Exhibit 10.24
MSI/EAGLE SUPPLY, INC., AS BORROWER
LOAN AND SECURITY AGREEMENT
Dated as of October 22, 1998
$9,075,000
FLEET CAPITAL CORPORATION, AS LENDER
TABLE OF CONTENTS
SECTION 1. CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 REVOLVING CREDIT LOANS.. . . . . . . . . . . . . . . . . . . . . 1
1.2 TERM LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. INTEREST, FEES AND CHARGES . . . . . . . . . . . . . . . . . . . 2
2.1 INTEREST.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 CLOSING FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 COLLATERAL MONITORING FEE. . . . . . . . . . . . . . . . . . . . 4
2.4 UNUSED AVAILABILITY FEE. . . . . . . . . . . . . . . . . . . . . 4
2.5 AUDIT AND APPRAISAL FEES . . . . . . . . . . . . . . . . . . . . 4
2.6 CAPITAL ADEQUACY CHANGE. . . . . . . . . . . . . . . . . . . . . 5
2.7 REIMBURSEMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . 6
2.8 BANK CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 COLLECTION CHARGES . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. LOAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 7
3.1 MANNER OF BORROWING REVOLVING CREDIT LOANS . . . . . . . . . . . 7
3.2 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.3 PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.4 APPLICATION OF PAYMENTS AND COLLECTIONS. . . . . . . . . . . . .12
3.5 ALL LOANS TO CONSTITUTE ONE OBLIGATION . . . . . . . . . . . . .12
3.6 LOAN ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.7 STATEMENTS OF ACCOUNT. . . . . . . . . . . . . . . . . . . . . .12
SECTION 4. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . .13
4.1 TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . .13
4.2 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 5. SECURITY INTERESTS . . . . . . . . . . . . . . . . . . . . . . .14
5.1 SECURITY INTEREST IN COLLATERAL. . . . . . . . . . . . . . . . .14
5.2 LIEN PERFECTION; FURTHER ASSURANCES. . . . . . . . . . . . . . .15
5.3 KEY MAN LIFE INSURANCE . . . . . . . . . . . . . . . . . . . . .15
SECTION 6. COLLATERAL ADMINISTRATION. . . . . . . . . . . . . . . . . . . .15
6.1 LOCATION OF COLLATERAL . . . . . . . . . . . . . . . . . . . . .15
6.2 INSURANCE OF COLLATERAL. . . . . . . . . . . . . . . . . . . . .15
6.3 PROTECTION OF COLLATERAL . . . . . . . . . . . . . . . . . . . .16
6.4 ADMINISTRATION OF ACCOUNTS.. . . . . . . . . . . . . . . . . . .16
6.5 ADMINISTRATION OF INVENTORY. . . . . . . . . . . . . . . . . . .18
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6.6 RECORDS AND SCHEDULES OF EQUIPMENT . . . . . . . . . . . . . . .18
6.7 PAYMENT OF CHARGES . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . .19
7.1 GENERAL REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . .19
7.2 CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES. . . . . . .25
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . .25
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS. . . . . . . . . . . . . . .25
8.1 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . .25
8.2 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . .28
8.3 SPECIFIC FINANCIAL COVENANTS.. . . . . . . . . . . . . . . . . .32
SECTION 9. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . .32
9.1 DOCUMENTATION. . . . . . . . . . . . . . . . . . . . . . . . . .32
9.2 NO DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9.3 OTHER LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . . . . .35
9.4 ADJUSTED AVAILABILITY. . . . . . . . . . . . . . . . . . . . . .35
9.5 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . .35
9.6 VENDOR CHECKS. . . . . . . . . . . . . . . . . . . . . . . . . .35
9.7 RENT REDUCTION . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT. . . . . . . .36
10.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . .36
10.2 ACCELERATION OF THE OBLIGATIONS. . . . . . . . . . . . . . . . .38
10.3 OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . .39
10.4 REMEDIES CUMULATIVE; NO WAIVER . . . . . . . . . . . . . . . . .40
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .40
11.1 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . .40
11.2 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
11.3 MODIFICATION OF AGREEMENT; SALE OF INTEREST. . . . . . . . . . .41
11.4 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . .42
11.5 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . .42
11.6 CUMULATIVE EFFECT, CONFLICT OF TERMS . . . . . . . . . . . . . .42
11.7 EXECUTION IN COUNTERPARTS. . . . . . . . . . . . . . . . . . . .42
11.8 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
11.9 LENDER'S CONSENT . . . . . . . . . . . . . . . . . . . . . . . .44
11.10 CREDIT INQUIRIES . . . . . . . . . . . . . . . . . . . . . . . .44
11.12 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .44
11.13 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . .44
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11.14 GOVERNING LAW; CONSENT TO FORUM. . . . . . . . . . . . . . . . .44
11.15 WAIVERS BY BORROWER. . . . . . . . . . . . . . . . . . . . . . .45
11.16 PARTIES TO ACT IN A COMMERCIALLY REASONABLE MANNER . . . . . . .46
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made as of this 22nd day of October,
1998, by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island
corporation with an office at 000 Xxxxxxxxxxx Xxxx., Xxxxxxxxxxx, Xxxxxxxxxxx
00000, and MSI/EAGLE SUPPLY, INC. ("Borrower"), a Delaware corporation with its
executive office and principal place of business at 000 Xxxx 00xx Xxxxxx, Xxxxx
0000, Xxx Xxxx, XX 00000. 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, Lender agrees to make a Total Credit Facility of up to Nine Million
Seventy-Five Thousand Dollars ($9,075,000) available upon Borrower's request
therefor, as follows:
1.1 REVOLVING CREDIT LOANS..1 REVOLVING CREDIT LOANS.
1.1.1 LOANS AND RESERVES. Lender 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
subsection 3.1.1 hereof, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time less reserves, if any.
Lender shall have the right to establish reserves in such amounts, and with
respect to such matters, as Lender shall deem necessary or appropriate, against
the amount of Revolving Credit Loans which Borrower may otherwise request under
this subsection 1.1.1, including, without limitation, with respect to (i) price
adjustments, damages, unearned discounts, returned products or other matters for
which credit memoranda are issued in the ordinary course of Borrower's business;
(ii) shrinkage, spoilage and obsolescence of Inventory; (iii) slow moving
Inventory, (iv) other sums chargeable against Borrower's Loan Account as
Revolving Credit Loans under any section of this Agreement; (v) amounts owing by
Borrower to any Person to the extent secured by a Lien (other than a Permitted
Lien) on, or trust over, any Collateral of Borrower; and (vi) such other
matters, events, conditions or contingencies as to which Lender, in its sole
credit judgment, determines reserves should be established from time to time
hereunder.
1.1.2 OVERADVANCES. Lender may in its sole discretion make
Revolving Credit Loans to Borrower as requested by Borrower in accordance with
the terms of subsection 3.1.1 hereof at a time when the unpaid balance of
Revolving Credit Loans exceeds, or would exceed with the making of any such
Revolving Credit Loan, the Borrowing Base (any such loan being herein referred
to individually as an "Overadvance" and collectively as "Overadvances"). All
Overadvances shall be repaid on demand, shall be secured by all of the
Collateral and shall bear interest as provided in this Agreement for Revolving
Credit Base Rate Loans.
1.1.3 USE OF PROCEEDS. The Revolving Credit Loans shall be used
for Borrower's general working capital needs in a manner consistent with the
provisions of this Agreement and applicable law, as well as initially to fund
the acquisition of certain assets from Masonry Supply, Inc. in accordance with
the terms of the Asset Purchase Agreement.
1.2 TERM LOAN. Lender agrees to make a Term Loan to Borrower on the
Closing Date in the principal amount of $3,075,000, which shall be repaid in
successive monthly installments in accordance with the terms of the Term Note.
The monthly payments under the Term Loan shall be based on a seven-year
amortization schedule with each installment due and payable on the first day of
each month, commencing on December 1, 1998, followed by a final installment
which shall be due and payable on the earlier to occur of the end of the seven
year term, the end of the Original Term or Renewal Term (as applicable), or the
termination of this Agreement. The Term Loan shall be secured by all of the
Collateral.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 INTEREST.
2.1.1 REVOLVING CREDIT INTEREST:
(a) RATE OPTIONS. At the time of each Revolving
Credit Loan under the Revolving Credit Facility, and thereafter from time to
time, Borrower shall have the right, subject to the terms and conditions of this
Agreement and provided no Default or Event of Default has occurred, to designate
to Lender in writing that all, or a portion of the Revolving Credit Loans shall
bear interest at either the (i) Revolving Credit LIBOR Rate or (ii) Revolving
Credit Base Rate. Interest on each portion thereof shall accrue and be paid at
the time and rate applicable to the respective option selected by Borrower or
otherwise governing under the terms of this Agreement. If for any reason the
Revolving Credit LIBOR Rate option is unavailable, or Borrower does not
designate that the Revolving Credit LIBOR Rate should apply, the Revolving
Credit Base Rate shall apply. The rate of interest on Revolving Credit Base
Rate Loans shall increase or decrease by an amount equal to any increase or
decrease in the Base Rate effective as of the opening of business on the day
that any such change in the Base Rate occurs.
(b) REVOLVING CREDIT LIBOR RATE OPTION. Provided no
Default or Event of Default has occurred, and subject to the provisions of
Section 2.1.1 (a)(i) if Borrower desires to have the Revolving Credit LIBOR Rate
apply to all or a portion of the Revolving Credit Loans, Borrower shall give
Lender a written irrevocable request no later than 11:00 A.M. Eastern time on
the third (3rd) Business Day prior to the requested borrowing date specifying
(i) the date the Revolving Credit LIBOR Rate shall apply (which shall be a
Business Day), (ii) the Interest Period, and (iii) the amount to be subject to
the Revolving Credit LIBOR Rate provided
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that such amount shall be an integral multiple of Two Hundred Fifty Thousand
Dollars ($250,000.00).
2.1.2 TERM INTEREST:
(a) RATE OPTIONS. On the Closing Date, and thereafter
from time to time, Borrower shall have the right, subject to the terms and
conditions of this Agreement, and provided no Default or Event of Default has
occurred, to designate to Lender in writing that all, or a portion of the
outstanding principal balance of the Term Loan shall bear interest at either the
(i) Term LIBOR Rate, or (ii) Term Base Rate. Interest on each portion thereof
shall accrue and be paid at the time and rate applicable to the respective
option selected by Borrower or otherwise governing under the terms of this
Agreement. If for any reason an option is unavailable, Borrower may designate
another option. If Borrower does not elect any such option or, if, for any
reason the Term LIBOR Rate is not available, the Term Loan shall bear interest
at the Term Base Rate. The rate of interest on the Term Base Rate Loans shall
increase or decrease by an amount equal to any increase or decrease in the Base
Rate, effective as of the opening of business on the date that any such change
in the Base Rate occurs.
(b) TERM LIBOR RATE OPTION. Provided no Default or
Event of Default has occurred, and subject to the provisions of
Section 2.1.2(a)(i) if Borrower desires to have the Term LIBOR Rate apply to all
or a portion of the Term Loan, Borrower shall give Lender a written irrevocable
request no later than 11:00 A.M. Eastern Time on the third (3rd) Business Day
prior to the requested borrowing date specifying (i) the date the Term LIBOR
Rate shall apply (which shall be a Business Day), (ii) the Interest Period, and
(iii) the amount of the Loan to be subject to the Term LIBOR Rate; provided that
such amount shall be an integral multiple of Two Hundred Fifty Thousand Dollars
($250,000.00).
2.1.3 DEFAULT RATE OF INTEREST. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, the principal
amount of the Loans shall bear interest at a rate per annum equal to two percent
(2%) above the rate applicable with respect to Base Rate Loans.
2.1.4 COMPUTATION OF INTEREST AND FEES. Interest, fees and
collection charges hereunder shall be calculated daily and shall be computed on
the actual number of days elapsed over a year consisting of three hundred and
sixty (360) days.
2.1.5 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
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conform thereto. To the extent the laws of the State of Texas may apply to this
Agreement, notwithstanding anything herein to the contrary, if at any time the
applicable interest rate, together with all fees and charges which are treated
as interest under applicable law (collectively the "Charges"), as provided for
herein or in any other document executed in connection herewith, or otherwise
contracted for, charged, received, taken or reserved by Lender, shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by Lender in accordance with applicable law, the
rate of interest payable on the Loans, together with all Charges payable to
Lender, shall be limited to the Maximum Rate. For purposes of Texas law, the
term "MAXIMUM RATE" means the maximum rate of nonusurious interest permitted
from day to day by applicable law, including as to Article 5069, Vernon's Texas
Civil Statutes (and as the same may be incorporated by reference in other Texas
statutes), but otherwise without limitation, that rate based upon the "weekly
ceiling".
2.2 CLOSING FEE. Borrower shall pay to Lender a closing fee of
$75,000, which shall be fully earned and nonrefundable on the Closing Date and
shall be paid concurrently with the initial Loans hereunder.
2.3 COLLATERAL MONITORING FEE. Borrower shall pay to Lender each
month, in arrears, on the first day of the following month, a collateral
monitoring fee of $1,000, which fee shall be pro-rated for any month during
which this Agreement is in effect for less than a full month.
2.4 UNUSED AVAILABILITY FEE. Borrower shall pay to Lender an unused
availability fee, which shall be payable in arrears on the first Business Day of
each calendar month hereafter. The unused availability fee shall equal
one-quarter of one percent (1/4%) per annum of the amount by which the Revolving
Credit Limit exceeds the average daily amount of the Revolving Credit Loans
outstanding during the immediately preceding month; provided however that until
such time as the aggregate outstanding balance of all Revolving Credit Loans
exceeds $4,000,000, the unused availability fee shall be calculated based on the
amount during each month by which Four Million Dollars ($4,000,000) exceeds the
average daily amount of the Revolving Credit Loans outstanding during such
month. Such fee shall be pro-rated for any month during which this Agreement is
in effect for less than a full month.
2.5 AUDIT AND APPRAISAL FEES. Borrower shall pay to Lender audit and
appraisal fees from time to time in connection with Lender's periodic audits and
appraisals of Borrower's books and records and such other matters as Lender
shall deem appropriate, plus all out-of-pocket expenses incurred by Lender in
connection with such audits and appraisals. Such audit and appraisal fees shall
be calculated at the rate of $500 for each member of Lender's field examination
staff engaged in any such audit and appraisal for each day during which such
examination is being conducted and, absent the occurrence and continuance of an
Event of Default, such audits and appraisals shall be conducted not more than
three (3) times during each twelve (12) month period, commencing as of the
Closing Date. Audit fees shall be payable on
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the first day of the month following the date of issuance by Lender of a request
for payment thereof to Borrower. Upon Borrower's request, Lender shall provide
to Borrower in reasonable detail the back-up and support of any out-of-pocket
expenses referred to herein.
2.6 CAPITAL ADEQUACY CHANGE. If Lender shall have determined that
the adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority (each
such law, rule, regulation, request or directive a "Capital Adequacy Rule"),
does or shall have the effect of reducing the rate of return on Lender's capital
as a consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender's policies with respect to capital adequacy) by a material
amount, then from time to time, after submission by Lender to Borrower of a
written demand therefor (a "Capital Adequacy Demand"), the Borrower shall pay to
Lender such additional amount or amounts (each a "Capital Adequacy Amount", it
being understood that Capital Adequacy Amount may include an increase in the
Applicable Interest Rate Margin) as will compensate Lender for such reduction.
A certificate of Lender claiming entitlement to payment as set forth above shall
be conclusive in the absence of manifest error. Such certificate shall set
forth the nature of the occurrence giving rise to such reduction, the additional
Capital Adequacy Amount or Amounts to be paid to Lender, and the method by which
such Capital Adequacy Amounts were determined. In determining such Capital
Adequacy Amount, Lender may use any reasonable averaging and attribution method.
2.6.1 TERMINATION OF AGREEMENT FOLLOWING CAPITAL ADEQUACY
DEMAND. At its option, Borrower may elect to terminate this Agreement following
its receipt of a Capital Adequacy Demand, PROVIDED Borrower gives Lender notice
of such election not more than thirty (30) days following its receipt of such
Capital Adequacy Demand, and PROVIDED, further, that so long as the effective
date of such termination and the payment and satisfaction in full of all
Obligations occurs within one hundred and eighty (180) days from the date of
such notice, Borrower shall not be obligated to pay any of the charges described
in subsection 4.2.3, it being understood, however, that until such effective
date of termination and the payment and satisfaction in full of all Obligations,
Borrower shall continue to be obligated to pay Lender for each Capital Adequacy
Amount theretofore requested by Lender pursuant to a Capital Adequacy Demand.
2.6.2 SUBSEQUENT CHANGE IN CAPITAL ADEQUACY RULES. In the
event that any Capital Adequacy Rule, the adoption or change in or compliance by
Lender with which shall have resulted in a Capital Adequacy Demand, shall be
revised subsequent to the date of such Capital Adequacy Demand, such that, in
Lender's determination, its rate of return on capital shall be improved to a
level more favorable than the rate of return which, as a result of the initial
change in such Capital Adequacy Rule, precipitated such Capital Adequacy Demand,
then, in
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such event, effective promptly following such determination, PROVIDED Borrower
shall not have theretofore given to Lender a notice of election to terminate in
accordance with subsection 2.6.1: (i) in the case of a Capital Adequacy Demand
to increase the Applicable Interest Rate Margin, Lender shall reduce the
Applicable Interest Rate Margin by a percentage; and (ii) in the case of a
Capital Adequacy Demand for payment of a fee or other charge, Lender shall
rebate to Borrower a portion of such payment, in each case which Lender shall
determine to be reasonably commensurate with the improvement in Lender's rate of
return on capital caused by the subsequent revision to the Capital Adequacy
Rule. Notwithstanding anything hereinabove to the contrary, Lender shall have
no obligation whatsoever to make any such adjustment to the Applicable Interest
Rate Margin, or to otherwise rebate any Capital Adequacy Amount to Borrower, at
any time on or after: (i) the occurrence and continuance of an Event of Default;
(ii) the date of Borrower's notice of election to terminate in accordance with
subsection 2.6.1; or (iii) the effective date of termination of this Agreement.
2.7 REIMBURSEMENT OF EXPENSES. If, at any time or times regardless
of whether or not an Event of Default then exists, Lender or any Participating
Lender incurs reasonable legal or reasonable accounting expenses or any other
reasonable costs or reasonable out-of-pocket expenses in connection with (i) the
negotiation and preparation of this Agreement or any of the other Loan
Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents; (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 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 Lender or any Participating Lender against
Borrower or any other Person which may be obligated to 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 reasonable legal and reasonable accounting expenses
and other reasonable costs and reasonable out of pocket expenses of Lender shall
be charged to Borrower. All amounts chargeable to Borrower under this Section
2.7 shall be Obligations secured by all of the Collateral, shall be payable on
demand to Lender or to such Participating Lender, as the case may be, 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
Lender for reasonable expenses incurred by the Lender in its administration of
the Collateral to the extent and in the manner provided in Section 6 hereof.
2.8 BANK CHARGES Borrower shall pay to Lender, on demand, any and
all fees, costs or expenses which Lender or any Participating Lender pays to a
bank or other similar institution (including, without limitation, any fees paid
by the Lender to any Participating Lender) arising out of or in connection with
(i) the forwarding to Borrower or any other Person on behalf of Borrower, by
Lender or any Participating Lender, proceeds of Loans and (ii) the depositing
for
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collection, by Lender or any Participating Lender, of any check or item of
payment received or delivered to Lender or any Participating Lender on account
of the Obligations.
2.9 COLLECTION CHARGES. If items of payment are received by Lender
at a time when there are no Loans outstanding, such items of payment shall be
subject to a collection charge equal to two (2) days' interest on the amount
thereof at the rate then applicable to Revolving Credit Base Rate Loans, which
collection charges shall be payable on the first Business Day of each month.
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 REVOLVING CREDIT LOAN REQUESTS. A request for a
Revolving Credit Loan shall be made, or shall be deemed to be made, in the
following manner: (i) Borrower shall give Lender same day notice, no later than
11:00 A.M. (Eastern time) of such day, of its intention to borrow a Revolving
Credit Base Rate Loan, and at least three (3) Business Days prior notice of its
intention to borrow a Revolving Credit LIBOR Rate Loan, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed borrowing
date; PROVIDED, however, that no such request may be made at a time when there
exists a Default or an Event of Default and (ii) 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 for a Revolving Credit
Loan on the due date in the amount required to pay such interest or other
Obligation. As an accommodation to Borrower, Lender may permit telephone
requests for Revolving Credit Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Lender by Borrower. Unless Borrower
specifically directs Lender in writing not to accept or act upon telephonic or
electronic communications from Borrower, Lender shall have no liability to
Borrower for any loss or damage suffered by Borrower as a result of Lender's
honoring any requests, executions of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Lender by Borrower, and
Lender shall have no duty to verify the origin of any such communication or the
authority of the person sending it. Each notice of borrowing shall be
irrevocable by and binding on Borrower, and if such notice requests the
borrowing of a LIBOR Rate Loan, such notice shall state the Interest Period with
respect thereto. Borrower, at its option, may choose Base Rate Loans or LIBOR
Rate Loans, provided that any LIBOR Rate Loan shall be in a minimum amount of
$250,000, and PROVIDED, FURTHER, that the right of Borrower to choose any LIBOR
Rate Loan is subject to the provisions of subsection 3.1.4.
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3.1.2 DISBURSEMENT. Borrower hereby irrevocably authorizes
Lender 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) shall
be disbursed by Lender via wire transfer, 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 Lender 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(ii)
shall be disbursed by Lender by way of direct payment of the relevant interest
or other Obligation.
3.1.3 AUTHORIZATION. Borrower hereby irrevocably authorizes
Lender, in Lender'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 during the immediately preceding
month and to pay all costs, fees and expenses at any time owed by Borrower to
Lender hereunder.
3.1.4 NOTICE OF CONTINUATION AND NOTICE OF CONVERSION.
(a) Subject to the provisions of subsection 3.1.4(c),
Borrower may elect to maintain any borrowing consisting of LIBOR Rate Loans, or
any portion thereof, as a LIBOR Rate Loan by selecting a new Interest Period for
such borrowing, which new Interest Period shall commence on the last day of the
then existing Interest Period. Each selection of a new Interest Period (a
"Continuation") shall be made on three (3) Business Days' prior notice, given by
Borrower to Lender not later than 11:00 A.M. (Eastern time) on the third (3rd)
Business Day preceding the date of any proposed Continuation. If the Borrower
elects to maintain more than one borrowing consisting of LIBOR Rate Loans by
combining such borrowings into one borrowing and selecting a new Interest Period
pursuant to this subsection, each of the borrowings so combined shall consist of
Loans having Interest Periods ending on the same date provided that Borrower may
not combine Revolving Credit LIBOR Rate Loans and Term LIBOR Loans with each
other. If the Borrower shall fail to select a new Interest Period for any
borrowing consisting of LIBOR Rate Loans in accordance with this subsection,
such LIBOR Rate Loans will automatically convert into corresponding Base Rate
Loans.
(b) Subject to the provisions of subsection 3.1.4 (c),
Borrower may, on three (3) Business Days' prior notice given to Lender, convert
the entire amount of or a portion of all Loans of the same Type into Loans of
another Type (a "Conversion"), PROVIDED, that no Default or Event of Default
shall have occurred and be continuing, and PROVIDED, further, that any
Conversion of any LIBOR Rate Loans into Base Rate Loans may only be made on the
last day of the Interest Period for such LIBOR Rate Loans, and upon Conversion
of any Base Rate Loans into LIBOR Rate Loans, Borrower shall pay accrued
interest to the date of Conversion on
8
the principal amount converted on the first day of the following month. Each
such notice shall be given not later than 11:00 A.M. (Eastern time) on the third
(3rd) Business Day preceding the date of any proposed Conversion. Each
Conversion shall be in an aggregate amount of not less than $500,000. Borrower
may elect to convert the entire amount of or a portion of all Loans of the same
Type comprising more than one borrowing into Loans of another Type by combining
such borrowings into one borrowing consisting of Loans of such other Type;
PROVIDED, HOWEVER, that if the borrowings so combined consist of LIBOR Rate
Loans, such LIBOR Rate Loans shall have Interest Periods ending on the same date
and provided further that Borrower may not combine Revolving Credit Loans and
all or a portion of the Term Loans with each other.
(c) Notwithstanding anything contained in clauses (a) and (b)
above to the contrary:
(i) In the event that Borrower shall have requested a
LIBOR Rate Loan(s) in accordance with the terms hereof and Lender shall have
reasonably determined that Eurodollar deposits equal to the amount of the
principal of the requested LIBOR Rate Loan and for the Interest Period specified
are unavailable, impractical or unlawful, or that the rate based on the LIBOR
Rate will not adequately and fairly reflect the cost of funds of the LIBOR Rate
Loan applicable to the specified Interest Period, of making or maintaining the
principal amount of the requested LIBOR Rate Loan specified by Borrower during
the Interest Period specified, or that by reason of circumstances affecting
Eurodollar markets, adequate and reasonable means do not exist for ascertaining
the rate based on the LIBOR Rate applicable to the specified Interest Period,
Lender shall promptly give notice of such determination to Borrower that the
rate based on the LIBOR Rate is not available. A reasonable determination by
Lender hereunder shall be conclusive evidence of the correctness of the fact and
amount of such additional costs or unavailability, absent manifest error. Upon
such a determination, (A) the right of Borrower to select, continue or convert
to, or maintain a LIBOR Rate Loan at the rate based on the LIBOR Rate shall be
suspended until Lender shall have notified Borrower that such conditions shall
have ceased to exist, and (B) the requested LIBOR Rate Loans shall accrue
interest as if such Loans were Base Rate Loans.
(ii) The LIBOR Rate may be automatically adjusted by
Lender on a prospective basis to take into account the additional or increased
cost of maintaining any necessary reserves for Eurodollar deposits or increased
costs due to changes in applicable law or regulation or the interpretation
thereof by Lender based on the Federal Reserve Board's or any other applicable
agency's or governing body's directive, mandate or interpretation, occurring
subsequent to the commencement of the then applicable Interest Period, including
but not limited to changes in tax laws (except changes of general applicability
in corporate income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any successor or other
applicable governing body), excluding the Reserve Percentage and any Reserve
which has resulted in a payment pursuant to Section 2.6 below, that increase the
9
cost to Lender of funding the LIBOR Rate Loans. Lender shall promptly give
Borrower notice of such a determination and adjustment, which determination
shall be conclusive absent manifest error.
(iii) There shall not be outstanding at any one
time more than an aggregate of six (6) LIBOR Rate Loans.
(d) Each notice of Continuation or Conversion shall be
irrevocable and binding on Borrower. In the case of (i) any borrowing of a
Loan, Continuation or Conversion that the related notice of borrowing, notice of
Continuation or notice of Conversion specifies is to be comprised of LIBOR Rate
Loans, or (ii) any payment of principal of, or Conversion or Continuation of,
any LIBOR Rate Loan made other then on the last day of the Interest Period for
such Loan as a result of a payment, prepayment, Conversion or Continuation of
such Loan or acceleration of the maturity of any of the Obligations pursuant to
Section 10 hereof, or for any other reason, then in any such case, upon Lender's
demand, Borrower shall pay to Lender and indemnify Lender from and against (i)
any loss, cost or expense incurred by Lender as a result of any failure to
fulfill, on or before the date for such borrowing, Continuation or Conversion,
the applicable conditions set forth in Section 9 hereof, and (ii) any additional
losses, costs or expenses which Lender may reasonably incur as a result of such
payment, including, without limitation in each such case, any loss (excluding
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by Lender to
fund the LIBOR Rate Loans to be made as part of such borrowing, Continuation or
Conversion.
3.1.5 BORROWING BASE CERTIFICATES. Borrower shall give Lender
a Borrowing Base Certificate on a monthly basis; provided that if Borrower's
Availability is, at any time, less than $250,000, Borrower shall give Lender a
Borrowing Base Certificate on such more frequent basis as Lender may request.
3.2 PAYMENTS. Except where evidenced by notes or other instruments
issued or made by Borrower to 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.
(a) Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Lender or Borrower of any proceeds of any of the Collateral
other than Equipment, to the extent of said proceeds, (ii) the occurrence of an
Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations, or (iii) termination of this Agreement
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pursuant to Section 4 hereof; PROVIDED, however, that if an Overadvance shall
exist at any time, Borrower shall, on demand, repay the Overadvance.
(b) Principal payable on account of the Term Loan
shall be payable by Borrower as set forth in Sections 1.2, Section 3.3.3 and the
corresponding Term Note.
3.2.2 INTEREST. Interest accrued on all Loans shall be due on
the earliest of (i) the first calendar day of each month (for the immediately
preceding month), computed through the last calendar day of the preceding month,
(ii) the occurrence of an Event of Default in consequence of which Lender 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 Lender or to any other Person designated by Lender 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 Lender
as and when provided in this Agreement, the Other Agreements or the Security
Documents, or on demand, whichever is earlier.
3.3 PREPAYMENTS.
3.3.1 Except for dispositions of Inventory permitted by Section
8.2.7, if Borrower sells any of the Collateral or if any of the Collateral is
lost or destroyed or taken by condemnation, Borrower shall pay to Lender, unless
otherwise agreed to by Lender, or as otherwise expressly authorized by this
Agreement, as and when received by Borrower and as a mandatory prepayment of the
outstanding Loans, until paid and satisfied in full, a sum equal to the proceeds
(including insurance proceeds) received by Borrower from such sale, loss or
destruction. Any such prepayment shall be applied first to the Term Loan in the
inverse order of maturity and then to the Revolving Credit Loans; provided that
if such Loan is accruing interest at the LIBOR Based Rate, such prepayment shall
be delivered to Lender as and when received by Borrower but applied at the end
of the applicable Interest Period.
3.3.2 LIBOR RATE LOANS. No portion of the LIBOR Rate Loans may
be prepaid during an Interest Period unless Borrower first satisfies in full its
obligations under Section 3.1.4(d) above arising from such prepayment.
3.3.3 EXCESS CASH FLOW RECAPTURE. Borrower shall, on an annual
basis, within ten (10) Business Days of delivery to Lender of Borrower's annual
consolidated financial statement, pursuant to Section 8.1.2(i), prepay the Term
Loan in an amount equal to forty percent
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(40%) of Borrower's Excess Cash Flow ("Excess Cash Flow Payments"). All Excess
Cash Flow Payments shall be applied to the Term Loan as determined by Lender in
the inverse order of maturity.
3.4 APPLICATION OF PAYMENTS AND COLLECTIONS3.4 APPLICATION OF
PAYMENTS AND COLLECTIONS. All items of payment received by Lender 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. For the purpose of computing interest hereunder, all items of payment
received by Lender shall be deemed applied by Lender on account of the
Obligations (subject to final payment of such items) on the first Business Day
after receipt (or deemed receipt) by Lender of good funds in Lender's account
located in Chicago, Illinois, or such other account as to which Lender may
advise Borrower in writing. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Borrower upon
any of its books and records. If as the result of collections of Accounts as
authorized by subsection 6.4.6 hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower, but
shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists.
3.5 ALL LOANS TO CONSTITUTE ONE OBLIGATION. The Loans shall
constitute one general Obligation of Borrower, and shall be secured by Lender's
Lien upon all of the Collateral.
3.6 LOAN ACCOUNT. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are paid to Lender, 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. Lender will account to Borrower monthly
with a statement of Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days of the date such accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
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SECTION 4. TERM AND TERMINATION
4.1 TERM OF AGREEMENT. Subject to Lender's right to cease making
Loans to Borrower upon or after the occurrence of any 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 October 21, 2003 (the "Original Term"),
and this Agreement shall automatically renew itself for one (1) year periods
thereafter (the "Renewal Terms"), unless (a) the party which elects not to renew
this Agreement gives at least one hundred and eighty (180) days written notice
thereof to the other party prior to the expiration of the Original Term (or the
then current Renewal Term, as the case may be) or (b) this Agreement shall be
sooner terminated as provided in Section 4.2 hereof.
4.2 TERMINATION.
4.2.1 TERMINATION BY LENDER. Lender may terminate this
Agreement without notice at any time on or after the occurrence of an Event of
Default.
4.2.2 TERMINATION BY BORROWER. Upon at least ninety (90) days
prior written notice to Lender, 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. Any
notice of termination given by Borrower shall be irrevocable unless Lender
otherwise agrees in writing, and Lender shall have no obligation to make any
Loans on or after the termination date stated in such notice. Borrower may
elect to terminate this Agreement in its 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 any
termination of this Agreement by Borrower pursuant to subsection 4.2.2 hereof,
Borrower shall pay to Lender (in addition to the then outstanding principal,
accrued interest and other charges owing under the terms of this Agreement and
any of the other Loan Documents) as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to two percent (2%) of the Total
Credit Facility if termination occurs during the period from the Closing Date
through and including October 21, 1999, one percent (1%) of the Total Credit
Facility if termination occurs during the period from October 22, 1999 through
and including October 21, 2000, and one-half of one percent (1/2%) of the Total
Credit Facility if termination occurs during the period from October 22, 2000
through and including October 21, 2001. Notwithstanding anything hereinabove to
the contrary, no termination charge shall be payable under any of the following
circumstances: (a) if termination of this Agreement occurs pursuant to and in
accordance with the terms of subsection 2.6.1; or (b) if termination of this
Agreement occurs after October 22, 2001, but on or before the last day of the
Original Term or on the last day of any Renewal Term.
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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 Lender 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
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests in
the Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrower or any Account Debtor and applied to the Obligations, Lender 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 Lender from any such loss or
damage; or (ii) have retained such monetary reserves and Liens on the Collateral
for such period of time as Lender, in its reasonable discretion, may deem
necessary to protect Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 SECURITY INTEREST IN COLLATERAL. To secure the prompt payment
and performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing Lien upon all of the following Property and interests in such
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) Deposit Accounts, Investment Property, money market
accounts and security entitlements, of every nature wherever located;
(vi) All monies, checks, notes and instruments of any kind,
now or at any time or times hereafter, in the possession or under the control of
Lender or a bailee or Affiliate of Lender;
14
(vii) 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 (vi) above;
and
(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;
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 necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Lender's Lien upon the Collateral.
Unless prohibited by applicable law, Borrower hereby authorizes Lender 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 Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents, including without
limitation delivery of all vehicle titles and appropriate documentation
necessary to have Lender's first lien noted thereon.
5.3 KEY MAN LIFE INSURANCE. As additional security for the payment
and performance to Lender of all Obligations, Borrower shall cause to be
assigned to Lender, and maintained at all times, a Key Man Life Insurance policy
on the life of Xxxx Xxxxxx, in an amount equal to at least $2,000,000.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit, will at all times be kept by Borrower at one or more of the business
locations set forth in Exhibit 6.1 hereto and shall not, without the prior
written approval of Lender, be moved therefrom except, prior to an Event of
Default and Lender's acceleration of the Obligations in consequence thereof, for
sales of Inventory in the ordinary course of business.
6.2 INSURANCE OF COLLATERAL. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability, flood and such other
risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrower shall deliver the originals or copies of such
policies to Lender with lender's loss payable endorsements, in form satisfactory
to Lender, naming Lender as sole loss payee, assignee or additional insured, as
appropriate. Each policy of
15
insurance or endorsement shall contain a clause requiring the insurer to give
not less than (30) days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Lender 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, Lender may, at its option,
but shall not be required to, procure the same and charge the Borrower therefor.
Borrower agrees to deliver to Lender, promptly as rendered, true copies of all
reports made in any reporting forms to insurance companies.
6.3 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, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Lender shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Lender's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency or other person whomsoever, but the same shall be at
Borrower's sole risk.
6.4 ADMINISTRATION OF ACCOUNTS.
6.4.1 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 Lender on such periodic basis as Lender
shall request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the fifteenth day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form acceptable to
Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of
proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if at any time following the Closing Date, Accounts in an aggregate
face amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) 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 Lender, Borrower shall notify Lender 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 Lender,
Borrower shall execute and deliver to Lender formal written assignments of
16
all of its Accounts weekly or daily, which shall include all Accounts that have
been created since the date of the last assignment, together with copies of
invoices or invoice registers related thereto.
6.4.2 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 Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of Fifty Thousand Dollars
($50,000) are in dispute between Borrower and any Account Debtor, Borrower shall
provide Lender with written notice thereof at the time of submission of the next
Schedule of Accounts, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default which continues without cure for a period of
fifteen (15) days, Lender shall have the right to settle or adjust all disputes
and claims directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorneys' fees, to Borrower.
6.4.3 TAXES. If an Account includes a charge for any tax
payable to any governmental taxing authority, Lender 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
Lender shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
6.4.4 ACCOUNT VERIFICATION. Whether or not a Default or an
Event of Default has occurred, any of Lender's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or 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 Lender in an effort to facilitate and
promptly conclude any such verification process.
6.4.5 MAINTENANCE OF DOMINION ACCOUNT. Borrower shall maintain
a Dominion Account pursuant to a tripartite arrangement among Borrower, Lender
and a bank or banks as may be selected by Borrower and acceptable to Lender.
Such arrangement shall include such terms and conditions as are acceptable to
Lender. All funds deposited in the Dominion Account shall immediately become
the property of Lender, and Borrower shall obtain the agreement by such banks in
favor of Lender to waive any offset rights against the funds so deposited.
Lender assumes no responsibility for such arrangement, including, without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder.
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6.4.6 COLLECTION OF ACCOUNTS; PROCEEDS OF COLLATERAL. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Lender. All remittances received by Borrower on
account of Accounts, together with the proceeds of any other Collateral, shall
be held as Lender's property by Borrower as trustee of an express trust for
Lender's benefit, and Borrower shall immediately deposit same in kind in the
Dominion Account, except as otherwise permitted in this Agreement. Lender
retains the right at all times after the occurrence of a Default or an Event of
Default to notify Account Debtors that Accounts have been assigned to Lender and
to collect Accounts directly in its own name and to charge the collection costs
and expenses, including reasonable attorneys' fees to Borrower. Lender has no
duty to protect, insure, collect or realize upon the Accounts or preserve rights
therein.
6.5 ADMINISTRATION OF INVENTORY.
6.5.1 RECORDS AND REPORTS OF INVENTORY. Borrower shall keep
accurate and complete records of its Inventory. Borrower shall furnish to
Lender Inventory reports in form and detail satisfactory to Lender at such times
as Lender may request, but at least once each month, not later than the
twentieth day of such month. Borrower shall conduct a physical inventory no
less frequently than annually and shall provide to Lender a report based on each
such physical inventory promptly thereafter, together with such supporting
information as Lender shall request.
6.5.2 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
Twenty Five Thousand Dollars ($25,000), Borrower shall immediately notify Lender
of the same, specifying the reason for such return and the location, condition
and intended disposition of the returned Inventory.
6.6 RECORDS AND SCHEDULES OF EQUIPMENT. Borrower shall keep accurate
records, itemizing and describing the kind, type, quality, quantity and value of
its Equipment, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
6.7 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.
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SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to
enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
7.1.1 ORGANIZATION AND QUALIFICATION. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on Exhibit 7.1.1 hereto and in all other states and jurisdictions where
the character of its business or the nature of its activities make such
qualification necessary.
7.1.2 CORPORATE POWER AND AUTHORITY. Each of Borrower and its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of
the other Loan Documents have been duly authorized by all necessary corporate
action and do not and will not (i) require any consent or approval of the
shareholders of Borrower or any of its Subsidiaries; (ii) contravene Borrower's
or any of its Subsidiaries' charter, articles or certificate of incorporation or
bylaws; (iii) violate, or cause Borrower or any of its Subsidiaries 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 Borrower or any of its Subsidiaries; (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 Borrower or any of its
Subsidiaries is a party or by which it or its Properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by Borrower or any of its Subsidiaries.
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 each of Borrower and its Subsidiaries
enforceable against it in accordance with its respective terms.
7.1.4 CAPITAL STRUCTURE. Exhibit 7.1.4 hereto states (i) the
correct name of each of the Subsidiaries of Borrower, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by Borrower, (ii) the
name of each of Borrower's corporate or joint venture Affiliates and the nature
of the affiliation, (iii) the number, nature and holder of all outstanding
Securities of Borrower and each Subsidiary of Borrower and (iv) the number of
authorized, issued and treasury shares of Borrower and each Subsidiary of
Borrower. Borrower has good title to all of the shares it purports to own of
the stock of each of its Subsidiaries, free and clear in
19
each case of any Lien other than Permitted Liens. All such shares have been
duly issued and are fully paid and non-assessable. There are 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 or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of Borrower or any of its Subsidiaries. There are no outstanding
agreements or instruments binding upon any of Borrower's shareholders relating
to the ownership of its shares of capital stock.
7.1.5 CORPORATE NAMES. Neither Borrower nor any of its
Subsidiaries 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 of its Subsidiaries has been the surviving
corporation 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. Each of
Borrower's and its Subsidiaries' executive offices and other places of business
are as listed on EXHIBIT 6.1 hereto. During the preceding one (1) year period,
neither Borrower, Masonry Supply, Inc. nor any of their Subsidiaries has had an
office, place of business or agent for service of process other than as listed
on EXHIBIT 6.1. Except as shown on EXHIBIT 6.1, 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. Each of Borrower
and its Subsidiaries 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 Borrower's Properties that is not a Permitted Lien.
Except with respect to those Permitted Liens described in Section 8.2.5(iv), and
in Section 8.2.5(vi) and (vii) which specifically and expressly provide
otherwise, the Liens granted to Lender under Section 5 hereof are first priority
perfected Liens.
7.1.8 ACCOUNTS. Lender 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 Lender, 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;
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(iii) It is for a liquidated amount maturing as stated
in the duplicate invoice covering such sale or rendition of services, a copy of
which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest
therein, is not, and will not (by voluntary act or omission of the Borrower) be
in the future, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition known to Borrower (or with respect
to which Borrower should reasonably have had such knowledge), except for a
dispute resulting in returned goods where such dispute is deemed by Lender 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 made no agreement with any Account
Debtor thereunder for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except discounts or allowances
which are granted by Borrower in the ordinary course of its business for prompt
payment 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 Lender pursuant to Section 6.4 hereof;
(vi) There are no facts, events or occurrences which in
any way impair the validity or enforceability of any Accounts or tend to reduce
the amount payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account
Debtor thereunder (i) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (ii) such Account
Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are 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 collectibility of such Account.
7.1.9 EQUIPMENT. The Equipment 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.
7.1.10 FINANCIAL STATEMENTS, FISCAL YEAR. Borrower has caused to be
furnished to Lender year end audited financial statements for Masonry Supply,
Inc. as of June 30, 1996, June 30, 1997 and June 30, 1998, along with true and
complete copies of the management letter(s) delivered in conjunction therewith.
Borrower shall deliver to Lender the Effective Date Balance
21
Sheet (as defined in the Asset Purchase Agreement), on the Closing Date. The
fiscal year of Borrower and each of its Subsidiaries ends on June 30 of each
year.
7.1.11 FULL DISCLOSURE. The financial statements referred to in
subsection 7.1.10 hereof do not (to the best of Borrower's knowledge), nor does
this Agreement or any other written statement of Borrower to Lender, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading. There is no fact
which Borrower has failed to disclose to Lender in writing which materially
affects adversely or, so far as Borrower can now foresee, will materially affect
adversely the Property, business, prospects, profits or condition (financial or
otherwise) of Borrower or any of its Subsidiaries or the ability of Borrower or
its Subsidiaries to perform this Agreement or the other Loan Documents.
7.1.12 SOLVENT FINANCIAL CONDITION. Each of Borrower and its
Subsidiaries is now, and, after giving effect to the Loans to be made, at all
times will be, Solvent.
7.1.13 SURETY OBLIGATIONS. Neither Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract nor has Borrower or any of its Subsidiaries issued or
entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any other Person.
7.1.14 TAXES. Borrower's federal tax identification number is
00-0000000. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit 7.1.14 hereto. Borrower and each of its
Subsidiaries 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 property as and when such taxes, assessments, fees,
levies and charges are due and payable, unless and to the extent any thereof are
being actively contested in good faith and by appropriate proceedings, and
Borrower maintains reasonable reserves on its books therefor. The provision for
taxes on the books of Borrower and its Subsidiaries is adequate for all years
not closed by applicable statutes, and for its current fiscal year.
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.
7.1.16 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each of
Borrower and its Subsidiaries owns or possesses 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.
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7.1.17 GOVERNMENTAL CONSENTS. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its
Property as now owned or leased and operated by it.
7.1.18 COMPLIANCE WITH LAWS. Each of Borrower and its
Subsidiaries has duly complied with, and its Property, 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 Borrower
or such Subsidiary, as applicable, its Property or the conduct of its business,
and there have been no citations, notices or orders of noncompliance issued to
Borrower or any of its Subsidiaries under any such law, rule or regulation.
Each of Borrower and its Subsidiaries 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 has
been produced in violation of the Fair Labor Standards Act (29 U.S.C. Section
201 ET SEQ.), as amended.
7.1.19 RESTRICTIONS. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement or charter or
other corporate restriction which materially and adversely affects its business
or the use or ownership of any of its Property. Neither Borrower nor any of its
Subsidiaries 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 of its Subsidiaries, 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
of its Subsidiaries, or the business, operations, Property, prospects, profits
or condition of Borrower or any of its Subsidiaries. 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.
7.1.21 NO DEFAULTS. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or Borrower's performance hereunder, constitute a Default or an Event of
Default. Neither Borrower nor any of its Subsidiaries is in default, and no
event has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default in
the payment of any Indebtedness to any Person for Money Borrowed.
7.1.22 LEASES. Exhibit 7.1.22(a) hereto is a complete listing
of all capitalized leases of Borrower and its Subsidiaries, and Exhibit
7.1.22(b) hereto is a complete listing of all
23
operating leases of Borrower and its Subsidiaries. Each of Borrower and its
Subsidiaries is in full 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 of its Subsidiaries has any Plan. Borrower and
each of its Subsidiaries is in full compliance with the requirements of ERISA
and the regulations promulgated thereunder with respect to each Plan. No fact
or situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries 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 or any of its Subsidiaries and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower or any of its Subsidiaries,
or with any material supplier, and there exists no present condition or state of
facts or circumstances which would materially affect adversely Borrower or any
of its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such 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 of its Subsidiaries 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 of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.1.26 ENVIRONMENTAL MATTERS: Except as disclosed on Exhibit
"7.1.26" attached hereto and made a part hereof, Borrower has no knowledge:
(a) of the presence of any Hazardous Substances on any
of the real property where Borrower conducts operations or has its personal
property; or
(b) of any on-site spills, releases, discharges,
disposal(s) or storage of Hazardous Substances that have occurred or are
presently occurring on any of such real property or where any Collateral is
located; or
(c) of any spills, releases, discharges or disposal(s)
of Hazardous Substances that have occurred or are presently occurring on any
other real property as a result of the conduct, action or activities of
Borrower.
24
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to such
real property.
7.2 CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in this Agreement and in 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
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Lender has consented to such
changes or such changes are expressly permitted by this Agreement.
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 Lender
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 Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 VISITS AND INSPECTIONS. Permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Property 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.
8.1.2 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 sound financial
and business practices, in a manner consistent with the information previously
provided to Lender, reflecting all its financial transactions, and cause to be
prepared and furnished to Lender the following:
(i) not later than one hundred and twenty (120) days
after the close of each fiscal year of Borrower, unqualified audited financial
statements of Borrower and its Subsidiaries as of the end of such year, on a
Consolidated and consolidating basis, certified by a
25
firm of independent certified public accountants of recognized standing selected
by Borrower but acceptable to Lender (except for a qualification with respect to
(A) the reasonableness of fees, charges or credits between or among Borrower,
Parent or any Affiliates or (B) changes in accounting principles with which the
accountants concur);
(ii) not later than forty-five (45) days after the end
of each fiscal month hereafter (other than the first and last fiscal month of
each fiscal year, as to which Borrower shall have no obligation to deliver to
Lender financial statements as at and for the end of such fiscal months),
unaudited interim financial statements of Borrower and its Subsidiaries as of
the end of such month and of the portion of Borrower's fiscal year then elapsed,
on a Consolidated and consolidating basis, certified by the chief financial
officer of Borrower as fairly presenting the Consolidated financial position and
results of operations of Borrower and its Subsidiaries for such month and period
subject only to changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the sending or filing thereof, as
the case may be, copies of any proxy statements, financial statements or reports
which Borrower has made available to its Public shareholders and copies of any
regular, periodic and special reports or registration statements which 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 ERISA in connection with each Plan; and
(v) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Borrower's and each of its Subsidiaries' financial
condition or results of operations.
Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1.2, Borrower shall forward to Lender a copy of
the accountants' letter, if any, to Borrower's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to Lender a certificate of the aforesaid certified public
accountants certifying to Lender that, based upon their examination of the
financial statements of Borrower and its 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 Lender, that they are aware that Lender is relying on such
financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in clauses
(i) and (ii) of this subsection 8.1.2, or more frequently if
26
requested by Lender, Borrower shall cause to be prepared and furnished to Lender
a compliance certificate in the form of Exhibit 8.1.2 hereto executed by the
chief financial officer of Borrower.
8.1.3 LANDLORD AND STORAGE AGREEMENTS. Provide Lender with copies of
all agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.4 SUBORDINATIONS. Provide Lender with a debt subordination
agreement or other instrument, in form and substance satisfactory to Lender,
executed by Borrower and in the case of such agreement executed by any Person
who is an officer, director or Affiliate of the Person to whom Borrower is or
hereafter becomes indebted for Subordinated Debt, subordinating in right of
payment and claim all of such Subordinated Debt, and any future advances thereon
to the full and final payment and performance of the Obligations (unless
otherwise provided in such agreement).
8.1.5 GUARANTOR FINANCIAL STATEMENTS. Deliver or cause to be delivered
to Lender financial statements for each Guarantor in form and substance
satisfactory to Lender at such intervals and covering such time periods as
Lender may request. Without limiting the generality of the foregoing, Borrower
shall deliver to Lender, or cause the Parent to deliver to Lender:
(i) no later than one hundred and twenty (120) days after the
close of each fiscal year of the Parent, unqualified audited financial statement
of the Parent and its Subsidiaries as of the end of such year, on a Consolidated
and consolidating basis; and
(ii) not later than forty-five (45) days after the end of each
fiscal quarter hereafter, unaudited interim financial statements of the Parent
and its Subsidiaries as of the end of such quarter and of the portion of the
Parent's fiscal year then elapsed, on a Consolidated and consolidating basis,
certified by the chief financial officer of the Parent as fairly presenting the
Consolidated financial position and results of operations of the Parent and its
Subsidiaries for such quarter and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
8.1.6 PROJECTIONS. No later than ten (10) days prior to the end of
each fiscal year of Borrower, deliver to Lender Projections of the financial
conditions and results of operation of Borrower for the next succeeding fiscal
year, such Projections to be prepared on a month-to-month basis.
8.1.7 NOTICES. Promptly notify Lender in writing of the occurrence of
any event or the existence of any fact which renders any representation or
warranty in this Agreement or in any of the other Loan Documents inaccurate,
incomplete or misleading.
27
8.1.8 YEAR 2000 COMPLIANCE. Take all action necessary to
assure that at all times the computer-based systems utilized by Borrower and
each of its Subsidiaries are able to effectively interpret, process and
manipulate data, including dates before, on and after December 31, 1999.
Borrower shall provide to Lender, within 180 days of the Closing Date, assurance
reasonably satisfactory to Lender that the computer-based systems utilized at
such time can perform without error functions involving dates before, on and
after December 31, 1999.
8.2 NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 MERGERS, CONSOLIDATIONS, ACQUISITIONS. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; nor acquire, nor permit any of its Subsidiaries to acquire, all or
any substantial part of the Property of any Person, without Lender's prior
written consent.
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 (i) Persons other than Parent or an Affiliate,
in excess of Twenty Five Thousand Dollars ($25,000), in the aggregate
outstanding at any one time during any fiscal year of the Borrower, and (ii)
Parent and/or any Affiliate in excess of One Hundred Fifty Thousand Dollars
($150,000), in the aggregate outstanding at any one time during any fiscal year
of the Borrower.
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 Lender;
(ii) Indebtedness of any Subsidiary of Borrower to
Borrower;
(iii) accounts payable to trade creditors and
obligations and accruals for current operating expenses (other than for Money
Borrowed) which are not aged more than one hundred twenty (120) days from
billing date or more than thirty (30) days from 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;
(iv) Obligations to pay Rentals permitted by subsection
8.2.9;
28
(v) Permitted Purchase Money Indebtedness;
(vi) contingent liabilities arising out of (A)
guarantees permitted under subsection 8.2.6 or as otherwise permitted in this
Agreement, (B) endorsements of checks and other negotiable instruments for
deposit or collection in the ordinary course of business and (C) payments under
lease agreements, employment agreements and other agreements entered into in the
ordinary course of business upon fair and reasonable terms;
(vii) Indebtedness owing by Borrower or any Subsidiary
of Borrower to the Parent or to any other Affiliate in respect of intercompany
advances or charges, PROVIDED such advances or charges are made and incurred in
the ordinary course of business pursuant to and consistent with prior practices
of the Parent or any Affiliate of the Parent and so long as the interest rate
corresponding to any such indebtedness does not exceed 8% per annum;
(viii) Indebtedness which is secured by real Property;
(ix) Subordinated Debt;
(x) Indebtedness and other obligations of Borrower
under the Asset Purchase Agreement; and
(xi) Indebtedness not included in paragraphs (i)
through (x) above, or not otherwise specifically permitted under this Agreement,
which does not exceed at any time, in the aggregate, the sum of Three Hundred
Thousand Dollars ($300,000).
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, except: (i) in the ordinary course
of Borrower's or such Subsidiary's business and on terms no less favorable to
Borrower or such Subsidiary than Borrower or such Subsidiary could obtain in a
comparable arm's length transaction with a Person not an Affiliate of Borrower
or such Subsidiary; (ii) as otherwise specifically permitted in this Agreement,
in the other Loan Documents or in any waiver of the terms of this covenant
agreed to in writing by Lender (which waiver will not be unreasonably withheld
or delayed) and (iii) for charges, credits, advances, distributions, allocations
and/or accruals of intercompany management fees up to Two Hundred Thousand
Dollars ($200,000) during the period commencing as of the Closing Date through
June 30, 1999 and up to Four Hundred Thousand Dollars ($400,000) per each fiscal
year during the term of the Agreement thereafter, rent, interest and other
intercompany transactions by and between Borrower or any Subsidiary of Borrower,
on the one hand, and an Affiliate of or Parent of Borrower, on the other hand,
in fact or in substance not inconsistent with past practices of Parent and its
Affiliates.
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8.2.5 LIMITATION ON LIENS. Create or suffer to exist, or
permit any Subsidiary of Borrower to create or suffer to exist, any Lien upon
any of its Property (exclusive of real Property) income or profits, whether now
owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the Provisions of ERISA) not yet due, or being contested in
the manner described in subsection 7.1.14 hereto, but only if in Lender's
judgment such Lien does not adversely affect Lender's rights or the priority of
Lender's Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in respect of
any such Lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property (exclusive of real
Property) of Borrower or materially impair the use thereof in the operation of
Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase
Money Indebtedness;
(v) Liens securing Indebtedness permitted under
Section 8.2.3(viii);
(vi) such other Liens as appear on Exhibit 8.2.5
hereto; and
(vii) such other Liens as Lender may hereafter approve
in writing.
8.2.6 GUARANTEES. Guaranty, indemnify, or otherwise agree to
become liable for the payment or performance by any other Person of any
Indebtedness or other liabilities or obligations of such Person, except:
(i) as otherwise described under subsection 8.2.3
(vi)(B); and
(ii) for the guaranty by Borrower of an Affiliate's
payment or performance obligations arising under any instrument or agreement in
respect of Indebtedness for which such Affiliate is liable and which
Indebtedness is secured by a mortgage or deed of trust in favor of the holder
such Indebtedness against real Property, the title to or ownership of which is
in such Affiliate; provided that, (A) Borrower is the tenant in possession of
such real Property and (B) maximum liability of Borrower under all such
guarantees does not exceed Five Hundred Thousand Dollars ($500,000) in the
aggregate at any one time outstanding.
30
8.2.7 DISPOSITION OF ASSETS. Sell or otherwise dispose of any
of, or permit any Subsidiary of Borrower to sell or otherwise dispose of any of,
its Property (exclusive of real Property), including any disposition of Property
(exclusive of real Property) as part of a sale and leaseback transaction, to or
in favor of any Person, except, in each case, for so long as no Event of Default
exists hereunder: (i) sales of Inventory and sales of other Property which does
not constitute Collateral, in each case in the ordinary course of business; (ii)
a transfer of Property to Borrower by a Subsidiary of Borrower, (iii) transfers
of Property (other than Collateral) by Borrower to (A) any Affiliate, including
the Parent, in satisfaction of indebtedness and (B) the Parent as a dividend, so
long as, in each case, such transfer is made in the ordinary course of business
or pursuant to and consistent with prior practices of any Affiliate, including
Parent, so long as such dividends are otherwise permitted by this Agreement, or
(iv) other dispositions expressly authorized by this Agreement.
8.2.8 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.
8.2.9 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 twelve (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 Four Hundred Thousand
Dollars ($400,000); PROVIDED, HOWEVER, that not more than an additional
aggregate sum of Three Hundred Thousand Dollars ($300,000) may be payable during
any current or future period of twelve (12) consecutive months for Rentals
payable (a) under operating leases and (b) pursuant to Capitalized Lease
Obligations, in each case entered into or incurred, as the case may be, on or
after the Closing Date with respect to Property consisting of Equipment. 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, exclusive of occupancy
costs.
8.2.10 CAPITAL EXPENDITURES. Make Capital Expenditures (other
than payments on Capitalized Lease Obligations) which, as to Borrower and/or any
of its Subsidiaries exceed Two Hundred Thousand Dollars ($200,000), in the
aggregate, during any fiscal year of Borrower or be obligated for Capitalized
Lease Obligations in excess of Three Hundred Thousand Dollars ($300,000) during
any fiscal year of Borrower or any of its Subsidiaries.
8.2.11 DISTRIBUTIONS. Declare or make, or permit any Subsidiary
of Borrower to declare or make, any Distributions.
8.2.12 STOCK OF BORROWER AND/OR SUBSIDIARIES. Issue, or permit
any of its Subsidiaries to issue, any additional shares of its capital stock
except director's qualifying shares
31
and except in respect to stock options to Borrower's directors or management, or
in conjunction with an initial public offering.
8.2.13 RESTRICTED INVESTMENT. Make or have, or permit any
Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.14 TAX CONSOLIDATION. File or consent to the filing of any consolidated
income tax return with any Person other than Parent or a Subsidiary of Borrower.
8.2.15 SUBORDINATED DEBT. Make any payments of Subordinated
Debt in violation of the corresponding subordination agreement(s).
8.3 SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants and agrees that unless otherwise consented to by Lender in writing, it
shall:
8.3.1 MINIMUM ADJUSTED TANGIBLE NET WORTH. Maintain at all
times an Adjusted Tangible Net Worth of not less than an amount equal to 80% of
the actual Net Worth as shown on the Effective Date Balance Sheet.
8.3.2 CASH FLOW. Achieve Cash Flow of not less than the amount
shown below for the period corresponding thereto:
PERIOD AMOUNT
------ -------
The 2 month period commencing as of
November 1, 1998 through December 31, 1998 $0.00
The 5 month period commencing as of
November 1, 1998 through March 31, 1999 $0.00
The 6 month period commencing as of
January 1, 1999 through June 30, 1999 $0.00
The 9 month period commencing as of
January 1, 1999 through September 30, 1999 $250,000.00
The 12 month period commencing as of
January 1, 1999 through December 31, 1999,
and for each fiscal quarter thereafter
on a rolling 4-quarter basis $250,000.00
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, Lender shall not be required to make
any Loan under this Agreement unless and until each of the following conditions
has been and continues to be satisfied:
9.1 DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents,
32
together with such additional documents, instruments, opinions and certificates
as Lender and its counsel shall require in connection therewith from time to
time, all in form and substance satisfactory to Lender and its counsel,
including without limitation, the following:
(A) Certified copies of Borrower's casualty insurance policies,
together with loss payable endorsements on Lender's standard form of Lender Loss
Payee naming Lender as lender loss payee, and certified copies of Borrower's
liability insurance policies, together with endorsements naming Lender as
additional insured;
(B) Certified copies of (i) resolutions of Borrower's and Parent's
respective board of directors authorizing the execution and delivery of this
Agreement and the Loan Documents (as applicable) and the performance of all
transactions contemplated hereby and thereby, (ii) Borrower's and Parent's
by-laws, and (iii) an incumbency certificate of Borrower and Parent;
(C) A copy of the Articles or Certificate of Incorporation of
Borrower and Parent, and all amendments thereto, certified by the Secretary of
State or other appropriate official of its respective jurisdiction of
incorporation;
(D) Good standing certificates for Borrower and Parent, issued by the
Secretary of State or other appropriate official of Borrower's and Parent's
jurisdiction of incorporation and each jurisdiction where the conduct of
Borrower's business activities or the ownership of its Properties necessitates
qualification;
(E) A closing certificate signed by the Chief Executive Officer of
Borrower dated as of the date hereof, stating that (i) the representations and
warranties set forth in Section 7 hereof are true and correct on and as of such
date, (ii) Borrower is, on such date, in compliance with all the terms and
provisions set forth in this Agreement and (iii) on such date no Default or
Event of Default has occurred or is continuing;
(F) The Security Documents duly executed, accepted and acknowledged
by or on behalf of each of the signatories thereto;
(G) The Other Agreements duly executed and delivered by Borrower;
(H) The favorable, written opinion of Carlton, Fields, Xxxx,
Xxxxxxxx, Xxxxx & Cutter, P.A., counsel to Borrower and Parent, as to the
transactions contemplated by this Agreement and any of the other Loan Documents;
33
(I) Written instruction from Borrower directing the application of
proceeds of the initial Loans made pursuant to this Agreement, and an initial
Borrowing Base Certificate from Borrower;
(J) Duly executed agreement establishing the Dominion Account with a
financial institution acceptable to Lender for the collection or servicing of
the Accounts;
(K) Payment of all fees and expenses owing hereunder;
(L) Landlord Waivers for each of Borrower's locations as listed on
Exhibit 6.1 hereto;
(M) Surety Agreement from Parent;
(N) UCC-1 Financing Statements;
(O) Assignment of Key-Man Life Insurance Policy on the life of Xxxx
Xxxxxx in an amount equal to at least $2,000,000;
(P) Duly executed subordination agreements with respect to the
Subordinated Debt from Masonry Supply, Inc. and from Parent both in favor of
Lender;
(Q) Duly executed copy of the employment contract/noncompete between
Borrower and Xxxx Xxxxxx, covering a period not shorter than five (5) years;
(R) Evidence that the transactions contemplated by the Asset Purchase
Agreement have been consummated;
(S) Receipt of assurances that neither Borrower nor Parent will be
liable for any income tax liability of Masonry Supply, Inc for the period
commencing January 1, 1998 through June 30, 1998;
(T) Verification from Borrower's and Masonry Supply, Inc.'s tax
accountant that the approximate $3,408,000 of net operating loss carryforward of
Parent as of June 30, 1997 as shown on Parent's June 30, 1997 financial
statements plus any such additional carryforward losses incurred in Parent's
fiscal year ending June 30, 1998 will be available to offset future federal
income tax liabilities of Borrower and that Borrower will not be a federal tax
paying entity until Parent's carryforward losses are exhausted or no longer
available;
(U) Receipt of Masonry Supply, Inc.'s audited financial statements
for the fiscal years ending June 30, 1996, June 30, 1997 and June 30, 1998 which
shall contain no
34
material adverse change from the results previously provided to Lender and
utilized by Lender in Lender's credit analysis;
(V) Evidence that as of the Closing Date, Masonry Supply,
Inc. shall have a minimum of $500,000 in cash which shall be used to fund, in
part, the acquisition or, alternatively cash in an amount equal to $500,000 less
any sums (not to exceed $400,000) used by Masonry Supply, Inc. to pay off
existing Indebtedness;
(W) Written assurances from an independent third-party
satisfactory to Lender that all computer-based systems utilized by Borrower
will, within 180 days of the Closing Date and at a cost to Borrower not to
exceed $50,000, be able to effectively interpret, process and manipulate data
including dates before, on and after December 31, 1999; and
(X) Such other documents, instruments and agreements as
Lender shall reasonably request in connection with the foregoing matters.
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 or waived by Lender in
writing.
9.4 ADJUSTED AVAILABILITY. Lender shall have determined that
immediately after giving effect to (i) the making of the initial Loans requested
to be made on the Closing Date and (ii) the payment or reimbursement by Borrower
to Lender for all fees and costs incurred or payable in connection with the
transactions contemplated hereby and due on the Closing Date, Adjusted
Availability shall not be less than Seven Hundred Fifty Thousand Dollars
($750,000), where Adjusted Availability shall mean the excess, if any, of
Availability over that portion, if any, of Borrower's trade accounts payable
outstanding on the Closing Date which remains unpaid beyond the due date of the
relevant account payable.
9.5 NO LITIGATION. No action, proceeding, investigation, regulation
or legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages in respect of, or which is related to or arises out of,
this Agreement or the consummation of the transactions contemplated hereby.
9.6 VENDOR CHECKS. Borrower and Lender shall have performed vendor
checks with key suppliers, including without limitation, Texas Industries, Inc.
and Lehigh Portland Cement Company to achieve assurances that the supply
relationships with Masonry Supply, Inc. will continue with Borrower without
interruption.
35
9.7 RENT REDUCTION. Borrower and Lender shall have verified that
appropriate rent reductions have been instituted with respect to the Mansfield,
Texas location.
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: (i) fail to make
any payment of interest, fees, expenses or principal under the Term Loan or
other Obligations (except those described in clause (ii) hereof) payable under
this Agreement on the due date thereof and such failure shall continue without
cure for three (3) days, PROVIDED that such three (3) day cure period shall not
be applicable if such payments are due and payable due to maturity, or on demand
or acceleration following an Event of Default; or (ii) fail to make any payment
of principal under the Revolving Credit Loans 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 Lender by or on behalf of Borrower, any
Subsidiary of Borrower or Guarantor 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.
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,
6.4, 8.1.1, 8.1.2, 8.2 (other than subsection 8.2.5, but only to the extent set
forth in subsection 10.1.4) 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 shall fail or
neglect to keep or observe (i) any covenant contained in subsection 8.2.5 (ii)
or (iii), to the extent any Lien referred to therein and which Borrower has
suffered to exist has been created or arises without Borrower's knowledge or
consent or (ii) any other covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
in either case the breach of such covenant is not cured to Lender's satisfaction
within twenty (20) days after the sooner to occur of Borrower's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of Borrower.
10.1.5 DEFAULT UNDER SECURITY DOCUMENTS/OTHER AGREEMENTS. Any
event of default shall occur under, or Borrower shall default in the performance
or observance of any
36
covenant, condition or agreement contained in, any of the Security Documents or
the Other Agreements 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 (other than the Obligations) 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 UNINSURED LOSSES. Any loss, theft, damage or destruction of any
of the Collateral not fully covered (subject to such deductibles as Lender shall
have permitted) by insurance shall have occurred, and such loss, theft, damage
or destruction shall have a material adverse effect on Borrower's financial
condition, Property or business prospects.
10.1.8 ADVERSE CHANGES. There shall occur any material adverse change
in the financial condition, Property or business prospects of Borrower.
10.1.9 INSOLVENCY AND RELATED PROCEEDINGS. Borrower or any Guarantor
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, any Subsidiary of Borrower or any Guarantor under the
Bankruptcy Code (if against Borrower, any Subsidiary of Borrower or any
Guarantor, the continuation of such proceeding for more than sixty (60) days),
or Borrower or any Guarantor shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
10.1.10 BUSINESS DISRUPTION. There shall occur a cessation of a
substantial part of the business of Borrower or any Subsidiary of Borrower for a
period which significantly affects Borrower's or such Subsidiary's capacity to
continue its business, on a profitable basis; or Borrower or any Subsidiary of
Borrower shall suffer the loss or revocation of any license or permit now held
or hereafter acquired by Borrower or such Subsidiary which is necessary to the
continued or lawful operation of its business; or Borrower or any Subsidiary
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.
10.1.11 CHANGE OF OWNERSHIP; ETC. The Parent or the shareholders
of Parent as of the Closing Date shall cease to own or control, beneficially and
of record, all of the issued and outstanding capital stock of Borrower, or
Xxxxxxx X. Xxxxxx shall cease to own or control beneficially, at least fifteen
percent (15%) of the issued and outstanding capital stock of the Parent or
Borrower, or Xxxxxxxxx X. Xxxxxxxx shall cease to own or control beneficially,
at least fifteen percent (15%) of the issued and outstanding capital stock of
the Parent or Borrower,
37
or both Xxxxxxx X. Xxxxxx and Xxxxxxxxx X. Xxxxxxxx shall cease to be actively
engaged in the senior management of Borrower's business affairs or upon any sale
or transfer permitted hereunder by the Parent of the issued and outstanding
capital stock of Borrower, the Parent shall fail to then deliver to Lender a
writing executed by the Parent confirming the continuing effectiveness of the
Guaranty Agreement executed by it in favor of the Lender, which writing shall
contain a reaffirmation by the Parent of its continuing liability under the
Surety Agreement in accordance with its terms.
10.1.12 ERISA. A Reportable Event shall occur which Lender, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower, any Subsidiary of Borrower or any Guarantor is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's, such Subsidiary's or such
Guarantor's complete or partial withdrawal from such Plan.
10.1.13 CHALLENGE TO AGREEMENT. Borrower, any Subsidiary of
Borrower or any Guarantor, 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
Lender.
10.1.14 REPUDIATION OF OR DEFAULT UNDER SURETY AGREEMENT. Any
Guarantor shall revoke or attempt to revoke the Surety Agreement signed by such
Guarantor, or shall repudiate such Guarantor's liability thereunder or shall be
in default under the terms thereof.
10.1.15 CRIMINAL FORFEITURE. Borrower, any Subsidiary of
Borrower or any Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of Borrower, any Subsidiary
of Borrower or any Guarantor.
10.1.16 JUDGMENTS. Any money judgment, writ of attachment or
similar process, singly, or in the aggregate, in each case in excess of One
Hundred Thousand Dollars ($100,000), is filed against Borrower, any Subsidiary
of Borrower or any Guarantor, or any of their respective Property and such
judgment, writ of attachment or similar process is not satisfied, bonded to the
satisfaction of Lender or stayed, in each case within 45 days of such filing.
10.2 ACCELERATION OF THE OBLIGATION. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any
38
portion of the Obligations shall, at the option of Lender and without
presentment, demand protest or further notice by Lender, become at once due and
payable, and Borrower shall forthwith pay to Lender the full amount of such
Obligations, PROVIDED, that upon the occurrence of an Event of Default specified
in subsection 10.1.9 hereof, all of the Obligations shall become automatically
due and payable without declaration, notice or demand by Lender.
10.3 OTHER REMEDIES. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
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 Lender 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 Lender at a place designated by Lender 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 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 Lender, 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 Lender may designate in said notice. Lender 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.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and 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
one (1) Business Day for collection, first to the costs, expenses and attorneys'
fees incurred by Lender in collecting the Obligations, in enforcing the rights
of Lender 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 Lender therefor.
39
10.3.4 Lender 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 Lender's benefit.
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 or in any Surety Agreement given to Lender or contained in
any other agreement between Lender 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 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, Liens, rights, powers and remedies, but
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 Lender 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 Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 POWER OF ATTORNEY. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact), coupled with an
interest, solely for the purposes set forth below, and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
11.1.1 At such time or times upon or after the occurrence of a
Default or an Event of Default as Lender 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 Lender or under Lender's control.
40
11.1.2 At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of 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; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors, (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, and any
other Collateral; (xi) make and adjust claims under policies of insurance, and
(xii) do all other acts and things necessary, in Lender's determination, to
fulfill Borrower's obligations under this Agreement.
11.2 INDEMNITY. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure, or alleged
failure, to observe, perform or discharge Borrower's duties hereunder. In
addition, Borrower shall defend Lender against and save it harmless from all
claims of any Person with respect to the Collateral. Without limiting the
generality of the foregoing, these indemnities shall extend to any claims
asserted against Lender by any Person under any Environmental Laws or similar
laws by reason of Borrower's or any other Person's failure to comply with laws
applicable to solid or hazardous waste materials or other toxic substances.
Notwithstanding any contrary provision in this Agreement, the obligation of
Borrower under this Section 11.2 shall survive the payment in full of the
Obligations and the termination of this Agreement.
11.3 MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement may
not be modified, altered or amended except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation,
41
Borrower's rights, title, interests, remedies, powers, and duties hereunder or
thereunder. Borrower hereby consents to Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were "Lender" hereunder, and
Lender shall be relieved of all obligations hereunder upon any such assignments.
Borrower agrees that it will use its best efforts to assist and cooperate with
Lender in any manner reasonably requested by Lender to effect the sale of
participations in or assignments of any of the Loan Documents or any portion
thereof or interest therein, including, without limitation, assisting in the
preparation of appropriate disclosure documents. Borrower further agrees that
Lender may disclose credit information regarding Borrower and its Subsidiaries
to any potential participant or assignee.
11.4 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.
11.5 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 Lender permitted under Section 11.3
hereof.
11.6 CUMULATIVE EFFECT, CONFLICT OF TERMS. The provisions of the
Other Agreements and the Security Documents are hereby made coextensive 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.
11.7 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.
11.8 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
42
been validly served, given or delivered immediately when delivered against
receipt, five (5) days after deposit in the mail, postage prepaid, or one (1)
Business Day after deposit with an overnight courier or in the case of facsimile
notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
Attention: The Northeast Loan Administration Manager
Facsimile No.: 000-000-0000
With a copy to: Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
Facsimile No.: 215-569-5555
If to Borrower: MSI/Eagle Supply, Inc.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxxxx,
Executive Vice President
Facsimile No.: 000-000-0000
With a copy to: TDA Industries, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxxxx X. Xxxxxxxx
Facsimile No.: 000-000-0000
With a copy to: Xxxxxxx Xxxxxx
One Harbour Place
000 Xxxxx Xxxxxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxx, Esquire
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 11.8, PROVIDED, HOWEVER, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender.
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11.9 LENDER'S CONSENT. Whenever Lender's 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,
Lender shall be authorized to give or withhold such 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.
11.10 CREDIT INQUIRIES. Borrower hereby authorizes and permits
Lender to respond to usual and customary credit inquiries from third
parties concerning Borrower or any of its Subsidiaries.
11.11 TIME OF ESSENCE. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.12 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.
11.13 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.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPREME COURT OF THE STATE OF NEW
YORK, SITTING IN NEW YORK COUNTY, OR, AT LENDER'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE EXCLUSIVE
JURISDICTION TO
44
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER 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 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 FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER LENDER 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 LENDER TO EXERCISE ANY OF
LENDER'S 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 LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS
45
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.
11.16 PARTIES TO ACT IN A COMMERCIALLY REASONABLE MANNER. Each party
hereto agrees to act at all times in its dealings with the other party hereto in
a commercially reasonable manner.
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning of this Agreement.
Attest: MSI/EAGLE SUPPLY, INC.
("Borrower")
By: /s/ Illegible By: /s/ Xxxxxxx X. Xxxxxx
--------------------------- -----------------------------
Secretary
[Corporate Seal] Title: Chief Executive Officer
--------------------------
Accepted in Glastenbury CT
---------------------
FLEET CAPITAL CORPORATION
("Lender")
By: /s/ Xxx Xxxxxxx
-----------------------------
Title: Vice President
--------------------------
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