each such notice, a "Notice of Prepayment") of the intent to prepay Loans prior
to 11:00 A.M. (New York time) (a) for Base Rate Loans, at least one (1) Business
Day prior to the date of such prepayment and (b) for Eurodollar Loans, at least
three (3) Business Days prior to the date of such prepayment, the amount of such
prepayment, in the case of Eurodollar Loans, the specific borrowing(s) pursuant
to which such Eurodollar Loans were made; (ii) all partial prepayments shall be
in a minimum principal amount of $250,000 or an integral multiple of $250,000 in
excess thereof; and (iii) subject to Section 3.1.8, prepayment of Eurodollar
Loans pursuant to this subsection 3.2.5 shall only be made the last day of the
Interest Period applicable thereto. Any such prepayment shall be applied by
Agent if so requested by Borrower, first to Special Advances and second to
Revolving Credit Loans, and if not so requested, first to Revolving Credit
Advances and second, to Special Advances and in either case third, to the Term
Loan (100% to the outstanding principal installments of the Term Loan in the
inverse order of the maturities thereof), and fourth, to the remaining Loans in
such order as Agent may determine, subject to Borrower's ability to reborrow
Revolving Credit Loans and Special Advances in accordance with the terms hereof.
Notwithstanding anything contained in this subsection 3.2.5 to the contrary,
Borrower shall be permitted to prepay the Revolving Credit Loans at any time and
in any amounts.
3.3. Mandatory Prepayments.
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral; Extraordinary Receipts. Except as provided in subsection 6.4.2
hereof, when Borrower, Guarantor or any of Borrower's Subsidiaries sells or
otherwise disposes of any Collateral (other than Inventory in the ordinary
course of business), or if any of the Collateral is lost or destroyed or taken
by condemnation or if Borrower receives any Extraordinary Receipts, Borrower
shall repay the Loans in an amount equal to the net proceeds of such sale or
other disposition (i.e., gross proceeds less the reasonable costs of such sales
or other dispositions), loss, destruction or condemnation or the amount of
Extraordinary Receipts, as applicable, such repayments to be made promptly but
in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof. Any such
prepayment shall be applied by Agent first to the Special Advances, second to
the Term Loan (100% to the outstanding principal installments of the Term Loan
in the inverse order of the maturities thereof) and third, to the remaining
Loans in such order as Agent may determine, subject to Borrower's ability to
reborrow Revolving Credit Loans in accordance with the terms hereof. The Total
Credit Facility shall be automatically and permanently reduced, without notice,
in an amount equal to the portion of any prepayment applied to reduce the Term
Loan and the Special Advances.
3.3.2. Excess Cash Flow. Commencing with the Fiscal Year
ending December 31, 1998, Borrower shall prepay the outstanding amount of the
Term Loan and the Special Advances upon delivery of the annual Financial
Statements of Borrower in and required by subsection 8.1.3(i) for such Fiscal
Year but in any event not later than ninety (90) days after the end of each such
Fiscal Year with a portion of Borrower's Excess Cash Flow for such Fiscal Year.
Excess Cash Flow for each Fiscal Year shall be distributed by Borrower on the
following basis: (i) the first $350,000 shall be distributed by Borrower to
Agent for application as a prepayment of the
14
Special Advances until paid in full and (ii) the balance shall be distributed by
Borrower (a) 40% to the Agent for application as a prepayment of the Special
Advances, if any, and the Term Loan (to the outstanding principal installments
in the order of maturities thereof), subject to Borrower's ability to reborrow
Special Advances in accordance with the terms hereof, (b) 40% to Xxxxxx
Investments, Inc. in payment of the outstanding principal balance of and
interest on the Shareholder Notes and (c) 20% to be retained by Borrower. At
such time as the Special Advance Amount shall have been permanently reduced to
$0, Excess Cash Flow shall be distributed by Borrower solely in accordance with
the provisions of subclause (ii) above. At such time as the Special Advance
Amount shall be permanently reduced to $0 and the Term Loan shall have been paid
in full, Excess Cash Flow shall be distributed by Borrower (a) 80% to Xxxxxx
Investments, Inc. in payment of the outstanding principal balance of and
interest on the Shareholder Notes and (b) 20% to be retained by Borrower. In the
event that the Financial Statement is not so delivered, then a calculation based
upon estimated amounts shall be made by Agent pursuant to this subsection 3.3.2,
subject to adjustment when the Financial Statement is delivered to Agent as
required hereby. The calculation made by Agent shall not be deemed a waiver of
any of the rights that Agent or Lenders may have as a result of the failure by
Borrower to deliver such Financial Statement on a timely basis. The Total Credit
Facility shall be automatically and permanently reduced, without notice, in an
amount equal to the portion of any prepayment applied to reduce the Term Loan
and the Special Advances.
3.3.3. Debt and Equity Offering. Upon the consummation of a
debt offering on terms and conditions acceptable in all respects to Agent by
Borrower, Holdings or any of their Subsidiaries, Borrower shall prepay the
outstanding amount of the Special Advances in an amount equal to one hundred
percent (100%) of the "net proceeds" of any such debt offering. For the purposes
hereof, "net proceeds" shall mean gross proceeds less the actual costs of any
such offering. Upon the consummation of an equity offering by Borrower, Holdings
or any of their Subsidiaries, Borrower shall prepay the outstanding amount of
the Special Advances in an amount equal to fifty percent (50%) of the "net
proceeds" of any such equity offering. The foregoing shall not be deemed to be
implied consent to any such offering or offerings otherwise prohibited by the
terms and conditions hereof. The Special Advance Amount shall be automatically
and permanently reduced, without notice, in an amount equal to such prepayment.
Notwithstanding the foregoing, Borrower shall have no obligation to make any
such prepayment in the event that Borrower, Holdings or any of their
Subsidiaries shall consummate a debt or equity offering at a time when (i) no
Event of Default shall have occurred and be continuing and (ii) no Indebtedness
of Borrower, Holdings or such Subsidiary is past due and (iii) Agent and Lenders
shall have indicated in writing that the terms and conditions of and all
documents evidencing and/or relating to such debt or equity offering are
satisfactory to Agent and the Lenders.
3.4. Application of Payments and Collections. All items of payment received
by Agent by 12:00 noon, New York City time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
New York City time, on any Business Day shall be deemed received on the
following Business Day. Subject to the terms of subsections 3.2.5 and 3.3,
Borrower irrevocably waives the right to direct the application of any and all
payments and collections at any time or times hereafter received by Agent from
or on behalf of Borrower, and Borrower does hereby irrevocably agree that Agent
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time
15
or times hereafter by Agent or its agent against the Obligations, in such manner
as Agent may deem advisable.
3.5. All Loans to Constitute One Obligation. The Loans shall constitute one
general Obligation of Borrower, and shall be secured by Agent's Lien upon all of
the Collateral.
3.6. Loan Account. Agent shall enter all Loans as debits to an account
evidencing such Loans ("Loan Account") and shall also record in Borrower's Loan
Account all payments made by Borrower on any Obligations and all proceeds of
Collateral which are finally paid to Agent, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower.
3.7. Statements of Account. Agent will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent shall be deemed final, binding and conclusive
upon Borrower absent manifest error or unless Agent is notified by Borrower in
writing to the contrary within 30 days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
3.8. Increased Costs. In the event that any change, after the date of this
Agreement, in any applicable law or treaty, or in the interpretation or
application thereof, or compliance by Agent or any Lender with any new request
or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other regulatory authority (other than those in
effect on the date hereof), shall:
(i) (1) subject Agent or any Lender to any
tax with respect to this Agreement (other than (a) any tax based on or
measured by net income or otherwise in the nature of a net income tax,
including, without limitation, any franchise tax or any similar tax
based on capital, net worth or comparable basis for measurement and (b)
any tax collected by a withholding on payments and which either is
computed by reference to the net income of the payee or is in the
nature of an advance collection of a tax based on or measured by the
net income of the payee) or (2) change the basis of taxation of
payments to Agent or any Lender of principal, fees, interest or any
other amount payable hereunder or under any Loan Documents (other than
in respect of (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital, net
worth or comparable basis for measurement and (b) any tax collected by
a withholding on payments and which either is computed by reference to
the net income of the payee or is in the nature of an advance
collection of a tax based on or measured by the net income of the
payee);
(i) impose, modify or hold applicable any
reserve (except any reserve taken into account in the determination of
the applicable Eurodollar Rate), special deposit, assessment or similar
requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System;
or
16
(ii) impose on Agent or any Lender or the London
interbank Eurodollar market any other condition with respect to any
Loan Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Loans hereunder by an amount that
Agent or such Lender deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any of the Loans by
an amount that Agent or such Lender deems to be material, then, in any such
case, Borrower shall pay Agent or such Lender, upon its demand and certification
not later than sixty (60) days following its receipt of notice of the imposition
of such increased costs, such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be, to the
extent Agent or such Lender has not otherwise been compensated, with respect to
a particular Loan, for such increased cost as a result of an increase in the
Base Rate or Eurodollar Rate. An officer of Agent or such Lender shall determine
the amount of such additional cost or reduced amount using reasonable averaging
and attribution methods and shall certify the amount of such additional cost or
reduced amount to Borrower, which certification shall include a written
explanation of such additional cost or reduction to Borrower. Such certification
shall be conclusive absent manifest error. If Agent or any Lender claims any
additional cost or reduced amount pursuant to this Section 3.8, then Agent or
such Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different lending office or to file any certificate
or document reasonably requested by Borrower if the making of such designation
or filing would avoid the need for, or reduce the amount of, any such additional
cost or reduced amount and would not, in the sole discretion of Agent or such
Lender, be otherwise disadvantageous to Agent or such Lender.
3.9. Basis For Determining Interest Rate Inadequate or Unfair. In the event
that Agent or the Required Lenders shall have determined that:
(i) reasonable means do not exist for
ascertaining the Eurodollar Rate for any Interest Period; or
(ii) Dollar deposits in the relevant amount and
for the relevant maturity are not available in the London interbank
Eurodollar market with respect to a proposed Eurodollar Loan, or a
proposed conversion of a Base Rate Loan into a Eurodollar Loan;
Agent shall give Borrower prompt written, telephonic or telegraphic notice of
the determination of such effect. If such notice is given, (i) any such
requested Eurodollar Loan shall be made as a Base Rate Loan, unless Borrower
shall notify Agent no later than 10:00 A.M. (New York City time) three (3)
Business Days prior to the date of such proposed borrowing that the request for
such borrowing shall be canceled or made as an unaffected type of Eurodollar
Loan, and (ii) any Base Rate Loan which was to have been converted to an
affected type of Eurodollar Loan shall be continued as or converted into a Base
Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 A.M. (New
York City time) three (3) Business Days prior to the proposed conversion, shall
be maintained as an unaffected type of Eurodollar Loan.
3.10. Capital Adequacy. In the event that Agent or any Lender shall have
determined that any change in applicable law or guideline regarding capital
adequacy, or any change in the
17
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Agent or any Lender with any new request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency not in effect on the date hereof,
has or would have the effect of reducing the rate of return on Agent's or any
Lender's capital as a consequence of its obligations hereunder to a level below
that which Agent or any Lender could have achieved but for such adoption, change
or compliance (taking into consideration Agent's and each Lender's policies with
respect to capital adequacy) by an amount deemed by Agent or any Lender to be
material, then, from time to time, upon written demand not later than sixty (60)
days following such Lender's or Agent's making such determination (which demand
shall be accompanied by a certification demonstrating the calculation of such
amounts in reasonable detail) by Agent or such Lender, Borrower shall pay to
Agent or such Lender such additional amount or amounts as will compensate Agent
or such Lender for such reduction. In determining such amount or amounts, Agent
or such Lender may use any reasonable averaging or attribution methods. The
protection of this Section 3.10 shall be available to Agent or any Lender
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law or condition.
3.10.1. Certificate. A certificate of an officer of Agent or
such Lender setting forth such amount or amounts as shall be necessary to
compensate Agent or such Lender pursuant to Section 3.10 hereof and the reasons
therefor when delivered to Borrower shall be conclusive absent manifest error.
SECTION 4. TERM AND TERMINATION.
4.1. Term of Agreement. Subject to Lenders' right to cease making Loans to
Borrower upon or after the occurrence of a Default or Event of Default, this
Agreement shall be in effect for a period of five (5) years from the date
hereof, through and including May __, 2003 (the "Original Term") unless
terminated as provided in Section 4.2 hereof.
4.2. Termination.
4.2.1. Termination by Lenders. Required Lenders may terminate
this Agreement (without notice thereof to Borrower) upon or after the occurrence
and during the continuance of an Event of Default.
4.2.2. Termination by Borrower. Upon at least ninety (90) days
prior written notice to Agent, Borrower may, at its option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrower has paid all of the Obligations in immediately available funds and all
Letters of Credit and LC Guaranties have expired or have been cash
collateralized to Agent's satisfaction. Any notice of termination given by
Borrower shall be irrevocable unless Required Lenders otherwise agree in
writing, and Lenders shall have no obligation to make any Loans or issue or
procure any Letters of Credit or LC Guaranties on or after the termination date
stated in such notice. Borrower may elect to terminate this Agreement in its
18
entirety only. No section of this Agreement or type of Loan available hereunder
may be terminated singly.
4.2.3. Termination Charges. At the effective date of
termination of this Agreement for any reason, Borrower shall pay to Agent for
its own account (in addition to the then outstanding principal, accrued interest
and other charges owing under the terms of this Agreement and any of the other
Loan Documents) as liquidated damages for the loss of the bargain and not as a
penalty, an amount equal to two percent (2.0%) of the average outstanding Loans
and Letters of Credit during such year if termination occurs during the first
Loan Year and one percent (1.0%) of the average outstanding Loans and Letters of
Credit during such year if termination occurs during the second or third Loan
Year. Notwithstanding the foregoing, if Borrower shall have requested in writing
from Agent that the Total Credit Facility be increased and such request is
denied, then, if Borrower shall terminate this Agreement within ninety (90) days
of such denial and at the time of such termination no Event of Default exists,
all charges under this Section 4.2.3 shall be waived.
4.2.4. Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination and Agent shall retain its Liens in the Collateral
and all of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Agent, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Agent shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Agent or Lenders may incur as a result of
dishonored checks or other items of payment received by Agent or Lenders from
Borrower or any Account Debtor and applied to the Obligations, Agent shall, at
its option, (i) have received a written agreement, executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Agent and Lenders from any such
loss or damage; or (ii) have retained such monetary reserves and Liens on the
Collateral for such period of time as Agent, in its reasonable discretion, may
deem necessary to protect Agent and Lenders from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral. To secure the prompt payment and
performance to Lenders of the Obligations, Borrower hereby grants to Agent for
the ratable benefit of Lenders a continuing security interest and Lien upon all
of Borrower's assets, including all of the following Property and interests in
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
19
(iv) General Intangibles;
(v) All monies and other Property of any kind
now or at any time or times hereafter in the possession or under the control of
Agent or any Lender or a bailee or Affiliate of Agent or any Lender;
(vi) All Subsidiary Stock;
(vii) All investment property;
(viii) All accessions to, substitutions for and
all replacements, products and cash and non-cash proceeds of (i)
through (vii) above, including, without limitation, proceeds of and
unearned premiums with respect to insurance policies insuring any of
the Collateral; and
(ix) All books and records (including, without
limitation, customer lists, credit files, computer programs,
print-outs, and other computer materials and records) of Borrower
pertaining to any of (i) through (viii) above.
5.2. Lien Perfection; Further Assurances. Borrower shall execute such UCC-1
financing statements as are required by the Code and such other instruments,
assignments or documents as are requested by Agent and reasonably necessary to
perfect Agent's Lien upon any of the Collateral and shall take such other action
as may be reasonably required to perfect or to continue the perfection of
Agent's Lien upon the Collateral. Unless prohibited by applicable law, Borrower
hereby authorizes Agent to execute and file any such financing statement on
Borrower's behalf. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof. At Agent's request,
Borrower shall also promptly execute or cause to be executed and shall deliver
to Agent any and all documents, instruments and agreements deemed reasonably
necessary by Agent to give effect to or carry out the terms or intent of the
Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1. General.
6.1.1. Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by Borrower
at one or more of the business locations set forth in Exhibit 6.1.1 hereto and
shall not, without the prior written approval of Agent, be moved therefrom
except, prior to an Event of Default and Agent's acceleration of the maturity of
the Obligations in consequence thereof, for (i) sales of Inventory in the
ordinary course of business; and (ii) removals in connection with dispositions
of Equipment that are authorized by subsection 6.4.2 hereof.
6.1.2. Insurance of Collateral. Borrower shall maintain and
pay for insurance to the extent available at commercially reasonable rates upon
all Collateral which is customarily
20
insured wherever located and with respect to Borrower's business, covering
casualty, hazard, public liability and such other customary risks in such
amounts, with such insurance companies as are reasonably satisfactory to Agent.
Borrower shall deliver copies of such policies to Agent with satisfactory
lender's loss payable endorsements, naming Agent as loss payee, assignee or
additional insured, as appropriate. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever and a clause specifying that the interest of Agent shall not
be impaired or invalidated by any act or neglect of Borrower or the owner of the
Property or by the occupation of the premises for purposes more hazardous than
are permitted by said policy. If Borrower fails to provide and pay for such
insurance, Agent may, at its option, but shall not be required to, procure the
same and charge Borrower therefor. Borrower agrees to deliver to Agent, promptly
as rendered, true copies of all reports made in any reporting forms to insurance
companies.
6.1.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of the
sale thereof shall be borne and paid by Borrower. If Borrower fails to promptly
pay any portion thereof when due, Agent may, at its option, but shall not be
required to, pay the same and charge Borrower therefor. Neither Agent nor any
Lender shall be liable or responsible (except for reasonable care in the custody
thereof while any Collateral is in Agent's or any Lender's actual possession or
under their actual control) in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency, or other person whomsoever, but the same shall be at Borrower's sole
risk.
6.2. Administration of Accounts.
6.2.1. Records, Schedules and Assignments of Accounts.
Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit to Agent on such periodic
basis as Agent shall request a sales and collections report for the preceding
period, in form satisfactory to Agent. On or before the fifteenth day of each
month from and after the date hereof, Borrower shall deliver to Agent, in form
acceptable to Agent, accounts payable schedules and a detailed aged trial
balance of all Accounts existing as of the last day of the preceding month,
specifying the names, addresses, face value, dates of invoices and due dates for
each Account Debtor obligated on an Account so listed ("Schedule of Accounts"),
and, upon Agent's request therefor, copies of proof of delivery and the original
copy of all documents, including, without limitation, repayment histories and
present status reports relating to the Accounts so scheduled and such other
matters and information relating to the status of then existing Accounts as
Agent shall reasonably request. In addition, if Accounts in an aggregate face
amount in excess of $50,000 become ineligible because they fall within one of
the specified categories of ineligibility set forth in the definition of
Eligible Accounts or otherwise established by Agent, Borrower shall notify Agent
of such occurrence on the first Business Day following such occurrence and the
Borrowing base shall thereupon be adjusted to reflect such occurrence. If
requested by Agent, Borrower shall execute and deliver to Agent formal written
assignments of all of its Accounts weekly or daily,
21
which shall include all Accounts that have been created since the date of the
last assignment, together with copies of invoices or invoice registers related
thereto.
6.2.2. Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Agent as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $25,000 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Agent with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence and during
the continuance of an Event of Default, Agent shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Agent may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorney's fees, to
Borrower.
6.2.3. Taxes. If an Account includes a charge for any tax
payable to any governmental taxing authority, Agent is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor, provided, however that
Agent shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
6.2.4. Account Verification. Whether or not a Default or an
Event of Default has occurred, any of Agent's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Agent, any
designee of Agent or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, telegraph or otherwise.
Borrower shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.
6.2.5. Maintenance of Dominion Account. Borrower shall
maintain a Dominion Account pursuant to a lockbox arrangement acceptable to
Agent with such banks as may be selected by Borrower and be acceptable to Agent.
Borrower shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances received in
the lockbox to the Dominion Account for application on account of the
Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Agent and Borrower shall obtain the agreement by such
banks in favor of Agent to waive any offset rights against the funds so
deposited. Agent assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
6.2.6. Collection of Accounts, Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Agent. All remittances received by Borrower on
account of Accounts, together with the proceeds of any other Collateral, shall
be held as Agent's property by Borrower as trustee of an express trust for
Agent's benefit and Borrower shall immediately deposit same in kind in the
Dominion Account. Agent retains the right at all times after the occurrence of a
Default or an Event of Default, if continuing, to notify
22
Account Debtors that Accounts have been assigned to Agent and to collect
Accounts directly in its own name and to charge the collection costs and
expenses, including attorneys' fees to Borrower.
6.3. Administration of Inventory.
6.3.1. Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its inventory. Borrower shall furnish to Agent
Inventory reports in form and detail satisfactory to Agent at such times as
Agent may request, but at least once each month, not later than the twentieth
day of such month. Borrower shall conduct a physical inventory annually and
shall provide to Agent a report based on each such physical inventory promptly
thereafter, together with such supporting information as Agent shall request.
6.3.2. Returns of Inventory. If at any time or times hereafter
any Account Debtor returns any Inventory to Borrower the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$50,000, Borrower shall immediately notify Agent of the same, specifying the
reason for such return and the location, condition and intended disposition of
the returned Inventory.
6.4. Administration of Equipment.
6.4.1. Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with subsection
6.4.2 hereof, and shall furnish Agent with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Agent. Immediately on request therefor by Agent, Borrower shall deliver to Agent
any and all evidence of ownership, if any, of any of the Equipment.
6.4.2. Dispositions of Equipment. Borrower will not sell,
lease or otherwise dispose of or transfer any of the Equipment or any part
thereof without the prior written consent of Agent; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate during
any consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $50,000 or less, provided that all proceeds thereof are
remitted to Agent for application to the Loans, or (ii) replacements of
Equipment that is substantially worn, damaged or obsolete with Equipment of like
kind, function and value, provided that the replacement Equipment shall be
acquired prior to or concurrently with any disposition of the Equipment that is
to be replaced, the replacement Equipment shall be subject to the Liens of Agent
and shall be free and clear of all other Liens other than Permitted Liens that
are not Purchase Money Liens, and Borrower shall have given Agent at least 5
days prior written notice of such disposition.
6.5. Payment of Charges. All amounts chargeable to Borrower under Section 6
hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until paid
in full at the rate applicable to Base Rate Loans from time to time.
23
6.6. Additional Payments. Any sums expended by Agent or any Lender due to
Borrower's failure to perform or comply with its obligations under this
Agreement or any other Loan Document may be charged to Borrower's account as a
Revolving Credit Loan and added to the Obligations.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties. To induce Agent and Lenders to
enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Agent and Lenders that:
7.1.1. Organization and Qualification. It is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. It is duly qualified and is authorized to do
business and is in good standing in all states and jurisdictions where the
character of its Properties or the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. Exhibit 7.1.1 sets forth all states or
jurisdictions where Borrower or any Subsidiary is qualified and authorized to do
business as of the Closing Date.
7.1.2. Power and Authority. It is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and each of
the other Loan Documents to which it is a party. The execution, delivery and
performance of this Agreement and each of the other Loan Documents have been
duly authorized by all necessary corporate action and do not and will not (i)
require any consent or approval of its shareholders; (ii) contravene its
charter, articles or certificate of incorporation or by-laws; (iii) violate, or
cause it to be in default under, any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having applicability to it which violation or default would likely have a
Material Adverse Effect; (iv) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which it is a party or by which it or its Properties may be bound
or affected which violation or default would likely have a Material Adverse
Effect; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by it.
7.1.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of the Borrower enforceable against it in
accordance with its respective terms; except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law).
7.1.4. Capital Structure. Exhibit 7.1.4 hereto states (i) the
correct name of Borrower and each of Borrower's Subsidiaries, its jurisdiction
of incorporation and the percentage of its stock owned by each Person listed
thereon, (ii) the name of the corporate or joint venture Affiliates of Borrower
and of each Subsidiary of Borrower, and the nature of the affiliation, and (iii)
the number, nature and holder of all outstanding stock of Borrower and of
each Subsidiary of
24
Borrower, in each case as of the Closing Date. Holdings has good title to all of
the stock of Borrower and Borrower has good title to all shares or stock it
purports to own of each Subsidiary of Borrower, free and clear in each case of
any Lien other than Permitted Liens. All such shares or stock have been duly
issued and are fully paid and non-assessable. Except as set forth on Exhibit
7.1.4, there are (i) no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Securities, stock or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of Borrower and (ii) no outstanding
agreements or instruments binding upon any stockholders of Borrower or any
Subsidiary of Borrower relating to the ownership of its shares of capital stock.
7.1.5. Corporate Names. Neither Borrower nor any Subsidiary of
Borrower has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit
7.1.5, neither Borrower nor any Subsidiary of Borrower has been the surviving
entity of a merger or consolidation or acquired all or substantially all of the
assets of any Person.
7.1.6. Business Locations; Agent for Process. The chief
executive office and other places of business of Borrower and each Subsidiary of
Borrower are as listed on Exhibit 7.1.6 hereto. During the preceding one-year
period, neither Borrower nor any Subsidiary of Borrower has had an office, place
of business or agent for service of process other than as listed on Exhibit
7.1.6. Except as shown on Exhibit 7.1.6, no Inventory is stored with a bailee,
warehouseman or similar party, nor is any Inventory consigned to any Person.
7.1.7. Title to Properties; Priority of Liens. Borrower and
each Subsidiary of Borrower has good, indefeasible and marketable title to and
fee simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged all lawful claims which, if unpaid, might become
a Lien against any of its Properties that is not a Permitted Lien. The Liens
granted to Agent for the ratable benefit of Lenders under Section 5 hereof are
first priority Liens, subject only to Permitted Liens.
7.1.8. Accounts. Agent may rely, in determining which Accounts
are Eligible Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. Unless otherwise indicated in writing
to Agent, with respect to each Account:
(i) It is genuine and in all respects what
it purports to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona
fide sale and delivery of goods or rendition of services by Borrower in
the ordinary course of its business and in accordance with the terms
and conditions of all purchase orders, contracts or other documents
relating thereto and forming a part of the contract between Borrower
and the Account Debtor;
(iii) It is for a liquidated amount payable
on the date stated in the duplicate invoice covering such sale or
rendition of services, a copy of which has been furnished or is
available to Agent;
25
(iv) Such Account, and Agent's security
interest therein, is not subject to any offset, Lien, deduction,
defense, dispute, counterclaim or any other adverse condition except
where the amount in controversy is deemed by Agent to be immaterial,
and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
(v) Borrower has not made any agreement with
any Account Debtor thereunder for any extension, compromise, settlement
or modification of any such Account or any deduction therefrom, except
for discounts or allowances which are granted by Borrower in the
ordinary course of its business and which are reflected in the
calculation of the net amount of each respective invoice related
thereto and are reflected in the Schedules of Accounts submitted to
Agent pursuant to subsection 6.2.1 hereof or such other extensions,
compromises, settlements or modifications of any Account or any
deduction therefrom disclosed in writing by Borrower to Agent and
consented thereto in writing by Agent;
(vi) To the best of Borrower's knowledge,
the Account Debtor thereunder (1) had the capacity to contract at the
time any contract or other document giving rise to the Account was
executed and (2) such Account Debtor was at such time Solvent; and
(vii) To the best of Borrower's knowledge at
the time such Account arose, there were no proceedings or actions which
are threatened or pending against any Account Debtor thereunder which
might result in any material adverse change in such Account Debtor's
financial condition or the collectability of such Account.
7.1.9. Equipment. Any Equipment used for the operation of the
Borrower's business is in good operating condition and repair, and all necessary
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the Equipment shall be maintained and preserved,
reasonable wear and tear excepted. Borrower will not permit any of the Equipment
to become affixed to any real Property leased to Borrower so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or consented
to a leasehold mortgage in favor of and in form acceptable to Lender, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property other than Equipment that is subject to first priority (except
for Permitted Liens) Liens in favor of Agent for the benefit of Lenders.
7.1.10. Financial Statements; Fiscal Year. (a) The balance sheets of
Borrower on a Consolidated Basis as of December 31, 1997, and the related
statements of income, changes in stockholder's equity, and changes in financial
position for the periods ended on such dates, have been prepared in accordance
with GAAP, and present fairly the financial position of Borrower on a
Consolidated Basis at such dates and the results of Borrower's operations for
such periods, subject to normally occurring year-end audit adjustments. Since
December 31, 1997, there has been no event or condition having a Material
Adverse Effect and no change in the aggregate value of Equipment (except in
connection with reasonable wear and tear of such Equipment) and real Property
owned by Borrower.
26
(b) The pro forma balance sheet of
Borrower on a Consolidated Basis (the "Pro Forma Balance Sheet") furnished to
Agent on the Closing Date reflects the consummation of the transactions
contemplated under this Agreement (the "Transactions") and is accurate, complete
and correct in all material respects and fairly reflects on a proforma basis the
financial condition of Borrower and its Subsidiaries as of the Closing Date
after giving effect to the Transactions, and has been prepared in accordance
with GAAP, consistently applied, subject to normal year end adjustments. The Pro
Forma Balance Sheet has been certified as accurate, complete and correct in all
material respects as of the Closing Date by the chief financial officer,
treasurer or controller of Borrower. All financial statements referred to in
this subsection 7.1.10(b), including the related schedules and notes thereto,
have been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
(c) Projections of Borrower on a
Consolidated Basis with respect to Fiscal Year 199_ and the Pro Forma Balance
Sheet, copies of which are annexed hereto as Exhibit 7.1.10(c), were prepared by
Borrower and reviewed by its chief financial officer, treasurer or controller
and, as of the Closing Date, are based on underlying assumptions which provide a
reasonable basis for the Projections contained therein and reflect Borrower's
judgment based on present circumstances of the most likely set of conditions and
course of action for the projected period. The Projections together with the Pro
Forma Balance Sheet, are sometimes herein referred to as the "Pro Forma
Financial Statements".
7.1.11. Full Disclosure. The financial statements referred to
in subsection 7.1.10 hereof do not, nor does this Agreement or any other written
statement delivered by Borrower to Agent or any Lender in connection herewith,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not materially
misleading. There is no fact which Borrower has failed to disclose to Agent in
writing which would likely have a Material Adverse Effect.
7.1.12. Solvent Financial Condition. Borrower and each
Guarantor is now and, after giving effect to the Transactions, will be, Solvent.
7.1.13. Surety Obligations. Neither Borrower nor any
Subsidiary of Borrower is obligated as surety or indemnitor under any surety or
similar bond or other contract issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person.
7.1.14. Taxes. Borrower's federal tax identification number is
as set forth on Exhibit 7.1.14. The federal tax identification number of each
Subsidiary of Borrower is shown on Exhibit 7.1.14 hereto. Borrower and each
Subsidiary of Borrower has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid, or made provision for
the payment of, all taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties shown in such returns to be due and
payable or assessed against them by any governmental authority, unless and to
the extent any such amounts are being actively contested in good faith and by
appropriate proceedings and Borrower and each Subsidiary of Borrower, as
applicable, maintains reasonable reserves on their books therefor. The provision
for taxes on the books of Borrower and each Subsidiary of Borrower are adequate
for all years not closed by
27
applicable statutes, and for its current fiscal year and, for all tax years
thereafter which are not closed by applicable statutes, the provisions for taxes
on the books of Borrower and each Subsidiary of Borrower will be adequate.
7.1.15. Brokers. There are no claims for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement other than the payment of $100,000
in connection with the closing of the transactions contemplated hereby.
7.1.16. Patents, Trademarks, Copyrights and Licenses. Borrower
and each Subsidiary of Borrower owns, possesses or has the right to use all the
patents, trademarks, service marks, trade names, copyrights and licenses
necessary for the present and planned future conduct of its business without any
known conflict with the rights of others. All such patents, trademarks, service
marks, tradenames, copyrights, licenses and other similar rights are listed on
Exhibit 7.1.16 hereto.
7.1.17. Governmental Consents. Borrower and each Subsidiary of
Borrower has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises materially necessary to continue to conduct its
business as heretofore or proposed to be conducted by it and to own or lease and
operate its Properties as now owned or leased by it.
7.1.18. Compliance with Laws. Borrower and each Subsidiary of
Borrower has duly complied, and its Properties, business operations and
leaseholds are in compliance in all material respects, with the provisions of
all federal, state and local laws, rules and regulations applicable to it as
applicable, its Properties or the conduct of its business and there have been no
citations, notices or orders of noncompliance issued to Borrower or any
Subsidiary of Borrower under any such law, rule or regulation. Borrower and each
Subsidiary of Borrower has established and maintains an adequate monitoring
system to insure that it remains in compliance with all federal, state and local
laws, rules and regulations applicable to it. No Inventory produced by Borrower
has been produced in violation of the Fair Labor Standards Act (29 U.S.C. ss.
201 et seq.), as amended.
7.1.19. Restrictions. Neither Borrower nor any Subsidiary of
Borrower is a party or subject to any contract, agreement, or charter or other
corporate restriction, which solely as a result of the terms thereof could
reasonably be expected to have a Material Adverse Effect. Neither Borrower nor
any Subsidiary of Borrower is a party or subject to any contract or agreement
which restricts its right or ability to incur Indebtedness, other than as set
forth on Exhibit 7.1.19 hereto, none of which prohibit the execution of or
compliance with this Agreement or the other Loan Documents by Borrower or any
Subsidiary of Borrower, as applicable.
7.1.20. Litigation. Except as set forth on Exhibit 7.1.20
hereto, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Borrower, threatened, against or affecting Borrower or any
Subsidiary of Borrower, or the business, operations, Properties, prospects,
profits or condition of Borrower or any Subsidiary of Borrower, which could
reasonably be expected to have a Material Adverse Effect. Neither Borrower nor
any Subsidiary of Borrower
28
is in default with respect to any order, writ, injunction, judgment, decree or
rule of any court, governmental authority or arbitration board or tribunal which
would likely have a Material Adverse Effect.
7.1.21. No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
and the other Loan Documents or Borrower's performance hereunder or thereunder,
constitute a Default or an Event of Default. Neither Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.22. Leases. Exhibit 7.1.22(A) hereto is a complete listing
of all capitalized leases of Borrower and Exhibit 7.1.22(B) hereto is a complete
listing of all operating leases of Borrower. Borrower is in compliance with all
of the terms of each of its respective capitalized and operating leases.
7.1.23. Pension Plans. Except as disclosed on Exhibit 7.1.23
hereto, neither Borrower nor any Subsidiary of Borrower has any Plan. Borrower
and each Subsidiary of Borrower is in full compliance with the requirements of
ERISA and the regulations promulgated thereunder with respect to each Plan. No
fact or situation that would likely have a Material Adverse Effect exists in
connection with any Plan. Neither Borrower nor any Subsidiary of Borrower has
any withdrawal liability in connection with a Multiemployer Plan.
7.1.24. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers of Borrower, the absence of whose purchases individually or in the
aggregate would likely have a Material Adverse Effect, or with any material
supplier of Borrower, the absence of whose products or services would likely
have a Material Adverse Effect. There exists no present condition or state of
facts or circumstances which would have a Material Adverse Effect on Borrower or
prevent Borrower from conducting its business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
7.1.25. Labor Relations. Except as described on Exhibit 7.1.25
hereto, neither Borrower nor any Subsidiary of Borrower is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any
Subsidiary of Borrower's employees or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.1.26. O.S.H.A. and Environmental Compliance. Except as
set forth on Exhibit 7.1.26:
(a) Borrower and each Subsidiary of
Borrower has duly complied with, and its facilities, business, assets, property,
leaseholds and Equipment are in compliance in all material respects with, the
provisions of the Federal Occupational Safety and Health Act, the Environmental
Protection Act, RCRA and all other Environmental Laws; there have been no
outstanding citations, notices or orders of non-compliance issued to Borrower or
any Subsidiary of
29
Borrower or relating to its business, assets, property, leaseholds or Equipment
under any such laws, rules or regulations that would have a Material Adverse
Effect.
(b) Borrower and each Subsidiary of
Borrower has been issued all material federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws.
(c) (i) There are no visible signs of
releases, spills, discharges, leaks or disposals (collectively referred to as
"Releases") of Hazardous Substances at, upon, under or within any real Property
or any premises leased by Borrower or any Subsidiary of Borrower that would have
a Material Adverse Effect; (ii) to Borrower's knowledge there are no underground
storage tanks or polychlorinated biphenyls on the real Property or any premises
leased by Borrower or any Subsidiary of Borrower; (iii) Borrower has not used
the real Property or any premises leased by Borrower or any Subsidiary of
Borrower as a treatment, storage or disposal facility of Hazardous Waste; and
(iv) no Hazardous Substances are used on the real Property or any premises
leased by Borrower or any Subsidiary of Borrower, excepting such quantities as
are handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of Borrower or any Subsidiary of
Borrower or of its tenants.
7.2. Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for those
representations and warranties which are expressly limited by their terms to a
specific date and taking into account any amendments to the Schedules and
Exhibits hereto as a result of any disclosures made by Borrower to Agent after
the Closing Date.
7.3. Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent
and Lenders and the parties thereto and the closing of the transactions
described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or Lenders,
Borrower and each Guarantor covenants that it shall:
8.1.1. Visits and Inspections. Permit representatives of
Agent, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrower
and each of its Subsidiaries, inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's and each of its Subsidiaries' business, assets,
liabilities, financial condition, business prospects and results of operations.
30
8.1.2. Notices. Promptly notify Agent in writing of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading in any material respect.
8.1.3. Financial Statements. Keep, and cause each Subsidiary
to keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP reflecting
all its financial transactions; and cause to be prepared and furnished to Agent
and Lenders the following (all to be prepared in accordance with GAAP applied on
a consistent basis, unless Borrower's certified public accountants concur in any
change therein and such change is disclosed to Agent and is consistent with
GAAP):
(i) not later than 90 days after the close of
each Fiscal Year of Borrower, (i) audited financial statements of
Nations Flooring, Inc. on a Consolidated Basis as of the end of such
Fiscal Year, reported on by a firm of independent certified public
accountants of recognized standing selected by Borrower but acceptable
to Agent (the "Accountants") and (ii) unaudited financial statements of
Borrower as of the end of such Fiscal Year on a consolidating basis;
(ii) not later than thirty (30) days after the end
of each Fiscal Month hereafter, including the last Fiscal Year of
Borrower's Fiscal Year unaudited interim financial statements of
Borrower as of the end of such period and of the portion of Borrower's
Fiscal Year then elapsed, on a Consolidated Basis and consolidating
basis, certified by the principal financial officer of Borrower as
prepared in accordance with GAAP and fairly presenting the
consolidating and consolidated financial position and results of
operations of Borrower for such period subject only to changes from
audit and year-end adjustments and except that such statements need not
contain notes;
(iii) promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements or
financial statements which Holdings or Nations Flooring, Inc., Borrower
or any Subsidiary of Holdings or Borrower has made available to its
shareholders and copies of any regular, periodic and special reports or
registration statements which Holdings, Borrower or any Subsidiary of
Holdings or Borrower files with the Securities and Exchange Commission
or any governmental authority which may be substituted therefor, or any
national securities exchange;
(iv) promptly after the filing thereof, copies of
any annual report to be filed with the Pension Benefit Guaranty
Corporation (the "PBGC") in connection with each Plan; and
(v) such other data and information (financial and
otherwise) as Agent or any Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or Borrower's, any
Subsidiary of Borrower's or any of their respective Subsidiaries'
financial condition or results of operations.
Concurrently with the delivery of the financial
statements described in clause (i) of this subsection 8.1.3, Borrower shall
forward to Agent a copy of the accountants' letter to
31
Holdings' management or board of directors that is prepared in connection with
such financial statements and also shall cause to be prepared and shall furnish
to Agent a certificate of the aforesaid certified public accountants certifying
that, based upon their examination of the financial statements of Borrower and
its respective Subsidiaries performed in connection with their examination of
said financial statements, they are not aware of any Default or Event of Default
or, if they are aware of such Default or Event of Default, specifying the nature
thereof, and acknowledging, in a
manner satisfactory to Agent, that they are aware that Agent and Lenders are
relying on such financial statements in making their decisions with respect to
the Loans. Concurrently with the delivery of the financial statements described
in clauses (i) and (ii) of this subsection 8.1.3, or more frequently if
requested by Agent, Borrower shall cause to be prepared and furnished to Agent a
Compliance Certificate in the form of Exhibit 8.1.3 hereto executed by the chief
financial officer, treasurer or controller of Borrower.
8.1.4. Landlord and Storage Agreements. Provide Agent with
copies of all agreements between Borrower, each Subsidiary of Borrower or any of
their respective Subsidiaries and any landlord or warehouseman which owns any
premises at which any Inventory may, from time to time, be kept.
8.1.5. Credit Memoranda. Issue and process credit memoranda
with respect to credits, discounts or other allowances taken by Account Debtors
in the ordinary course of Borrower's business, but in no event shall such credit
memoranda be issued and processed later than three (3) months after the taking
of the applicable credit, discount or other allowance.
8.1.6. Projections. No later than 30 days prior to the end of
each fiscal year of Borrower, deliver to Agent Projections of Borrower on a
Consolidated Basis for the forthcoming 3 years, year by year, and for the
forthcoming fiscal year, month by month.
8.1.7. Environmental Matters. (a) Borrower shall and shall
cause each Subsidiary of Borrower to ensure that the real Property remains in
material compliance with all applicable Environmental Laws and they shall not
place or permit to be placed any Hazardous Substances on any real Property in
violation of any applicable law or governmental regulations.
(b) Borrower shall and shall cause each
Subsidiary of Borrower to establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.
(c) Borrower shall and shall cause each Subsidiary
of Borrower to (i) employ in connection with the use of the real Property
appropriate technology necessary to maintain compliance with any applicable
Environmental Laws and (ii) to the extent necessary, dispose of any and all
Hazardous Waste generated at the real Property only at facilities and with
carriers that maintain valid permits under RCRA and any other applicable
Environmental Laws. Borrower shall and shall cause each Subsidiary of Borrower
to use its best efforts to obtain certificates of disposal, if required, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower or any Subsidiary of
Borrower in connection with the transport or disposal of any Hazardous Waste
generated at the real Property.
32
(d) In the event Borrower or any Subsidiary of
Borrower (i) obtains, gives or receives notice of any Release or threat of
Release of a reportable quantity of any Hazardous Substances at the real
Property (any such event being hereinafter referred to as a "Hazardous
Discharge") or (ii) receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at the real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws having a Material Adverse Effect on the real
Property or Borrower's or any Subsidiary of Borrower's interest therein from any
state or local agency responsible in whole or in part for environmental matters
in the state in which the real Property is located or the United States
Environmental Protection Agency (any such person or entity hereinafter, the
"Authority") (any of the foregoing is referred to herein as an "Environmental
Complaint"), then Borrower shall promptly give written notice of same to Agent
detailing facts and circumstances of which Borrower or any Subsidiary of
Borrower is aware giving rise to the Hazardous Discharge or Environmental
Complaint. Such information is to be provided to allow Agent to protect its
security interest in the Collateral and is not intended to create nor shall it
create any obligation upon Agent or any Lender with respect thereto.
(e) Borrower shall and shall cause each Subsidiary
of Borrower to promptly forward to Agent copies of any request for information,
notification of potential liability, demand letter relating to potential
responsibility with respect to the investigation or cleanup of Hazardous
Substances at any other site owned, operated or used by Borrower or any
Subsidiary of Borrower to dispose of Hazardous Substances and shall continue to
forward copies of correspondence between Borrower or any Subsidiary of Borrower
and the Authority regarding such claims to Agent until the claim is settled.
Borrower shall and shall cause each Subsidiary of Borrower to promptly forward
to Agent copies of all documents and reports concerning a Hazardous Discharge at
the real Property that Borrower or any Subsidiary of Borrower is required to
file under any applicable Environmental Laws. Such information is to be provided
solely to allow Agent to protect Agent's security interest in the Collateral.
(f) Borrower shall and shall cause each Subsidiary
of Borrower to respond promptly to any Hazardous Discharge or Environmental
Complaint and take all actions reasonably required by applicable Environmental
Laws in order to safeguard the health of any Person and to avoid subjecting the
Collateral or real Property to any Lien. If Borrower or any Subsidiary of
Borrower shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or Borrower or any Subsidiary of Borrower shall fail to
comply with any of the requirements of any applicable Environmental Laws, Agent
on behalf of Lenders may, but without the obligation to do so, for the sole
purpose of protecting Agent's interest in Collateral: (A) give such notices or
(B) enter onto the real Property (or authorize third parties to enter onto the
real Property) and take such actions as Agent (or such third parties as directed
by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate
or otherwise deal with any such Hazardous Discharge or Environmental Complaint.
All reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Base Rate Loans, shall be paid upon demand by Borrower, and
until paid shall be added to and become a part of the Obligations secured by the
Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender, Borrower and any Subsidiary of Borrower.
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(g) At any time following any Hazardous Discharge
or Environmental Complaint Borrower shall and shall cause each Subsidiary of
Borrower, as applicable, to provide Agent, at Borrower's expense, with any
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and if an abatement, cleanup or removal is required under applicable
Environmental Laws, the potential costs in connection with abatement, cleanup
and removal of any Hazardous Substances found on, under, at or within the real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrower or any Subsidiary of Borrower, as applicable, to post a bond,
letter of credit or other security reasonably satisfactory to Agent to secure
payment of these costs and expenses.
(h) Borrower shall and shall cause each Subsidiary
of Borrower to defend and indemnify Agent and Lenders and hold Agent, Lenders
and their respective employees, agents, directors and officers harmless from and
against all loss, liability, damage and expense, claims, costs, fines and
penalties, including reasonable attorney's fees, suffered or incurred by Agent
or Lenders under or on account of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the real Property,
whether or not the same originates or emerges from the real Property or any
contiguous real estate, except to the extent such loss, liability, damage and
expense is attributable to any Hazardous Discharge resulting from actions on the
part of Agent or any Lender. Borrower's and each Subsidiary of Borrower's
obligations under this Section 8.1.7 shall arise upon the discovery of the
presence of any Hazardous Substances at the real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Substances. Borrower's and each
Subsidiary of Borrower's obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(i) For purposes of Sections 8.1.7 and 7.1.26,
all references to real Property shall be deemed to include all of Borrower's and
each Subsidiary of Borrower's right, title and interest in and to its owned and
leased premises.
8.2. Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lenders, Borrower
covenants that, it will not:
8.2.1. Mergers; Consolidations; Acquisitions.
(i) Merge or consolidate, or permit any
Subsidiary of Borrower to merge or consolidate, with any Person; or
(ii) Acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the Properties of any
Person.
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8.2.2. Loans. Make, or permit any Subsidiary of Borrower to
make, any loans or other advances of money (other than for salary, travel
advances, advances against commissions and other similar advances in the
ordinary course of business) to any Person.
8.2.3. Total Indebtedness. Create, incur, assume, or
suffer to exist, or permit any Subsidiary of Borrower to create, incur or suffer
to exist, any Indebtedness, except:
(i) Obligations owing to Agent and/or Lenders;
(ii) Subordinated Debt existing on the date of
this Agreement;
(iii) Indebtedness of Borrower to any Subsidiary
of Borrower;
(iv) accounts payable to trade creditors and
current operating expenses (other than for Money Borrowed) which are
not aged more than 90 days from billing date or more than 30 days from
the due date, in each case incurred in the ordinary course of business
and paid within such time period, unless the same are being actively
contested in good faith and by appropriate and lawful proceedings; and
Borrower or such Subsidiary shall have set aside such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by
Borrower or such Subsidiary and its independent accountants;
(v) Obligations to pay Rentals permitted by
subsection 8.2.12;
(vi) Purchase Money Indebtedness in an aggregate
amount not to exceed $200,000 (excluding capitalized leases);
(vii) contingent liabilities arising out of
endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business; and
(viii) Indebtedness under the Shareholder Notes;
(ix) Indebtedness not included in paragraphs (i)
through (vii) above which does not exceed at any time, in the
aggregate, the sum of $250,000.
8.2.4. Affiliate Transactions. Enter into, or be a party to,
or permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or any Subsidiary, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to Borrower or such Subsidiary than
would obtain in a comparable arm's length transaction with a Person not an
Affiliate or stockholder of Borrower or such Subsidiary.
8.2.5. Limitation on Liens. Create or suffer to exist, or
permit any Subsidiary of Borrower or any Guarantor to create or suffer to exist,
any Lien upon any of its Property (including the Subsidiary Stock and the
capital stock of Borrower), income or profits, whether now owned or hereafter
acquired, except:
35
(i) Liens at any time granted in favor of
Agent for the benefit of Lenders;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due, or being
contested in the manner described in subsection 7.1.14 hereto, but only
if in Agent's judgment such Lien does not adversely affect Agent's
rights or the priority of Agent's Lien in the Collateral;
(iii) Liens arising in the ordinary course of
business by operation of law or regulation, but only if payment in
respect of any such Lien is not at the time required or if such payment
is being contested in good faith by appropriate proceedings diligently
conducted, and such Liens do not (1) have any material effect on the
priority of the Liens in favor of the Agent for the benefit of Lenders
or (2) in the aggregate, materially detract from the value of the
Property or materially impair the use thereof in the operation of
Borrower's or any Subsidiary's business;
(iv) Purchase Money Liens securing Purchase
Money Indebtedness permitted under subsection 8.2.3(vi) hereof;
(v) Liens securing Indebtedness of Borrower's or
a Subsidiary of Borrower to Borrower or another such Subsidiary; and
(vi) such other Liens as appear on Exhibit 8.2.5
hereto.
8.2.6. Subordinated Debt. Make, or permit any Subsidiary
of Borrower to make, any payment or prepayment of any part or all of any
Subordinated Debt except as permitted in any applicable Subordination Agreement.
8.2.7. Distributions. Declare, pay or make any distribution on
shares of its capital stock or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any shares of its capital stock, or
of any options to purchase or acquire any capital stock of Borrower
("Distribution") except that so long as no Event of Default shall have occurred
and be continuing (i) following delivery of the monthly Financial Statements of
Borrower in and required by subsection 8.1.3(ii) for the Fiscal Month ended
November 30, 1998 (the "Six Month Statement"), Borrower may pay Holdings an
amount equal to the actual cash dividends paid on Borrower's behalf with respect
to the Preferred Stock during the immediately preceding six (6) months (the
"Dividend Payment") so long as (a) Borrower's Excess Cash Flow for such six (6)
month period (as evidenced by the Six Month Statement) was at least equal to the
Dividend Payment, (b) Borrower's accounts payable and all other obligations with
respect to outstanding Indebtedness are not unpaid beyond normal terms and (c)
after giving effect to the Dividend Payment, Borrower has Availability of at
least $300,000, (ii) thereafter until the Special Advance Amount shall be
permanently reduced to $0 and there shall be no Special Advances outstanding,
Borrower may pay dividends on the Preferred Stock so long as (a) Borrower's
Excess Cash Flow for the Fiscal Month immediately preceding the date of any such
payment is at least equal to such payment, (b) Borrower's accounts payable and
all other obligations with respect to outstanding Indebtedness are not unpaid
beyond normal terms and after giving to any such payment, Borrower
36
has Availability of at least $300,000 and (iii) following the payment in full of
all Special Advances and the permanent reduction of the Special Advance Amount
to $0, Borrower may pay dividends on the Preferred Stock.
8.2.8. Capital Expenditures. Make Capital Expenditures
(including, without limitation, by way of capitalized leases) which, in the
aggregate, as to Borrower and its Subsidiaries, exceed $250,000 during any
fiscal year of Borrower.
8.2.9. Disposition of Assets. Sell, lease or otherwise dispose
of any of, or permit any Subsidiary of Borrower to sell, lease or otherwise
dispose any of, its Properties, including any disposition of Property as part of
a sale and leaseback transaction, to or in favor of any Person, except (i) sales
of Inventory in the ordinary course of business, (ii) a transfer of Property to
Borrower by a Subsidiary of Borrower, or (iii) dispositions expressly authorized
by this Agreement.
8.2.10. Xxxx-and-Hold Sales, Etc. Make a sale to any customer
on a xxxx-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis.
8.2.11. Restricted Investment. Make or have, or permit
any Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.12. Leases. Become, or permit any of its Subsidiaries to
become, a lessee under any operating lease (other than a lease under which
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of 12 consecutive months
under the lease in question and all other leases under which Borrower or any of
its Subsidiaries is then lessee would exceed $1,500,000. The term "Rentals"
means, as of the date of determination, all payments which the lessee is
required to make by the terms of any lease.
8.2.13. Tax Consolidation. File or consent to the filing
of any Consolidated income tax return with any Person other than a Subsidiary of
Borrower or Nations Flooring, Inc. or its Subsidiaries.
8.2.14. Stock of Subsidiaries. Permit any of its
Subsidiaries to issue any additional shares of its capital stock except
director's qualifying shares.
8.2.15. Management Fee. Pay any management or similar
fees in excess of $240,000 in the aggregate in any Fiscal Year.
8.3. Specific Financial Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lenders, Borrower
covenants that, unless otherwise consented to by Lenders in writing, it shall:
8.3.1. Minimum Net Worth. Maintain a Net Worth of Borrower on
a Consolidated Basis as of the end of each Fiscal Year commencing with the
Fiscal Year ending December 31, 1998 of not less than the amount set forth below
opposite the period corresponding thereto:
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Fiscal Year Ended Amount
December 31, 1998 An amount equal to (a) actual Net Worth on
the Closing Date minus $500,000 plus (b) 75%
of the cumulative positive Net Income of
Borrower on a Consolidated Basis for the
Fiscal Year 1998 (the "Recalculated 1998
Amount")
December 31, 1999 An amount equal to (a) the Recalculated 1998
Amount plus (b) 75% of the cumulative
positive Net Income of Borrower on a
Consolidated Basis for Fiscal Year 1999 (the
"Recalculated 1999 Amount")
December 31, 2000 An amount equal to (a) the Recalculated 1999
Amount plus (b) 75% of the cumulative
positive Net Income of Borrower on a
Consolidated Basis for Fiscal Year 2000 (the
"Recalculated 2000 Amount")
December 31, 2001 An amount equal to (a) the Recalculated 2000
Amount plus (b) 75% of the cumulative
positive Net Income of Borrower on a
Consolidated Basis for Fiscal Year 2001 (the
"Recalculated 2001 Amount")
December 31, 2002 An amount equal to (a) the Recalculated 2001
Amount plus (b) 75% of the cumulative
positive Net Income of Borrower on a
Consolidated Basis for Fiscal Year 2002 (the
"Recalculated 2002 Amount")
8.3.2. Funded Debt Coverage. Maintain a Funded Debt Coverage
Ratio at the end of each Fiscal Quarter with respect to the four (4) Fiscal
Quarters then ended (other than with respect to the Fiscal Quarters ending June
30, 1998, September 30, 1998 and December 31, 1998 the Funded Debt Coverage
Ratio with respect to which shall be calculated for the period commencing on the
Closing Date and ending on the last day of the applicable Fiscal Quarter end)
not more than (a) 3.5 to 1.0 at the end of the Fiscal Quarters ended June 30,
1998, September 30, 1998 and December 31, 1998 and (b) 3.0 to 1.0 at the end of
each Fiscal Quarter thereafter.
8.3.3. Fixed Charge Coverage. Maintain Fixed Charge Coverage
at the end of each Fiscal Quarter with respect to the four (4) Fiscal Quarters
then ended (other than with respect to the Fiscal Quarters ending June 30, 1998,
September 30, 1998 and December 31, 1998 the Fixed Charge Coverage Ratio with
respect to which shall be calculated for the period commencing on the Closing
Date and ending on the last day of the applicable Fiscal Quarter end) not less
than (a) 1.05 to 1.0 at the end of the Fiscal Quarters ended June 30, 1998,
September 30, 1998 and Xxxxxxxx 00, 0000, (x) 1.1 to 1.0 at the end of the
Fiscal Quarters ended March 31, 1999, June 30, 1999, September 30, 1999 and
December 31, 1999 and (c) 1.2 to 1.0 with respect to each Fiscal Quarter
thereafter.
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SECTION 9. CONDITIONS PRECEDENT
A. Notwithstanding any other provision of this Agreement or
any of the other Loan Documents, and without affecting in any manner the rights
of Agent and Lenders under the other sections of this Agreement, Lenders shall
not be required to make the initial Loans under this Agreement unless and until
each of the following conditions has been and continues to be satisfied or has
been waived in writing by Required Lenders:
9.1. Documentation. Agent shall have received, in form and substance
satisfactory to Agent and its counsel and its local counsel, a duly executed
copy of this Agreement and the other Loan Documents, together with such
additional documents, instruments and certificates as Lenders and their counsel
shall require in connection therewith from time to time, all in form and
substance satisfactory to Lenders and their counsel.
9.2. No Default. No Default or Event of Default shall exist.
9.3. Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.4. Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
Agent to be filed, registered or recorded in order to create, in favor of Agent,
a perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Agent shall
have received an acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration or recordation and satisfactory evidence of the
payment of any necessary fee, tax or expense relating thereto.
9.5. Proceedings of Corporate Parties. Agent shall have received a copy
of the resolutions in form and substance reasonably satisfactory to Agent, of
the Board of Directors of Borrower and each Subsidiary of Borrower authorizing,
as applicable (i) the execution, delivery and performance of this Agreement, and
any other Loan Documents (collectively the "Documents") and (ii) the granting by
Borrower of the security interests in and liens upon the Collateral certified by
the Secretary or an Assistant Secretary of the applicable party as of the
Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate.
9.6. Incumbency Certificates of Each Corporate Party. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower
and each Subsidiary of Borrower, dated the Closing Date, as to the incumbency
and signature of the officers of Borrower and each Subsidiary of Borrower
executing this Agreement or any other Loan Document, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
39
9.7. Certificates. Agent shall have received a copy of the Articles or
Certificate of incorporation of Borrower and each Subsidiary of Borrower, and
all amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of formation together with copies of the By-laws of
Borrower and each Subsidiary of Borrower and all agreements of Borrower's and
each Subsidiary of Borrower's shareholders certified as accurate and complete by
the Secretary or Assistant Secretary of Borrower and each Subsidiary of Borrower
and all such agreements shall be satisfactory to Agent.
9.8. Good Standing Certificates. Agent shall have received good standing
certificates for Borrower and each Subsidiary of Borrower dated not more than 30
days prior to the Closing, issued by the Secretary of State or other appropriate
official of Borrower's jurisdiction of formation and each jurisdiction where the
conduct of Borrower's and each Subsidiary of Borrower's business activities or
the ownership of its properties necessitates qualification.
9.9. Legal Opinion. Agent shall have received the executed legal opinion
of Xxxxxxxx & Xxxxx in form and substance satisfactory to Agent which shall
cover such matters incident to the transactions contemplated by this Agreement,
the Transactions and related agreements as Agent may reasonably require.
9.10. No Litigation. Except as described on Exhibit 9.10, (i) no
litigation, investigation or proceeding before or by any arbitrator or
governmental body shall be continuing or threatened against Borrower, any
Subsidiary of Borrower or against the officers or directors of Borrower or any
Subsidiary of Borrower (A) in connection with the Loan Documents or the
Acquisition Agreement or any of the transactions contemplated hereby or thereby
and which, in the reasonable opinion of Agent, is deemed material or (B) which
if adversely determined, could, in the reasonable opinion of Agent, have a
Material Adverse Effect; (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to Borrower or any Subsidiary of Borrower
or the conduct of its business or inconsistent with the due consummation of the
transactions shall have been issued by any governmental body and (iii) no
material adverse change has occurred in the financial status of Borrower or its
Subsidiaries from the information previously disclosed to Agent in writing prior
to the Closing Date.
9.11. Information; Collateral Examination. Agent shall have received all
financial, business, and other information regarding Borrower, its Subsidiaries
and their respective Properties as Agent shall have reasonably requested. Agent
shall have completed Collateral examinations and received appraisals, the
results of which shall be satisfactory in form and substance to Lenders, of the
Receivables, Inventory, General Intangibles and Equipment of Borrower and all
books and records in connection therewith.
9.12. Fees. Agent shall have received payment of all fees and expenses of
Agent and the Lenders on or prior to the Closing Date pursuant to this
Agreement.
9.13. Insurance. Agent shall have received in form and substance
satisfactory to Agent certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified
40
copies of Borrower's liability insurance policies, together with endorsements
naming Agent as a co-insured.
9.14. Pledge Agreement. Agent shall have received in form and substance
satisfactory to Agent the Pledge Agreement.
9.15. Payment Instructions. Agent shall have received written instructions
from Borrower directing the application of proceeds of the initial Loans made
pursuant to this Agreement.
9.16. No Adverse Material Change. (i) Since December 31, 1997, there shall
have occurred (x) no event or condition having a Material Adverse Effect, (y) no
material damage or destruction to any of the Collateral nor any material
depreciation in the value thereof and (z) no event, condition or state of facts
which could reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect.
9.17. Contract Review. Agent shall have reviewed all material contracts of
Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be reasonably satisfactory in
all material respects to Agent.
9.18. Environmental Reports. Agent shall have received all environmental
studies and reports prepared by independent environmental engineering firms with
respect to all real Property owned or leased by Borrower and Agent shall have
received evidence satisfactory to Agent (i) that the operations of Borrower and
its Subsidiaries comply with applicable Environmental Laws; (ii) that such
operations are not the subject of any federal, state or local investigation
evaluating the need for remedial action, involving a material expenditure, to
respond to a release or threatened release of any toxic or hazardous waste or
substance into the environment; (iii) that neither the Borrower nor the
Guarantor has or could reasonably be expected to have any contingent liability
deemed material by the Lenders in connection with any release of any toxic or
hazardous waste or substance into the environment.
9.19. Leasehold Agreements. Agent shall have received landlord, mortgagee
or warehouseman agreements satisfactory to Agent with respect to all premises
leased by Borrower at which material amounts of Inventory are located.
9.20. Consents. Agent shall have received any and all Consents necessary to
permit the effectuation of the Transactions and all other transactions
contemplated by this Agreement and the other Loan Documents (without the
imposition of any conditions that are not acceptable to Agent or Lenders); and,
Agent shall have received such Consents and waivers of such third parties as
might assert claims with respect to the Collateral, as Agent and its counsel
shall deem necessary.
9.21. Financial Condition Certificates. Agent shall have received executed
Officer's Certificates satisfactory in form and substance to it, certifying that
Borrower on a Consolidated Basis is Solvent immediately prior to and after
giving effect to the Transactions and the
41
Indebtedness contemplated hereby and as to the financial resources of Borrower
on a Consolidated Basis and its ability to meet its obligations and liabilities
as they become due.
9.22. Closing Certificate. Agent shall have received a closing certificate
signed by an authorized officer of Borrower dated as of the date hereof, stating
that (i) all representations and warranties set forth in this Agreement and the
other Loan Documents are true and correct in all
material respects immediately prior to and after giving effect to the making of
the initial Loans hereunder, (ii) Borrower is on such date in compliance with
all the terms and provisions set forth in this Agreement and the other Loan
Documents and (iii) on such date no Default or Event of Default has occurred or
is continuing.
9.23. Subsidiary Stock. Agent shall have received evidence that all issued
and outstanding capital stock of each of Borrower's Subsidiaries shall be owned
by Borrower or one or more of Borrower's Subsidiaries.
9.24. Corporate Structure. Agent shall be satisfied with the corporate and
legal structure and capitalization of Holdings, Borrower and its Subsidiaries
including, each class of capital stock of such Person and each instrument or
agreement relating to such structure or capitalization.
9.25. ERISA. Agent shall be satisfied that (i) Borrower and its
Subsidiaries will be able to meet their respective obligations under all
employee and retiree welfare plans, (ii) the employee benefit plans of Borrower
and its Subsidiaries are, in all material respects, funded in accordance with
the minimum statutory requirements, (iii) no material "reportable event" (as
defined in ERISA, but excluding events for which reporting has been waived) has
occurred as to any such employee benefit plan and (iv) no termination of, or
withdrawal from, any such employee benefit plan has occurred or is contemplated
that could reasonably be expected to result in a material liability.
9.26. Availability. Agent shall have determined that after giving effect to
the Transactions (including, without limitation, the initial Loans, Letters of
Credit and LC Guaranties contemplated hereby), and the payment of all closing
costs incurred in connection with the Transactions, Closing Availability shall
not be less than $1,300,000.
9.27. Leases . Agent shall have received evidence that Borrower shall have
entered into written extension of its lease for its premises located at 000 Xxxx
Xxxxxxxxxx Xxxx., Xxx Xxxxx, Xxxxxx on terms and conditions satisfactory to
Agent.
9.28. Subordinated Debt. Agent shall have received evidence that Borrower
shall have received proceeds of Subordinated Debt in an amount not less than
$500,000 on terms and conditions satisfactory to Agent and Subordinated Lender
and Borrower shall have entered into a Subordination Agreement on terms and
conditions satisfactory to Agent in connection with the repayment of such
Subordinated Debt.
9.29. Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent and its counsel.
42
9.30. Conditions to Each Loan. The agreement of Lenders to make any Loans
or cause to be opened any Letters of Credit requested to be made or opened on
any date (including, without limitation, the initial Loans), is subject to the
satisfaction of the following conditions precedent as of the date such Loan is
made or Letter of Credit opened:
(i) Representations and Warranties. Each of
the representations and warranties made by Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date,
except for those representations and warranties limited by their terms to a
specified date.
(ii) No Default. No Event of Default or
Default shall have occurred and be continuing on such date, or would exist after
giving effect to the Loans requested to be made, on such date and, in the case
of the initial Loan, after giving effect to the consummation of the transaction
contemplated by the Acquisition Agreement; provided, however, that Agent in its
sole discretion, may continue to make Loans notwithstanding the existence of an
Event of Default or Default and that any Loans so made shall not be deemed a
waiver of any such Event of Default or Default; and
(iii) Maximum Loans. In the case of any Loans
requested to be made, after giving effect thereto, the aggregate Loans shall not
exceed the maximum Loans permitted under this Agreement.
Each request for a Loan by Borrower hereunder shall constitute a representation
and warranty by Borrower as of the date of such Loan that the conditions
contained in this subsection shall have been satisfied.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1. Payment of Obligations. Borrower shall fail to pay any
of the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
10.1.2. Misrepresentations. Any representation, warranty or
other statement made or furnished to Agent or any Lender by or on behalf of
Borrower or any Subsidiary of Borrower in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
43
10.1.3. Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2,
6.1.1, 6.2, 6.3, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.4. Breach of Other Covenants. Borrower or any
Subsidiary of Borrower shall fail or neglect to perform, keep or observe any
covenant contained in this Agreement (other than a covenant which is dealt with
specifically elsewhere in Section 10.1 hereof) and the breach of such other
covenant is not cured to Agent's satisfaction within fifteen (15) days after the
sooner to occur of Borrower's or Subsidiary of Borrower's receipt of notice of
such breach from Agent or the date on which such failure or neglect first
becomes known to any senior officer of Borrower or Subsidiary of Borrower.
10.1.5. Default Under Security Documents/Other Agreements. Any
event of default shall occur under, or Borrower or any Subsidiary of Borrower
shall default in the performance or observance of any term, covenant, condition
or agreement contained in, any of the Security Documents or the Other Agreements
or the Acquisition Agreement and such default shall continue beyond any
applicable grace period.
10.1.6. Other Defaults. There shall occur any default or event
of default on the part of Borrower under any agreement, document or instrument
to which Borrower is a party or by which Borrower or any of its Property is
bound, creating or relating to any Indebtedness in excess of $500,000 if the
payment or maturity of such Indebtedness is accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made.
10.1.7. Insolvency and Related Proceedings. Borrower or any
Subsidiary of Borrower shall cease to be Solvent or shall suffer the appointment
of a receiver, trustee, custodian or similar fiduciary, or shall make an
assignment for the benefit of creditors, or any petition for an order for relief
shall be filed by or against Borrower or any Subsidiary of Borrower under the
Bankruptcy Code (if against Borrower, the continuation of such proceeding for
more than 30 days), or Borrower or any Subsidiary of Borrower shall make any
offer of settlement, extension or composition to its unsecured creditors
generally.
10.1.8. Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower or any Guarantor for
a period which significantly affects Borrower's or such Guarantor's capacity to
continue its business, on a profitable basis; or Borrower or any Guarantor shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by Borrower or such Guarantor which is necessary to the continued or
lawful operation of Borrower's business; or Borrower shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which Borrower or any Guarantor leases,
uses or occupies any Property shall be canceled or terminated prior to the
expiration of its stated term; or any part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
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10.1.9. Change of Ownership. Holdings shall fail to own and
control, beneficially, all of the issued and outstanding voting stock of
Borrower and Borrower shall cease to own and control all of the issued and
outstanding voting stock of its Subsidiaries.
10.1.10. ERISA. A Reportable Event shall occur which Agent, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the PBGC of any Plan or for the appointment by the appropriate
United States district court of a trustee for any Plan, or any Plan shall be
terminated or any such trustee shall be requested or appointed, or
if Borrower or any Subsidiary of Borrower is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting
from Borrower's or such Subsidiary's complete or partial withdrawal from such
Plan.
10.1.11. Challenge to Agreement. Borrower or any Subsidiary of
Borrower, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Agent for the
benefit of Lenders.
10.1.12. Criminal Forfeiture. Borrower shall be criminally
indicted or convicted under any law that could lead to a forfeiture of any
material Property of Borrower.
10.1.13. Judgments. Any money judgment, writ of attachment or
similar process is filed against Borrower or any Subsidiary of Borrower, or any
of their respective Property, if the amount thereof not covered by insurance is
in excess of $250,000 and such judgment, attachment or process remains unstayed,
unpaid, undischarged or unbonded (but only to the extent the issuance of such
bond stays all related judgment enforcement proceedings) for 30 consecutive
days.
10.1.14. Repudiation of or Default Under Guaranty Agreement.
Any Guarantor shall revoke or attempt to revoke any Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability hereunder or
thereunder or shall be in default under the terms thereof.
10.2. Acceleration of the Obligations. Without in any way limiting the
right of Agent or the Lenders to demand payment of any portion of the
Obligations payable on demand in accordance with Section 3.2 hereof, upon or at
any time after the occurrence of an Event of Default, all or any portion of the
Obligations shall, at the option of the Required Lenders and without
presentment, demand, protest or further notice by Agent or any Lender, become at
once due and payable and Borrower shall forthwith pay to Agent for the ratable
benefit of Lenders, the full amount of such Obligations, provided, that upon the
occurrence of an Event of Default specified in subsection 10.1.7 hereof, all of
the Obligations shall become automatically due and payable without declaration,
notice or demand by Agent or any Lender.
10.3. Other Remedies. Upon the occurrence of an Event of Default, Agent
shall have and may exercise from time to time the following rights and remedies:
45
10.3.1. All of the rights and remedies of a secured party
under the Code or under other applicable law, and all other legal and equitable
rights to which Agent may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2. The right to take immediate possession of the
Collateral, and to (i) require Borrower to assemble the Collateral, at
Borrower's expense, and make it available to Agent and Lenders at a place
designated by Agent which is reasonably convenient to both
parties, and (ii) enter any premises where any of the Collateral shall be
located and to keep and store the Collateral on said premises until sold (and if
said premises be the Property of Borrower, Borrower agrees not to charge Agent
or any Lender for storage thereof).
10.3.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Agent, in
its sole discretion, may deem advisable. Borrower agrees that ten (10) days
written notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Agent may designate in said notice. Agent shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Agent shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, in a commercially reasonable manner, for cash,
credit or any combination thereof, and Agent or any Lender may purchase all or
any part of the Collateral at public or, if permitted by law, private sale and,
in lieu of actual payment of such purchase price, may set off the amount of such
price against the Obligations. The proceeds realized from the sale of any
Collateral may be applied, after allowing two (2) Business Days for collection,
first to the costs, expenses and attorneys' fees incurred by Agent in collecting
the Obligations, in enforcing the rights of Agents and Lenders under the Loan
Documents and in collecting, retaking, completing, protecting, removing,
storing, advertising for sale, selling and delivering any Collateral, second to
the interest due upon any of the Obligations; and third, to the principal of the
Obligations. If any deficiency shall arise, Borrower shall remain liable to
Agent and Lenders therefor.
10.3.4. Agent is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Agent's benefit.
10.3.5. Agent may, at its option, require Borrower to deposit
with Agent funds equal to the Aggregate LC Amount and, if Borrower fails to
promptly make such deposit, Lenders may advance such amount as a Revolving
Credit Loan (whether or not an Overadvance is created thereby). Any such deposit
or advance shall be held by Agent as a reserve to fund future payments on
outstanding LC Guaranties and future drawings against outstanding Letters of
Credit. At such time as all LC Guaranties have been paid or terminated and all
Letters of Credit have been drawn
46
upon or expired, any amounts remaining in such reserve shall be applied against
any outstanding Obligations, or, if all Obligations have been indefeasibly paid
in full, returned to Borrower.
10.4. Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Agent or Lenders or contained in any other agreement
between or among Agent, Lenders and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Agent or any Lender to
require strict performance by Borrower of any provision of this Agreement or to
exercise or enforce any rights, Liens, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents or security or Collateral
shall not operate as a waiver of such performance by Borrower, and all such
requirements, Liens, rights, powers, and remedies shall continue in full force
and effect until all Loans and all other Obligations owing or to become owing
from Borrower to Agent or Lenders shall have been fully satisfied. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the other Loan Documents and no Event of
Default by Borrower under this Agreement or any other Loan Documents shall be
deemed to have been suspended or waived by Agent or any Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Agent (with the
consent of Lenders or Required Lenders, as applicable, in accordance with the
terms of subsection 12.3) and directed to Borrower.
SECTION 11. REGARDING AGENT
11.1. Appointment. Each Lender hereby designates Fleet to act as Agent for
such Lender under this Agreement and the other Loan Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
2.3), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement, Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the other Loan Documents or applicable law unless
Agent is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
11.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan Documents.
Neither Agent nor any of its
47
officers, directors, employees or agents shall be (i) liable for any action
taken or omitted by them as such hereunder or in connection herewith, unless
caused by their gross negligence (but not mere negligence) or willful misconduct
or (ii) responsible in any manner for any recitals, statements, representations
or warranties made by Borrower or any officer thereof contained in this
Agreement or in any other Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any of the other Loan Documents
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any of the other Loan Documents or for any
failure of Borrower to perform its obligations hereunder or thereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the other Loan Documents, or to inspect
the properties, books or records of Borrower. The duties of Agent as respects
the Loans to Borrower shall be mechanical and administrative in nature; Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Agreement except as expressly set forth herein.
11.3. Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of Borrower in connection with the making and the continuance of the
Loans hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of Borrower. Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Loans or at any time or
times thereafter except as shall be provided by Borrower pursuant to the terms
hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any of the other Loan
Documents, or of the financial condition of Borrower, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any of the other Loan Documents or
the financial condition of Borrower, or the existence of any Event of Default or
any Default.
Agent may resign on sixty (60) days' written notice to each of
Lenders and Borrower. The Required Lenders will promptly designate a successor
Agent which in the absence of an Event of Default shall be reasonably
satisfactory to Borrower; provided that such resignation shall not be effective
until a successor Agent has been designated and approved by Borrower, which such
approval shall not be unreasonably withheld.
Any such successor Agent shall succeed to the rights, powers
and duties of Agent, and the term "Agent" shall mean such successor agent
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent. After any Agent's resignation as Agent, the
provisions of this Section 11 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
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11.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement, any Other Agreement or any Security Document,
Agent shall be entitled to refrain from such act or taking such action unless
and until Agent shall have received instructions from the Required Lenders; and
Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, Lenders shall not have any right of action
whatsoever against Agent as a result of its acting or refraining from acting
hereunder in accordance with the instructions of the Required Lenders.
11.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed in good faith by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and the
other Loan Documents and its duties hereunder, upon advice of counsel selected
by it. Agent may employ agents and attorneys-in-fact and shall not be liable for
the default or misconduct of any such agents or attorneys-in-fact selected by
Agent with reasonable care.
11.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the other Loan Documents, unless Agent has received notice from a Lender or
Borrower referring to this Agreement or the other Loan Documents, describing
such Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
11.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Loans (or, if no Loans are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any other Loan Document; provided that, Lenders shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct.
11.8. Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Loans made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrower
("Other
49
Transactions") as if it were not performing the duties specified herein,
and may accept fees and other consideration from Borrower for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders; provided, however, Agent shall not exercise any rights of
set-off under this Agreement with respect to Borrower's obligations to Agent
arising out of any Other Transactions.
11.9. Delivery of Documents. To the extent Agent receives documents and
information from Borrower pursuant to the terms of this Agreement, Agent will
promptly furnish such documents and information to Lenders.
11.10. Borrower's Undertaking to Agent. Without prejudice to its
obligations to the Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent
to pay to Agent from time to time on demand all amounts from time to time due
and payable by it for the account of Agent or the Lenders or any of them
pursuant to this Agreement to the extent not already paid. Any payment made
pursuant to any such demand shall pro tanto satisfy Borrower's obligations to
make payments for the account of the Lenders or the relevant one or more of them
pursuant to this Agreement.
SECTION 12. MISCELLANEOUS
12.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) and Agent, or Agent's
agent, may, without notice to Borrower and in Borrower's or Agent's name, but at
the cost and expense of Borrower:
12.1.1. At such time or times upon the occurrence and during
the continuance of an Event of Default as Agent or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Agent or any Lender or under
Agent's or any Lender's control.
12.1.2. At such time or times upon the occurrence and during
the continuance of an Event of Default as Agent in its sole discretion may
determine: (a) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of Borrower's rights and remedies with respect to the collection of
the Accounts; (b) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral or any legal proceedings brought to collect any of
the Accounts or other Collateral; (c) sell or assign any of the Accounts and
other Collateral upon such terms, for such amounts and at such time or times as
Agent deems advisable; (d) take control, in any manner, of any item of payment
or proceeds relating to any Collateral; (e) prepare, file and sign Borrower's
name to a proof of claim in bankruptcy or similar document against any Account
Debtor or to any notice of lien, assignment or satisfaction of lien or similar
document in connection with any of the Collateral; (f) receive, open and dispose
of all mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Agent may designate; (g) endorse
the name of Borrower upon any of the items of payment or proceeds relating to
any
50
Collateral and deposit the same to the account of Agent on account of the
Obligations; (h) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar document or
agreement relating to the Accounts, Inventory and any other Collateral; (i) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (j) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment and any other
Collateral; (k) make and adjust claims under policies of insurance; and (l) do
all other acts and things necessary, in Agent's determination, to fulfill
Borrower's obligations under this Agreement.
12.2. Indemnity. Borrower will indemnify and hold harmless Agent, each
Lender and each of their Affiliates and their officers, directors, employees,
agents and advisors (each an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with (a) the Transactions and any of the other
transactions contemplated by this Agreement, (b) any acquisition or proposed
acquisition or similar business combination or proposed business combination by
Borrower or any Subsidiary of Borrower or any of their Subsidiaries or
Affiliates of all or any portion of the shares of capital stock or substantially
all of the Property and assets of any other Person, (c) the Loans and any use
made or proposed to be made with the proceeds thereof or (d) the actual or
alleged presence of Hazardous Materials on any Property of Borrower or any
Subsidiary of Borrower or any of their Subsidiaries or any environmental action
or proceeding relating in any way to Borrower or any Subsidiary of Borrower or
any of their Subsidiaries or any of their respective Properties, in each case,
whether or not such investigation, litigation or proceeding is brought by
Borrower or any Subsidiary of Borrower or any of their shareholders or creditors
or an Indemnified Party, or an Indemnified Party is otherwise a party thereto
and whether or not the Transactions are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross (not mere) negligence or willful misconduct. Borrower
further agrees that no Indemnified Party will have any liability (whether direct
or indirect, in contract or tort or otherwise) to Borrower or any Subsidiary of
Borrower or any of their respective security holders or creditors arising out
of, related to or in connection with the Transactions, except for direct (as
opposed to consequential) damages determined in a final nonappealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party's gross (not mere) negligence or willful misconduct. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
Section 12.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
12.3. Modification of Agreement. The Required Lenders and Borrower may,
subject to the provisions of this Section 12.3, from time to time enter into
written supplemental agreements to this Agreement or the other Loan Documents
executed by Borrower, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of the Lenders,
the Agent or Borrower thereunder or the conditions, provisions or terms thereof
or waiving any Event of Default thereunder, but only to the extent specified in
such written agreements;
51
provided, however, that no such supplemental agreement shall without the consent
of all the Lenders:
(i) increase the Commitment Percentage of any
Lender.
(ii) extend the final maturity of any Note or any
scheduled installment due date under Section 1.3 hereof, or decrease
the rate of interest or reduce any fee payable by Borrower to any such
Lender pursuant to this Agreement.
(iii) alter the definition of the term Required
Lenders or alter, amend or modify this Section 12.3.
(iv) release any Collateral during any calendar
year having an aggregate value in excess of $100,000.
(v) change the rights and duties of Agent.
(vi) increase the Total Credit Facility.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrower, the Lenders and the Agent and all future holders
of the Obligations. In the case of any waiver, Borrower, the Agent and the
Lenders shall be restored to their former positions and rights, and any Event of
Default waived shall be deemed to be cured and not continuing, but no waiver of
a specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right resulting from such subsequent
Event of Default.
12.4. Successors and Assigns; Participations; New Lenders.
(i) This Agreement shall be binding upon and
inure to the benefit of Borrower, Agent, each Lender, all future holders of the
Notes and their respective successors and assigns, except that Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of Agent and each Lender.
(ii) Borrower acknowledges that in the regular
course of commercial banking business one or more Lenders may at any time and
from time to time sell participating interests in the Loans to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Lender shall provide written notice to Agent and Borrower of
any sales of participating interests made by each Lender. Each Transferee may
exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Loans held by it or other Obligations
payable hereunder as fully as if such Transferee were the direct holder thereof
provided that Borrower shall not be required to pay to any Transferee more than
the amount which it would have been required to pay to Lender which granted an
interest in its Loans or other Obligations payable hereunder to such Transferee
had such Lender retained such interest in the Loans hereunder or other
Obligations payable hereunder and in no event shall Borrower be required to pay
any such amount arising from the same circumstances and with respect to the same
Loans or other Obligations
52
payable hereunder to both such Lender and such Transferee. Borrower hereby
grants to any Transferee a continuing security interest in any deposits, moneys
or other property actually or constructively held by such Transferee as security
for the Transferee's interest in the Loans. No such participation shall create a
direct contractual relationship between Borrower and such participant, and no
participant shall be given (i) the right to instruct the Lender to take or to
refrain from taking any action hereunder, or (ii) any voting rights hereunder
(other than for reductions or postponements of any amounts payable hereunder or
the release of all or substantially all of the Collateral).
(iii) Any Lender may sell, assign or transfer its
rights under this Agreement and the other Loan Documents to one or more
additional banks or financial institutions reasonably acceptable to Agent and
Borrower (such acceptance not to be unreasonably withheld or delayed) which
additional banks or financial institutions may commit to make Loans hereunder
(each a "Purchasing Lender"), pursuant to a Commitment Transfer Supplement,
executed by a Purchasing Lender, the transferor Lender, and Agent in the form
annexed hereto as Exhibit 12.4 and delivered to Agent for recording provided,
however, that any transfer of less than all of any Lender's rights hereunder or
any transfer to a Person who is not a Lender hereunder shall be in minimum
amounts of not less than $2,500,000. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the other Loan Documents. Borrower
hereby consents to the addition of such Purchasing Lender and the resulting
adjustment of the Commitment Percentages arising from the purchase by such
Purchasing Lender in accordance with the terms of subsection 12.4(iii) of all or
a portion of the rights and obligations of such transferor Lender under this
Agreement and the other Loan Documents. Borrower shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing at such transferring Lender's expense.
(iv) Agent shall maintain at its address a copy of
each Commitment Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and Lenders may treat each Person whose name
is recorded in the Register as the owner of the Loan recorded therein for the
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall receive a fee in the amount of $3,000
payable by the applicable Purchasing Lender upon the effective date of each
transfer or assignment to such Purchasing Lender.
(v) Borrower authorizes each Lender to
disclose to any Transferee or Purchasing Lender and any prospective Transferee
or Purchasing Lender any and all financial
53
information in such Lender's possession concerning Borrower which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement
or in connection with such Lender's credit evaluation of Borrower, subject to
such prospective Transferee's agreeing to maintain the confidentiality of such
information pursuant to an agreement reasonably acceptable to Borrower.
(vi) Borrower agrees to take all actions that
Agent may reasonably request in attempting to sell, transfer or assign any of
its rights or interest under this Agreement. Such actions include, but are not
limited to, (a) Borrower causing senior management and representatives of
Borrower and its Subsidiaries to be available to participate in information
meetings with prospective Purchasing Lenders at such times and places as Agent
may reasonably request, (b) Borrower using its reasonable efforts to ensure that
Agent's attempt to sell, transfer or assign any of its rights or interest under
this Agreement benefit from Borrower lending relationships and (c) Borrower
providing Agent with all information reasonably requested by Agent in order to
accomplish such sale, transfer or assignment.
(vii) Notwithstanding anything to the contrary in
this Section 12.4, without Agent's prior written consent, no Lender (other than
Fleet) may assign or sell any of its rights or interests hereunder, provided,
however, any Lender hereunder may assign all or any of its rights hereunder
without the consent of Borrower or Agent to (a) the Federal Reserve Bank as
collateral or (b) any Affiliate of such Lender.
(viii) Upon at least 60 days prior written notice
to Agent, any Lender may terminate its commitment to make Loans hereunder as of
the last day of the Original Term.
12.5. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.6. Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lenders permitted under Section 12.4
hereof.
12.7. Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
12.8. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
54
12.9. Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one (1)
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Agent: FLEET CAPITAL CORPORATION
000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Northeast Loan Administrator
Facsimile No.: (000) 000-0000
With a copy to: XXXX & HESSEN LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Borrower: Carpet Barn, Inc
c/x Xxxxxx Investments, Inc.
000 Xxxxxx Xxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxxxx & Xxxxx, P.C.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.9; provided, however, that any notice,
request or demand to or upon Agent pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Agent.
12.10. Lenders' Consent. Whenever Agent's, Required Lenders' or Lenders'
consent is required to be obtained under this Agreement, any of the Other
Agreements or any of the Security Documents as a condition to any action,
inaction, condition or event, Agent, Required Lenders and Lenders, as the case
may be, shall be authorized to give or withhold such consent in their sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
55
12.11. Credit Inquiries. Borrower and each Subsidiary of Borrower hereby
authorize and permit Agent and Lenders to respond to usual and customary credit
inquiries from third parties concerning Borrower or any Subsidiary of Borrower.
12.12. Time of Essence. Time is of the essence of this Agreement,
the Other Agreements and the Security Documents.
12.13. Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
12.14. Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
12.15. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW
YORK. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK: PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL
SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF SUCH
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF
LENDERS' LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDERS' OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDERS,
BORROWER HEREBY CONSENTS AND AGREES THAT ANY FEDERAL OR STATE COURT SITTING IN
THE STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDERS PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED
56
OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDERS OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.16. WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT
TO TRIAL BY JURY (WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF
THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii) OTHER THAN NOTICES
EXPRESSLY PROVIDED TO BE GIVEN TO BORROWER HEREIN, PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL
PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY LENDERS ON WHICH ANY LOAN PARTY MAY IN ANY WAY BE
LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDERS MAY DO IN THIS REGARD;
(iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND
OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDERS TO
EXERCISE ANY OF LENDERS' REMEDIES; (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDERS'
ENTERING INTO THIS AGREEMENT AND THAT LENDERS ARE RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS
THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
[SIGNATURE LINES ON FOLLOWING PAGE]
57
IN WITNESS WHEREOF, this Agreement has been
duly executed on the day and year specified at the beginning of this Agreement.
CARPET BARN, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: /s/ Xxxxxx X. Xxxxxx
------------------------------
Title: President
FLEET CAPITAL CORPORATION
("Agent" and "Lender")
By: /s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
------------------------------
Title:
------------------------------
Commitment Percentage: 100%
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of May
__, 1998, by and among the financial institutions party thereto and the various
financial institutions which become parties thereto ("Lenders"), Fleet Capital
Corporation as administrative and collateral agent for Lenders (in such
capacity, "Agent") and Carpet Barn, Inc. ("Borrower"), the following terms shall
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Accounts - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or acquired by
Borrower or in which Borrower now has or hereafter acquired any interest.
Adjusted Net Earnings From Operations - with respect to any
fiscal period, means the net earnings (or loss) after provision for income taxes
for such fiscal period of Borrower on a Consolidated Basis, as reflected on the
Consolidated financial statement of Borrower supplied to Agent pursuant to
subsection 8.1.3 of the Agreement, but excluding:
(i) any gain or loss arising from the sale of
capital assets;
(ii) any gain arising from any write-up of
assets;
(iii) earnings or losses of any Subsidiary of
Borrower accrued prior to the date it became a Subsidiary;
(iv) earnings or losses of any corporation or
Person, substantially all the assets of which have been acquired in any manner
by Borrower, realized by such corporation or Person prior to the date of such
acquisition;
(v) net earnings of any business entity (other
than a Subsidiary of Borrower) in which Borrower has an ownership interest
unless such net earnings shall have actually been received by Borrower in the
form of cash distributions;
(vi) any portion of the net earnings of any
Subsidiary of Borrower which for any reason is unavailable for payment of
dividends to Borrower;
(vii) the earnings or losses of any Person (other
than an Affiliate of Borrower) to which any assets of Borrower shall have been
sold, transferred or disposed of, or into which Borrower shall have merged, or
been a party to any consolidation or other form of reorganization, prior to the
date of such transaction;
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(viii) any gain arising from the acquisition of any
Securities of Borrower; and
(ix) any gain or non cash loss arising from
extraordinary items.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of a
Person; or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by a Person or a Subsidiary of a Person.
Aggregate LC Amount - at any time, without duplication, the
aggregate undrawn face amount of all Letters of Credit and LC Guaranties then
outstanding.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits thereto and this Appendix A.
Availability - the amount of money which Borrower is entitled
to borrow from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which Agent may have paid for the
account of Borrower pursuant to any of the Loan Documents and which have not
been reimbursed by Borrower) and the LC Amount is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
Bank - Fleet National Bank.
Base Rate - a rate per annum equal to the higher of (i) the
Federal Funds Rate in effect on such day plus 1/2 of 1% or (ii) the rate of
interest announced or quoted by Bank from time to time as its prime rate for
commercial loans, whether or not such rate is the lowest rate charged by Bank to
its most preferred borrowers; and, if such prime rate for commercial loans is
discontinued by Bank as a standard, a comparable reference rate designated by
Bank as a substitute therefor shall be the Base Rate.
Base Rate Loans - any Loans bearing interest computed by
reference to the Base Rate.
Borrower - Carpet Barn, Inc., a Delaware corporation.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(i) an amount equal to:
(a) the Maximum Revolving Amount;
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MINUS
(b) the Aggregate LC Amount;
MINUS
(c) Reserves; or
(ii) an amount equal to:
(a) up to 85% ("Accounts Advance Rate")
of the net amount of Eligible Accounts of Borrower;
PLUS
(b) the lesser of (1) $1,500,000 or (2)
up to 50% ("Inventory Advance Rate") of the value of Eligible Inventory of
Borrower calculated on the basis of the lower of cost or market calculated on a
first-in, first-out basis;
PLUS
(c) up to the Special Advance Amount;
MINUS
(d) Reserves.
For purposes hereof, the net amount of Eligible Accounts at
any time shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at Agent's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any time
issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time.
Business Day - means, with respect to Eurodollar Loans, any
day on which commercial banks are open for domestic and international business
including dealings in Dollar deposits in London, England and New York, New York
and with respect to all other Loans, any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of New York or is a day
on which banking institutions located in such state are closed.
Capital Expenditures - expenditures made or liabilities
incurred by Borrower for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year and capitalized under GAAP, including the total principal
portion of Capitalized Lease Obligations.
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Capitalized Lease Obligation - any Indebtedness represented by
the principal portion of obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
Cash Flow - for any fiscal period, means (i) Adjusted Net
Earnings From Operations for such period, plus (ii) depreciation and
amortization and any other non-cash expenses of Borrower (iii) plus increases
and minus decreases in deferred taxes of Borrower for such period, all as
determined in accordance with GAAP.
CERCLA - shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
Closing Availability - Availability minus all sums then due
and owing by Borrower to trade creditors beyond normal trade terms.
Closing Date - the date on which all of the conditions
precedent in Section 9 of the Agreement are satisfied and the initial Loan is
made or the initial Letter of Credit or LC Guaranty is issued under the
Agreement.
Code - the Uniform Commercial Code as adopted and in force in
the State of New York, as from time to time in effect.
Collateral - all of the Property and interests in Property
described in Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of the
Obligations.
Commitment Percentage - of any Lender means the percentage set
forth below such Lender's name on the signature page of the Agreement as same
may be adjusted upon any assignment by a Lender pursuant to Section 12.4
thereof.
Commitment Transfer Supplement - a document in the form of
Exhibit 12.4 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Loans under the Agreement.
Consents - all material filings and all material licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign, necessary
to carry on Borrower's business, including, without limitation, any Consents
required under all applicable federal, state or other applicable law.
Consolidated Basis - the consolidation in accordance with GAAP
of the accounts or other items of Borrower and its Subsidiaries.
Consolidated Interest Expense - shall mean, for any period to
the extent actually paid, the interest expense (net of interest income) of
Borrower on a Consolidated Basis during such period determined in accordance
with GAAP consistently applied, and shall in any event include,
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without limitation, interest on Capitalized Lease Obligations and shall exclude
original issue discount amortization to the extent it is required to be included
in accordance with GAAP.
Current Assets - at any date means the amount at which all of
the current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP except that
amounts due from Affiliates and investments in Affiliates shall be excluded
therefrom.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in subsection 2.1.2 of the
Agreement.
Dividend Payment - as defined in subsection 8.2.7 of the
Agreement.
Dollar - and the sign $ shall mean lawful money of the United
States of America.
Dominion Account - a special account of Agent established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to Agent in its reasonable discretion, and over which Agent shall
have sole and exclusive access and control for withdrawal purposes.
EBITDA - with respect to any fiscal period, means the sum of
Adjusted Net Earnings From Operations before interest expense, taxes,
depreciation and amortization for said period as determined in accordance with
GAAP of Borrower on a Consolidated Basis.
Eligible Account - an Account arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services which
Agent, in its sole credit judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if:
(i) it arises out of a sale made by Borrower to
a Subsidiary or an Affiliate of Borrower or to a Person controlled by an
Affiliate of Borrower; or
(ii) it is unpaid for more than 90 days after the
original due date shown on the invoice; or
(iii) it is due or unpaid more than 90 days after the
original invoice
date; or
(iv) 50% or more of the Accounts from the Account
Debtor are not deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account
Debtor exceed 15% of the net amount of all Eligible Accounts, to the extent of
such excess; or
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(vi) any covenant, representation or warranty
contained in the Agreement with respect to such Account has been breached to the
extent it affects the collectability of such Account ; or
(vii) the Account Debtor is also Borrower's creditor
or supplier, or the Account Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with respect to any other
Account due from such Account Debtor to Borrower, or the Account otherwise is or
may become subject to any right of setoff by the Account Debtor to the extent
such amount owed is, subject to set-off by or disputed with such Account Debtor;
or
(viii) the Account Debtor has commenced a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter amended,
or made an assignment for the benefit of creditors, or a decree or order for
relief has been entered by a court having jurisdiction in the premises in
respect of the Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other petition
or other application for relief under the federal bankruptcy laws has been filed
against the Account Debtor, or if the Account Debtor has failed, suspended
business, ceased to be Solvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a significant
portion of its assets or affairs; or
(ix) it arises from a sale to an Account Debtor
outside the United States
to the extent the aggregate amount of such Accounts exceeds $25,000, unless the
sale is on letter of credit, guaranty or acceptance terms, in each case
acceptable to Agent in its sole discretion; or
(x) it arises from a sale to the Account Debtor
on a xxxx-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; or
(xi) the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless Borrower
assigns its right to payment of such Account to Agent, in a manner satisfactory
to Agent, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C.
ss.203 et seq., as amended); or
(xii) the Account is subject to a Lien other than a
Permitted Lien; or
(xiii) the goods giving rise to such Account have not
been delivered to and accepted by the Account Debtor or the services giving rise
to such Account have not been performed by Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the
Account Debtor for any deduction therefrom, except for discounts or allowances
which are made in the ordinary course of
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business and which discounts or allowances are reflected in the calculation of
the face value of each invoice related to such Account.
Eligible Inventory - such finished goods Inventory of Borrower
(other than packaging materials and supplies) which Agent, in its sole credit
judgment, deems to be Eligible Inventory. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory if:
(i) it is not in good, new and saleable
condition; or
(ii) it is slow-moving, obsolete or
unmerchantable; or
(iii) it does not meet all material standards imposed
by any governmental agency or authority; or
(iv) it does not conform in all respects to the
warranties and representations set forth in the Agreement,
(v) it is not at all times subject to Agent's
duly perfected, first priority security interest and no other Lien except a
Permitted Lien; or
(vi) it is not situated at a location in
compliance with the Agreement or is in transit.
Environmental Complaint - shall have the meaning set forth in
Section 8.1.7(d) hereof.
Environmental Laws - shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
Equipment - with respect to Borrower, all machinery,
apparatus, equipment, fittings, furniture, fixtures, motor vehicles and other
tangible personal Property (other than Inventory) of every kind and description
used in Borrower's operations or owned by Borrower, or in which Borrower has an
interest, whether now owned or hereafter acquired by Borrower and wherever
located, and all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended, and all rules and regulations from time to time promulgated
thereunder.
Eurodollar Loan - any Loan bearing interest computed by
reference to the Eurodollar Rate.
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Eurodollar Rate - for any Eurodollar Loan, for the then
current Interest Period relating thereto, the rate per annum equal to the
quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate
of the rates (expressed as a decimal) of reserve requirements current on the day
that is two (2) Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
over the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System.
Event of Default - as defined in Section 10.1 of the
Agreement.
Excess Cash Flow - with respect to any fiscal period means Net
Income minus mandatory principal payments with respect to Indebtedness for Money
Borrowed (other than the Revolving Credit Loans) for such period, minus
non-financed Capital Expenditures actually made by Borrower during such period
minus cash payments of dividends on the Preferred Stock plus or minus any
non-cash loss or gain arising from the sale of any capital assets.
Federal Funds Rate shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank.
Financial Statement - the audited financial statements of
Borrower on a Consolidated Basis for each Fiscal Year.
Fiscal Month - each monthly accounting period during any
Fiscal Year.
Fiscal Quarter - each quarterly accounting period during any
Fiscal Year.
Fiscal Year - the accounting period beginning on January 1 of
each year and ending on December 31 of each year.
Fixed Charge Coverage - means, for any period, the ratio of
(i) (A) EBITDA of Borrower on a Consolidated Basis for such period minus (B)
cash payments in respect of actual Capital Expenditures of Borrower during such
period minus (C) cash taxes actually paid during such period to (ii) the sum of
the aggregate of payments of regularly scheduled principal and Consolidated
Interest Expense with respect to Indebtedness for Money Borrowed made during
such period.
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Funded Debt Coverage Ratio - means, for any period, the ratio
of (A) Indebtedness for Money Borrowed of Borrower on a Consolidated Basis for
such period to (B) EBITDA of Borrower on a Consolidated Basis for such period.
General Intangibles - with respect to Borrower all general
intangibles and other personal property of Borrower (including things in action)
other than goods, Accounts, chattel paper, documents, instruments and money,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment of any of the
Accounts by an Account Debtor all rights of indemnification, all deposit
accounts of Borrower and all other intangible property of every kind and nature.
Guarantor - means each Person that shall execute and deliver a
Guaranty to Agent.
Guaranty - means the guaranty of the obligations of Borrower
executed by each Guarantor in favor of Agent and Lenders and each related
guaranty security agreement, as applicable.
Hazardous Discharge - shall have the meaning set forth in
Section 4.19(d) hereof.
Hazardous Substance - shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, or any other
applicable Environmental Law and in the regulations adopted pursuant thereto.
Hazardous Wastes - shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
Holdings - means Carpet Barn Holdings, Inc., a Delaware
corporation.
Indebtedness - as applied to a Person means, without
duplication
(i) all items which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person as at the date as of which Indebtedness
is to be determined, including, without limitation, Capitalized Lease
Obligations,
(ii) all obligations of other Persons which such
Person has guaranteed,
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(iii) all reimbursement obligations in connection
with letters of credit or letter of credit guaranties issued for the account of
such Person, and
(iv) in the case of Borrower, the Obligations.
Interest Period - as defined in subsection 3.1.5.
Inventory - with respect to Borrower, all of Borrower's
inventory, whether now owned or hereafter acquired including, but not limited
to, all goods intended for sale or lease by Borrower, or for display or
demonstration; all work in process; all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
Borrower's business; and all documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by
Borrower.
LC Guaranty - any guaranty pursuant to which Agent or any
Affiliate of Agent shall guaranty the payment or performance by Borrower of its
reimbursement obligation under any letter of credit.
Lender and Lenders - the meaning ascribed to such terms in the
Preamble to the Agreement and each person which is a transferee, successor or
assign of any Lender.
Letter of Credit - any letter of credit issued by Agent or any
of Agent's Affiliates for the account of Borrower.
Letter of Credit Fee Payment Date - the last Business Day of
each March, June, September and December and on the last day of the Original
Term.
LIBOR - for any Eurodollar Loan for the then current Interest
Period, the rate of interest equal to the average (rounded upwards, if necessary
to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Bank in the London interbank
eurodollar market as at 11:00 A.M. London time two (2) Business Days prior to
the beginning of such Interest Period, for delivery on the first day of such
Interest Period, and in an amount approximately equal to the amount of such
Eurodollar Loan for a period approximately equal to such Interest Period.
Lien - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall also
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of the Agreement, Borrower
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.
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Loan Account - the loan account established on the books of
Agent pursuant to and as defined in Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loan Year - the applicable year during the Term calculated
initially from the Closing Date (i.e. the Closing Date through the day prior to
the one year anniversary of the Closing Date, "Loan Year 1", the one year
anniversary date through the day prior to the two year anniversary of the
Closing Date, "Loan Year 2", etc.)
Loans - all loans and advances of any kind made by Lenders
pursuant to the Agreement.
Margin - For each type of Loan, on the Closing Date the rate
per annum set forth under the relevant column heading below:
Type of Loan Base Rate Loans Eurodollar Loans
------------ --------------- ----------------
Revolving Credit Loans 1.25% 2.75%
(other than Special
Advances)
Term Loan 1.75% 3.25%
Special Advances 2.00% 3.50%
provided the applicable Margin with respect to Revolving Credit Loans (other
than Special Advances) and the Term Loan shall be subject to change based upon
the Fixed Charge Coverage Ratio for the preceding four (4) Fiscal Quarters
commencing with the four (4) Fiscal Quarters ended as of December 31, 1998
following the delivery of the audited annual financial statements of Borrower on
a Consolidated Basis for the Fiscal Year ended December 31, 1998 (so long as (i)
such statements are delivered on or before the Required Delivery Date therefor
and (ii) no Event of Default shall have occurred and be continuing) to the rates
set forth below under the relevant column heading as of the first day of the
first month following the applicable Required Delivery Date:
Eurodollar Loans Base Rate Loans
Revolving Credit Revolving
Fixed Charge Coverage Loans (other than Credit Loans
Ratio Special Advances) Term Loan (other than Term
Special Advances) Loan
Greater than or equal 2.00% 2.50% .50% 1.00%
to 2.50x
Greater than or equal to 2.25% 2.75% .75% 1.25%
2.00x but less than 2.50x
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Less than 2.00x 2.75% 3.25% 1.25% 1.75%
Material Adverse Effect - a material adverse effect on (a) the
condition (financial or otherwise), operations, performance, properties, assets
or business of Borrower and its Subsidiaries, taken as a whole, (b) Borrower's
or any Subsidiary of Borrower's ability to pay or perform the Obligations in
accordance with the terms thereof, (c) the value of the Collateral, the Liens on
the Collateral or the priority of any such Lien, (d) the practical realization
of the benefits of Agent's or any Lender's rights and remedies under this
Agreement or the other Loan Documents or (e) any of the Transactions.
Maximum Revolving Amount - $5,000,000
Money Borrowed - means (i) Indebtedness arising from the
lending of money by any Person to Borrower; (ii) Indebtedness, whether or not in
any such case arising from the lending by any Person of money to Borrower, (A)
which is represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by bonds,
debentures, notes or similar instruments, or (C) upon which interest charges are
customarily paid (other than accounts payable) or that was issued or assumed as
full or partial payment for Property; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with respect to
letters of credit or guaranties of letters of credit and (v) Indebtedness of
Borrower under any guaranty of obligations that would constitute Indebtedness
for Money Borrowed under clauses (i) through (iii) hereof, if owed directly by
Borrower.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Net Income - for any period, shall mean, the net income of
Borrower on a Consolidated Basis for such period as determined in accordance
with GAAP as of the Closing Date.
Net Worth - at a particular date, all amounts which would be
included under shareholders' equity (including preferred stock whether or not
categorized as part of shareholders' equity in accordance with GAAP) on a
balance sheet of Borrower on a Consolidated Basis determined in accordance with
GAAP as at such date and as adjusted to reflect changes in Net Worth evidenced
in the Pro Forma Balance Sheet.
Notes - the Term Notes and the Revolving Notes.
Obligations - all Loans and all other advances, debts,
liabilities, obligations, covenants and duties, together with all interest, fees
and other charges thereon, owing, arising, due or payable from Borrower to Agent
or Lenders of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, arising under the Agreement or any of
the other Loan Documents whether direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however created.
Original Term - as defined in Section 4.1 of the Agreement.
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Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents), heretofore, now
or hereafter executed by Borrower, any Subsidiary of Borrower, any Guarantor or
any other third party and delivered to Agent and Lenders in respect of the
Transactions.
Overadvance - as to Borrower, the amount, if any, by which the
outstanding principal amount of Revolving Credit Loans plus the LC Amount
exceeds the Maximum Revolving Amount.
Participating Lender - each Person who shall be granted the
right by any Lender to participate in any of the Loans described in the
Agreement and who shall have entered into a participation agreement in form and
substance satisfactory to Lenders.
Permitted Liens - any Lien of a kind specified in subsection
8.2.5 of the Agreement.
Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
Plan - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.
Pledge Agreement - the Pledge Agreement(s) executed by
Borrower or any Subsidiary of Borrower pursuant to which such Person pledges the
Subsidiary Stock.
Preferred Stock - (i) the 4,660 shares of Holding's preferred
stock, par value $.01 per share, consisting of two series, one designated as
Series A 12% Cumulative Preferred Stock, par value $.01 per share, stated value
$1,000 per share, and the other designated as 12% Cumulative Preferred Stock,
par value $.01 per share, stated value $1,000 per share, (ii) the $500,000 of
indebtedness of Holdings or its Affiliates to Facundo Bacardi, which
indebtedness bears interest at a rate of 12% per annum, payable monthly and
(iii) any shares of preferred stock issued by Nations Flooring, Inc. in
exchange, by merger or otherwise, for the preferred stock or indebtedness
referred to in clauses (i) or (ii) above. Any reference in any of the Loan
Documents to dividends with respect to Preferred Stock shall mean any dividends
paid or interest payment with respect to the preferred stock or indebtedness
referred to in the preceding sentence.
Pro Forma Balance Sheet - as defined in Section 7.1.10(b) of
the Agreement.
Projections - Borrower's forecasted Consolidated and
consolidating (a) balance sheets, (b) profit and loss statements, (c) cash flow
statements (d) capitalization statements and (e) Accounts and Inventory
valuations all prepared on a consistent basis with Borrower's historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
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Purchase Money Indebtedness - means and includes (i)
Indebtedness (including Capitalized Lease Obligations) (other than the
Obligations) for the payment of all or any part of the purchase price of any
fixed assets, (ii) any Indebtedness (including Capitalized Lease Obligations)
(other than the Obligations) incurred at the time of or within 10 days prior to
or after the acquisition of any fixed assets for the purpose of financing all or
any part of the purchase price thereof, and (iii) any renewals, extensions or
refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Indebtedness, but only if such Lien shall at all times be
confined solely to the fixed assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien
including Liens securing Capitalized Lease Obligations.
Purchasing Lender - as defined in Section 12.4(iii) of the
Agreement.
Quarterly Financial Statement - the quarterly consolidated
financial statements of Borrower with respect to each Fiscal Quarter.
RCRA - shall mean the Resource Conservation and Recovery Act,
42 U.S.C. ss.ss.6901 et seq., as same may be amended from time to time.
Rentals - as defined in subsection 8.2.12 of the Agreement.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
Required Lenders - Lenders holding at least fifty-one percent
(51%) of the Loans as of the most recent Settlement Date and, if no Loans are
then outstanding, Lenders holding at least fifty-one percent (51%) of the
Commitment Percentages.
Required Delivery Date - each date of required delivery of a
Financial Statement or a Quarterly Financial Statement.
Reserves - as defined in subsection 1.1.1 of the Agreement.
Restricted Investment - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or capital
contribution, or otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of
Borrower to the extent existing on the Closing Date;
(ii) rights to payment arising from the sale of
goods and services in the ordinary course of business of Borrower and its
Subsidiaries;
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(iii) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one year from
the date of acquisition thereof;
(iv) investments in certificates of deposit
maturing within one year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or any state thereof
having capital surplus and undivided profits aggregating at least $100,000,000;
and
(v) investments in commercial paper given the
highest rating by a national credit rating agency and maturing not more than 270
days from the date of creation thereof.
Revolving Credit Loan - a Loan made by any Lender as provided
in Section 1.1 of the Agreement including, without limitation, Special Advances.
Revolving Notes - shall have the meaning set forth in
subsection 1.1.1.
Schedule of Accounts - as defined in subsection 6.2.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
Security Documents - all instruments and agreements now or at
any time hereafter securing the whole or any part of the Obligations.
Settlement Date - the Closing Date and thereafter on the first
day of each Week unless such day is not a Business Day in which case it shall be
the next succeeding Business Day; provided, however, if Agent so elects in its
discretion, Settlement Date shall mean each Business Day of the Week.
Shareholder Notes - the aggregate indebtedness on the Closing Date of the
Company, Holdings and Nations Flooring, Inc. to Xxxxxx Investments, Inc.,
whether or not evidenced or memorialized by a written agreement, plus any
additional indebtedness incurred by the Company, Holdings or Nations Flooring,
Inc. to Xxxxxx Investments, Inc. after the Closing Date in respect of the
Preferred Stock or otherwise.
Six Month Statement - as defined in subsection 8.2.7 of the
Agreement.
Solvent - as to any Person, such Person (i) owns Property
whose fair saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts, which will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability), (ii) is able to pay all of its Indebtedness as such
Indebtedness matures, (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage
and (iv) does not intend to, and does not believe it will, incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature.
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Special Advances - at any date the amount, if any, by which $0
exceeds the difference between (A) the amount derived from clauses (ii)(a) and
(ii)(b) minus (ii)(d) of the definition of Borrowing Base as of such date and
(B) outstanding Revolving Credit Loans as of such date.
Special Advance Amount - an amount up to $750,000 reduced by
$187,500 on each October 31 and April 30 during the Original Term until reduced
to $0.
Subordinated Debt - Indebtedness of Borrower that is
subordinated to the Obligations in a manner satisfactory to Lenders.
Subordination Agreement - the Subordination Agreement to be
dated on or about the Closing Date among Borrower, Lender and C.B. Realty of
Delaware, Inc.
Subsidiary - any corporation or limited liability company of
which a Person owns, directly or indirectly through one or more intermediaries,
more than 50% of the Voting Stock at the time of determination and each direct
and indirect Subsidiary of such Person.
Subsidiary Stock - all of the issued and outstanding shares of
stock owned by Borrower or any Subsidiary of Borrower of any of its
Subsidiaries.
Term Loan - means Loans made pursuant to Section 1.3 hereof.
Term Notes - shall have the meaning set forth in subsection
1.3.
Transactions - as defined in Section 7.1.10(b) of the
Agreement.
Total Credit Facility - $10,000,000.
Transferee - as defined in Section 12.4(ii) of the Agreement.
Voting Stock - Securities of any class or classes of a
corporation or membership interests of a limited liability company, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors with respect to a corporation or entitled to
elect the managers with respect to a limited liability company (or Persons
performing similar functions).
Week - the time period commencing with a Monday and ending on
the following Monday.
Other Terms. All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.
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Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. The section titles, table of contents
and list of exhibits appear as a matter of convenience only and shall not affect
the interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
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