EXHIBIT 10.15AC
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and between
ACR GROUP, INC. as Borrower
and
BANK OF AMERICA, N.A. as Lender
Dated effective as of May 25, 2000
Dallas2 685321 v 2, 46715.01144
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TABLE OF CONTENTS
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ARTICLE 1 - DEFINITIONS ......................................................... 1
Section 1.1 Definitions.................................................... 1
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Section 1.2 Other Referential Provisions................................... 31
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Section 1.3 Exhibits and Schedules......................................... 32
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ARTICLE 2 - REVOLVING CREDIT FACILITY ........................................... 32
Section 2.1 Revolving Credit Loans. ....................................... 32
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Section 2.2 Manner of Borrowing Revolving Credit Loans..................... 32
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Section 2.3 Repayment of Revolving Credit Loans............................ 33
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Section 2.4 Revolving Credit Note.......................................... 34
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Section 2.5 Letters of Credit.............................................. 34
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Section 2.6 Bank Products.................................................. 38
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Section 2.7 Borrowing Base................................................. 38
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ARTICLE 2A - EQUIPMENT TERM LOAN FACILITY ........................................ 39
Section 2A.1 Equipment Term Loan Facility................................... 39
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Section 2A.2 Repayment of Equipment Term Loan............................... 39
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Section 2A.3 Equipment Term Note............................................ 39
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ARTICLE 2B - REAL ESTATE TERM LOAN FACILITY ...................................... 39
Section 2B.1 Real Estate Term Loans......................................... 39
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Section 2B.2 Repayment of Real Estate Term Loans............................ 40
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Section 2B.3 Real Estate Term Loan Notes.................................... 40
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Section 2B.4 Manner of Borrowing Real Estate Term Loan B and Real Estate Term
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Loan C.................................................................. 41
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Section 2B.5 Disbursement............................................... 41
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ARTICLE 2C - CAPEX LOANS FACILITY ................................................ 42
Section 2C.1 Capex Loan..................................................... 42
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Section 2C.2 Repayment of Capex Loan........................................ 42
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Section 2C.3 Capex Note..................................................... 42
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Section 2C.4 Manner of Borrowing Capex Loan................................. 42
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Section 2C.5 Disbursement................................................... 43
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ARTICLE 2D - ACQUISITION LOAN FACILITY ........................................... 43
Section 2D.1 Acquisition Loans.............................................. 43
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Section 2D.2 Repayment of Acquisition Loans................................. 43
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Section 2D.3 Acquisition Loan Notes......................................... 43
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Section 2D.4 Manner of Borrowing............................................ 44
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Section 2C.5 Disbursement................................................... 44
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ARTICLE 3A - INTEREST AND FEES ................................................... 44
Section 3A.1 Interest....................................................... 44
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Section 3A.2 Conversion and Continuation Elections.......................... 46
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Section 3A.3 Maximum Interest Rate.......................................... 47
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Section 3A.4 Fees........................................................... 48
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Section 3A.5 Interest Limitation............................................ 48
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ARTICLE 3B - GENERAL LOAN PROVISIONS ............................................. 49
Section 3B.1 Manner of Payment.............................................. 50
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Section 3B.2 Statements of Account.......................................... 50
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Section 3B.3 Termination of Agreement....................................... 50
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Section 3B.4 Extension of Facility.......................................... 50
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Section 3B.5 Application of Prepayments..................................... 51
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Section 3B.6 Taxes, Yield Protection and Illegality......................... 51
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ARTICLE 4 - CONDITIONS PRECEDENT ................................................. 54
Section 4.1 General Conditions............................................. 54
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Section 4.2 Capex Loans.................................................... 56
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Section 4.4 Acquisition Loans.............................................. 57
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Section 4.5 All Loans...................................................... 58
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ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BORROWER ........................... 59
Section 5.1 Representations and Warranties................................. 59
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Section 5.2 Survival of Representations and Warranties, Etc................ 65
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ARTICLE 6 - SECURITY INTEREST .................................................... 66
Section 6.1 Security Interest.............................................. 66
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Section 6.2 Continued Priority of Security Interest........................ 66
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ARTICLE 7 - COLLATERAL COVENANTS ................................................. 67
Section 7.1 Collection of Receivables...................................... 67
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Section 7.2 Verification and Notification.................................. 69
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Section 7.3 Disputes, Returns and Adjustments.............................. 69
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Section 7.4 Invoices....................................................... 69
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Section 7.5 Delivery of Instruments........................................ 69
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Section 7.6 Inventory...................................................... 70
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Section 7.7 Returned Goods................................................. 70
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Section 7.8 Ownership and Defense of Title................................. 70
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Section 7.9 Insurance...................................................... 71
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Section 7.10 Location of Offices and Collateral............................. 72
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Section 7.11 Records Relating to Collateral................................. 72
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Section 7.12 Inspection..................................................... 73
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Section 7.13 Information and Reports........................................ 74
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Section 7.14 Power of Attorney.............................................. 76
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Section 7.15 Preservation of Lender's Rights................................ 76
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Section 7.16 Maintenance of Equipment....................................... 76
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ARTICLE 8 - AFFIRMATIVE COVENANTS ................................................ 76
Section 8.1 Preservation of Corporate Existence and Similar Matters........ 76
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Section 8.2 Compliance with Applicable Law................................. 76
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Section 8.3 Conduct of Business............................................ 77
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Section 8.4 Payment of Taxes and Claims.................................... 77
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Section 8.5 Accounting Methods and Financial Records....................... 77
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Section 8.6 Use of Proceeds................................................ 77
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Section 8.7 Hazardous Waste and Substances; Environmental Requirements..... 78
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Section 8.8 Accuracy of Information........................................ 79
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Section 8.9 Revisions or Updates to Schedules.............................. 79
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Section 8.10 Additional Subsidiaries and Pledge of Assets................... 79
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Section 8.11 Additional Real Estate and Leases.............................. 79
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Section 8.12 Intercreditor Agreements....................................... 80
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ARTICLE 9 - INFORMATION .......................................................... 80
Section 9.1 Financial Statements........................................... 80
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Section 9.2 Officer's Certificate.......................................... 81
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Section 9.3 Copies of Other Reports........................................ 81
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Section 9.4 Notice of Litigation and Other Matters......................... 81
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Section 9.5 ERISA.......................................................... 83
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ARTICLE 10 - NEGATIVE COVENANTS .................................................. 83
Section 10.1 Financial Ratios............................................... 83
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Section 10.2 Indebtedness................................................... 84
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Section 10.3 Guaranties..................................................... 84
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Section 10.4 Investments; Acquisitions...................................... 84
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Section 10.5 Capital Expenditures........................................... 84
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Section 10.6 Restricted Distributions and Payments, Etc..................... 84
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Section 10.7 Merger, Consolidation, Dissolution, and Sale of Assets......... 85
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Section 10.8 Transactions with Affiliates................................... 85
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Section 10.9 Liens.......................................................... 85
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Section 10.10 Operating Leases............................................... 85
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Section 10.11 Benefit Plans.................................................. 85
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Section 10.12 Sales and Leasebacks........................................... 85
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Section 10.13 Amendments of Other Agreements................................. 86
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Section 10.14 Minimum Availability........................................... 86
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Section 10.15 Change in Business............................................. 86
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ARTICLE 11 - DEFAULT ............................................................. 86
Section 11.1 Events of Default.............................................. 86
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Section 11.2 Remedies........................................................ 89
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Section 11.3 Application of Proceeds......................................... 92
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Section 11.4 Power of Attorney............................................... 92
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Section 11.5 Miscellaneous Provisions Concerning Remedies.................... 93
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ARTICLE 12 - MISCELLANEOUS........................................................ 94
Section 12.1 Notices......................................................... 94
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Section 12.2 Expenses........................................................ 95
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Section 12.3 Stamp and Other Taxes........................................... 96
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Section 12.4 Setoff.......................................................... 96
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Section 12.5 Litigation...................................................... 97
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Section 12.6 Continuing Rights of Lender in respect of Secured Obligations;
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Reversal of Payments.................................................... 97
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Section 12.7 Injunctive Relief............................................... 97
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Section 12.8 Accounting Matters.............................................. 98
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Section 12.9 Assignment; Participation....................................... 98
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Section 12.10 Amendments..................................................... 98
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Section 12.11 Performance of Borrower's Duties............................... 98
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Section 12.12 INDEMNIFICATION................................................ 98
Section 12.13 All Powers Coupled with Interest............................... 99
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Section 12.14 Survival....................................................... 99
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Section 12.15 Severability of Provisions..................................... 99
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Section 12.16 Governing Law.................................................. 99
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Section 12.17 Acceptance and Performance..................................... 99
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Section 12.18 Counterparts................................................... 99
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Section 12.19 Reproduction of Documents...................................... 100
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Section 12.20 Funds Transfer Services........................................ 100
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Section 12.21 Amendment and Restatement...................................... 101
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Section 12.22 No Oral Agreements............................................. 101
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EXHIBITS
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Exhibit A Form of Acquisition Loan Note A
Exhibit B Form of Acquisition Loan Note B
Exhibit C Form of Additional Subsidiaries Supplement
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Capex Note
Exhibit F Form of Equipment Term Note
Exhibit G Form of Real Estate Term Note B
Exhibit H Form of Real Estate Term Note C
Exhibit I Form of Revolving Credit Note
Exhibit J Form of Notice of Conversion/Continuation
Exhibit K Wire Transfer Procedures
SCHEDULES
Schedule 5.1(a) Foreign Qualifications
Schedule 5.1(b) Subsidiaries of Borrower
Schedule 5.1(e) Business of Borrower
Schedule 5.1(f) Compliance with Laws;Governmental Approvals
Schedule 5.1(g) Exceptions to Title
Schedule 5.1(h) Real Estate Owned and Leased
Schedule 5.1(i) Lien Exceptions
Schedule 5.1(j) Indebtedness for Money Borrowed
Schedule 10.3 Guaranties Schedule 5.1(k) Litigation
Schedule 5.1(l) Tax Return Exceptions
Schedule 5.1(p) ERISA Matters
Schedule 5.1(u) Chief Executive Office; Location of Books and Records
Schedule 5.1(v) Inventory
Schedule 5.1(w) Fictitious, Assumed Names
Schedule 5.1(z) Employee Relations
Schedule 5.1(aa) Intellectual Property
Schedule 7.6 Consignment Inventory
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement is executed by and
between ACR Group, Inc, a Texas corporation ("Borrower"), and BANK OF AMERICA,,
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N.A., a national banking association and successor in interest by merger to
NationsBank, N.A., successor to NationsBank of Texas, N.A. ("Lender"), effective
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as of May 25, 2000 (the "Agreement Date"), as follows:
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ARTICLE 1 - DEFINITIONS
Section 1.1 Definitions. For the purposes of this Agreement:
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"Account Debtor" means a Person who is obligated on a Receivable.
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"Acquire" or "Acquisition", as applied to any Business Unit or Investment,
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means the acquisition of such Business Unit or Investment by purchase, exchange,
issuance of stock or other securities, or by merger, reorganization or any other
method.
"Acquired Subsidiary" means a Person that becomes a Wholly-Owned Subsidiary
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of Borrower as a result of an Acquisition.
"Acquisition Loan" means a Loan made to Borrower by Lender pursuant to
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Section 2D.1, in each case consisting of a Tranche A Acquisition Loan and a
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Tranche B Acquisition Loan, and "Acquisition Loans" mean all of such Loans.
"Acquisition Loan Amount" means, with respect to any Acquisition financed
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in whole or in part with proceeds of an Acquisition Loan, an amount, determined
as of the Funding Date of such Acquisition Loan, equal to (A) an amount,
designated by Borrower up to but not exceeding 100% of the Cash Purchase
Consideration payable by Borrower in consideration of such Acquisition less
(B) the aggregate amount includable in the Borrowing Base in respect of
Eligible Receivables and Eligible Inventory which are acquired, or are to be
acquired, by Borrower pursuant to, or which are owned by a Person that becomes
an Acquired Subsidiary as a result of, such Acquisition.
"Acquisition Loan Note A" means a promissory note made by Borrower payable
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to the order of Lender evidencing the obligation of Borrower to pay the
aggregate unpaid principal amount of the Tranche A Acquisition Loans,
substantially in the form of Exhibit A, with all of the blanks properly
completed, either as originally executed or as such promissory note may be
renewed, extended, modified, amended, supplemented, or restated from time to
time.
"Acquisition Loan Note B" means a promissory note made by Borrower payable
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to the order of Lender evidencing the obligation of Borrower to pay the
aggregate unpaid principal amount of the Tranche B Acquisition Loans,
substantially in the form of Exhibit B, with all of the blanks properly
completed, either as originally executed or as such promissory note may be
renewed, extended, modified, amended, supplemented, or restated from time to
time.
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"Additional Subsidiaries Supplement" means an Additional Subsidiaries
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Supplement required by Section 8.10, substantially in the form of Exhibit C, or
otherwise in form and substance satisfactory to Lender.
"Adjusted Net Income" means, as applied to any Person, the Net Income or
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Net Loss of such Person for the period in question after deducting any federal
income taxes paid in cash by such Person during the period in question.
"Affiliate" means, with respect to a Person, (a) any officer, director,
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employee or managing agent of such Person, (b) any spouse, parents, brothers,
sisters, children and grandchildren of such Person, (c) any association,
partnership, trust, entity or enterprise in which such Person is a director,
officer or general partner, (d) any other Person that, (i) directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10 % or more of any class of voting stock or
partnership or other interest of such Person or any Subsidiary of such Person,
or (iii) 10% or more of the voting stock or partnership or other interest of
which is directly or indirectly beneficially owned or held by such Person or a
Subsidiary of such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities or
partnership or other interests, by contract or otherwise.
"Agency Account" means an account of Borrower or a Subsidiary of Borrower
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maintained by it with a Clearing Bank pursuant to an Agency Account Agreement.
"Agency Account Agreement" means an agreement among Borrower or a
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Subsidiary of Borrower, Lender and a Clearing Bank which designates an Agency
Account for the deposit of checks and items constituting proceeds of
Receivables, and establishes the terms for transferring balances therein to
Lender for deposit to the Teller Account.
"Agreement" means this Agreement, including the Exhibits and Schedules
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hereto, and all amendments, modifications and supplements hereto and thereto and
restatements hereof and thereof.
"Agreement Date" means the date as of which this Agreement is dated.
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"Anniversary Date" means each anniversary of the Agreement Date.
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"Applicable Margin" means:
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(a) with respect to Base Rate Revolving Credit Loans, 0.00%;
(b) with respect to Base Rate Term Loans, 0.00 %;
(c) with respect to Base Rate Capex Loans, 0.25 %;
(d) with respect to Base Rate Tranche A Acquisition Loans, 0.50%;
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(e) with respect to Base Rate Tranche B Acquisition Loans, 1.00%;
(f) with respect to LIBOR Rate Revolving Credit Loans, 2.25 %;
(g) with respect to LIBOR Rate Term Loans, 2.50 %;
(h) with respect to LIBOR Rate Capex Loans, 2.75%;
(i) with respect to LIBOR Rate Tranche A Acquisition Loans, 2.75%;
(j) with respect to LIBOR Rate Tranche B Acquisition Loans, 3.00%;
in each case subject to adjustment from time to time thereafter to the
applicable percentage specified corresponding to the Leverage Ratio, as set
forth below, respectively:
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BASE RATE LOANS
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Leverage Ratio Base Rate Base Rate Base Rate Base Rate Base Rate
Revolving Credit Term Capex Tranche A Tranche B
Loans Loans Loans Acquisition Acquisition
Loans Loans
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Greater than 0.25% 0.25% 0.25% 0.50% 1.00%
or equal
to 4.25 to 1.0
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Less than 4.25 to 0.00% 0.25% 0.25% 0.50% 1.00%
1.0 but greater
than or equal to
3.5 to 1.0
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Less than 3.5 to 1.0 0.00% 0.00% 0.25% 0.50% 1.00%
but greater than or
equal to 2.75 to 1.0
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Less than 2.75 to 1.0 0.00% 0.00% 0.25% 0.50% 1.00%
but greater than or
equal to 2.00 to 1.0
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Less than 2.0 to 1.0 0.00% 0.00% 0.25% 0.50% 1.00%
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LIBOR RATE LOANS
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Leverage Ratio LIBOR Rate LIBOR LIBOR LIBOR Rate LIBOR Rate
Revolving Credit Rate Term Rate Tranche A Tranche B
Loans Loans Capex Acquisition Acquisition
Loans Loans Loans
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Greater than or equal
to 4.25 to 1.00 2.75% 3.00% 2.75% 2.75% 3.00%
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Less than 4.25 to 1.0 2.50% 2.75% 2.75% 2.75% 3.00%
but greater than or
equal to 3.5 to 1.0
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LIBOR RATE LOANS
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LIBOR Rate LIBOR LIBOR LIBOR Rate LIBOR Rate
Leverage Ratio Revolving Credit Rate Term Rate Tranche A Tranche B
Loans Loans Capex Acquisition Acquisition
Loans Loans Loans
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Less than 3.5 to 1.0 2.25% 2.50% 2.75% 2.75% 3.00%
but greater than or
equal to 2.75 to 1.0
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Less than 2.75 to 1.0 2.00% 2.25% 2.75% 2.75% 3.00%
but greater than or
equal to 2.00 to 1.0
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Less than 2.0 to 1.0 1.75% 2.00% 2.75% 2.75% 3.00%
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For the purpose of determining any such adjustments to the Applicable Margin,
the Leverage Ratio shall be determined based upon Borrower's consolidated
financial statements for its respective fiscal quarter periods, beginning with
the fiscal quarter ending February 29, 2000, delivered to Lender as required by
Section 9.1(b), and any such adjustment, if any, shall become effective as of
the date, on or after the first day of the calendar month following the month in
which such financial statements are delivered to Lender, when any Base Rate Loan
is made, or any LIBOR Rate Loan is continued or converted, as the case may be.
"Availability" means as of the date of determination, the amount of
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Revolving Credit Loans available to be borrowed by Borrower hereunder in
accordance with Section 2.1 less the sum of the outstanding principal balance of
all Revolving Credit Loans hereunder and the Letter of Credit Reserve as of such
date.
"Bank Products" means any one or more of the following types of services or
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facilities extended to Borrower or any Guarantor by Bank or any Affiliate of
Bank in reliance on Bank's agreement to indemnify such Affiliate: (a) credit
cards; (b) ACH Transactions; and (c) Hedge Agreements.
"Bank Products Reserve" means all reserves which Lender from time to time
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establishes in its sole discretion for the Bank Products then provided or
outstanding.
"Base Rate" means, for any day, the rate of interest in effect for such day
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as publicly announced from time to time by the Bank in Charlotte, North Carolina
as its "prime rate" (the "prime rate" being a rate set by the Bank based upon
various factors including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a prime point for pricing some
loans, which may be priced at, above, or below such announced rate). Any change
in the prime rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Base Rate Tranche A Acquisition Loan" means any portion of an Acquisition
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Loan Tranche A during any period in which it bears interest based upon the Base
Rate.
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"Base Rate Tranche B Acquisition Loan" means any portion of an Acquisition
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Loan Tranche B during any period in which it bears interest based upon the Base
Rate.
"Base Rate Capex Loan" means any portion of the Capex Loan during any
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period in which it bears interest based upon the Base Rate.
"Base Rate Revolving Credit Loan " means any portion of the Revolving
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Credit Loan during any period in which it bears interest based upon the Base
Rate.
"Base Rate Term Loan" means any portion of the Equipment Term Loan or Real
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Estate Term Loan, respectively, during any period in which it bears interest
based upon the Base Rate.
"Benefit Plan" means an employee benefit plan as defined in Section 3(35)
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of ERISA (other than a Multiemployer Plan) in respect of which a Person or any
Related Company is, or within the immediately preceding 6 years was, an
"employer" as defined in Section 3(5) of ERISA, including such plans as may be
established after the Agreement Date.
"Blocked Collection Account" means a demand deposit account maintained by
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Borrower or a Subsidiary of Borrower with Lender and established for the purpose
of depositing checks and other items received in a Lockbox and otherwise and
constituting proceeds of Receivables, access to which (other than for purposes
of deposit) is blocked to Borrower and over which Lender has the sole right of
control and access for purposes of withdrawal, transfer and debit.
"Borrower" means ACR Group, Inc., a Texas corporation, and its successors
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and assigns.
"Borrowing" means a borrowing hereunder consisting of a Revolving Credit
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Loan, Term Loan, Capex Loan or Acquisition Loan, as the case may be, made on the
same day by Lender to Borrower.
"Borrowing Base" means at any time an amount equal to the sum of:
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(a) 85% (or such lesser percentage as Lender may in its sole good
faith discretion determine from time to time) of the face value of Eligible
Receivables due and owing at such time, plus
(b) the lesser of
(i) 50% at any time during the period May 1 through November 30
of any calendar year or 65% at any time during the period December 1
of any calendar year and April 30 of the following calendar year (or,
in either such case, such lesser percentage as Lender may in its sole
good faith discretion determine from time to time) of the lesser of
cost and fair market value of Eligible Inventory at such time, and
(ii) $12,500,000, minus
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(c) the Letter of Credit Reserve, the Environmental Compliance
Reserve, the Bank Products Reserve, in each case if any, and such other
reserves as Lender may determine from time to time in the good faith
exercise of its reasonable credit judgment.
"Borrowing Base Certificate" means a certificate in the form of Exhibit D
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attached hereto.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a day
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on which banks in Dallas, Texas or Charlotte, North Carolina are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any
day that is a Business Day pursuant to clause (a) above and that is also a day
on which trading in Dollars is carried on by and between banks in the London
interbank market.
"Business Unit" means the assets constituting the business, or a division
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or operating unit thereof, of any Person.
"Capex Loan" means a Loan made to Borrower pursuant to Section 2C.1, and
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"Capex Loans" means all of such Loans.
"Capex Loan Amortization Amount" means an amount, determined for each Capex
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Loan, equal to the original principal amount funded under such Capex Loan
divided by sixty (60).
"Capex Loan Amortization Payment" means an amount, determined as of each
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Capex Loan Installment Payment Date, equal to the sum of the Capex Loan
Amortization Amount for all Capex Loans which have been funded through such
date.
"Capex Loan Availability" means with respect to any Capex Loan, an amount,
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determined as of the time of funding thereof, equal to the sum of eighty percent
(80.0%) of the Cost Value of Eligible Purchased Equipment which is to be
financed or refinanced with proceeds of such Capex Loan.
"Capex Loan Installment Payment Date" means each Payment Date commencing on
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the first day of the calendar month next following the calendar month in which
the initial Capex Loan is funded, and continuing thereafter until the earlier of
the Termination Date or the date when all Capex Loans have been irrevocably paid
in full.
"Capex Note" means a promissory note made by Borrower payable to the order
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of Lender evidencing the obligation of Borrower to pay the aggregate unpaid
principal amount of Capex Loans made to Borrower by Lender, substantially in the
form of Exhibit E, with all of the blanks properly completed, either as
originally executed or as such promissory note may be renewed, extended,
modified, amended, supplemented, or restated from time to time.
"Capital Adequacy Regulation" means any guideline, request, or directive of
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any central bank or other Governmental Authority, or any other law, rule, or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
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"Capital Expenditures" means, with respect to any Person, all expenditures
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made and liabilities incurred for the acquisition of assets (other than assets
which constitute a Business Unit) which are not, in accordance with GAAP,
treated as expense items for such Person in the year made or incurred or as a
prepaid expense applicable to a future year or years.
"Capitalized Lease" means a lease that is required to be capitalized for
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financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Cash Purchase Consideration" means, as of any date of determination and
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with respect to any Acquisition by Borrower or a Subsidiary of Borrower, the
purchase price to be paid at the time of Acquisition for the assets being
Acquired, or for the Capital Stock issued by the Person being Acquired, as the
case may be, including all cash consideration paid (whether classified as
purchase price, noncompete payments, consulting payments, or otherwise and
without regard to whether such amount is paid at closing or paid over time) and
the Dollar value of all other consideration (other than Capital Stock of
Borrower) to be transferred at such time by Borrower and/or such Subsidiary in
connection with such Acquisition to the seller or sellers, all valued in
accordance with the applicable agreement entered into by Borrower in respect of
such Acquisition (not including the amount of any Indebtedness incurred,
assumed, or acquired by Borrower or such Subsidiary in connection with such
Acquisition).
"Change of Control" means the occurrence of any of the following: (a) the
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adoption of a plan relating to the liquidation or dissolution of Borrower or,
except as allowed by Section 10.7, any Subsidiary of Borrower, (b) the
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acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) of a direct or indirect
majority in interest (more than 50%) of the voting power of the voting stock of
Borrower by way of merger or consolidation or otherwise, (c) the first day on
which a majority of the members of the Management Group of Borrower are not
Continuing Directors, (d) except as allowed by Section 10.7, any Subsidiary of
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Borrower shall cease to be a Wholly-Owned Subsidiary of Borrower.
"Clearing Bank" means any banking institution with which an Agency Account
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has been established pursuant to an Agency Account Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
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time.
"Collateral" means and includes all right, title and interest of Borrower
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and each Guarantor, respectively, in and to each of the following, wherever
located and whether now or hereafter existing or now owned or hereafter acquired
or arising:
(a) all Receivables,
(b) all Inventory,
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(c) all Equipment,
(d) all Real Estate,
(e) all Contract Rights,
(f) all General Intangibles,
(g) all Deposit Accounts,
(h) all goods and other property, whether or not delivered, (i) the
sale or lease of which gives or purports to give rise to any Receivable,
including, but not limited to, all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including, without
limitation, all rights as an unpaid vendor or lienor (including, without
limitation, stoppage in transit, replevin and reclamation) with respect to such
goods and other properties,
(i) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and other agreements
and property which secure or relate to any Receivable or other Collateral or are
acquired for the purpose of securing and enforcing any item thereof,
(j) all documents of title, policies and certificates of insurance,
securities, chattel paper and other documents and instruments evidencing or
pertaining to any and all items of Collateral,
(k) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof,
(l) all cash deposited with Lender or any Affiliate thereof or which
Lender is entitled to retain or otherwise possess as collateral pursuant to the
provisions of this Agreement or any of the Security Documents, and
(m) any and all products and cash and non-cash proceeds of the
foregoing (including, but not limited to, any claims to any items referred to in
this definition and any claims against third parties for loss of, damage to or
destruction of any or all of the Collateral or for proceeds payable under or
unearned premiums with respect to policies of insurance) in whatever form,
including, but not limited to, cash, negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements and
other documents.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
-----------
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
8
"Continuing Directors" means, with respect to Borrower, as of any date of
--------------------
determination, any duly appointed member of the Management Group of Borrower who
(a) was a member of such Management Group on the Agreement Date or (b) was
nominated for election or elected to such Management Group with the affirmative
vote of a majority of the Management Group who were members of such Management
Group at the time of such nomination or election.
"Contract Rights" means and includes, as to any Person, all of such
---------------
Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"Controlled Disbursement Account" means the account maintained by and in
-------------------------------
the name of Borrower with Lender for the purpose of disbursing Revolving Credit
Loan proceeds and amounts credited thereto pursuant to Section 2.2(b)(i) and
Section 7.1(f).
"Conversion/Continuation Date" means the effective date of (a) any
----------------------------
conversion of LIBOR Rate Loans to Base Rate Loans or of Base Rate Loans to LIBOR
Rate Loans or (b) any continuation of LIBOR Rate Loans as LIBOR Rate Loans.
"Cost Value" means, with respect to any Eligible Purchased Equipment, the
----------
actual net purchase price (exclusive of taxes, freight, transportation,
installation charges, service charges, maintenance charges or other charges not
directly part of the base purchase price) thereof, as evidenced by a purchase
contract, purchase order, invoice or other written evidence, satisfactory to
Lender, issued by the seller thereof.
"Credit Support" has the meaning specified in Section 2.5(a).
--------------
"Default" means any event or condition which, if not cured, would with the
-------
passage of time or the giving of notice, or both, constitute an Event of
Default.
"Default Rate" means a fluctuating per annum interest rate at all times
------------
equal to the sum of
(a) the interest rate otherwise applicable under Section 3A.1 plus (b) two
percent (2%). Each Default Rate shall be adjusted simultaneously with any change
in the applicable Interest Rate.
"Deposit Accounts" means any demand, time, savings, passbook or like
account maintained with a bank, savings and loan association, credit union or
like organization, other than an account evidenced by a certificate of deposit
that is an instrument under the UCC.
"Dollar" and "$" means freely transferable United States dollars.
------ -
"EBITDA" means Net Income plus interest expense plus income taxes plus
------
depreciation and amortization expense.
"ERISA" means the Employee Retirement Income Security Act of 1974, as in
-----
effect from time to time, and any successor statute.
9
"Effective Date" means the later of (a) the Agreement Date, and (b) the
--------------
first date on which all of the conditions set forth in Section 4.1 shall have
been fulfilled or waived by Lender.
"Effective Interest Rate" means the rate of interest per annum on the Loans
-----------------------
in effect from time to time pursuant to the provisions of Sections 3A.1.
"Eligible Acquired Equipment" means, with respect to any Permitted
---------------------------
Acquisition by Borrower which is to be financed in whole or in part with an
Acquisition Loan, Equipment which is acquired or to be acquired by Borrower with
proceeds of such Acquisition Loan, or which is owned by a Person that becomes an
Acquired Subsidiary as a result of such Acquisition, and is deemed by Lender in
the exercise of its sole good faith discretion to be eligible for purposes of
determination of the Tranche A Acquisition Loan Amount with respect to such
Acquisition Loan. Unless otherwise approved in writing by Lender, no such
Equipment shall be deemed to be Eligible Acquired Equipment unless it meets all
of the following requirements: (a) such Equipment is owned by Borrower or such
Acquired Subsidiary of Borrower, and is subject to the Security Interest which
is perfected as to such Equipment and is subject to no other Lien whatsoever
other than a Permitted Lien and (b) Borrower has delivered, or caused to be
delivered, to Lender such information and documentation, including without
limitation all items required by Section 4.4, in each case in form and substance
satisfactory to Lender.
"Eligible Acquired Real Estate" means, with respect to any Permitted
-----------------------------
Acquisition by Borrower which is to be financed in whole or in part with an
Acquisition Loan, real property and improvements which are acquired or to be
acquired by Borrower with proceeds of such Acquisition Loan, or which are owned
by a Person that becomes an Acquired Subsidiary as a result of such Acquisition,
and is deemed by Lender in the exercise of its sole good faith discretion to be
eligible for purposes of determination of the Tranche A Acquisition Loan Amount
with respect to such Acquisition Loan. Unless otherwise approved in writing by
Lender, no such real property or improvements shall be deemed to be Eligible
Acquired Real Estate unless it meets all of the following requirements: (a) such
real property and improvements are owned by Borrower or such Acquired
Subsidiary, and is subject to the Security Interest which is perfected as to
such real property and improvements, and is subject to no other Lien whatsoever
other than a Permitted Lien and (b) Borrower has delivered, or caused to be
delivered, to Lender such information and documentation, including without
limitation all items required by Section 4.4, in each case in form and substance
satisfactory to Lender.
"Eligible Inventory" means Inventory of Borrower and its Subsidiaries held
------------------
for sale in the ordinary course of the business of Borrower or such Subsidiary
(but not including packaging or shipping materials or maintenance supplies)
which are deemed by Lender in the exercise of its sole good faith discretion to
be eligible for inclusion in the calculation of the Borrowing Base. Unless
otherwise approved in writing by Lender, no Inventory shall be deemed to be
Eligible Inventory unless it meets all of the following requirements: (a) such
Inventory is owned by Borrower or a Wholly-Owned Subsidiary of Borrower, is
subject to the Security Interest, which is perfected as to such Inventory, and
is subject to no other Lien whatsoever other than a Permitted Lien; (b) such
Inventory consists of raw materials or finished goods and does not consist of
work-in-process, supplies (other than finished goods supplies, parts and glue
stocked for resale to customers in the ordinary course of business) or consigned
goods; (c) such Inventory is in good condition and meets
10
all standards applicable to such goods, their use or sale imposed by any
governmental agency, or department or division thereof, having regulatory
authority over such matters; (d) such Inventory is currently either usable or
saleable, at prices approximating at least the cost thereof, in the normal
course of Borrower's or such Subsidiary's business; (e) such Inventory is not
obsolete or returned (other than Inventory which is returned in the ordinary
course of business and which is in condition which is immediately resalable by
Borrower in the ordinary course of business) or repossessed or used goods taken
in trade; (f) such Inventory is located within the United States at one of the
locations listed in Schedule 5.1(v); and (g) such Inventory is in the possession
---------------
and control of Borrower or a Subsidiary of Borrower and not any third party.
"Eligible Purchased Equipment" means, with respect to any Capex Loan,
----------------------------
Equipment which is listed in the Schedule of Equipment delivered to Lender on
the Agreement Date or which is acquired or to be acquired by Borrower or a
Subsidiary of Borrower after February 29, 2000 and prior to the date that is 180
days prior to the Termination Date, with proceeds of such Capex Loan, which is
subject to the Security Agreement and is deemed by Lender in the exercise of its
sole good faith discretion to be eligible for purposes of determination of the
Capex Loan Amount with respect to such Capex Loan. Unless otherwise approved in
writing by Lender, no such Equipment shall be deemed to be Eligible Purchased
Equipment unless it meets all of the following requirements:
(a) such Equipment is owned by Borrower or a Wholly-Owned Subsidiary of
Borrower, and is subject to the Security Interest which is perfected as to such
Equipment and is subject to no other Lien whatsoever other than a Permitted Lien
and (b) Borrower has delivered, or caused to be delivered, to Lender such
information and documentation, including without limitation all items required
by Section 4.2)a) each case in form and substance satisfactory to Lender.
"Eligible Receivable" means the unpaid portion of a Receivable payable in
-------------------
Dollars to Borrower or a Subsidiary of Borrower net of any returns, discounts,
claims, credits, charges or other allowances, offsets, deductions,
counterclaims, disputes or other defenses and reduced by the aggregate amount of
all reserves, limits and deductions provided for in this definition and
elsewhere in this Agreement which is deemed by Lender in the exercise of its
sole good faith discretion to be eligible for inclusion in the calculation of
the Borrowing Base. Unless otherwise approved in writing by Lender, no
Receivable shall be deemed an Eligible Receivable unless it meets all of the
following requirements: (a) such Receivable is owned by Borrower or a Wholly-
Owned Subsidiary of Borrower and represents a complete bona fide transaction
which requires no further act under any circumstances on the part of Borrower or
such Subsidiary to make such Receivable payable by the Account Debtor; (b) such
Receivable is not unpaid more than 90 days after the date of the original
invoice or past due more than 60 days after its due date, which shall not be
later than 30 days after the invoice date; (c) such Receivable does not arise
out of any transaction with any Subsidiary, Affiliate, creditor, lessor or
supplier of Borrower or such Subsidiary; (d) such Receivable is not owing by an
Account Debtor more than 40% of whose then-existing accounts owing to Borrower
or such Subsidiary do not meet the requirements set forth in clause (b) above;
----------
(e) if the Account Debtor with respect thereto is located outside of the United
States of America, the goods which gave rise to such Receivable were shipped
after receipt by Borrower or such Subsidiary from the Account Debtor of an
irrevocable letter of credit that has been confirmed by a financial institution
acceptable to Lender and is in form and substance acceptable to Lender, payable
in the full face amount of the face value of the Receivable in Dollars at a
place of payment located within the United States and has been duly assigned to
Lender; (f) such Receivable is not subject to the Assignment of Claims Act
11
of 1940, as amended from time to time, or any applicable law now or hereafter
existing similar in effect thereto, as determined in the sole discretion of
Lender, or to any provision prohibiting its assignment or requiring notice of or
consent to such assignment; (g) neither Borrower nor such Subsidiary is in
breach of any express or implied representation or warranty with respect to the
goods the sale of which gave rise to such Receivable; (h) the Account Debtor
with respect to such Receivable is not insolvent or the subject of any
bankruptcy or insolvency proceedings of any kind or of any other proceeding or
action, threatened or pending, which might, in Lender's sole judgment, have a
Materially Adverse Effect on such Account Debtor; (i) the goods the sale of
which gave rise to such Receivable were shipped or delivered to the Account
Debtor on an absolute sale basis and not on a ▇▇▇▇ and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return basis or on
the basis of any other similar understanding, and such goods have not been
returned or rejected; (j) such Receivable is not owing by an Account Debtor or a
group of affiliated Account Debtors whose then-existing accounts owing to
Borrower exceed in face amount 25% of Borrower's total Eligible Receivables; (k)
such Receivable is evidenced by an invoice or other documentation in form
acceptable to Lender containing only terms normally offered by Borrower or such
Subsidiary, and dated no earlier than the date of shipment; (l) such Receivable
is a valid, legally enforceable obligation of the Account Debtor with respect
thereto and is not subject to any present, or contingent (and no facts exist
which are the basis for any future), offset, deduction or counterclaim, dispute
or other defense on the part of such Account Debtor; (m) such Receivable is not
evidenced by chattel paper or an instrument of any kind; (n) such Receivable
does not arise from the performance of services other than training and
educational services to customers, including services under or related to any
warranty obligation of Borrower or such Subsidiary or out of service charges by
Borrower or such Subsidiary or other fees for the time value of money; and (o)
such Receivable is subject to the Security Interest, which is perfected as to
such Receivable, and is subject to no other Lien whatsoever other than a
Permitted Lien and the goods giving rise to such Receivable were not, at the
time of the sale thereof, subject to any Lien other than a Permitted Lien.
"Eligible Term Loan B Real Estate" means the Real Estate and improvements
--------------------------------
owned by Borrower and comprising Borrower's facility in Katy, Texas.
"Eligible Term Loan C Real Estate" means the Real Estate and improvements
--------------------------------
comprising the facilities located in Denver, Colorado, Colorado Springs,
Colorado and Albuquerque, New Mexico, to be Acquired by Borrower with proceeds
of Real Estate Term Loan C.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for a Release or
injury to the environment.
"Environmental Compliance Reserve" means any reserve which the Lender,
--------------------------------
after the Agreement Date, establishes in its good faith discretion from time to
time for amounts that are reasonably likely to be expended by Borrower or a
Subsidiary of Borrower in order for such Borrower or Subsidiary and its
operations and property (a) to comply with any notice from a Governmental
Authority asserting material non-compliance with Environmental Laws, or (b) to
correct any such material non-compliance identified in a report delivered to
Lender pursuant to Section 8.7
-----------
12
"Environmental Laws" means all federal, state, local and foreign laws now
------------------
or hereafter in effect relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport or handling of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
"Environmental Lien" means a Lien in favor of any Governmental Authority
------------------
for (a) any liability under Environmental Laws, or (b) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"Equipment" means and includes, as to any Person, all of such Person's then
---------
owned or existing and future acquired or arising machinery, apparatus,
equipment, motor vehicles, tractors, trailers, rolling stock, fittings, fixtures
and other tangible personal property (other than Inventory) of every kind and
description used in such Person's business operations or owned by such Person or
in which such Person has an interest and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
"Equipment Term Loan" has the meaning prescribed by Section 2A.1.
------------------- ------------
"Equipment Term Note" means a promissory note made by Borrower payable to
-------------------
the order of Lender evidencing the obligation of Borrower to pay the aggregate
unpaid principal amount of Equipment Term Loan (and any promissory note or notes
that may be issued from time to time in substitution, renewal, extension,
replacement, or exchange thereof) substantially in the form of Exhibit F, with
---------
all of the blanks properly completed, either as originally executed or as such
promissory note may be renewed, extended, modified, amended, supplemented, or
restated from time to time.
"Event of Default" means any of the events specified in Section 11.1.
---------------- ------------
"Existing Equipment Term Loan" means the "Equipment Loan" as defined by the
----------------------------
Prior Loan Agreement.
"Existing Liens" means all security interests and liens previously granted
--------------
by Borrower or any Subsidiary of Borrower to or for the benefit of Lender,
including without limitation pursuant to the Prior Loan Agreement or the
"Existing Borrower Security Agreement" and "Existing Guarantor Subsidiary
Agreement" as defined by the Prior Loan Agreement.
"Extended Term" has the meaning prescribed by Section 3B.4.
------------- ------------
13
"Facility Type" means, for any Loan, the designation of whether such Loan
-------------
is a Revolving Credit Loan, an Equipment Term Loan, a Real Estate Term Loan, a
Capex Loan or an Acquisition Loan, as the case may be.
"Fair Market Value" means, with respect to any Real Estate, the fair market
-----------------
value thereof as determined by a credentialed appraiser acceptable to Lender, on
a fair market valuation basis in a manner acceptable to Lender, in form required
by Lender's internal policies and applicable laws and otherwise in form and
substance satisfactory to Lender.
"Financing Statements" means the Uniform Commercial Code financing
--------------------
statements previously executed and delivered, or to be executed and delivered,
by Borrower and each of its Subsidiaries, naming Lender (or a predecessor in
interest of Lender) as secured party and Borrower or any such Subsidiary, as
applicable, as debtor, as the same may be amended, modified or supplemented from
time to time.
"Fixed Charges" means scheduled principal and interest payments on
-------------
Indebtedness for Money Borrowed.
"Free Cash Flow" means EBITDA less Unfunded Capital Expenditures less cash
--------------
payments made in respect of income tax liabilities due and owing.
"Funded Debt" means Indebtedness for Money Borrowed.
-----------
"Funding Date" means the date on which a Borrowing occurs.
------------
"GAAP" means generally accepted accounting principles consistently applied
----
and maintained throughout the period indicated and consistent with the prior
financial practice of the Person referred to.
"General Intangibles" means, as to any Person, all of such Person's then
-------------------
owned or existing and future acquired or arising general intangibles, choses in
action and causes of action and all other intangible personal property of such
Person of every kind and nature (other than Receivables), including, without
limitation, Intellectual Property, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, reversions or any rights thereto and any other amounts payable to
such Person from any Benefit Plan, Multiemployer Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which such Person is
beneficiary (specifically excluding that certain $2 million life insurance
policy on ▇▇▇▇ ▇▇▇▇▇▇▇, Jr. pledged to The Catalyst Fund, Ltd.) and any letter
of credit, guarantee, claims, security interest or other security held by or
granted to such Person to secure payment by an Account Debtor of any of the
Receivables.
14
"Governmental Approvals" means all authorizations, consents, approvals,
----------------------
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local, foreign national or
provincial, and all agencies thereof.
"Governmental Authority" means any government or political subdivision or
----------------------
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Guarantor" means, individually and collectively, each Person who
---------
guarantees the Secured Obligations, including without limitation, each
Subsidiary of Borrower.
"Guaranty", "Guaranteed" or to "Guarantee," as applied to any obligation of
--------
another Person shall mean and include:
(a) a guaranty (other than by endorsement of negotiable instruments
for collection in the ordinary course of business), directly or indirectly,
in any manner, of any part or all of such obligation of such other Person,
and
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by (i) the purchase of securities or obligations, (ii) the
purchase, sale or lease (as lessee or lessor) of property or the purchase
or sale of services primarily for the purpose of enabling the obligor with
respect to such obligation to make any payment or performance (or payment
of damages in the event of nonperformance) of or on account of any part or
all of such obligation or to assure the owner of such obligation against
loss, (iii) the supplying of funds to, or in any other manner investing in,
the obligor with respect to such obligation, (iv) repayment of amounts
drawn down by beneficiaries of letters of credit, or (v) the supplying of
funds to or investing in a Person on account of all or any part of such
Person's obligation under a guaranty of any obligation or indemnifying or
holding harmless, in any way, such Person against any part or all of such
obligation.
"Guaranty Agreement" shall mean the guaranty agreements executed by each
------------------
Guarantor, in form and substance satisfactory to Lender.
"Indebtedness" of any Person means, without duplication, (a) Liabilities,
------------
(b) all obligations for money borrowed or for the deferred purchase price of
property or services or in respect of reimbursement obligations under letters of
credit, (c) all obligations represented by bonds, debentures, notes and accepted
drafts that represent extensions of credit, (d) Capitalized Lease Obligations,
(e) all obligations (including, during the noncancellable term of any lease in
the nature of a title retention agreement, all future payment obligations under
such lease discounted to their present value in accordance with GAAP) secured by
any Lien to which any property or asset owned or held by such Person is subject,
whether or not the obligation secured thereby shall have been assumed by such
Person, (f) all obligations of other Persons which such Person has Guaranteed,
including, but not limited to, all obligations of such Person consisting of
recourse liability with
15
respect to accounts receivable sold or otherwise disposed of by such Person, and
(g) in the case of Borrower (without duplication) the Loans.
"Indemnified Claims" means any and all claims, demands, actions, causes of
------------------
action, judgments, obligations, liabilities, losses, damages and consequential
damages, penalties, fines, costs, fees, expenses and disbursements (including
without limitation, fees and expenses of attorneys and other professional
consultants and experts in connection with investigation or defense) of every
kind, known or unknown, existing or hereafter arising, foreseeable or
unforeseeable, which may be imposed upon, threatened or asserted against, or
incurred or paid by, any Indemnified Person at any time and from time to time,
because of, resulting from, in connection with, or arising out of any
transaction, act, omission, event or circumstance in any way connected with the
Collateral or the Loan Documents (including enforcement of Lender's rights
thereunder or defense of Lender's actions thereunder), including but not limited
to economic loss, property damage, personal injury or death in connection with,
or occurring on or in the vicinity of, any Collateral through any cause
whatsoever, any act performed or omitted to be performed under any Loan
Documents, any breach by Borrower or a Subsidiary of Borrower of any
representation, warranty, covenant, agreement or condition contained in any Loan
Documents or any Event of Default as defined in this Agreement. "Indemnified
Claims" does not include any claims arising from the gross negligence or willful
misconduct of Lender.
"Indemnified Persons" collectively means Lender and its officers,
-------------------
directors, shareholders, employees, agents, attorneys and representatives, and
any Person owned or controlled by, or which owns or controls or is under common
control or is otherwise affiliated with, Lender.
"Initial Term" has the meaning prescribed by Section 3B.4.
------------
"Intellectual Property" means, as to any Person, all of such Person's then
---------------------
owned existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service ▇▇▇▇
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to ▇▇▇ for past, present and future infringements of any of the
foregoing.
"Interest Period" means, as to any LIBOR Rate Loan, the period commencing
---------------
on the Funding Date of such Loan or on the Conversion/Continuation Date on which
the Loan is converted into or continued as a LIBOR Rate Loan, and ending on the
date one, two, three or six months thereafter as selected by Borrower in its
Notice of Borrowing, or Notice of Conversion/Continuation; provided that:
--------
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
16
(ii) any Interest Period pertaining to a LIBOR Rate Loan that begins
on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period;
(iii) no Interest Period in respect of any Equipment Term Loan, Real
Estate Term Loan, Capex Loan or Acquisition Loan may extend beyond a
scheduled principal Payment Date thereof unless, after giving effect
thereto, the aggregate principal amount of such Loan subject to LIBOR Rate
Loans having Interest Periods that end after such principal repayment date
shall be equal to or less than the aggregate principal amount of such Loan
to be outstanding hereunder after such principal Payment Date; and
(iv) no Interest Period with respect to any Loan shall extend beyond
the Stated Termination Date for such Loan.
"Inventory" means and includes, as to any Person, all of such Person's then
---------
owned or existing and future acquired or arising (a) goods intended for sale or
lease or for display or demonstration, (b) work in process, (c) raw materials
and other materials and supplies of every nature and description used or which
might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of goods or otherwise used or
consumed in the conduct of business, and (d) documents evidencing and general
intangibles relating to any of the foregoing.
"Investment" means, with respect to any Person: (a) the direct or indirect
----------
purchase or acquisition of any beneficial interest in, any share of capital
stock of, evidence of Indebtedness of or other security issued by any other
Person, (b) any loan, advance or extension of credit to, or contribution to the
capital of, any other Person, excluding advances to employees in the ordinary
course of business not to exceed $20,000.00 and sales of inventory in the
ordinary course of business, (c) any Guaranty of the obligations of any other
Person, or (d) any commitment or option to take any of the actions described in
clauses (a), (b) or (c) above.
"Letter of Credit Issuer" means Lender or any Affiliate of Lender that
-----------------------
issues a Letter of Credit. "Lender" means Bank of America, N.A., a national
banking association and successor in interest by merger to NationsBank, N.A.,
successor to NationsBank of Texas, N.A., and its successors and assigns. When
used throughout this Agreement, the term "Lender" shall also include Lender's
successors and assigns, including specifically any party to whom Lender, or its
successors or assigns, may assign its rights and interests under this Agreement.
"Lender's Office" means the office of Lender specified in or determined in
---------------
accordance with the provisions of Section 12.1(c).
---------------
"Letter of Credit" has the meaning prescribed by Section 2.5(a).
---------------- --------------
17
"Letter of Credit Documents" means each of the documents, agreements and
--------------------------
other writings required by Lender to be executed and/or delivered in connection
with the issuance of a Letter of Credit, including, without limitation, each
letter of credit application and reimbursement agreement.
"Letter of Credit Facility" means, at any time, obligations arising under
-------------------------
Letters of Credit in an aggregate face amount not to exceed $1,000,000 incurred
pursuant to Section 2.5.
"Letter of Credit Fees" means fees charged in connection with the issuance
---------------------
of a Letter of Credit determined in accordance with Section 3A.4(c).
"Letter of Credit Reserve" means, at any time, 100% of the sum of (i) the
------------------------
aggregate undrawn amount of all Letters of Credit outstanding at such time, plus
(ii) the aggregate amount of all drawings under Letters of Credit for which
Letter of Credit Issuer has not been reimbursed.
"Leverage Ratio" means, at any time, the ratio determined on a consolidated
--------------
basis for Borrower and its Subsidiaries (including any Subsidiary which is
Acquired by Borrower in a Permitted Acquisition) of (i) Funded Debt determined
as of such time, to (ii) EBITDA determined for the preceding four (4) completed
fiscal quarters.
"Liabilities" means all liabilities of a Person determined in accordance
-----------
with GAAP and includable on a balance sheet of such Person prepared in
accordance with GAAP.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate
----------
Loans, the rate of interest per annum determined pursuant to the following
formula:
LIBOR Rate = Offshore Base Rate
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Offshore Base Rate" means the rate per annum appearing on
------------------
Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the Offshore Base Rate shall
be, for any Interest Period, the rate per annum appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable
to such Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates. If for any reason none of the
foregoing rates is available, the Offshore Base Rate shall be, for any
Interest Period, the rate per annum determined by the Agent as the
rate of interest at which dollar deposits in the approximate amount of
the LIBOR Rate Loan comprising part of such Borrowing would be offered
by the Bank's London Branch to major banks in the offshore dollar
market
18
at their request at or about 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term
comparable to such Interest Period.
"Eurodollar Reserve Percentage" means, for any day during any
-----------------------------
Interest Period, the reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1.0%) in effect on such day
applicable to member banks under regulations issued from time to time
by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental, or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"). The Offshore Rate for each
outstanding LIBOR Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
"LIBOR Rate Tranche A Acquisition Loan" means any portion of a Tranche A
-------------------------------------
Acquisition Loan during any period in which it bears interest based upon the
LIBOR Rate.
"LIBOR Rate Tranche B Acquisition Loan" means any portion of a Tranche B
-------------------------------------
Acquisition Loan during any period in which it bears interest based upon the
LIBOR Rate.
"LIBOR Rate Capex Loan" means any portion of the Capex Loan during any
---------------------
period in which it bears interest based upon the LIBOR Rate.
"LIBOR Rate Loan" means any of the LIBOR Rate Revolving Credit Loans, the
---------------
LIBOR Rate Term Loans, LIBOR Rate Capex Loans, the LIBOR Rate Tranche A
Acquisition Loans and the LIBOR Rate Tranche B Acquisition Loans, and "LIBOR
Rate Loans" means all of such Loans.
"LIBOR Rate Revolving Credit Loan" means any portion of the Revolving
--------------------------------
Credit Loan during any period in which it bear interest based upon the LIBOR
Rate.
"LIBOR Rate Term Loan" means any of the Equipment Term Loan or the Real
--------------------
Estate Term Loan, respectively, during any period in which it bears interest
based upon the LIBOR Rate.
"Lien" as applied to the property of any Person means: (a) any security
----
interest, mortgage, deed to secure debt, deed of trust, lien, pledge, charge,
lease constituting a Capitalized Lease Obligation, conditional sale or other
title retention agreement, or other security interest, security title or
encumbrance of any kind in respect of any property of such Person or upon
proceeds thereof or upon the income or profits therefrom, (b) any arrangement,
express or implied, under which any property of such Person is transferred,
sequestered or otherwise identified for the purpose of subjecting the same to
the payment of Indebtedness or performance of any other obligation in priority
to the payment of the general, unsecured creditors of such Person, (c) any
Indebtedness which is unpaid more than 30 days after the same shall have become
due and payable and which if unpaid might by law (including, but not limited to,
bankruptcy and insolvency laws) or otherwise be given any priority whatsoever
over general unsecured creditors of such Person, and (d) the filing of, or any
agreement to give, any financing statement under the UCC or its equivalent in
any jurisdiction.
19
"Loan Documents" means, collectively, this Agreement, the Notes, the
--------------
Security Documents and each other instrument, agreement and document executed
and delivered by Borrower and its Subsidiaries in connection with this Agreement
and each other instrument, agreement or document referred to herein or
contemplated hereby, and any and all renewals, extensions, amendments,
modifications or replacements thereof.
"Loan" means any loan made by Lender to Borrower or maintained by Lender
----
for Borrower pursuant to this Agreement, including any Revolving Credit Loan,
Term Loan, Capex Loan or Acquisition Loan, and "Loans" means, collectively, all
of the foregoing.
"Lockbox" means the U.S. Post Office Box(es) specified in, or pursuant to,
-------
an Agency Account Agreement or a Lockbox Agreement.
"Lockbox Agreement" means an agreement between Lender and Borrower pursuant
-----------------
to which Lender and Borrower designate a Lockbox for the receipt of checks and
other items constituting proceeds of Receivables.
"Long Term Debt" means any Indebtedness which will not mature or become due
--------------
within the next twelve (12) months.
"Management Group" means, as of any date of determination, the board of
----------------
directors, board of managers or similar constituency having management authority
in respect of an entity under applicable law.
"Materially Adverse Effect" means any act, omission, event or undertaking
-------------------------
which would, singly or in the aggregate, have a materially adverse effect upon
(a) the business, assets, properties, liabilities, condition (financial or
otherwise), results of operations or business prospects of Borrower or any of
its Subsidiaries, (b) upon the respective ability of Borrower or any of its
Subsidiaries to perform any obligations under this Agreement or any other Loan
Document to which it is a party, or (c) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or the
ability of Lender to enforce any rights or remedies under or in connection with
any Loan Document; in any case, whether resulting from any single act, omission,
situation, status, event, or undertaking, together with other such acts,
omissions, situations, statuses, events, or undertakings.
"Maximum Rate" means, at any time, the maximum rate of interest Lenders may
------------
lawfully contract for, charge, or receive in respect of the Secured Obligations
as allowed by any applicable laws. For purposes of determining the Maximum Rate
under the applicable laws of the State of Texas, the applicable rate ceiling
shall be (a) the "weekly ceiling" described in and computed in accordance with
the provisions of Section 303.003 of the Texas Finance Code, as amended or (b)
if the parties subsequently contract as allowed by Texas law, the quarterly
ceiling or the annualized ceiling computed pursuant to Section 303.008 of the
Texas Finance Code, as amended; provided, however, that at any time the "weekly
ceiling", the quarterly ceiling, or the annualized ceiling shall be less than
18.0% per annum or more than 24.0% per annum, the provisions of Section
303.009(a) and Section 303.009(b) of the Texas Finance Code, as amended, shall
control for purposes of such determination, as applicable.
20
"Modification Agreement" means an Agreement between Lender and Borrower
----------------------
pursuant to which the "Real Estate Term Note" under the Prior Loan Agreement is
modified, consistent with the terms of this Agreement.
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness for
--------------
money borrowed, (b) Indebtedness, whether or not in any such case the same was
for money borrowed, (i) represented by notes payable and drafts accepted, that
represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than trade Indebtedness) or that was issued
or assumed as full or partial payment for property, (c) Indebtedness that
constitutes a Capitalized Lease Obligation, and (d) Indebtedness that is such by
virtue of clause (f) of the definition thereof, but only to the extent that the
obligations Guaranteed are obligations that would constitute Indebtedness for
Money Borrowed.
"Mortgages" means and includes any and all of the mortgages, deeds of
---------
trust, deeds to secure debt, assignments, and other instruments executed and
delivered by Borrower or any of its Subsidiaries to or for the benefit of Lender
by which Lender acquires a Lien on any Real Estate, or a collateral assignment
of Borrower's or Subsidiary's interest under leases of Real Estate, and all
amendments, modifications, and supplements thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA to which Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding 6 years.
"Net Income" or "Net Loss" means, as applied to any Person, the net income
---------- --------
(or net loss) of such Person for the period in question after giving effect to
deduction of or provision for all operating expenses, all taxes and reserves
(including reserves for deferred taxes and all other proper deductions), all
determined in accordance with GAAP, provided that there shall be excluded (net
of tax effect): (a) the net income (or net loss) of any Person accrued prior to
the date it becomes a Subsidiary of, or is merged into or consolidated with, the
Person whose Net Income is being determined or a Subsidiary of such Person, (b)
the net income (or net loss) of any Person excluding Subsidiaries consolidated
in accordance with GAAP in which the Person whose Net Income is being determined
or any Subsidiary of such Person has an ownership interest, except, in the case
of net income, to the extent that any such income has actually been received by
such Person or such Subsidiary in the form of cash dividends or similar
distributions, (c) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during such period
or such restoration is made within six months of the commencement of the next
fiscal year, (d) any net gains or losses on the sale or other disposition, not
in the ordinary course of business, of Investments, Business Units and other
capital assets, (e) any non-cash net gain arising from the collection of the
proceeds of any insurance policy, (f) any write-up of any asset, and (g) any
other extraordinary item as defined by GAAP.
"Net Worth" of any Person means the total shareholders' equity (including
---------
capital stock, additional paid-in capital and retained earnings, after deducting
treasury stock other than treasury stock owned by Borrower as a result of a
repurchase pursuant to Section 10.6) which would appear as such on a balance
sheet of such Person prepared in accordance with GAAP.
21
"Notes" means the Revolving Credit Note, Equipment Term Note, Real Estate
-----
Term Note A, Real Estate Term Note B, Capex Note, Acquisition Loan Note A and
Acquisition Loan Note B, and "Note" means any of the foregoing, respectively.
"Notice of Borrowing" means written notice delivered to Lender by Borrower,
-------------------
in form and substance satisfactory to Lender, therein giving notice to Lender of
Borrower's request for a Loan as required by this Agreement.
"Notice of Conversion/Continuation" has the meaning prescribed by Section
---------------------------------
3A.2(b).
"Operating Lease" means any lease (other than a lease constituting a
---------------
Capitalized Lease Obligation) of real or personal property.
"Orderly Liquidation Value" means, with respect to any Eligible Acquired
-------------------------
Equipment, the orderly liquidation value thereof, as reflected by a written
appraisal prepared by a credentialed appraiser acceptable to Lender, on a
valuation basis acceptable to, and otherwise in form and substance acceptable
to, Lender.
"Other Taxes" means any present or future stamp or documentary taxes or any
-----------
other excise or property taxes, charges, or similar levies (excluding, in the
case of Lender, such taxes (including income taxes or franchise taxes) as are
imposed on or measured by Lender's net income) which arise from any payment made
hereunder or from the execution, delivery, or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.
"Payment Date" means the first day of each calendar month beginning June 1,
------------
2000 and continuing through the calendar month in which the Termination Date
occurs.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency.
"Permitted Acquisition" means:
---------------------
(a) an Acquisition in which the aggregate purchase price is less than
$1,000,000 and which is wholly paid for by Borrower other than with
proceeds of an Acquisition Loan, provided that:
(i) both before and after giving effect to such Acquisition and
any Loans requested to be made in connection therewith, no Default or
Event of Default exists or will exist or would result therefrom;
(ii) if the purchase price payable in connection with such
Acquisition is financed in whole or in part with Indebtedness other
than Loans, such Indebtedness is Subordinated Indebtedness which is
allowed by this Agreement;
(iii) if the purchase price payable in connection with such
Acquisition is financed in part with Indebtedness other than Loans,
such Indebtedness is Subordinated Indebtedness which is allowed by
this Agreement;
22
(iv) if such Acquisition is an Acquisition of the Capital Stock
of a Person, the acquisition is structured so that the acquired Person
shall become a Wholly-Owned Subsidiary of Borrower, and if such
Acquisition is an Acquisition of assets, the acquisition is structured
so that Borrower or a Wholly-Owned Subsidiary of Borrower shall
acquire such assets; and
(v) Borrower shall not, as a result of or in connection with any
such Acquisition, assume or incur any direct or contingent liabilities
(whether relating to environmental, tax, litigation, or other matters)
that could reasonably be expected, as of the date of such Acquisition,
to result in the existence or occurrence of a Materially Adverse
Effect; or
(b) an Acquisition in which the aggregate purchase price is equal to
or more than $1,000,000, or which is paid for, in whole or in part, with
proceeds of an Acquisition Loan, provided that:
(i) both before and after giving effect to such Acquisition and
the Loans (if any) requested to be made in connection therewith, no
Default or Event of Default exists or will exist or would result
therefrom;
(ii) not less than forty five (45) Business Days prior to
entering into any binding agreement in connection with such
Acquisition, Borrower shall have notified Lender of Borrower's
intention to enter into such Acquisition;
(iii) as soon as available, but not less than forty five (45)
Business Days prior to such Acquisition, Borrower shall have provided
to Lender a copy of the information provided to the board of directors
of Borrower in connection with such Acquisition;
(iv) if the purchase price payable in connection with such
Acquisition is financed in part with Indebtedness other than Loans,
such Indebtedness is Subordinated Indebtedness which is allowed by
this Agreement;
(v) if all or any portion of such Acquisition is financed by a
Borrowing under the Revolving Credit Facility, the incremental
increase in the unpaid balance of the Revolving Credit Loans resulting
from such Borrowing (net of principal reductions applied to the
Revolving Credit Loans on the day of such Borrowing) does not exceed
$1,000,000 unless such incremental increase has been approved by
Lender in writing;
(vi) if such Acquisition is an Acquisition of the Capital Stock of
a Person, the acquisition is structured so that the acquired Person
shall become a Wholly-Owned Subsidiary of Borrower, and if such
Acquisition is an Acquisition of assets, the acquisition is structured
so that Borrower or a Wholly-Owned Subsidiary of Borrower shall
acquire such assets;
23
(vii) Borrower shall not, as a result of or in connection with
any such Acquisition, assume or incur any direct or contingent
liabilities (whether relating to environmental, tax, litigation, or
other matters) that could reasonably be expected, as of the date of
such Acquisition, to result in the existence or occurrence of a
Materially Adverse Effect;
(viii) Borrower shall certify to Lender (and provide Lender with a
pro forma calculation in form and substance satisfactory to Lender)
that, after giving effect to completion of such Acquisition,
Availability is not less than $0 on a pro forma basis which includes
all consideration given in connection with such Acquisition, other
than Capital Stock of Borrower delivered to the seller(s) in such
Acquisition, as having been paid in cash at the time of making such
Acquisition; and
(ix) the Business Unit or assets being Acquired, as the case may
be, shall be and pertain to substantially the same line of business as
conducted by Borrower on the Agreement Date.
"Permitted Guaranties" means the Guaranty of the Secured Obligations by
--------------------
each of Borrower's Subsidiaries.
"Permitted Indebtedness for Money Borrowed" means the Indebtedness listed
-----------------------------------------
on Schedule 5.1(j).
"Permitted Investments" means Investments of Borrower or any of its
---------------------
Subsidiaries in:
(i) negotiable certificates of deposit, time deposits and banker's acceptances
issued by Lender or any Affiliate of Lender or by any United States bank or
trust company having capital, surplus and undivided profits in excess of
$250,000,000, (ii) any direct obligation of the United States of America or any
agency or instrumentality thereof which has a remaining maturity at the time of
purchase of not more than one year and repurchase agreements relating to the
same, and (iii) sales on credit in the ordinary course of business on terms
customary in the industry.
"Permitted Liens" means (a) Liens securing taxes, assessments and other
---------------
governmental charges or levies (excluding Environmental Liens or any Lien
imposed pursuant to any of the provisions of ERISA) or the claims of
materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of business, but
(i) in all cases, only if payment shall not at the time be required to be made
in accordance with Section 8.4, and (ii) in the case of warehousemen or
landlords controlling locations where Inventory is located, only if such liens
have been waived or subordinated to the Security Interest in a manner
satisfactory to Lender; (b) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment of,
obligations under workers' compensation, unemployment insurance or similar
legislation or under surety or performance bonds, in each case arising in the
ordinary course of business; (c) Purchase Money Liens securing Permitted
Purchase Money Indebtedness; (d) Liens of Lender arising under this Agreement
and the other Loan Documents; and (e) Liens shown on Schedule 5.1(i).
---------------
24
"Permitted Purchase Money Indebtedness" means Purchase Money Indebtedness
-------------------------------------
secured only by Purchase Money Liens and Capitalized Lease Obligations, incurred
by Borrower or any of its Subsidiaries after the Agreement Date, subject to a
maximum increase of $500,000 annually.
"Person" means an individual, corporation, partnership, association, trust
------
or unincorporated organization or a government or any agency or political
subdivision thereof.
"Prior Loan Agreement" means the certain Loan and Security Agreement dated
--------------------
August 27, 1997, between Lender and Borrower, as amended by the First Amendment
to Loan and Security Agreement dated as of September 9, 1997, the Second
Amendment to Loan and Security Agreement dated as of November 26, 1997, the
Third Amendment to Loan and Security Agreement dated as of January 28, 1998, the
Fourth Amendment to Loan and Security Agreement dated as of October 26, 1998,
the Fifth Amendment to Loan and Security Agreement dated as of July 5, 1999, and
the Sixth Amendment to Loan and Security Agreement dated as of October 14, 1999.
"Purchase Money Indebtedness" means Indebtedness created to finance the
---------------------------
payment of all or any part of the purchase price (not in excess of the fair
market value thereof) of any tangible asset (other than Inventory) and incurred
at the time of or within 10 days prior to or after the acquisition of such
tangible asset.
"Purchase Money Lien" means any Lien securing Purchase Money Indebtedness,
-------------------
but only if such Lien shall at all times be confined solely to the tangible
asset (other than Inventory) the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
"Rate Type" means, for any Loan, the designation of whether such Loan is a
---------
Base Rate Loan or a LIBOR Rate Loan, as the case may be.
"Real Estate" means, with respect to a Person, all of such Person's now or
-----------
hereafter owned or leased estates in real property, including, without
limitation, all fees, leaseholds, and future interests, together with all of
such Person's now and hereafter owned or leased interests in the improvements
thereon, the fixtures attached thereto, and the easements appurtenant thereto.
"Real Estate Term Loan" means Real Estate Term Loan A and Real Estate Term
---------------------
Loan B, or either of them.
"Real Estate Term Loan A" has the meaning prescribed in Section 2B.1(a).
-----------------------
"Real Estate Term Loan A Amount" means the amount of the unpaid principal
------------------------------
amount of Real Estate Term Loan A on and as of the Agreement Date, being
$287,819.50
"Real Estate Term Loan B" has the meaning prescribed in Section 2B.1(b).
-----------------------
"Real Estate Term Loan B Amortization Amount" means an amount, determined
-------------------------------------------
for each Loan under Real Estate Term B Loan, equal to the original principal
amount funded under such Loan divided by one hundred twenty (120).
25
"Real Estate Term Loan B Amortization Payment" means an amount, determined
--------------------------------------------
as of each Payment Date, equal to the sum of the Real Estate Term Loan B
Amortization Amount for all Loans under Real Estate Term Loan B which have been
funded through such date.
"Real Estate Term Loan B Maximum Amount" means an amount, determined as of
--------------------------------------
the Funding Date of Real Estate Term Loan B, equal to the lesser of (i) the sum
of (A) 75% of the Fair Market Value of all Eligible Term Loan B Real Estate plus
80% of Orderly Liquidation Value of all Eligible Term Loan B Equipment or (ii)
$4,000,000 less the Real Estate Term Loan A Amount less the unpaid principal
balance, if any, of Real Estate Term Loan C as of such date.
"Real Estate Term Loan C" has the meaning prescribed in Section 2B.1(c).
-----------------------
"Real Estate Term Loan C Amortization Amount" means an amount, determined
-------------------------------------------
for each Loan under Real Estate Term C Loan, equal to the original principal
amount funded under such Loan divided by one hundred twenty (120).
"Real Estate Term Loan C Amortization Payment" means an amount, determined
--------------------------------------------
as of each Payment Date, equal to the sum of the Real Estate Term Loan C
Amortization Amount for all Loans under Real Estate Term Loan C which have been
funded through such date.
"Real Estate Term Loan C Maximum Amount" means an amount, determined as of
--------------------------------------
the Funding Date of Real Estate Term Loan C, equal to the lesser of (i) the sum
of (A) 75% of the Fair Market Value of all Eligible Term Loan C Real Estate plus
80% of Orderly Liquidation Value of all Eligible Term Loan C Equipment or (ii)
$4,000,000 less the Real Estate Term Loan A Amount less the unpaid principal
balance, if any, of Real Estate Term Loan B as of such date.
"Real Estate Term Note A" means the certain promissory note dated October
-----------------------
26, 1998, executed by Borrower payable to NationsBank, N.A., predecessor in
interest to Lender, in the face amount of $333,419.50, such promissory note
being the "Real Estate Term Note" previously executed by Borrower pursuant to,
and as defined by, the Prior Loan Agreement, as modified by the Modification
Agreement, and as hereafter may be renewed, modified, extended, amended or
restated.
"Real Estate Term Note B" means a promissory note made by Borrower payable
-----------------------
to the order of Lender evidencing the obligation of Borrower to pay the
aggregate unpaid principal amount of Real Estate Term Loan B (and any promissory
note or notes that may be issued from time to time in substitution, renewal,
extension, replacement, or exchange thereof) substantially in the form of
Exhibit G, with all of the blanks properly completed, either as originally
executed or as such promissory note may be renewed, extended, modified, amended,
supplemented, or restated from time to time.
"Real Estate Term Note C" means a promissory note made by Borrower payable
-----------------------
to the order of Lender evidencing the obligation of Borrower to pay the
aggregate unpaid principal amount of Real Estate Term Loan C (and any promissory
note or notes that may be issued from time to time in substitution, renewal,
extension, replacement, or exchange thereof) substantially in the form of
Exhibit H, with all of the blanks properly completed, either as originally
executed or as such
26
promissory note may be renewed, extended, modified, amended, supplemented, or
restated from time to time.
"Release" means a release, spill, emission, leaking, pumping, injection,
-------
deposit, disposal, discharge, dispersal, leaching, or migration of a Contaminant
into the indoor or outdoor environment or into or out of any Real Estate or
other property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater, or Real Estate or other property.
"Receivables" means and includes, as to any Person, all of such Person's
-----------
then owned or existing and future acquired or arising (a) rights to the payment
of money or other forms of consideration of any kind (whether classified under
the UCC as accounts, contract rights, chattel paper, general intangibles or
otherwise) including, but not limited to, accounts receivable, letters of credit
and the right to receive payment thereunder, chattel paper, tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments, documents,
acceptances and all other debts, obligations and liabilities in whatever form
from any Person and guaranties, security and Liens securing payment thereof, (b)
goods, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise to, any such right to payment or other debt,
obligation or liability, and (c) cash and non-cash proceeds of any of the
foregoing. Notwithstanding the foregoing, the definition of "Receivables" shall
not include money received as proceeds from the sale of capital stock or
securities of Borrower or any Subsidiary.
"Related Company" means, as to any Person, any (a) corporation which is a
---------------
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as such Person, (b) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with such Person, or (c) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person or any corporation described in clause (a) above or any partnership,
trade or business described in clause (b) above.
"Restricted Distribution" by any Person means (a) its retirement,
-----------------------
redemption, purchase, or other acquisition for value of any capital stock or
other equity securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities or partnership interests, (c) any loan or advance by such Person
to, or other investment by such Person in, the holder of any of such securities
or partnership interests, and (d) any other payment by such Person in respect of
such securities or partnership interests.
"Restricted Payment" means (a) any redemption, repurchase or prepayment or
------------------
other retirement, prior to the stated maturity thereof or prior to the due date
of any regularly scheduled installment or amortization payment with respect
thereto, of any Indebtedness of a Person (other than the Secured Obligations and
trade debt), and (b) the payment by any Person of the principal amount of or
interest on any Indebtedness (other than trade debt) owing to an Affiliate of
such Person.
"Revolving Credit Facility" means the principal sum of $25,000,000.
-------------------------
27
"Revolving Credit Loan" means any loan made to Borrower pursuant to Section
--------------------- -------
2.1, as well as all such Revolving Credit Loans collectively, and any and all
---
renewals, extensions, modifications, or replacements thereof.
"Revolving Credit Note" means a promissory note made by Borrower payable to
----------------------
the order of Lender evidencing the obligation of Borrower to pay the aggregate
unpaid principal amount of Revolving Credit Loans, substantially in the form of
Exhibit I, with all of the blanks properly completed, either as originally
---------
executed or as such promissory note may be renewed, extended, modified, amended,
supplemented, or restated from time to time.
"Schedule of Equipment" means a schedule delivered by Borrower to Lender
---------------------
pursuant to Section 7.13.(c).
-----------------
"Schedule of Inventory" means a schedule delivered by Borrower to Lender
---------------------
pursuant to the provisions of Section 7.13(b).
---------------
"Schedule of Receivables" means a schedule delivered by Borrower to Lender
-----------------------
pursuant to the provisions of Section 7.13(a).
---------------
"Secured Obligations" means, in each case whether now in existence or
-------------------
arising, (a) the principal of and interest and premium, if any, on all Loans,
(b) all reimbursement and other obligations relating to Letters of Credit, (c)
all debts, liabilities, and obligations now or hereafter arising from or in
connection with Bank Products and (d) all indebtedness, liabilities,
obligations, overdrafts, covenants and duties of Borrower to Lender or any
Affiliate of Lender of every kind, nature and description, direct or indirect,
absolute or contingent, due or not due, contractual or tortious, liquidated or
unliquidated and whether or not evidenced by any note and whether or not for the
payment of money under or in respect of this Agreement, the Note or any of the
other Loan Documents.
"Security Documents" means this Agreement and each of (a) the Prior Loan
------------------
Agreement, and the "Existing Borrower Security Agreement" and the "Existing
Guarantor Security Agreements" defined therein, respectively, (c) the Financing
Statements, (d) the Mortgages and (e) each other writing executed and delivered
by any Person securing the Secured Obligations or evidencing such security.
"Security Interest" means the Liens of Lender on and in the Collateral
-----------------
effected hereby or by any of the Security Documents or pursuant to the terms
hereof or thereof.
"Subordinated Indebtedness" means any Indebtedness for money borrowed of
-------------------------
Borrower or any of its Subsidiaries which is subordinated in writing to the
Secured Obligations on terms and conditions acceptable to Lender in its sole
discretion.
"Stated Termination Date" means the date determined under clause (a) of the
-----------------------
definition of "Termination Date" in this Section 1.1.
---------------- -----------
28
"Subsidiary" when used to determine the relationship of a Person to another
----------
Person, means a Person of which an aggregate of 50% or more of the stock of any
class or classes or 50% or more of other ownership interests is owned of record
or beneficially by such other Person or by one or more Subsidiaries of such
other Person or by such other Person and one or more Subsidiaries of such
Person, (i) if the holders of such stock or other ownership interests (A) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote has been suspended
by the happening of such a contingency, or (B) are entitled, as such holders, to
vote for the election of a majority of the directors (or individuals performing
similar functions) of such Person, whether or not the right so to vote exists by
reason of the happening of a contingency, or (ii) in the case of such other
ownership interests, if such ownership interests constitute a majority voting
interest.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
deductions, charges, or withholdings, and all liabilities with respect thereto,
excluding, in the case of Lender, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by Lender's net income in any
jurisdiction (whether federal, state, or local and including any political
subdivision thereof) under the laws of which Lender is organized or maintains a
lending office.
"Tangible Net Worth" means, as applied to any Person, the Net Worth of such
------------------
Person plus Subordinated Debt at the time in question, after deducting therefrom
the amount of all intangible items reflected therein, including the unamortized
amount of all debt discount and expense, research and development expense,
deferred charges, goodwill, Intellectual Property, excess cost of investment in
Subsidiaries over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP.
"Teller Account" means an account of Lender maintained for the purpose of
--------------
receiving deposits and transfers of proceeds of Collateral (including without
limitation deposits and transfers from the Blocked Collection Account) for
application to the Secured Obligations.
"Term Loan" means the Equipment Term Loan and any Real Estate Term Loan, or
---------
any of them, and "Term Loans" means all of such Loans.
----------
"Termination Date" means the earlier of (i) the last day of the Initial
----------------
Term or, if the Termination Date is extended pursuant to Section 3B.4, then the
------------
last day of any Extended Term and (b) the date on which all Secured Obligations
shall have been irrevocably paid in full and the Revolving Credit Facility
terminated.
"Termination Event" means (a) a "Reportable Event" as defined in Section
-----------------
4043(b) of ERISA, but excluding any such event as to which the provision for 30
days' notice to the PBGC is waived under applicable regulations, (b) the filing
of a notice of intent to terminate a Benefit Plan or the treatment of a Benefit
Plan amendment as a termination under Section 4041 of ERISA, or (c) the
institution of proceedings to terminate a Benefit Plan by the PBGC under Section
4042 of ERISA or the appointment of a trustee to administer any Benefit Plan.
"Tranche A Acquisition Loan" has the meaning prescribed by Section 2D.1.
-------------------------- ------------
29
"Tranche A Acquisition Loan Amortization Amount" means an amount,
----------------------------------------------
determined for each Tranche A Acquisition Loan, equal to the original principal
amount funded under such Loan divided by eighty-four (84).
"Tranche A Acquisition Loan Amortization Payment" means an amount,
-----------------------------------------------
determined as of each Payment Date, equal to the sum of the Tranche A
Acquisition Loan Amortization Amount for all Tranche A Acquisition Loans which
have been funded through such date.
"Tranche A Acquisition Loan Amount" means, with respect to any Acquisition
---------------------------------
Loan, an amount, determined as of the Funding Date thereof, equal to the sum of
(i) eighty percent (80.0%) of the Orderly Liquidation Value of Eligible Acquired
Equipment plus (ii) seventy five percent (75%) of the Fair Market Value of
Eligible Acquired Real Estate, in each case which is acquired or is to be
acquired by Borrower pursuant to, or which is owned by a Person that becomes an
Acquired Subsidiary as a result of, the Acquisition that is financed in whole or
in part by such Acquisition Loan.
"Tranche B Acquisition Loan" has the meaning prescribed by Section 2D.1.
-------------------------- ------------
"Tranche B Acquisition Loan Amortization Amount" means an amount,
----------------------------------------------
determined for each Tranche B Acquisition Loan, equal to the original principal
amount funded under such Loan divided by thirty-six (36).
"Tranche B Acquisition Loan Amortization Payment" means an amount,
-----------------------------------------------
determined as of each Payment Date, equal to the sum of the Tranche B
Acquisition Loan Amortization Amount for all Tranche B Acquisition Loans which
have been funded through such date.
"Tranche B Acquisition Loan Amount" means, with respect to any Acquisition
---------------------------------
Loan, an amount, determined as of the Funding Date thereof, equal to the
Acquisition Loan Amount with respect to such Acquisition Loan less the Tranche A
Acquisition Loan Amount with respect to such Acquisition Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time in
---
the State of Texas.
"Unfunded Capital Expenditures" means Capital Expenditures which are
-----------------------------
paid for by a Person (i) with proceeds of Revolving Credit Loans, or (ii)
otherwise, from sources other than Indebtedness for Money Borrowed.
"Unused Letter of Credit Subfacility" means an amount equal to the Letter
-----------------------------------
of Credit Facility minus the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit plus (b) the aggregate unpaid reimbursement
obligations with respect to all Letters of Credit.
"Unfunded Vested Accrued Benefits" means, with respect to any Benefit Plan
--------------------------------
at any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Benefit Plan exceeds (b) the fair market
value of all Benefit Plan assets allocable to such benefits, as determined using
such reasonable actuarial assumptions and methods as are specified in the
30
Schedule B (Actuarial Information) to the most recent Annual Report (Form 5500)
filed with respect to such Benefit Plan.
"Wholly-Owned Subsidiary" when used to determine the relationship of a
-----------------------
Subsidiary to a Person, means a Subsidiary all of the issued and outstanding
Capital Stock (other than directors' qualifying shares) of which shall at the
time be owned by such Person or one or more of such Person's Wholly-Owned
Subsidiaries or by such Person and one or more of such Person's Wholly-Owned
Subsidiaries.
Section 1.2 Other Referential Provisions.
----------------------------
(a) All terms in this Agreement, the Exhibits and Schedules hereto
shall have the same defined meanings when used in any other Loan Documents,
unless the context shall require otherwise.
(b) Except as otherwise expressly provided herein, all accounting
terms not specifically defined or specified herein shall have the meanings
generally attributed to such terms under GAAP including, without
limitation, applicable statements and interpretations issued by the
Financial Accounting Standards Board and bulletins, opinions,
interpretations and statements issued by the American Institute of
Certified Public Accountants or its committees.
(c) All personal pronouns used in this Agreement, whether used in the
masculine, masculine, feminine or neuter gender, shall include all other
genders; the singular shall include the plural, and the plural shall
include the singular.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provisions of this Agreement.
(e) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither
limit nor amplify the provisions of this Agreement, and all references in
this Agreement to Articles, Sections, Subsections, paragraphs, clauses,
subclauses, Schedules or Exhibits shall refer to the corresponding Article,
Section, Subsection, paragraph, clause or subclause of, or Schedule or
Exhibit attached to, this Agreement, unless specific reference is made to
the articles, sections or other subdivisions or divisions of, or to
schedules or exhibits to, another document or instrument.
(f) Each definition of a document in this Agreement shall include such
document as amended, modified, supplemented or restated from time to time
in accordance with the terms of this Agreement.
(g) Except where specifically restricted, reference to a party to a
Loan Document includes that party and its successors and assigns permitted
hereunder or under such Loan Document.
31
(h) Unless otherwise specifically stated, whenever a time is referred
to in this Agreement or in any other Loan Document, such time shall be the
local time in the city in which the principal office of Lender is located.
(i) Whenever the phrase "to the knowledge of Borrower" or words of
similar import relating to the knowledge of Borrower are used herein, such
phrase shall mean and refer to (i) the actual knowledge of the president or
chief financial officer or (ii) the knowledge that such officers would have
obtained if they had engaged in good faith in the diligent performance of
their duties, including the making of such reasonable specific inquiries as
may be necessary of the appropriate persons in a good faith attempt to
ascertain the accuracy of the matter to which such phrase relates.
(j) The terms accounts, chattel paper, documents, equipment, good
faith, instruments, general intangibles and inventory, as and when used
(without being capitalized) in this Agreement or the Security Documents,
shall have the meanings given those terms in the UCC.
Section 1.3 Exhibits and Schedules. All Exhibits and Schedules attached
----------------------
hereto are by reference made a part hereof.
ARTICLE 2 - REVOLVING CREDIT FACILITY
Section 2.1 Revolving Credit Loans. Upon the terms and subject to the
----------------------
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, Lender shall make Revolving Credit Loans to Borrower from
time to time from the Effective Date to the Termination Date, as requested by
Borrower in accordance with the terms of Section 2.2, in an aggregate principal
amount outstanding not to exceed at any time the lesser of (a) the Revolving
Credit Facility minus the Letter of Credit Reserve or (b) the Borrowing Base. It
is expressly understood and agreed that Lender may and at present intends to use
the lesser of the amounts referred to in the foregoing clauses (a) and (b) as a
maximum ceiling on Revolving Credit Loans; provided, however, that it is agreed
that should Revolving Credit Loans exceed the ceiling so determined or any other
limitation set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Secured Obligations and, as such, shall be entitled to
all benefits thereof and security therefor. The principal amount of any
Revolving Credit Loan which is repaid may be reborrowed by Borrower in
accordance with the terms of this Section 2.1. Lender is hereby authorized to
record each repayment of principal of the Revolving Credit Loans in its books
and records, such books and records constituting prima facie evidence of the
accuracy of the information contained therein.
Section 2.2 Manner of Borrowing Revolving Credit Loans. Borrowings of the
------------------------------------------
Revolving Credit Loans shall be made as follows:
(a) Requests for Borrowing. A request for a borrowing shall be made,
----------------------
or shall be deemed to be made, in the following manner:
(i) Borrower shall give Lender notice of each request for a
Revolving Credit Loan, therein specifying the amount of the proposed
borrowing and the
32
proposed borrowing date, as provided herein. With respect to all
Revolving Credit Loans, Borrower shall give notice to Lender (which
must be received by prior to 11 a.m., Dallas, Texas time) (i) two (2)
Business Days prior to the requested Funding Date, in the case of
LIBOR Rate Loans and (ii) no later than 11:00 a.m., Dallas, Texas time
on the requested Funding Date, in the case of Base Rate Loans),
specifying:
(A) the amount of the Borrowing (which, if a LIBOR Rate Loan,
shall be in an amount that is not less than $1,000,000 or an
integral multiple of $100,000 in excess thereof);
(B) the requested Funding Date, which shall be a Business
Day;
(C) whether the Revolving Credit Loans requested are to be
Base Rate Revolving Credit Loans or LIBOR Revolving Credit Loans;
and
(D) the duration of the Interest Period if the requested
Revolving Credit Loans are to be LIBOR Revolving Credit Loans. If
the Notice of Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of LIBOR Rate Loans,
such Interest Period shall be one month.
(ii) Whenever a check is presented to Lender for payment against
the Controlled Disbursement Account in an amount greater than the then
available balance in such account, such presentation shall be deemed
to be a request for a borrowing on the date of such notice in an
amount equal to the excess of such check over such available balance;
(iii) If any Secured Obligation becomes due and payable at any
time prior to the time otherwise provided by Section 2.3, or as
-----------
required by Lender pursuant to Section 11.2, then Borrower shall be
------------
deemed to have, requested Lender to make a Revolving Credit Loan in
the amount of such Secured Obligation, and Lender in its sole
discretion may make such Revolving Credit Loan, in which event such
Secured Obligation shall be deemed paid and the amount thereof shall
be included as a part of the Revolving Credit Loans (provided,
--------
however, that Lender shall have no obligation to make any such
-------
Revolving Credit Loan).
(iv) pursuant to Section 2.5(e)(ii).
------------------
(b) Disbursement of Loans. Borrower hereby irrevocably authorizes
Lender to disburse the proceeds of each borrowing requested, or deemed to
be requested, pursuant to this Section 2.2 as follows: (i) the proceeds of
-----------
each borrowing requested under Sections 2.2(a)(i) or 2.2(a)(ii) shall be
------------------ ----------
disbursed by Lender in lawful money of the United States of America in
immediately available funds by credit to the Controlled Disbursement
Account or to such other account as may be agreed upon by Borrower and
Lender from time to time; and (ii) the proceeds of each Borrowing requested
under Section 2.2(a)(iii) or
-------------------
33
2.2(a)(iv) shall be disbursed by Lender by way of direct payment of the
----------
relevant principal, interest or other Secured Obligation, as the case may
be.
Section 2.3 Repayment of Revolving Credit Loans. The Revolving Credit Loans
-----------------------------------
will be repaid as follows: (a) the outstanding principal amount of all the
Revolving Credit Loans is due and payable, and shall be repaid by Borrower in
full together with accrued and unpaid interest on the amount repaid to the date
of repayment, on the Termination Date; (b) if at any time the aggregate unpaid
principal amount of the Revolving Credit Loans then outstanding exceeds the
lesser of the amounts referred to in clauses (a) and (b) of Section 2.1,
----------- --- -----------
Borrower shall repay the Revolving Credit Loans in an amount sufficient to
reduce the aggregate unpaid principal amount of such Loans by an amount equal to
such excess, together with accrued and unpaid interest on the amount repaid to
the date of repayment; and (c) Borrower hereby instructs Lender to repay the
Revolving Credit Loans outstanding on any day in an amount equal to the amount
received by Lender on such day pursuant to Section 7.1(e). Any repayments under
--------------
this Section 2.3 shall be applied first to Base Rate Revolving Credit Loans and
-----------
thereafter to LIBOR Rate Revolving Credit Loans, in Lender's discretion. Except
as results from application of proceeds of Receivables as provided by Section
-------
7.1(e), prepayment of a LIBOR Rate Loan shall not be permitted without the prior
------
written consent of Lender. Should any prepayment of a LIBOR Rate Loan, or any
portion thereof, occur (whether as a result of applications under Section 7.1(e)
--------------
or by consent of Lender, or otherwise), then within 15 days of Lender's request
therefor, Borrower shall pay to Lender all amounts required by Section 3B.6(d).
---------------
Lender's statement of the amount of such loss or expense, prepared in reasonable
detail by Lender and presented to Borrower, shall be conclusive and binding for
all purposes, absent manifest error, gross negligence or bad faith in
computation.
Section 2.4 Revolving Credit Note. Lender's Revolving Credit Loans and the
---------------------
obligation of Borrower to repay such Revolving Credit Loans shall also be
evidenced by the Revolving Credit Note.
Section 2.5 Letters of Credit.
-----------------
(a) Agreement to Issue or Cause To Issue. Subject to the terms and
------------------------------------
conditions of this Agreement, and in reliance upon the representations and
warranties of Borrower herein set forth, Lender agrees (i) to cause the
Letter of Credit Issuer to issue for the account of Borrower one or more
commercial/documentary and standby letters of credit ("Letter of Credit")
----------------
and/or (ii) to provide credit support or other enhancement to a Letter of
Credit Issuer acceptable to Lender, which issues a Letter of Credit for the
account of Borrower (any such credit support or enhancement being herein
referred to as a "Credit Support") in accordance with this Section 2.5 from
--------------
time to time during the term of this Agreement.
(b) Amounts; Outside Expiration Date. Lender shall not have any
--------------------------------
obligation to take steps to issue or cause to be issued any Letter of
Credit or to provide Credit Support for any Letter of Credit at any time
if: (i) the maximum face amount of the requested Letter of Credit is
greater than the Unused Letter of Credit Subfacility at such time; (ii) the
maximum undrawn amount of the requested Letter of Credit and all
commissions, fees, and charges due from Borrower in connection with the
opening thereof exceed the Availability at such time; or (iii) such Letter
of Credit has an expiration date later than thirty (30) days prior to the
34
Stated Termination Date or more than twelve (12) months from the date of
issuance for standby letters of credit and 180 days for merchandise letters
of credit.
(c) Other Conditions. In addition to being subject to the satisfaction
----------------
of the applicable conditions precedent contained in Article 4, the
----------
obligation of Lender to issue or to cause to be issued any Letter of Credit
or to provide Credit Support for any Letter of Credit is subject to the
following conditions precedent having been satisfied in a manner reasonably
satisfactory to Lender:
(i) Borrower shall have delivered to the Letter of Credit Issuer,
at such times and in such manner as such Letter of Credit Issuer may
prescribe, an application in form and substance satisfactory to such
Letter of Credit Issuer and Lender for the issuance of the Letter of
Credit and such other documents as may be required pursuant to the
terms thereof, and the form and terms of the proposed Letter of Credit
shall be reasonably satisfactory to Lender and the Letter of Credit
Issuer; and
(ii) As of the date of issuance, no order of any court, arbitrator
or Governmental Authority shall purport by its terms to enjoin or
restrain money center banks generally from issuing letters of credit
of the type and in the amount of the proposed Letter of Credit, and no
law, rule or regulation applicable to money center banks generally and
no request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed Letter of
Credit Issuer refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
-----------------------------
(i) Request for Issuance. Borrower shall give Lender at least two
--------------------
(2) Business Days prior written notice of Borrower's request for the
issuance of a Letter of Credit, accompanied by a completed application
for issuance of such Letter of Credit and reimbursement agreement in
form satisfactory to Lender. Such notice shall be irrevocable and
shall specify the original face amount of the Letter of Credit
requested, the effective date (which date shall be a Business Day) of
issuance of such requested Letter of Credit, whether such Letter of
Credit may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit is to expire (which date shall be a
Business Day), the purpose for which such Letter of Credit is to be
issued, and the beneficiary of the requested Letter of Credit. The
Borrower shall attach to such notice the proposed form of the Letter
of Credit.
(ii) Responsibilities of Lender; Issuance. Lender shall determine,
------------------------------------
as of the Business Day immediately preceding the requested effective
date of issuance of the Letter of Credit set forth in the notice from
Borrower pursuant to Section 2.5(d)(1), (A) the amount of the
-----------------
applicable Unused Letter of Credit Subfacility and (B) the
Availability as of such date. If (i) the undrawn amount of the
35
requested Letter of Credit is not greater than the Unused Letter of
Credit Subfacility and (ii) the amount of such requested Letter of
Credit and all commissions, fees, and charges due from Borrower in
connection with the opening thereof would not exceed the Availability,
Lender shall, so long as the other conditions hereof are met, cause
the Letter of Credit Issuer to issue the requested Letter of Credit on
such requested effective date of issuance.
(iii) No Extensions or Amendment. Lender shall not be obligated to
--------------------------
extend or amend any Letter of Credit issued hereunder unless the
requirements of this Section 2.5 are met as though a new Letter of
-----------
Credit were being requested and issued.
(e) Payments Pursuant to Letters of Credit.
--------------------------------------
(i) Payment of Letter of Credit Obligations. The Borrower agrees
---------------------------------------
immediately upon demand to reimburse the Letter of Credit Issuer for
any draw under any Letter of Credit and Lender upon any payment
pursuant to any Credit Support, and to pay the Letter of Credit Issuer
the amount of all other obligations and other amounts payable to such
Letter of Credit Issuer under or in connection with any Letter of
Credit immediately when due, irrespective of any claim, setoff,
defense or other right which Borrower may have at any time against
such issuer or any other Person.
(ii) Revolving Credit Loans to Satisfy Reimbursement Obligations.
-----------------------------------------------------------
Each drawing under any Letter of Credit shall constitute a request by
Borrower to Lender for a Borrowing of a Base Rate Revolving Loan in
the amount of such drawing. The Funding Date with respect to such
borrowing shall be the date of such drawing.
(f) Indemnification; Exoneration; Power of Attorney.
-----------------------------------------------
(i) Indemnification. In addition to amounts payable as elsewhere
provided in this Section 2.5, Borrower hereby agrees to protect,
-----------
indemnify, pay and save Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which Lender (other
than Lender in its capacity as Letter of Credit Issuer) may incur or
be subject to as a consequence, direct or indirect, of the issuance of
any Letter of Credit or the provision of any Credit Support or
enhancement in connection therewith. The agreement in this Section
-------
2.5(f)(1) shall survive payment of all Secured Obligations. Nothing
---------
contained in this Agreement is intended to limit Borrower's rights, if
any, with respect to the Letter of Credit Issuer which arise as a
result of the letter of credit application and related documents
executed by and between Borrower and the Letter of Credit Issuer.
(ii) Assumption of Risk by Borrower. As among Borrower and Lender,
------------------------------
Borrower assumes all risks of the acts and omissions of, or misuse of
any of the Letters of Credit by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the
foregoing, Lender shall not be responsible for:
36
(A) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any Person in connection with the
application for and issuance of and presentation of drafts with
respect to any of the Letters of Credit, even if it should prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) the failure of the beneficiary of any
Letter of Credit to comply duly with conditions required in order to
draw upon such Letter of Credit; (D) errors, omissions, interruptions,
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (E)
errors in interpretation of technical terms; (F) any loss or delay in
the transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit or of the proceeds thereof;
(G) the misapplication by the beneficiary of any Letter of Credit of
the proceeds of any drawing under such Letter of Credit; or (H) any
consequences arising from causes beyond the control of Lender,
including any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto Governmental Authority. None of
the foregoing shall affect, impair or prevent the vesting of any
rights or powers of Lender under this Section 2.5(f).
(iii) Exoneration. In furtherance and extension, and not in
-----------
limitation, of the specific provisions set forth above, any action
taken or omitted by Lender under or in connection with any of the
Letters of Credit or any related certificates, if taken or omitted in
good faith, shall not put Lender under any resulting liability to
Borrower or relieve Borrower of any of its obligations hereunder to
Lender. Nothing contained in this Agreement is intended to limit
Borrower's rights, if any, with respect to the Letter of Credit Issuer
which arise as a result of the letter of credit application and
related documents executed by and between Borrower and the Letter of
Credit Issuer.
(iv) Power of Attorney. In connection with all Inventory financed
-----------------
by Letters of Credit, Borrower hereby appoints Lender, or Lender's
designee, as its attorney, with full power and authority: (a) to sign
and/or endorse Borrower's name upon any warehouse or other receipts;
(b) to sign Borrower's name on bills of lading and other negotiable
and non-negotiable documents; (c) to clear Inventory through customs
in Lender's or Borrower's name, and to sign and deliver to customs
officials powers of attorney in Borrower's name for such purpose; (d)
to complete in Borrower's or Lender's name, any order, sale, or
transaction, obtain the necessary documents in connection therewith,
and collect the proceeds thereof; and (e) to do such other acts and
things as are necessary in order to enable Lender to obtain possession
or control of the Inventory and to obtain payment of the Secured
Obligations. Neither Lender nor its designee, as Borrower's attorney,
will be liable for any acts or omissions, nor for any error of
judgment or mistakes of fact or law. This power, being coupled with an
interest, is irrevocable until all Secured Obligations have been paid
and satisfied.
37
(v) Account Party. The Borrower hereby authorizes and directs any
-------------
Letter of Credit Issuer to name Borrower as the "Account Party"
therein and to deliver to Lender all instruments, documents and other
writings and property received by the Letter of Credit Issuer pursuant
to the Letter of Credit, and to accept and rely upon Lender's
instructions and agreements with respect to all matters arising in
connection with the Letter of Credit or the application therefor.
(vi) Control of Inventory. In connection with all Inventory
--------------------
financed by Letters of Credit, Borrower will, at Lender's request,
instruct all suppliers, carriers, forwarders, customs brokers,
warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Lender holds a security interest to
deliver them to Lender and/or subject to Lender's order, and if they
shall come into Borrower's possession, to deliver them, upon request,
to Lender in their original form. The Borrower shall also, at Lender's
request, designate Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents.
(g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding
--------------------------------------------
the provisions of Section 2.5(b), any Letter of Credit is outstanding upon
--------------
the termination of this Agreement, then upon such termination Borrower
shall deposit with Lender, with respect to each Letter of Credit or Credit
Support then outstanding, at Lender in its discretion shall specify, either
(A) a standby letter of credit (a "Supporting Letter of Credit") in form
---------------------------
and substance satisfactory to Lender, issued by an issuer satisfactory to
Lender in an amount equal to the greatest amount for which such Letter of
Credit or such Credit Support may be drawn plus any fees and expenses
associated with such Letter of Credit or such Credit Support, under which
Supporting Letter of Credit Lender is entitled to draw amounts necessary to
reimburse Lender for payments to be made by Lender under such Letter of
Credit or Credit Support and any fees and expenses associated with such
Letter of Credit or Credit Support, or (B) cash in amounts necessary to
reimburse Lender for payments made by Lender under such Letter of Credit or
such Credit Support and any fees and expenses associated with such Letter
of Credit. Such Supporting Letter of Credit or deposit of cash shall be
held by Lender as security for, and to provide for the payment of, the
aggregate undrawn amount of such Letters of Credit or such Credit Support
remaining outstanding.
Section 2.6 Bank Products. Any Borrower may request and the Bank may, in
-------------
its sole and absolute discretion, arrange for such Borrower to obtain from the
Bank or the Bank's Affiliates Bank Products although no Borrower is required to
do so. To the extent Bank Products are provided by an Affiliate of the Bank,
each Borrower agrees to indemnify and hold the Bank and the Lenders harmless
from any and all costs and obligations now or hereafter incurred by the Bank or
any of the Lenders which arise from the indemnity given by the Bank to its
Affiliates related to such Bank Products; provided, however, nothing contained
-------- -------
herein is intended to limit the Borrower's rights with respect to the Bank or
its Affiliates, if any, which arise as a result of the execution of documents by
and between any Borrower and the Bank which relate to Bank Products. The
agreement contained in this Section shall survive termination of this Agreement.
Each Borrower acknowledges and agrees that the obtaining of Bank Products from
the Bank or the Bank's Affiliates (a) is in the sole
38
and absolute discretion of the Bank or the Bank's Affiliates, and (b) is subject
to all rules and regulations of the Bank or the Bank's Affiliates.
Section 2.7 Borrowing Base. The advance rates specified in this Agreement
--------------
for determination of the Borrowing Base may be decreased from time to time based
upon such considerations as Lender in good faith may deem appropriate in its
reasonable discretion. Advance rates from time to time used by Lender in
calculating the Borrowing Base are for the sole purpose of determining the
maximum amount of Revolving Credit Loans that may be outstanding from time to
time under this Agreement, and shall not be evidentiary of or binding upon
Lender with respect to the market value or liquidation value of any Collateral.
Lender shall have the right at any time in its good faith discretion to
establish a reserve in reduction of the Borrowing Base in respect of costs,
expenses, liens, claims, contingencies or other potential factors which, in the
event they should occur, could adversely affect or otherwise reduce the
anticipated net amount of timely collections in payment of Eligible Receivables
or the anticipated amount of proceeds which could be realized upon liquidation
of Eligible Inventory. Funding of Revolving Credit Loans hereunder shall at all
times remain subject to confirmation of existence and acceptability of Eligible
Receivables and Eligible Inventory, and the Borrowing Base. Any request for a
Revolving Credit Loan which, if funded, would exceed the Availability may be
declined by Lender in its sole discretion without prior notice.
ARTICLE 2A - EQUIPMENT TERM LOAN FACILITY
Section 2A.1 Equipment Term Loan Facility. The Existing Equipment Term Loan
----------------------------
hereby is renewed and continued and hereafter shall be subject to, and payable
in accordance with, the terms of this Agreement (as so renewed and continued,
the "Equipment Term Loan"). Borrower hereby ratifies and confirms the Equipment
-------------------
Term Loan as being and continuing in full force and effect, subject to the terms
of this Agreement. No additional Loans shall be made under the Equipment Term
Loan. Lender is hereby authorized to record each repayment of principal of the
Equipment Term Loan in its books and records, such books and records
constituting prima facie evidence of the accuracy of the information contained
therein.
Section 2A.2 Repayment of Equipment Term Loan. The Equipment Term Loan will
--------------------------------
be repaid as follows: (a) in monthly installments payable on each Payment Date
in an amount equal to $7,882.97, plus accrued and unpaid interest; and (b) a
final payment equal to all outstanding principal and accrued interest payable on
the earlier of (i) the Termination Date or (ii) February 28, 2002. Borrower may
prepay the Equipment Term Loans, in whole or in part, at time prior to maturity
without penalty.
Section 2A.3 Equipment Term Note. The Equipment Term Loan and the
-------------------
obligation of Borrower to repay the Equipment Term Loan shall be evidenced by
the Equipment Term Note.
ARTICLE 2B - REAL ESTATE TERM LOAN FACILITY
Section 2B.1 Real Estate Term Loans.
----------------------
39
(a) Real Estate Term Loan A. The Existing Real Estate Term Loan hereby
-----------------------
is ratified and confirmed as being and continuing in full force and effect,
payable in accordance with Real Estate Term Note A (as so ratified and
confirmed, herein called "Real Estate Term Loan A"). Borrower hereby
-----------------------
ratifies and confirms the Real Estate Term Loan A as being and continuing
in full force and effect, subject to the terms of this Agreement. No
additional Loans shall be made under the Real Estate Term Loan A. Lender is
hereby authorized to record each repayment of principal of Real Estate Term
Loan A in its books and records, such books and records constituting prima
facie evidence of the accuracy of the information contained therein.
(b) Real Estate Term Loan B. Upon the terms and subject to the
-----------------------
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, Lender agrees to make Loans (collectively the "Real
----
Estate Term Loan B") to Borrower, as requested by Borrower at any time,
------------------
from time to time, prior to November 27, 2000, in accordance with the terms
of Section 4.3, in an aggregate principal amount advanced up to but not
-----------
exceeding the Real Estate Term Loan B Maximum Amount. Lender is hereby
authorized to record each such Loan and repayment of principal of Real
Estate Term Loan B in its books and records, such books and records
constituting prima facie evidence of the accuracy of the information
contained therein.
(c) Real Estate Term Loan C. Upon the terms and subject to the
-----------------------
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, Lender agrees to make Loans (collectively the "Real
----
Estate Term Loan C") to Borrower, as requested by Borrower at any time,
------------------
from time to time, prior to November 27, 2000, in accordance with the terms
of Section 4.3, in an aggregate principal amount advanced up to but not
-----------
exceeding the Real Estate Term Loan C Maximum Amount. Lender is hereby
authorized to record each such Loan and repayment of principal of Real
Estate Term Loan C in its books and records, such books and records
constituting prima facie evidence of the accuracy of the information
contained therein.
Section 2B.2 Repayment of Real Estate Term Loans.
-----------------------------------
(a) Repayment of Real Estate Term Loan A. Real Estate Term Loan A will
------------------------------------
be repaid as follows: (a) in monthly installments payable on each Payment
Date in an amount to $2,400.00, plus accrued and unpaid interest; and (b) a
----
final payment equal to all outstanding principal and accrued interest
payable on the Termination Date. Borrower may prepay Real Estate Term Loan
A, in whole or in part, at time prior to maturity without penalty.
(b) Repayment of Real Estate Term Loan B. Real Estate Term Loan B will
------------------------------------
be repaid as follows: (a) in monthly installments payable on each Payment
Date in an amount equal to the Real Estate Term Loan B Amortization
Payment, plus accrued and unpaid interest; and (b) a final payment equal to
----
all outstanding principal and accrued interest payable on the Termination
Date. Borrower may prepay Real Estate Term Loan B, in whole or in part, at
time prior to maturity without penalty.
40
(c) Repayment of Real Estate Term Loan C. Real Estate Term Loan C will
------------------------------------
be repaid as follows: (a) in monthly installments payable on each Payment
Date in an amount equal to Real Estate Term Loan C Amortization Payment,
plus accrued and unpaid interest; and (b) a final payment equal to all
outstanding principal and accrued interest payable on the Termination Date.
Borrower may prepay Real Estate Term Loan C, in whole or in part, at time
prior to maturity without penalty.
Section 2B.3 Real Estate Term Loan Notes.
---------------------------
(a) Real Estate Term Note A. Real Estate Term Loan A and the
-----------------------
obligation of Borrower to repay Real Estate Term Loan A shall be evidenced
by the Real Estate Term Note A.
(b) Real Estate Term Note B. Real Estate Term Loan B and the
-----------------------
obligation of Borrower to repay Real Estate Term Loan B shall be evidenced
by the Real Estate Term Note B, which shall be dated, executed and
delivered as of the Funding Date of Real Estate Term Loan B.
(c) Real Estate Term Note C. Real Estate Term Loan C and the
-----------------------
obligation of Borrower to repay Real Estate Term Loan C shall be evidenced
by the Real Estate Term Note C, which shall be dated, executed and
delivered as of the Funding Date of Real Estate Term Loan C.
Section 2B.4 Manner of Borrowing Real Estate Term Loan B and Real Estate
-----------------------------------------------------------
Term Loan C. Borrower shall notify Lender of its intention to request a funding
-----------
under Real Estate Term Loan B or Real Estate Term Loan C, as the case may be, at
least 30 days prior to the Funding Date in respect of Real Estate Term Loan B
and at least 30 days prior to the Funding Date in respect of Real Estate Term
Loan C, and timely deliver to Lender (so as to provide Lender with a reasonable
opportunity for review and comment) all items required by Section 4.3. Borrower
shall deliver to Lender written notice of requested funding of Real Estate Term
Loan B or Real Estate Term Loan C, as the case may be (in any case which must be
received by prior to 11 a.m., Dallas, Texas time 5 Business Days prior to the
requested Funding Date thereof), specifying:
(a) the amount of the Borrowing which, if a LIBOR Rate Loan, shall be
in an amount that is not less than $1,000,000 or an integral multiple of
$100,000 in excess thereof;
(b) the requested Funding Date, which shall be a Business Day;
(c) the amount of any Base Rate Loan and LIBOR Rate Loan included
therein, respectively; and
(d) the duration of the Interest Period with respect to any LIBOR Rate
Loan.
41
If the Notice of Borrowing fails to specify the duration of the Interest Period
for a LIBOR Rate Loan, such Interest Period shall be one month.
Section 2B.5 Disbursement. Proceeds of Real Estate Term Loan B and Real
------------
Estate Term Loan C, respectively, shall be disbursed by Lender pursuant to
Borrower's written instructions, subject to the terms of this Agreement,
provided, that Lender may require that such proceeds, or any portion thereof,
--------
shall be disbursed directly to any Person to whom Borrower is indebted in
connection with the purposes provided by Section 8.6. As a condition to any
-----------
disbursement Lender may require executed lien waivers or releases, in form
satisfactory to Lender, in connection with any Indebtedness which is to be paid
with such proceeds and is owing to a Person who has supplied goods or materials,
or provided services, in connection with Eligible Term Loan B Real Estate or
Eligible Term Loan C Real Estate, as the case may be.
ARTICLE 2C - CAPEX LOANS FACILITY
Section 2C.1 Capex Loan. Upon the terms and subject to the conditions of,
----------
and in reliance upon the representations and warranties made under, this
Agreement, Lender agrees to make Capex Loans to Borrower from time to time from
the Effective Date to but not including the date that is 180 days prior to the
Termination Date, as requested by Borrower from time to time in accordance with
the terms of Section 4.2, in an amount up to the Capex Loan Availability,
-----------
provided, that the aggregate amount funded by Lender under all Capex Loans shall
--------
not exceed $1,000,000. Subject to the terms of this Agreement, each Loan under
the Capex Loan shall be funded at such times on and after the Effective Date as
Lender and Borrower may determine by mutual agreement.
Section 2C.2 Repayment of Capex Loan. The principal of the Capex Loans is
-----------------------
due and payable, and shall be repaid in full by Borrower in consecutive monthly
payments on each Capex Loan Installment Payment Date, each in an amount equal to
the Capex Loan Amortization Payment, plus one final payment of all remaining
unpaid principal which shall be due and payable on the Termination Date.
Section 2C.3 Capex Note. The Capex Loans and the obligation of Borrower to
----------
repay the Capex Loans shall be evidenced by the Capex Note, which shall be
dated, executed and delivered as of the Agreement Date.
Section 2C.4 Manner of Borrowing Capex Loan. Borrower shall give Lender
------------------------------
prior written notice of its request for funding a Capex Loan, in the manner
specified below, and sufficient information to allow Lender to confirm
Borrower's compliance with the applicable conditions required by Article 4,
provided, that the minimum amount which may be requested by Borrower and funded
at any time shall not in any event be less than $50,000. In order to request a
Capex Loan, Borrower shall:
(a) not later than thirty (30) days (or such shorter period as may be
allowed by Lender) prior to the requested Funding Date for such Capex Loan,
deliver to Lender all items required by Section 4.2 with respect to such
-----------
Capex Loan; and
42
(b) notify Lender of its intention to request funding of a Capex Loan,
which notice must be received by prior to 11 a.m., Dallas, Texas time) two
(2) Business Days prior to the requested Funding Date, specifying:
(i) the amount of the Borrowing (which, if a LIBOR Rate Loan,
shall be in an amount that is not less than $1,000,000 or an integral
multiple of $100,000 in excess thereof);
(ii) the requested Funding Date, which shall be a Business Day;
(iii) the amount of any Base Rate Loan and LIBOR Rate Loan
included therein, respectively; and
(iv) the duration of the Interest Period with respect to any
LIBOR Rate Loan. If the Notice of Borrowing fails to specify the
duration of the Interest Period for a LIBOR Rate Loan, such Interest
Period shall be one month.
Section 2C.5 Disbursement. Borrower hereby authorizes Lender to disburse
------------
the proceeds of the Capex Loan in accordance with Borrower's instructions,
provided, that at Lender's option such proceeds may be disbursed directly to the
holder of any Lien on Eligible Purchased Equipment which is the subject of any
such Capex Loan as necessary to cause the release of such Lien.
ARTICLE 2D - ACQUISITION LOAN FACILITY
Section 2D.1 Acquisition Loans. Upon the terms and subject to the
-----------------
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, Lender agrees to make Loans (each an "Acquisition Loan"
----------------
and collectively "Acquisition Loans") to Borrower, as requested by Borrower at
-----------------
any time prior to the date that is 180 days prior to the Termination Date in
accordance with the terms of Section 4.4, each in an aggregate principal amount
-----------
up to but not exceeding the Acquisition Loan Amount determined for such Loan,
provided that the aggregate amount funded by Lender under all Acquisition Loans
--------
shall not exceed $5,000,000. Each Acquisition Loan shall be funded as two
separate Loans, one ("Tranche A Acquisition Loan") in an amount equal to the
--------------------------
Tranche A Acquisition Loan Amount determined with respect to such Acquisition
Loan and the other ("Tranche B Acquisition Loan") in an amount equal to the
--------------------------
Tranche B Acquisition Loan Amount determined with respect to such Acquisition
Loan. Lender is hereby authorized to record each repayment of principal of each
Tranche A Acquisition Loan and Tranche B Acquisition Loan in its books and
records, such books and records constituting prima facie evidence of the
accuracy of the information contained therein.
Section 2D.2 Repayment of Acquisition Loans.
------------------------------
(a) Repayment of Tranche A Acquisition Loans. The aggregate amount of
----------------------------------------
the Tranche A Acquisition Loans will be repaid as follows: (a) in monthly
installments payable on each Payment Date in an amount equal to the Tranche
A Acquisition Loan Amortization Payment, plus accrued and unpaid interest;
and (b) a final payment equal to all outstanding
43
principal and accrued interest payable on the Termination Date. Borrower
may prepay the Tranche A Acquisition Loans, in whole or in part, at time
prior to maturity without penalty.
(b) Repayment of Tranche B Acquisition Loans. The aggregate amount of
----------------------------------------
the Tranche B Acquisition Loans will be repaid as follows: (a) in monthly
installments payable on each Payment Date in an amount equal to the Tranche
B Acquisition Loan Amortization Amount, plus accrued and unpaid interest;
and (b) a final payment equal to all outstanding principal and accrued
interest payable on the Termination Date. Borrower may prepay the Tranche B
Acquisition Loans, in whole or in part, at time prior to maturity without
penalty.
Section 2D.3 Acquisition Loan Notes.
----------------------
(a) Acquisition Loan Note A. The Tranche A Acquisition Loans and the
-----------------------
obligation of Borrower to repay the Tranche A Acquisition Loans shall be
evidenced by the Acquisition Loan Note A, which shall be dated, executed
and delivered as of the Agreement Date.
(b) Acquisition Loan Note B. The Tranche B Acquisition Loans and the
-----------------------
obligation of Borrower to repay the Tranche B Acquisition Loans shall be
evidenced by the Acquisition Loan Note B, which shall be dated, executed
and delivered as of the Agreement Date.
Section 2D.4 Manner of Borrowing. Borrower shall give Lender prior written
-------------------
notice of a request for any Acquisition Loan, in the manner specified below,
therein specifying the amount of the requested Borrowing, the proposed Funding
Date and providing Lender with such information as Lender may request in order
to determine the Tranche A Acquisition Loan Amount and the Tranche B Acquisition
Loan Amount, respectively, for such Acquisition Loan. In order to request an
Acquisition Loan, Borrower shall:
(a) Not later than sixty (60) days prior to the requested Funding Date
for such Acquisition Loan, deliver to Lender all items required by Section
-------
4.4 with respect to such Acquisition Loan; and
---
(b) Borrower shall notify Lender of its intention to request funding
of an Acquisition Loan, which notice must be received by prior to 11 a.m.,
Dallas, Texas time) two (2) Business Days prior to the requested Funding
Date, specifying:
(i) the amount of the Borrowing (which, if a LIBOR Rate Loan,
shall be in an amount that is not less than $1,000,000 or an integral
multiple of $100,000 in excess thereof);
(ii) the requested Funding Date, which shall be a Business Day;
(iii) the amount of any Base Rate Loan and LIBOR Rate Loan
included therein, respectively; and
44
(iv) the duration of the Interest Period with respect to any
LIBOR Rate Loan. If the Notice of Borrowing fails to specify the
duration of the Interest Period for a LIBOR Rate Loan, such Interest
Period shall be one month.
Section 2C.5 Disbursement. Proceeds of Acquisition Loans shall be disbursed
------------
by Lender pursuant to Borrower's written instructions, provided, that Lender may
require that such proceeds, or any portion thereof, shall be disbursed directly
to any Person to whom Borrower is indebted in connection with the purposes
provided by Section 8.6.
-------- -----------
ARTICLE 3A - INTEREST AND FEES
Section 3A.1 Interest.
--------
(a) All outstanding Secured Obligations shall bear interest on the
unpaid principal amount thereof (including, to the extent permitted by law,
on accrued interest thereon not paid when due) from the date made until
paid in full in cash at a rate determined by reference to the Base Rate or
the LIBOR Rate as provided herein, as applicable, but not to exceed the
Maximum Rate. Any of the Loans may be converted into, or continued as, Base
Rate Loans or LIBOR Rate Loans subject to, and in the manner provided in,
Section 3A.2. If at any time Loans are outstanding with respect to which
------------
notice has not been delivered to Lender in accordance with the terms of
this Agreement specifying the basis for determining the interest rate
applicable thereto, then those Loans shall be Base Rate Loans and shall
bear interest at a rate determined by reference to the Base Rate until
notice to the contrary has been given to Lender in accordance with this
Agreement and such notice has become effective. Except as otherwise
provided herein, the outstanding Secured Obligations shall bear interest as
follows:
(i) For all Base Rate Revolving Credit Loans and other Secured
Obligations (other than Base Rate Term Loans, Base Rate Capex Loans,
Base Rate Tranche A Acquisition Loans, Base Rate Tranche B Acquisition
Loans and LIBOR Rate Loans) at a fluctuating per annum rate equal to
the lesser of (A) the Base Rate plus the Applicable Margin for Base
Rate Revolving Credit Loans or (B) the Maximum Rate;
(ii) For all Base Rate Term Loans at a fluctuating per annum
rate equal to the lesser of (A) the Base Rate plus the Applicable
Margin for Base Rate Term Loans or (B) the Maximum Rate;
(iii) For all Base Rate Capex Loans at a fluctuating per annum
rate equal to the lesser of (A) the Base Rate plus the Applicable
Margin for Base Rate Capex Loans or (B) the Maximum Rate;
45
(iv) For Base Rate Tranche A Acquisition Loans at a fluctuating
per annum rate equal to the lesser of (A) the Base Rate plus the
Applicable Margin for Base Rate Tranche A Acquisition Loans or (B) the
Maximum Rate;
(v) For Base Rate Tranche B Acquisition Loans at a fluctuating
per annum rate equal to the lesser of (A) the Base Rate plus the
Applicable Margin for Base Rate Tranche B Acquisition Loans or (B) the
Maximum Rate;
(vi) For all LIBOR Revolving Credit Loans at a per annum rate
equal to the lesser of (A) the LIBOR Rate plus the Applicable Margin
for LIBOR Revolving Credit Loans or (B) the Maximum Rate;
(vii) For all LIBOR Rate Term Loans at a fluctuating per annum
rate equal to the lesser of (A) the LIBOR Rate plus the Applicable
Margin for LIBOR Rate Term Loans or (B) the Maximum Rate;
(viii) For all LIBOR Rate Capex Loans at a fluctuating per annum
rate equal to the lesser of (A) the LIBOR Rate plus the Applicable
Margin for LIBOR Rate Capex Loans or (B) the Maximum Rate;
(ix) For LIBOR Rate Tranche A Acquisition Loans at a
fluctuating per annum rate equal to the lesser of (A) the LIBOR Rate
plus the Applicable Margin for LIBOR Rate Tranche A Acquisition Loans
or (B) the Maximum Rate; and
(x) For LIBOR Rate Tranche B Acquisition Loans at a
fluctuating per annum rate equal to the lesser of (A) the LIBOR Rate
plus the Applicable Margin for LIBOR Rate Tranche B Acquisition Loans
or (B) the Maximum Rate.
Each change in the Base Rate shall be reflected in the interest rate
described in clauses (i) through (v) above as of the effective date of
----------- ---
such change. Subject to Section 3A.5, all interest charges shall be
------------
computed on the basis of a year of 360 days and actual days elapsed (which
results in more interest being paid than if computed on the basis of a
365-day year). Interest accrued on all Loans will be payable in arrears
(A) with respect to Base Rate Loans, on the next Business Day following
the last day of each calendar month and (B) with respect to LIBOR Rate
Loans, on the last day of each corresponding Interest Period and, in the
case of an Interest Period of greater than three months, at three-month
intervals after the first day of such Interest Period, in each case
continuing until all Secured Obligations have been irrevocably paid in
full..
(b) Default Rate; Judgment Rate. If any Default or Event of Default
---------------------------
occurs and is continuing and Lender in its discretion so elects, then,
while any such Default or Event of Default is continuing, all of the
Secured Obligations shall bear interest at a rate per annum equal to the
lesser of (i) the Default Rate applicable thereto or (ii) the Maximum Rate.
It is agreed that any judgement entered by a court in favor of Lender
against Borrower for payment of the Secured Obligations, or any part
thereof, shall provide for post-judgment interest on the amount thereof at
a rate equal to the Maximum Rate.
46
Section 3A.2 Conversion and Continuation Elections.
-------------------------------------
(a) Borrower may, upon irrevocable written notice to Lender in
accordance with Section 3A.2(b):
---------------
(i) elect, as of any Business Day, in the case of Base Rate
Loans to convert any such Loans (or any part thereof in an amount not
less than $500,000, or that is in an integral multiple of $100,000 in
excess thereof) into LIBOR Rate Loans of the same Facility Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any LIBOR Rate Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$500,000, or that is in an integral multiple of $100,000 in excess
thereof);
provided, that if at any time the aggregate amount of LIBOR Rate Loans in
--------
respect of any Borrowing is reduced, by payment, prepayment, or conversion
of part thereof to be less than $500,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the
right of Borrower to continue such Loans as, and convert such Loans into,
LIBOR Rate Loans, as the case may be, shall terminate, provided further,
-------- -------
that if the notice shall fail to specify the duration of the Interest
Period, such Interest Period shall be one month.
(b) Borrower shall deliver a notice of conversion/continuation in the
form of Exhibit J (a "Notice of Conversion/Continuation") to be received by
--------- ---------------------------------
Lender not later than 11:00 a.m. (Dallas, Texas time) at least three (3)
Business Days in advance of the Conversion/Continuation Date, if the Loans
are to be converted into or continued as LIBOR Rate Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the Facility Type and Rate Type of Loans to be converted
or renewed, and in each case the aggregate amount thereof;
(iii) the Facility Type and Rate Type of Loans resulting from
the proposed conversion or continuation, and in each case the
aggregate amount thereof; and
(iv) the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to any
LIBOR Rate Loan, Borrower has failed to select timely a new Interest Period
to be applicable to such LIBOR Rate Loan or if any Default or Event of
Default then exists, Borrower shall be deemed to have elected to convert
such LIBOR Rate Loan into a Base Rate Loan of the same Facility Type
effective as of the expiration date of such Interest Period.
47
(d) During the existence of a Default or Event of Default, Borrower
may not elect to have a Loan converted into or continued as a LIBOR Rate
Loan.
(e) After giving effect to any conversion or continuation of Loans,
there may not be more than three (3) different Interest Periods in effect.
Section 3A.3 Maximum Interest Rate. If, in any month, the Effective
---------------------
Interest Rate, absent such limitation, would have exceeded the Maximum Rate,
then the Effective Interest Rate for that month shall be the Maximum Rate, and
if, in future months, the Effective Interest Rate would otherwise be less than
the Maximum Rate, then the Effective Interest Rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In this connection, in the event that, upon payment in full of the
Secured Obligations, the total amount of interest paid or accrued under the
terms of this Agreement is less than the total amount of interest which would
have been paid or accrued if the Effective Interest Rate had at all times been
in effect, then Borrower shall, to the extent permitted by applicable law, pay
to Lender an amount equal to the difference between (i) the lesser of (A) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect and (B) the amount of interest which would have accrued
had the Effective Interest Rate, at all times, been in effect, and (ii) the
amount of interest actually paid or accrued under this Agreement. In the event
Lender receives, collects or applies as interest any sum in excess of the
Maximum Rate, such excess amount shall be applied to the reduction of the
principal balance of the applicable Secured Obligation, and, if no such
principal is then outstanding, such excess or part thereof remaining shall be
paid to Borrower.
Section 3A.4 Fees. Subject to Section 3A.5, Borrower agrees as follows:
---- ------------
(a) Origination Fee. As additional consideration for the extensions of
---------------
credit provided by this Agreement, Borrower shall pay to Lender, in
addition to any interest due under this Agreement:
(i) On the Agreement Date, a fee in an amount equal to
$58,000; and
(ii) At the time of the first Borrowing of an Acquisition
Loan, a fee in the amount of $50,000.
The origination fees provided for herein shall compensate Lender for the
internal costs associated with the origination, structuring, processing,
approving and closing of the transactions contemplated by this Agreement,
including, but not limited to, administrative, general overhead and lost
opportunity costs, but not including any out-of-pocket expenses for which
Borrower has agreed to reimburse Lender.
(b) Letter of Credit Fees. As consideration for the issuance by Lender
---------------------
of a Letter of Credit, Borrower agrees to pay to Lender all applicable
Letter of Credit Fees. Such fees shall be payable to Lender in advance on
the date of issuance of each Letter of Credit and shall be calculated
according to the face amount of such Letter of Credit based on its stated
term. Letter of Credit Fees shall be as follows: one and one-half percent
(1.5 %) per annum
48
of the face amount of each Letter of Credit subject to payment of Lender's
applicable minimum fee for issuance of letters of credit; provided, that at
--------
any time when any Default or Event of Default is in existence, at Lender's
discretion the forgoing percentage for determining the Letter of Credit Fee
shall increase by an additional two percent (2.0%). Such fees shall be
payable to Lender in advance on the date of issuance of each Letter of
Credit and shall be calculated according to the face amount of such Letter
of Credit based on its stated term. The Letter of Credit Fee shall be
computed on the basis of a 360-day year for the actual number of days
elapsed.
(c) General. All fees shall be fully earned by Lender when due and
-------
payable and, except as otherwise set forth herein, shall not be subject to
refund or rebate. All fees are for compensation for services and are not,
and shall not be deemed to be, interest or a charge for the use of money.
Section 3A.5 Interest Limitation. Lender and Borrower each acknowledges,
-------------------
agrees, and declares that it is its intention to expressly comply with all
applicable laws in respect of limitations on the amount or rate of interest that
can legally be contracted for, charged, or received under or in connection with
the Loan Documents. Notwithstanding anything to the contrary contained in any
Loan Document (even if any such provision expressly declares that it controls
all other provision of the Loan Documents), in no contingency or event
whatsoever shall the amount of interest (including the aggregate of all charges,
fees, benefits, or other compensation which constitutes interest under any
applicable laws) under the Loan Documents paid by Borrower, received by Lender,
agreed to be paid by Borrower, or requested or demanded to be paid by Lender,
exceed the Maximum Rate, and all provisions of the Loan Documents in respect of
the contracting for, charging, or receiving compensation for the use,
forbearance, or detention of money shall be limited as provided by this Section
3A.5. In the event any such interest is paid to Lender by Borrower in an amount
or at a rate which would exceed the Maximum Rate, Lender shall automatically
apply such excess to any unpaid amount of the Secured Obligations other than
interest, in inverse order of maturity, or if the amount of such excess exceeds
said unpaid amount, such excess shall be paid to Borrower. All interest paid, or
agreed to be paid, by Borrower, or taken, reserved, or received by Lender, shall
be amortized, prorated, spread, and allocated in respect of the Secured
Obligations throughout the full term of this Agreement. Notwithstanding any
provision contained in any of the Loan Documents, or in any other related
documents executed pursuant hereto, Lender shall never be entitled to charge,
receive, take, reserve, collect, or apply as interest any amount which, together
with all other interest under the Loan Documents would result in a rate of
interest under the Loan Documents in excess of the Maximum Rate and, in the
event Lender ever charges, receives, takes, reserves, collects, or applies any
amount in respect of Borrower that otherwise would, together with all other
interest under the Loan Documents, be in excess of the Maximum Rate, such amount
shall automatically be deemed to be applied in reduction of the unpaid principal
balance of the Secured Obligations and, if such principal balance is paid in
full, any remaining excess shall forthwith be paid to Borrower. Borrowers and
Lender shall, to the maximum extent permitted under any applicable laws, (i)
characterize any non-principal payment as a standby fee, commitment fee,
prepayment charge, delinquency charge, expense, or reimbursement for a third-
party expense rather than as interest and (ii) exclude prepayments,
acceleration, and the effect thereof. Nothing in any Loan Document shall be
construed or so operate as to require or obligate Borrower to pay any interest,
fees, costs, or charges greater than is permitted by any applicable laws.
Subject to the foregoing, Borrower agrees that the actual
49
effective rate of interest from time to time existing under the Loan Documents,
including all amounts agreed to by Borrower or charged or received by Lender
pursuant to and in accordance with the Loan Documents, which may be deemed to be
interest under any applicable laws, shall be deemed to be a rate which is agreed
to and stipulated by Borrower and Lender in accordance with applicable law.
ARTICLE 3B - GENERAL LOAN PROVISIONS
Section 3B.1 Manner of Payment.
-----------------
(a) Each payment (including prepayments) by Borrower on account of the
principal of or interest on the Loans or of any fee or other amounts
payable to Lender under the Loan Documents shall be made not later than
1:30 p.m., Dallas, Texas time on the date specified for payment under this
Agreement (or if such day is not a Business Day, the next succeeding
Business Day) to Lender at Lender's Office, in Dollars, in immediately
available funds and shall be made without any setoff, counterclaim or
deduction whatsoever.
(b) Borrower hereby irrevocably authorizes Lender and each Affiliate
of Lender to charge any account of Borrower maintained with Lender or such
Affiliate with such amounts as may be necessary from time to time to pay
any Secured Obligations which are not paid when due.
Section 3B.2 Statements of Account. Lender will account to Borrower within
---------------------
30 days after the end of each calendar month with a statement of Loans, charges
and payments made pursuant to this Agreement during such calendar month, and
such account rendered by Lender shall be deemed an account stated as between
Borrower and Lender and shall be deemed final, binding and conclusive unless
Lender is notified by Borrower in writing to the contrary within 60 days after
the date such account is delivered to Borrower, save for manifest error. Any
such notice shall be deemed an objection only to those items specifically
objected to therein. Failure of Lender to render such account shall in no way
affect its rights hereunder.
Section 3B.3 Termination of Agreement.
------------------------
(a) Termination Date. On the Termination Date the amount of the
----------------
Revolving Credit Facility shall be automatically reduced to zero, the
facilities for Term Loans, Capex Loans and Acquisition Loans shall
terminate and no further Loans shall be made on and after such date.
(b) Termination of Agreement. Borrower shall have the right, at any
------------------------
time, to terminate this Agreement upon not less than 60 Business Days'
prior written notice to Lender of Borrower's intention to terminate this
Agreement, which notice shall specify the effective date of such
termination. On the date specified in such notice, such termination shall
be effected; provided, however, that Borrower shall, on or prior to such
--------
day, pay to Lender, in same day funds, an amount equal to the aggregate
amount of all Loans outstanding on such date, together with accrued
interest thereon, all fees payable pursuant to Section 3A.4 accrued from
------------
the date last paid through the effective date of termination, any amounts
payable to Lender pursuant to the other provisions of this Agreement,
including, without
50
limitation, Sections 3B.6, 11.2, 12.12 and 12.13, any and all other Secured
------------- ---- ----- -----
Obligations then outstanding, an amount equal to the Letter of Credit
Reserve to be held by Lender as cash collateral security for the payment of
and to be applied to the payment of any amounts which may thereafter become
due with respect to any Letter of Credit, provide Lender with an
indemnification agreement in form and substance satisfactory to Lender with
respect to returned and dishonored items and such other matters as Lender
shall require and, if the termination occurs prior to the Termination Date
in effect at such time, an early termination fee computed as follows: (A)
$1,500,000 if such termination occurs on or prior to the first Anniversary
Date and (B) $1,000,000 if such termination occurs after the first
Anniversary Date but on or prior to the second Anniversary Date. No early
termination fee will apply if the termination is financed by another
division of Lender.
Section 3B.4 Extension of Facility. This Agreement shall continue in full
---------------------
force and effect for a period of three (3) years from the Agreement Date (the
"Initial Term"), and for successive one (1) year periods thereafter (each such
------------
successive period being referred to herein as the "Extended Term"), until
-------------
terminated by either Borrower or Lender giving to the other written notice of
the desired termination of this Agreement not less than sixty (60) days prior to
the last day of the Initial Term or Extended Term, as the case may be, on which
such termination is to be effective, provided, that termination under this
--------
Section 3B.4 can be effective only on the last day of such Initial Term or any
------------
Extended Term, as the case may be, conditioned upon full payment of all Secured
Obligations. Unless otherwise agreed by Lender, no such notice of termination
shall result in the release of the Secured Obligations or any Collateral or
affect the Security Interest or release any rights or obligations accrued
hereunder prior to the stated effective date of such termination and full
payment of all Secured Obligations.
Section 3B.5 Application of Prepayments. Voluntary prepayments on Loans
--------------------------
other than Revolving Loans shall be applied first to unpaid accrued interest,
costs, fees or expenses then due and owing to Lender by Borrower under the Loan
Documents, and thereafter as Borrower may direct in writing at the time of
tendering same, in each such case to principal in inverse order of maturity.
Section 3B.6 Taxes, Yield Protection and Illegality.
--------------------------------------
(a) Taxes.
-----
(i) Any and all payments by Borrower to Lender under this
Agreement and any other Loan Document shall be made free and clear of,
and without deduction or withholding for any Taxes. In addition,
Borrower shall pay all Other Taxes.
(ii) Borrower agrees to indemnify and hold harmless Lender for the
full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by Lender and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification
shall be made within 30 days after the date Lender makes written
demand therefor.
51
(iii) If Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable
hereunder to Lender then:
(A) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable
under this Section) Lender receives an amount equal to the sum it
would have received had no such deductions or withholdings been
made;
(B) Borrower shall make such deductions and withholdings;
(C) Borrower shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance
with applicable law; and
(D) Borrower shall also pay to Lender, at the time interest
is paid, all additional amounts which Lender specifies as
necessary to preserve the after-tax yield Lender would have
received if such Taxes or Other Taxes had not been imposed.
(iv) Within 30 days after the date of any payment by Borrower of Taxes
or Other Taxes, Borrower shall furnish Lender the original or a certified
copy of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to Lender.
(v) If Borrower is required to pay additional amounts to Lender
pursuant to Section 3B.6(c), then Lender shall use reasonable efforts
---------------
(consistent with legal and regulatory restrictions) to change the
jurisdiction of its lending office so as to eliminate any such additional
payment by Borrower which may thereafter accrue, if such change in the
judgment of Lender is not otherwise disadvantageous to Lender.
(b) Illegality.
----------
(i) If Lender determines that the introduction of any applicable
laws, or any change in any applicable laws, or in the interpretation or
administration of any applicable laws, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is
unlawful, for Lender or its applicable lending office to make LIBOR Rate
Loans, then, on notice thereof by Lender to Borrower, any obligation of
Lender to make LIBOR Rate Loans shall be suspended until Lender notifies
Borrower that the circumstances giving rise to such determination no longer
exist.
(ii) If Lender determines that it is unlawful to maintain any LIBOR
Rate Loan, Borrower shall, upon its receipt of notice of such fact and
demand from Lender, prepay in full such LIBOR Rate Loans then outstanding,
together with interest accrued thereon and amounts required under Section
-------
3B.6.(d), either on the
--------
52
last day of the Interest Period thereof, if Lender may lawfully continue to
maintain such LIBOR Rate Loans to such day, or immediately, if Lender may
not lawfully continue to maintain such LIBOR Rate Loan. If Borrower is
required to so prepay any LIBOR Rate Loan, then concurrently with such
prepayment, Borrower shall borrow from the affected Lender, in the amount
of such repayment, a Base Rate Loan.
(c) Increased Costs and Reduction of Return.
---------------------------------------
(i) If Lender determines that due to either (i) the
introduction of or any change in the interpretation of any law or
regulation or (ii) the compliance by Lender with any guideline or
request from any central bank or other Governmental Authority (whether
or not having the force of law), there shall be any increase in the
cost to Lender of agreeing to make or making, funding or maintaining
any LIBOR Rate Loans, then Borrower shall be liable for, and shall
from time to time, upon demand, pay to Lender additional amounts as
are sufficient to compensate Lender for such increased costs.
(ii) If Lender shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank
or other Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance by Lender or any
corporation or other entity controlling Lender with any Capital
Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by Lender or any corporation or
other entity controlling Lender and (taking into consideration
Lender's or such corporation's or other entity's policies with respect
to capital adequacy and Lender's desired return on capital) determines
that the amount of such capital is increased as a consequence of its
commitments, loans, credits or obligations under this Agreement, then,
upon demand of Lender to Borrower, Borrower shall pay to Lender, from
time to time as specified by Lender, additional amounts sufficient to
compensate Lender for such increase.
(d) Funding Losses. Borrower shall reimburse Lender and hold each
--------------
Lender harmless from any loss or expense which Lender may sustain or incur
as a consequence of:
(i) the failure of Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(ii) the failure of Borrower to borrow, continue or convert a
Loan after Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(iii) the prepayment or other payment (including after
acceleration thereof) of a LIBOR Rate Loan on a day that is not the
last day of the relevant Interest Period;
53
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Rate Loans
or from fees payable to terminate the deposits from which such funds
were obtained.
(e) Inability to Determine Rates. If Lender determines that for any
----------------------------
reason adequate and reasonable means do not exist for determining the LIBOR
Rate for any requested Interest Period with respect to a proposed LIBOR
Rate Loan, or that the LIBOR Rate for any requested Interest Period with
respect to a proposed LIBOR Rate Loan does not adequately and fairly
reflect the cost to Lender of funding such Loan, Lender will promptly so
notify Borrower. Thereafter, the obligation of Lenders to make or maintain
LIBOR Rate Loans hereunder shall be suspended until Lender revokes such
notice in writing. Upon receipt of such notice, Borrower may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by
it. If Borrower does not revoke any such Notice of Borrowing or Notice of
Conversion/Continuation, Lender shall make, convert or continue the Loans,
as proposed by Borrower, in the amount specified in the applicable Notice
of Borrowing or Notice of Conversion/Continuation submitted by Borrower,
but such Loans shall be made, converted or continued as Base Rate Loans
instead of LIBOR Rate Loans.
(f) Certificates of Lender. If Lender claims reimbursement or
----------------------
compensation under this Article 3B it shall deliver to Borrower a
----------
certificate setting forth in reasonable detail the amount payable to Lender
hereunder and such certificate shall be conclusive and binding on Borrower
in the absence of manifest error.
(g) Survival. The agreements and obligations of Borrower in this
--------
Section 3B.6 shall survive the payment of all other Secured Obligations.
------------
ARTICLE 4 - CONDITIONS PRECEDENT
Section 4.1 General Conditions. Notwithstanding any other provision of this
------------------
Agreement, Lender's obligation to make Loans is subject to the fulfillment of
each of the following conditions prior to or contemporaneously with the making
of such Loan:
(a) Closing Documents. Lender shall have received each of the
-----------------
following documents, all of which shall be satisfactory in form and
substance to Lender and its counsel:
(1) this Agreement, duly executed and delivered by Borrower;
(2) the Revolving Credit Note, the Equipment Term Note, the
Capex Note, the Modification Agreement, Acquisition Loan Note A and
Acquisition Loan Note B, each dated the Agreement Date and duly
executed and delivered by Borrower;
(3) a Guaranty Agreement, dated the Agreement Date and duly
executed and delivered by each Guarantor;
54
(4) a certificate of the corporate secretary of Borrower
certifying that (i) the articles of incorporation and by-laws of
Borrower and each Guarantor previously certified to Lender in
connection with the Prior Loan Agreement each remains in full force
and effect and has not been amended or otherwise modified since the
time of such delivery to Lender and (ii) Borrower and each Guarantor
is in good standing in the jurisdiction of its incorporation and in
each other jurisdiction in which it is qualified as a foreign
corporation to transact business;
(5) certified copies of all corporate action, including
stockholder approval, if necessary, taken by Borrower and each
Guarantor to authorize the execution, delivery and performance of this
Agreement and each other Loan Documents, if any, to be executed by it
in connection therewith and, with respect to Borrower, the borrowings
under this Agreement;
(6) certificates of incumbency and specimen signatures with
respect to each of the officers of Borrower and such Guarantor who is
authorized to execute and deliver each of the Loan Documents on behalf
of such Person or any document, certificate or instrument to be
delivered in connection with such Loan Documents and, with respect to
Borrower, to request borrowings under this Agreement;
(7) all Financing Statements and amendments to Financing
Statements, if any, as may be requested by Lender, duly executed and
delivered by Borrower and Guarantors as applicable;
(8) a certificate of the President of Borrower stating that, to
the best of his knowledge and based on an examination sufficient to
enable him to make an informed statement, (a) all of the
representations and warranties made or deemed to be made under this
Agreement are true and correct as of the Agreement Date, both with and
without giving effect to the Revolving Credit Loans to be made at such
time and the application of the proceeds thereof, and (b) no Default
or Event of Default exists;
(9) a signed opinion of counsel for Borrower and the Guarantors
opining as to such matters in connection with this Agreement as Lender
may reasonably request;
(10) a Pledge Agreement duly executed and accompanied by
original stock certificates and stock powers executed in blank for all
Subsidiaries of Borrower; and
(11) copies of any other Loan Documents duly executed by the
parties thereto with evidence satisfactory to Lender and its counsel
of the due authorization, binding effect and enforceability of each
such Loan Document on each such party and such other documents and
instruments, as Lender may reasonably request;
(b) No Injunctions, Etc. No action, proceeding, investigation,
-------------------
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental
55
agency or legislative body to enjoin, restrain or prohibit or to obtain
substantial damages in respect of or which is related to or arises out of
this Agreement or the consummation of the transactions contemplated hereby
or which, in Lender's good faith discretion, would make it inadvisable to
consummate the transactions contemplated by this Agreement.
(c) Material Adverse Change. As of the Agreement Date, there shall not
-----------------------
have occurred any change which, in Lender's good faith discretion, has had
or may have a Materially Adverse Effect as compared to the condition of
Borrower and its Subsidiaries as a whole presented to Lender by the most
recent audited consolidated financial statements of Borrower and its
Subsidiaries described in Section 5.1(n) and such other financial and
operating information delivered to Lender.
(d) Security Interests. Lender shall have received evidence
------------------
satisfactory to it of (i) the release and termination of all Liens other
than Permitted Liens and (ii) of Lender's first priority perfected Lien in
the Collateral.
(e) Payment of Fees, Costs and Expenses. Borrower shall have paid the
-----------------------------------
fee required by Section 3A.4(a)(i) and all costs and expenses, including
------------------
without limitation, reasonable attorneys fees, incurred by Lender in
connection with the preparation, negotiation and execution of this
Agreement and the other Loan Documents.
Section 4.2 Capex Loans. Lender's obligation to make Capex Loans is subject
-----------
to the fulfillment of each of the following additional conditions prior to or
contemporaneously with the making of each such Loan: With respect to all
Eligible Purchased Equipment to be financed by such Capex Loan, Lender shall
have received, prior to Lender's funding of any such Loan, (i) a purchase order,
invoice or other written evidence of the description and purchase price of such
Eligible Purchased Equipment, and such other information as may be requested by
Agent with respect thereto and (ii) evidence satisfactory to Lender that, after
giving effect to such Capex Loan, such Eligible Purchased Equipment will be free
and clear of all Liens other than the Security Interest.
Section 4.3 Real Estate Term Loan B; Real Estate Term Loan C. Lender's
------------------------------------------------
obligation to make Real Estate Term Loan B and Real Estate Term Loan C,
respectively, is subject to the fulfillment of each of the following additional
conditions, as applicable, prior to or contemporaneously with the making of such
Loan:
(a) Closing Documents. Lender shall have received each of the
-----------------
following items in form and substance satisfactory to Lender: With respect
to a request for Real Estate Term Loan B, Real Estate Term Note B, and with
respect to a request for Real Estate Term Loan C, Real Estate Term Note C,
in each case dated, executed and delivered as of the Funding Date thereof.
(b) Real Estate Matters. Lender shall have received each of the
-------------------
following with respect to each parcel of Real Estate which is the object
of, or in which Borrower is to acquire any interest in connection with,
Real Estate Term Loan B or Real Estate Term Loan C, as applicable, in each
case in form and substance satisfactory to Lender:
56
(i) an appraisal prepared by a credentialed appraiser
acceptable to Lender, on a valuation basis satisfactory to Lender; in
form required by Lender's internal policies and applicable laws and
otherwise in form and substance satisfactory to Lender
(ii) a Mortgage in proper form for recording in the
jurisdiction in which such Real Estate is located;
(iii) a policy of mortgagee's title insurance in an amount
acceptable to Lender and containing no exceptions other than those
which are acceptable to Lender;
(iv) a survey prepared by a credentialed surveyor acceptable to
Lender, certified to Lender as required by Lender's internal policies;
(v) environmental site assessments prepared by environmental
consultants, in form and substance acceptable to Lender;
(vi) releases of mechanics and materialmen's liens or other
lien waivers as Lender may request, together with evidence that any
and all Liens claimed by any Person other than Lender in respect of
such Real Estate have been released, in each case in form and
substance satisfactory to Lender;
(vii) such information in respect of Eligible Term Loan B Real
Estate or Eligible Term Loan C Real Estate, as the case may be, and
improvements to be financed or refinanced with proceeds of Real Estate
Loan B, or financed with proceeds of Real Estate Term Loan C, as the
case may be, as Lender may request; and
(viii) such other information, documentation, and
certifications, in form and substance satisfactory to Lender, as may
be required by Lender.
Section 4.4 Acquisition Loans. Lender's obligation to make an Acquisition
-----------------
Loan in connection with any Acquisition is subject to the fulfillment of each of
the following additional conditions prior to or contemporaneously with the
making of such Loan:
(a) Real Estate and Equipment Appraisals. With respect to all Real
------------------------------------
Estate that is proposed as Eligible Acquired Real Estate and all Equipment
that is proposed as Eligible Acquired Equipment in connection with such
Acquisition, Lender shall have received an appraisal prepared by a
credentialed appraiser acceptable to Lender, on a valuation basis
satisfactory to Lender, in form required by Lender's internal policies and
applicable laws and otherwise in form and substance satisfactory to Lender
(b) Real Estate Matters. Lender shall have received each of the
-------------------
following with respect to each parcel of Real Estate which is proposed as
Eligible Acquired Real Estate in connection with such Acquisition, in each
case in form and substance satisfactory to Lender:
57
(i) an appraisal prepared by a credentialed appraiser
acceptable to Lender, on a valuation basis satisfactory to Lender; in
form required by Lender's internal policies and applicable laws and
otherwise in form and substance satisfactory to Lender
(ii) a Mortgage, duly executed by Borrower or the applicable
Acquired Subsidiary, as the case may be, in proper form for recording
in the jurisdiction in which such Real Estate is located;
(iii) a policy of mortgagee's title insurance in an amount
acceptable to Lender and containing no exceptions other than those
which are acceptable to Lender;
(iv) a survey prepared by a credentialed surveyor acceptable to
Lender, certified to Lender as required by Lender's internal policies;
(v) environmental site assessments prepared by environmental
consultants acceptable to Lender; and
(vi) such information in respect of such Real Estate as Lender
may request.
(c) Receivables and Inventory. With respect to all Receivables and
-------------------------
Inventory proposed to be acquired in connection with such Acquisition, or
which is owned by a Person that becomes an Acquired Subsidiary as a result
of such Acquisition, Lender shall have received such information as Lender
may request in order to calculate the amount determinable under clause (B)
----------
of the definition of "Acquisition Loan Amount."
(d) Field Examination. Unless otherwise agreed by Lender in writing,
-----------------
Lender shall have completed an audit and field examination with respect to
Borrower and the Business Unit or Investment to be acquired in connection
with such Acquisition and the results thereof shall be satisfactory to
Lender.
(e) Acquisition Agreement. Lender shall have received a true and
---------------------
complete copy of the purchase agreement or other agreement evidencing or
governing such Acquisition, with all schedules and exhibits, together with
all agreements, instruments, authorizations, opinions and certifications
executed and delivered in connection therewith, in form and substance
satisfactory to Lender.
(f) Permitted Acquisition. Such Acquisition shall be a Permitted
---------------------
Acquisition.
(g) Fee. Lender shall have the fee payable under Section 3A.4(a)(ii).
---
(h) Other. Such other information, documentation, and certifications,
-----
in form and substance satisfactory to Lender, as may be required by Lender.
58
Section 4.5 All Loans. At the time of making of each Loan:
---------
(a) all of the representations and warranties made or deemed to be
made under this Agreement shall be true and correct at such time both with
and without giving effect to the Loans to be made at such time and the
application of the proceeds thereof, except that representations and
warranties which, by their terms, are applicable only to the Agreement Date
shall be required to be true and correct only as of the Agreement Date;
(b) no Default or Event of Default shall have occurred and be
continuing, or shall result from such Loan, and no other event or condition
which would be the subject of a required notice under Section 9.4 shall be
in existence;
(c) the corporate actions of Borrower referred to in Section 4.1(a)(4)
shall remain in full force and effect and the incumbency of officers shall
be as stated in the certificates of incumbency delivered pursuant to
Section 4.1(a)(5) or as subsequently modified and reflected in a
certificate of incumbency delivered to Lender; and
(d) Lender may, without waiving any condition, consider the conditions
specified in subparagraphs (a), (b) and (c) of this Section 4.2 fulfilled
----------------- --- --- -----------
and a representation by Borrower to such effect made if no written notice
to the contrary is received by Lender from Borrower prior to the making of
the Loans then to be made.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BORROWER
Section 5.1 Representations and Warranties. Borrower represents and
warrants to Lender as follows:
(a) Organization; Power; Qualification. Borrower and each of its
----------------------------------
Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted and is duly
qualified and authorized to do business in each jurisdiction in which
failure to be so qualified and authorized would have a Materially Adverse
Effect. The jurisdictions in which Borrower and each of its Subsidiaries is
qualified to do business as a foreign corporation are listed on Schedule
--------
5.1(a).
------
(b) Subsidiaries of Borrower. Borrower has no Subsidiaries except
------------------------
those which are listed on Schedule 5.1(b). The outstanding stock of
---------------
Borrower has been duly and validly issued and is fully paid and
nonassessable.
(c) Authorization of Agreement, Note, Loan Documents and Borrowing.
--------------------------------------------------------------
Borrower and each Guarantor have the right and power and has taken all
necessary action to authorize such Person to execute, deliver and perform
each of the Loan Documents to which it is a party in accordance with their
respective terms and, with respect to Borrower, to borrow hereunder. Each
of the Loan Documents have been duly executed and delivered by the duly
authorized officers of Borrower or such Guarantor, as applicable, and each
is, or
59
when executed and delivered in accordance with this Agreement will be, a
legal, valid and binding obligation of Borrower or such Guarantor, as
applicable, enforceable in accordance with its terms.
(d) Compliance of Agreement, Note, Loan Documents and Borrowing with
----------------------------------------------------------------
Laws, Etc. The execution, delivery and performance of the other Documents in
---------
accordance with their respective terms and, the borrowings hereunder do not
and will not, by the passage of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any applicable
law relating to Borrower, any Guarantor or any of Borrower's or any
Guarantor's Affiliates, (ii) conflict with, result in a breach of or
constitute a default under (A) the articles or certificate of
incorporation or by-laws of Borrower or any Guarantor, (B) any
indenture, agreement or other instrument to which Borrower or any
Guarantor is a party or by which any of its property may be bound or
(C) any Governmental Approval relating to Borrower or any Guarantor,
or,
(iii) result in or require the creation or imposition of any Lien
upon or with respect to any property now owned or hereafter acquired
by Borrower or any Guarantor other than the Security Interest.
(e) Business. Borrower and each of its Subsidiaries are engaged
--------
principally in the business described on Schedule 5.1(e).
---------------
(f) Compliance with Law; Governmental Approvals. Except as set forth
-------------------------------------------
in Schedule 5.1(f), each of Borrower and each of its Subsidiaries (i) has
---------------
all Governmental Approvals, including permits relating to federal, state
and local Environmental Laws, ordinances and regulations required by any
applicable law for it to conduct its business, each of which is in full
force and effect, is final and not subject to review on appeal and is not
the subject of any pending or, to the knowledge of Borrower or such
Subsidiary, as applicable, threatened attack by direct or collateral
proceeding, and (ii) is in compliance with each Governmental Approval
applicable to it and in compliance with all other applicable laws relating
to it, including, without being limited to, all Environmental Laws and all
occupational health and safety laws applicable to Borrower or such
Subsidiary or its properties, except for instances of noncompliance which
would not, singly or in the aggregate, cause a Default or Event of Default
or have a Materially Adverse Effect and in respect of which adequate
reserves have been established on the books of Borrower or such Subsidiary,
as applicable. Without limiting the forgoing, except as otherwise disclosed
on Schedule 5.1(f):
---------------
(i) Borrower has complied in all material respects with all
Environmental Laws and neither Borrower nor any of its presently owned
real property or presently conducted operations, nor its previously
owned real property or prior operations, is subject to any enforcement
order from or liability agreement with any Governmental
60
Authority or private Person respecting (i) compliance with any
Environmental Law or (ii) any potential liabilities and costs or
remedial action arising from the Release or threatened Release of a
Contaminant.
(ii) Borrower has obtained all permits necessary for its
current operations under Environmental Laws, and all such permits are
in good standing and each Borrower is in compliance with all material
terms and conditions of such permits.
(iii) Neither Borrower, nor to the best of Borrower's knowledge
any of its predecessors in interest, has in violation of any
Environmental Law stored, treated, or disposed of any hazardous waste.
(iv) Borrower has not received any summons, complaint, order,
or similar written notice indicating that it is not currently in
compliance with, or that any Governmental Authority is investigating
its compliance with, any Environmental Laws or that it is or may be
liable to any other Person as a result of a Release or threatened
Release of a Contaminant.
(v) To the best of Borrowers' knowledge, none of the present
or past operations of Borrower is the subject of any investigation by
any Governmental Authority evaluating whether any remedial action is
needed to respond to a Release or threatened Release of a Contaminant.
(vi) Except as described in Schedule 5.1 (f), there is not
now, nor to the best of Borrower's knowledge has there ever been on or
in the Real Estate of Borrower:
(A) any underground storage tanks or surface
impoundments,
(B) any asbestos-containing material, or
(C) any polychlorinated biphenyls (PCBs) used in
hydraulic oils, electrical transformers, or other equipment.
(vii) Borrower has not filed any notice under any requirement
of Environmental Law reporting a spill or accidental and unpermitted
Release or discharge of a Contaminant into the environment.
(viii) Borrower has not entered into any negotiations or
settlement agreements with any Person (including the prior owner of
its property) imposing material obligations or liabilities on Borrower
with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim.
(ix) None of the products manufactured, distributed, or sold
by Borrower contains asbestos containing material.
61
(x) No Environmental Lien has attached to the Real Estate of
Borrower or any Subsidiary of Borrower.
(g) Titles to Properties. Except as set forth in Schedule 5.1(g), each
-------------------- ---------------
of Borrower and each of its Subsidiaries has valid and legal title to or a
valid leasehold interest in all personal property and assets used in or
necessary to the conduct of Borrower's or such Subsidiary's business, as
applicable, including, but not limited to, those reflected on the
consolidated balance sheet of Borrower and its Subsidiaries delivered
pursuant to Section 5.1(n)(ii).
------------------
(h) Real Estate; Leases. Schedule 5.1(h) sets forth, as of the
------------------- ---------------
Agreement Date, a correct and complete list of all Real Estate owned by
Borrower, all leases and subleases of real or personal property by Borrower
as lessee or sublessee (other than leases of personal property as to which
it is lessee or sublessee for which the value of such personal property is
less than $100,000), and all leases and subleases of real or personal
property by Borrower as lessor or sublessor. Each of such leases and
subleases is valid and enforceable in accordance with its terms and is in
full force and effect, and no default by any party to any such lease or
sublease exists.
(i) Liens. Except as set forth in Schedule 5.1(i), none of the
-----
properties and assets of Borrower or any Subsidiary of Borrower is subject
to any Lien, except Permitted Liens. Other than the Financing Statements,
no financing statement under the Uniform Commercial Code of any state which
names Borrower or any Subsidiary of Borrower as debtor and which has not
been terminated has been filed in any state or other jurisdiction, and
Borrower or such Subsidiary, as applicable, has not signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except to perfect those
Liens listed in Schedule 5.1(i) and Permitted Liens.
(j) Indebtedness and Guaranties. Set forth on Schedule 5.1(j) is a
--------------------------- ---------------
complete and correct listing of all of Borrower's and each of its
Subsidiaries Indebtedness for Money Borrowed. Set forth on Schedule 10.3 is
-------------
a complete and correct listing of all Guaranties of Borrower or any
Subsidiary of Borrower. Neither Borrower nor any Subsidiary of Borrower is
in default of any material provision of any agreement evidencing or
relating to such any such Indebtedness or Guaranty.
(k) Litigation. Except as set forth on Schedule 5.1(k), there are no
---------- ---------------
actions, suits or proceedings pending (nor, to the knowledge of Borrower,
are there any actions, suits or proceedings threatened, nor is there any
basis therefor) against or in any other way relating adversely to or
affecting Borrower or any Subsidiary of Borrower or any of its or any
Subsidiary's property in any court or before any arbitrator of any kind or
before or by any governmental body which, in any case, could reasonably be
expected to cause a Materially Adverse Effect.
(l) Tax Returns and Payments. Except as set forth on Schedule 5.1(l),
------------------------ ---------------
all United States federal, state and local and foreign national, provincial
and local and all other tax returns of Borrower and each of its
Subsidiaries required by applicable law to be filed have
62
been duly filed, and all United States federal, state and local and foreign
national, provincial and local and all other taxes, assessments and other
governmental charges or levies upon Borrower or any Subsidiary of Borrower
and its property, income, profits and assets which are due and payable have
been paid, except any such nonpayment which is at the time permitted under
Section 8.4. The charges, accruals and reserves on the books of Borrower
-----------
and each of its Subsidiaries in respect of United States federal, state and
local taxes and foreign national, provincial and local taxes for all fiscal
years and portions thereof since the organization of Borrower or such
Subsidiary, as applicable are in the judgment of Borrower adequate, and
neither Borrower nor such Subsidiary, as applicable knows of any reason to
anticipate any additional assessments for any of such years which, singly
or in the aggregate, might have a Materially Adverse Effect.
(m) Burdensome Provisions. Neither Borrower nor any of its
---------------------
Subsidiaries is a party to any indenture, agreement, lease or other
instrument, or subject to any charter or corporate restriction,
Governmental Approval or applicable law, compliance with the terms of which
might have a Materially Adverse Effect.
(n) Financial Statements. Borrower has furnished to Lender a copy of
--------------------
the consolidated and consolidating unaudited balance sheet of Borrower and
its Subsidiaries as at March 31, 2000, and the related statement of income
for the monthly period then ended. Such financial statements are complete
and correct and present fairly and in all material respects in accordance
with GAAP, the consolidated financial position of Borrower and its
Subsidiaries, as at the dates thereof and the results of operations of
Borrower and its Subsidiaries for the periods then ended. Except as
disclosed or reflected in such financial statements, neither Borrower nor
any of its Subsidiaries had any material liabilities, contingent or
otherwise, and there were no material unrealized or anticipated losses of
Borrower or any of its Subsidiaries.
(o) Adverse Change. Since the date of the financial statements
--------------
described in clause (i) of Section 5.1(n), (i) no change in the business,
--------------
assets, liabilities, condition (financial or otherwise), results of
operations or business prospects of Borrower has occurred that has had, or
may have, a Materially Adverse Effect, and (ii) no event has occurred or
failed to occur which has had, or may have, a Materially Adverse Effect.
(p) ERISA Neither Borrower nor any of its Subsidiaries nor any Related
-----
Company maintains or contributes to any Benefit Plan other than those
listed on Schedule 5.1(p). Each Benefit Plan is in substantial compliance
---------------
with ERISA, and neither Borrower nor any of its Subsidiaries nor any
Related Company has received any notice asserting that a Benefit Plan is
not in compliance with ERISA. No material liability to the PBGC or to a
Multiemployer Plan has been, or is expected by Borrower to be, incurred by
Borrower or any of its Subsidiaries or any Related Company.
(q) Absence of Defaults. Neither Borrower nor any of its Subsidiaries
-------------------
is in default under its articles or certificate of incorporation or by-
laws, and no event or condition has occurred or exists which has not been
remedied, cured or waived (i) that constitutes a Default or an Event of
Default or (ii) that constitutes or that, with the passage of time or
63
giving of notice, or both, would constitute a default or event of default
by Borrower under any material agreement (other than this Agreement) or
judgment, decree or order to which Borrower or such Subsidiary, as
applicable, is a party or by which Borrower or such Subsidiary, as
applicable, or any of its properties may be bound or which would require
Borrower or such Subsidiary, as applicable, to make any payment thereunder
prior to the scheduled maturity date therefor.
(r) Accuracy and Completeness of Information. Borrower has disclosed
----------------------------------------
to Lender all material facts known to Borrower concerning the consolidated
financial condition and business operations of Borrower and its
Subsidiaries. All written information, reports and other papers and data
produced by or on behalf of Borrower and furnished to Lender were, at the
time the same were so furnished, complete and correct in all material
respects to the extent necessary to give the recipient a true and accurate
knowledge of the subject matter. No fact is known to Borrower which has
had, or may in the future have (so far as Borrower can foresee), a
Materially Adverse Effect which has not been set forth in the financial
statements or disclosure delivered prior to the Agreement Date, in each
case referred to in Section 5.1(n), or in such written information, reports
--------------
or other papers or data or otherwise disclosed in writing to Lender prior
to the Agreement Date. No document furnished or written statement made to
Lender by Borrower in connection with the negotiation, preparation or
execution of this Agreement or any of the Loan Documents contains or will
contain any untrue statement of a fact material to the creditworthiness of
Borrower or any of its Subsidiaries or omits or will omit to state a
material fact necessary in order to make the statements contained therein
not misleading.
(s) Solvency. In each case after giving effect to the Indebtedness
--------
represented by the Revolving Credit Loans outstanding and to be incurred
and the transactions contemplated by this Agreement, Borrower and each of
its Subsidiaries are solvent, having assets of a fair value which exceeds
the amount required to pay its respective debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they become
absolute and matured, and each of Borrower and each of its Subsidiaries are
able to and anticipates that it will be able to meet its debts as they
mature and has adequate capital to conduct the business in which it is or
proposes to be engaged.
(t) Status of Receivables. Each Receivable reflected in the
---------------------
computations included in any Borrowing Base Certificate meets the criteria
enumerated in clauses (a) through (o) of the definition of Eligible
----------- ---
Receivables, except as disclosed in such Borrowing Base Certificate or as
disclosed in a timely manner in a subsequent Borrowing Base Certificate or
otherwise in writing to Lender.
(u) Chief Executive Office. The chief executive office of Borrower and
----------------------
each of its Subsidiaries and the books and records relating to the
Receivables are located at the address or addresses set forth on Schedule
--------
5.1(u); except as set forth Schedule 5.1(u), neither Borrower nor any of
------ ---------------
its Subsidiaries has maintained its chief executive office or the books and
records relating to any Receivables at any other address at any time during
the five years immediately preceding the Agreement Date.
64
(v) Status of Inventory. All Inventory included in any Borrowing Base
-------------------
Certificate delivered to Lender pursuant to Section 7.13(d) meets the
---------------
criteria enumerated in clauses (a) through (g) of the definition of
----------- ---
Eligible Inventory, except as disclosed in such Borrowing Base Certificate
or in a subsequent Borrowing Base Certificate or as otherwise specifically
disclosed in writing to Lender. All Inventory is in good condition, meets
all standards imposed by any governmental agency or department or division
thereof having regulatory authority over such goods, their use or sale, and
is currently either usable or saleable in the normal course of Borrower's
or such Subsidiary's business, as applicable, except to the extent reserved
against in the financial statements delivered pursuant to Article 9 or as
---------
disclosed on a Schedule of Inventory delivered to Lender pursuant to
Section 7.13(b). Set forth on Schedule 5.1(v) is the (i) address (including
--------------- ---------------
street, city, county and state) of each facility at which Inventory is
located, (ii) the approximate quantity in Dollars of the Inventory
customarily located at each such facility, and (iii) if the facility is
leased or is a third party warehouse or processor location, the name of the
landlord or such third party warehouseman or processor. All Inventory is
located on the premises set forth on Schedule 5.1(v) or is in transit to
---------------
one of such locations, except as otherwise disclosed in writing to Lender.
(w) Corporate and Fictitious Names; Trade Names. Except as otherwise
-------------------------------------------
disclosed on Schedule 5.1(w), during the one-year period preceding the
---------------
Agreement Date, neither Borrower nor any Subsidiary of Borrower has been
known as or used any corporate or fictitious name other than the corporate
name of Borrower or such Subsidiary, as applicable, on the Agreement Date.
All trade names or styles under which Borrower, or such Subsidiary, as
applicable, sells Inventory or creates Receivables, or to which instruments
in payment of Receivables are made payable, are listed on Schedule 5.1(w).
---------------
(x) Federal Regulations. Neither Borrower nor any of its Subsidiaries
-------------------
is engaged, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" (as each of the quoted terms is defined or used in
Regulations G and U of the Board of Governors of the Federal Reserve
System).
(y) Investment Company Act. Neither Borrower nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
(z) Employee Relations. Neither Borrower nor any of its Subsidiaries
------------------
is, except as set forth on Schedule 5.1(z), party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of Borrower's or any Subsidiary's employees; Borrower knows
of no pending, threatened or contemplated strikes, work stoppage or other
labor disputes involving its employees or those of its Subsidiaries.
(aa) Intellectual Property. Each of Borrower and each of its
---------------------
Subsidiaries owns or possesses all Intellectual Property required to
conduct its business as now and presently planned to be conducted without,
to its knowledge, conflict with the rights of others, and Schedule 5.1(aa)
lists all Intellectual Property owned by Borrower and its Subsidiaries.
65
Section 5.2 Survival of Representations and Warranties, Etc. All
-----------------------------------------------
representations and warranties set forth in this Article 5 and all statements
contained in any certificate, financial statement or other instrument delivered
by or on behalf of Borrower pursuant to or in connection with this Agreement or
any of the Loan Documents (including, but not limited to, any such
representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as of
the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to one
such date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement,
any investigation made by or on behalf of Lender or any borrowing hereunder.
ARTICLE 6 - SECURITY INTEREST
Section 6.1 Security Interest.
-----------------
(a) To secure the payment, observance and performance of the Secured
Obligations, Borrower and each Guarantor hereby mortgages, pledges and
assigns all of the Collateral owned by Borrower and each Guarantor to
Lender for itself and as agent for any Affiliate of Lender and grants to
Lender for itself and as agent for any Affiliate of Lender a continuing
security interest in, and a continuing Lien upon, all of the Collateral.
(b) As security for the Secured Obligations, Borrower shall execute
and deliver, and shall cause each Guarantor to execute and deliver, to or
for the benefit of Lender one or more Mortgages on all of Borrower's and
such Guarantor's Real Estate in which Borrower or such Guarantor has any
fee ownership interest.
(c) As additional security for all of the Secured Obligations,
Borrower and each Guarantor grants to Lender for itself and as agent for
any Affiliate of Lender a security interest in, and assigns to Lender for
itself and as agent for any Affiliate of Lender all of Borrower's and
Guarantor's right, title and interest in and to, any deposits or other sums
at any time credited by or due from Lender and each Affiliate of Lender to
Borrower, with the same rights therein as if the deposits or other sums
were credited by or due from Lender.
(d) As security for the reimbursement and other obligations relating
to Letters of Credit, Borrower and each Guarantor grants to Letter of
Credit Issuer for itself and as agent for any affiliate of Letter of Credit
Issuer a continuing security interest in, and a continuing Lien upon all of
the Collateral.
Section 6.2 Continued Priority of Security Interest.
---------------------------------------
(a) The Security Interest granted by Borrower and each Guarantor shall
at all times be valid, perfected and enforceable against Borrower and each
Guarantor and all third parties in accordance with the terms of this
Agreement, as security for the Secured Obligations, and the Collateral
shall not at any time be subject to any Liens that are on a
66
parity with or junior to the Security Interest other than Permitted Liens,
and shall not at any time be subject to any Liens that are prior or senior
to the Security Interest.
(b) Borrower and each Guarantor shall, at its sole cost and expense,
take all action that may be necessary or desirable, or that Lender may
request, so as at all times to maintain the validity, perfection,
enforceability and priority of the Security Interest in the Collateral in
conformity with the requirements of Section 6.2(a) or to enable Lender to
--------------
exercise or enforce its rights hereunder, including, but not limited to:
(i) paying all taxes, assessments and other claims lawfully levied or
assessed on any of the Collateral, except to the extent that such taxes,
assessments and other claims constitute Permitted Liens, (ii) diligently
seeking to obtain, after the Agreement Date, obtaining and delivering to
Lender such landlords' waivers, mortgagees' waivers or mechanics' lien
waivers, or subordinations, in form satisfactory to Lender, (iii)
delivering to Lender, endorsed or accompanied by such instruments of
assignment as Lender may specify, and stamping or marking in such manner as
Lender may specify, any and all chattel paper, instruments, letters and
advices of guaranty and documents evidencing or forming a part of the
Collateral, and (iv) executing, delivering, filing and/or recording
Mortgages, financing statements, pledges, designations, hypothecations,
notices and assignments, in each case in form and substance satisfactory to
Lender, relating to the creation, validity, perfection, maintenance or
continuation of the Security Interest under the UCC or other applicable
law.
(c) Lender is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of or
in the name of Borrower or such Guarantor for any purpose described in
Section 6.2(b). A carbon, photographic or other reproduction of this
--------------
Agreement or of any of the Security Documents or of any financing statement
filed in connection with this Agreement is sufficient as a financing
statement, to the extent permitted by applicable law.
(d) Borrower and each Guarantor shall ▇▇▇▇ its books and records as
may be necessary or appropriate to evidence, protect and perfect the
Security Interest and shall cause its financial statements to reflect the
Security Interest.
ARTICLE 7 - COLLATERAL COVENANTS
Until this Agreement has been terminated and all the Secured Obligations
have been indefeasibly paid in full, unless Lender shall otherwise consent in
the manner provided in Section 12.11:
-------------
Section 7.1 Collection of Receivables.
-------------------------
(a) Unless otherwise agreed between Borrower or such Guarantor and
Lender and except as otherwise allowed by Section 7.1(d), Borrower and each
--------------
Guarantor will cause all moneys, checks, notes, drafts and other
collections and proceeds of Receivables to be forwarded to a Blocked
Collection Account. Upon written notice by Lender upon the occurrence of a
Materially Adverse Effect or at any time when an Event of Default is in
existence, Borrower and each Guarantor will cause all moneys, checks,
notes, drafts and
67
other collections and proceeds of Receivables to be forwarded to a Lockbox
for deposit to an Agency Account and will instruct each Account Debtor to
address all remittances in payment of Receivables to a specified Lockbox
and stamp all invoices evidencing Receivables with a legend stating that
payment thereon is to be made to Borrower or such Guarantor, as applicable,
at such specified Lockbox.
(b) All moneys, checks, notes, drafts and other payments relating to
or constituting proceeds of Receivables, or of any other Collateral, at any
time coming into Borrower's or any Guarantor's possession or control shall
be subject to an express trust in favor of Lender and promptly deposited to
an Agency Account or the Teller Account or delivered directly to Lender for
deposit to the Teller Account.
(c) All deposits to the Blocked Collection Account shall be
transferred daily for deposit to the Teller Account. All deposits to each
Agency Account shall be transmitted to Lender for deposit to the Teller
Account in accordance with the procedures set forth in the applicable
Agency Account Agreement.
(d) At Borrower's or any Guarantor's option, Borrower or such
Guarantor may allow any Account Debtor to make payment on any Receivables
by deposit directly to the Teller Account, for the account of Borrower, by
wire or electronic transfer or other immediately available cash equivalent,
with contemporaneous notice thereof to Lender.
(e) All deposits to the Teller Account shall be applied in payment of
the Secured Obligations pursuant to Section 2.3(c), as follows:
--------------
(i) All checks, drafts and similar non-cash items deposited to
the Teller Account shall be deemed subject to a collection period of
two (2) Business Days prior to application to the Secured Obligations,
at which time credit shall be provisional unless and until such items
are actually collected, provided, that for the sole purpose of
--------
calculating the amount that may be borrowed and remain outstanding
from time to time under the Revolving Credit Facility, such items
shall be assumed to be applied in reduction of the Secured Obligations
as of the Business Day of deposit thereof to the Teller Account.
(ii) All deposits to the Teller Account consisting of cash, wire
or electronic transfers or other immediately available cash
equivalents transferred from an Agency account as contemplated by
Section 7.1(c) shall be deemed received and applied to the Secured
--------------
Obligations as of the Business Day of deposit thereof to the Teller
Account. Any and all other deposits consisting of cash, wire or
electronic transfers or other immediately available cash equivalents
(including any such deposits received directly from an Account Debtor
as provided in Section 7.1(d)), shall be deemed received and applied
--------------
as of the later of the Business Day of deposit thereof to the Teller
Account or notification of such deposit to Lender by Borrower, such
Guarantor, or such Account Debtor.
68
(f) Any excess of amounts available for application to the Secured
Obligations under Section 7.1(b), Section 7.1(c) or Section 7.1(d) at any
-------------- ------------- --------------
time existing shall be held by Lender in a segregated cash collateral
account designated by Lender, as continuing security for the Secured
Obligations or, upon request by Borrower or any Guarantor during any time
when no Default or Event of Default is in existence, deposited to the
Controlled Disbursement Account.
(g) Neither Borrower nor any Guarantor will use, dispose, withhold or
otherwise exercise dominion over any proceeds of Receivables. Borrower and
each Guarantor agrees that it will not commingle proceeds of Receivables
with any other funds, and that no deposits will be made to the Blocked
Collection Account or any Agency Account other than collections and
proceeds of Receivables or proceeds of other Collateral. All amounts from
time to time deposited to the Blocked Collection Account or any Agency
Account shall remain subject to Lender's security interests under this
Agreement.
Section 7.2 Verification and Notification. Lender shall have the right (a)
-----------------------------
at any time and from time to time, in the name of Lender or in the name of
Borrower or the applicable Guarantor, to verify the validity, amount or any
other matter relating to any Receivables by mail, telephone, telegraph or
otherwise, and (b) after an Event of Default, to notify the Account Debtors or
obligors under any Receivables of the assignment of such Receivables to Lender
and to direct such Account Debtor or obligors to make payment of all amounts due
or to become due thereunder directly to Lender and, upon such notification and
at the expense of Borrower or such Guarantor, to enforce collection of any such
Receivables and to adjust, settle or compromise the amount or payment thereof,
in the same manner and to the same extent as Borrower or such Guarantor might
have done.
Section 7.3 Disputes, Returns and Adjustments.
-------- -----------------------
(a) Borrower and each Guarantor shall provide Lender with prompt
written notice of any dispute in excess of $150,000 under any Receivable.
(b) Borrower and each Guarantor shall notify Lender promptly of all
material returns and credits in excess of $75,000 in respect of any
Receivable, which notice shall specify the Receivables affected.
(c) Borrower and each Guarantor may, in the ordinary course of
business and prior to a Default or an Event of Default, grant any extension
of time for payment of any Receivable or compromise, compound or settle the
same for less than the full amount thereof or release wholly or partly any
Person liable for the payment thereof or allow any credit or discount
whatsoever thereon; provided that (i) with respect to all Receivables in
--------
any fiscal year of Borrower, any and all such actions do not exceed the
balance in the allowance for doubtful account reserve, and (ii) upon
request by Lender, Lender is notified in writing of all such adjustments
and the Receivable(s) affected thereby.
69
Section 7.4 Invoices.
--------
(a) Neither Borrower nor any Guarantor will make any material
substantive changes to the forms of invoices used for billing Account
Debtors, as such forms exist as of the Agreement Date, copies of which have
been disclosed to Lender.
(b) Upon the request of Lender, Borrower or any Guarantor shall
deliver to Lender, at Borrower's or such Guarantor's expense, copies of
customers' invoices or the equivalent, original shipping and delivery
receipts or other proof of delivery, customers' statements, the original
copy of all documents, including, without limitation, repayment histories
and present status reports, relating to Receivables and such other
documents and information relating to the Receivables as Lender shall
specify.
Section 7.5 Delivery of Instruments. Borrower will immediately notify
-----------------------
Lender in the event any Receivable in an amount in excess of $150,000 is, or
Receivables in excess of $500,000 in the aggregate are, at any time evidenced by
a promissory note or notes, trade acceptance or any other instrument for the
payment of money.
Section 7.6 Inventory. Borrower and each Guarantor represent and warrant to
---------
Lender that all Inventory shall be held for sale in the ordinary course of
Borrower's or such Guarantor's business, and is and will be fit for such
purpose. Borrower and each Guarantor will keep its Inventory in good and
marketable condition, at its own expense. Borrower and each Guarantor will
maintain a perpetual inventory system at all times and will conduct a physical
count or regular cycle count of all Inventory at least once per calendar year
and at Lender's request shall promptly supply Lender with a copy of such count.
No negotiable documents have been issued in respect of Borrower's or any
Guarantor's Inventory, and except for bills of lading covering Inventory shipped
to a purchaser in the ordinary course of business, none shall be issued without
prior written notice to Lender and, at Lender's request, completion of
arrangements satisfactory to Lender for possession of such negotiable documents
to be delivered to Lender. Except as disclosed on Schedule 7.6: (i) no Inventory
is held by Borrower or any Guarantor on consignment or approval, or on a sale or
return, ▇▇▇▇-and-hold, guaranteed sale, repurchase or similar basis, or has been
sold or delivered to any Person on consignment or approval, or on a sale or
return, ▇▇▇▇-and-hold, guaranteed sale, repurchase or similar basis, and (ii)
neither Borrower nor any Guarantor will acquire or accept any Inventory on
consignment or approval, or on a sale or return, ▇▇▇▇-and-hold, guaranteed sale,
repurchase or similar basis and will not sell any Inventory on consignment or
approval, or on a sale or return, ▇▇▇▇-and-hold, guaranteed sale, repurchase or
similar basis without the prior written consent of Lender. All cash receipts, if
any, from time to time received by Borrower or any Guarantor in respect of the
sale of Inventory, including without limitation cash, checks or similar items,
shall be subject to an express trust for the benefit of Lender and promptly
delivered to Lender in the form received for application in reduction of the
Secured Obligations.
Section 7.7 Returned Goods. The Security Interest in the Inventory shall,
--------------
without further act, attach to the cash and non-cash proceeds resulting from the
sale or other disposition thereof and to all Inventory which is returned to
Borrower or any Guarantor by customers or is otherwise recovered. Unless Lender
agrees otherwise: (i) neither Borrower nor any Guarantor shall issue any credits
or allowances with respect to such returned Inventory, and (ii) all such
returned Inventory
70
shall be segregated from all other Inventory, and shall not be reported as
Eligible Inventory, unless and until it is demonstrated to Lender's satisfaction
that such returned Inventory is in saleable condition and meets all criteria for
Eligible Inventory. Unless otherwise agreed by Lender, the amount of Receivables
relating to all returned Inventory shall be excluded from Eligible Receivables.
All returned Inventory shall be subject to Lender's continuing security
interests under this Agreement. Lender agrees to the existing practice of
credits for return of saleable Inventory issued within 90 days of purchase.
Section 7.8 Ownership and Defense of Title.
------------------------------
(a) Except for Permitted Liens, either Borrower or such Guarantor
shall at all times be the sole owner of each and every item of Collateral
and shall not create any Lien on, or sell, lease, exchange, assign,
transfer, pledge, hypothecate, grant a security interest or security tide
in or otherwise dispose of, any of the Collateral or any interest therein,
except for sales of Inventory in the ordinary course of business, for cash
or on open account or on terms of payment ordinarily extended to its
customers and except as otherwise expressly contemplated herein. The
inclusion of "proceeds" of the Collateral under the Security Interest shall
not be deemed a consent by Lender to any other sale or other disposition of
any part or all of the Collateral.
(b) Borrower and each Guarantor shall defend its title in and to the
Collateral and shall defend the Security Interest in the Collateral against
the claims and demands of all Persons.
(c) In addition to, and not in derogation of, the foregoing and the
requirements of any of the Security Documents, Borrower and each Guarantor
shall (i) protect and preserve all properties material to its business,
including Intellectual Property and maintain all tangible property in good
and workable condition in all material respects, with reasonable allowance
for wear and tear, and (ii) from time to time make or cause to be made all
needed and appropriate repairs, renewals, replacements and additions to
such properties necessary for the conduct of its business, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 7.9 Insurance.
---------
(a) Borrower and each Guarantor shall at all times maintain insurance
on the Inventory and Equipment against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as Lender shall
reasonably specify, in amounts and under policies issued by insurers
acceptable to Lender. All premiums on such insurance shall be paid by
Borrower or such Guarantor and copies of the policies delivered to Lender.
Neither Borrower nor any Guarantor shall use or permit the Inventory or
Equipment to be used in violation of any applicable law or in any manner
which might render inapplicable any insurance coverage.
(b) All insurance policies required under Section 7.9(a) shall name
Lender as an additional named insured and shall contain "New York standard"
loss payable clauses in the
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form submitted to Borrower or any Guarantor by Lender, or otherwise in form
and substance satisfactory to Lender, naming Lender as loss payee as its
interests may appear, and providing that (i) all proceeds thereunder shall
be payable to Lender, (ii) no such insurance shall be affected by any act
or neglect of the insured or owner of the property described in such
policy, and (iii) such policy and loss payable clauses may not be canceled,
amended or terminated unless at least ten days' prior written notice is
given to Lender.
(c) Any proceeds of insurance referred to in this Section 7.9 which
are paid to Lender shall be, at the option of Lender in its sole
discretion, either (i) applied to rebuild, restore or replace the damaged
or destroyed property, or (ii) applied to the payment or prepayment of the
Secured Obligations.
(d) Borrower and each Guarantor shall at all times maintain, in
addition to the insurance required by Section 7.9(a) or any of the Security
Documents, insurance with responsible insurance companies against such
risks and in such amounts as is customarily maintained by similar
businesses or as may be required by applicable law, including such public
liability, products liability, and third party property damage as is
consistent with reasonable business practices, and from time to time
deliver to Lender upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts and rates
of the insurance, the dates of the expiration thereof and the properties
and risks covered thereby.
(e) Without limiting the foregoing, Borrower shall also maintain flood
insurance, in the event of a designation of the area in which any Real
Estate covered by the Mortgages and any of the Equipment and Inventory
located on such Real Estate is located as "flood prone" or a "flood risk
area," (hereinafter "SFHA") as defined by the Flood Disaster Protection Act
of 1973, in an amount to be reasonably determined by the Agent, and shall
comply with the additional requirements of the National Flood Insurance
Program as set forth in said Act. Borrower shall also maintain flood
insurance for its Inventory and Equipment which is, at any time, located in
a SFHA.
Section 7.10 Location of Offices and Collateral.
----------------------------------
(a) Neither Borrower nor any Guarantor will change the location of its
chief executive office or the place where it keeps its books and records
relating to the Collateral or change its name, identity or corporate
structure, or use any trade name, assumed name or other fictitious name,
without giving Lender at least 30 days' prior written notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location, will at all times be kept by Borrower or such Guarantor at one of
the locations set forth in Schedule 5.1(v) and shall not, without the prior
written consent of Lender, be removed therefrom except, so long as no Event
of Default shall have occurred and be continuing, for sales of Inventory
otherwise permitted by this Agreement.
(c) If any Inventory is in the possession or control of any of
Borrower's or any Guarantor's agents or processors, Borrower or such
Guarantor shall notify such agents or
72
processors of the Security Interest and, upon the occurrence of an Event of
Default, shall instruct them (and cause them to acknowledge such
instruction) to hold all such Inventory for the account of Lender, subject
to the instructions of Lender.
Section 7.11 Records Relating to Collateral.
------------------------------
(a) Borrower and each Guarantor will at all times (i) keep complete
and accurate records of Inventory on a basis consistent with past practices
of Borrower or such Guarantor, itemizing and describing the kind, type and
quantity of Inventory and Borrower's or such Guarantor's cost therefor and
a current price list for such Inventory, and (ii) keep complete and
accurate records of all other Collateral.
(b) At Lender's request, Borrower and each Guarantor will take a
physical listing of all Inventory, wherever located, and promptly complete
and deliver same to Lender.
Section 7.12 Inspection. Lender shall have the right without hindrance or
----------
delay to conduct field examinations to inspect the Collateral and to inspect,
audit and copy Borrower's or any Guarantor's books, records, journals,
correspondence and other records and data relating to the Collateral or its
business. Lender (by any of its officers, employees or agents) shall have the
right, to the extent that the exercise of such right shall be within the control
of Borrower or such Guarantor, at any time or times to (a) visit the properties
of Borrower or any Guarantor, inspect the Collateral and the other assets of
Borrower and each Guarantor and inspect and make extracts from the books and
records of Borrower and each Guarantor, including, but not limited to,
management letters prepared by independent accountants, all during customary
business hours at such premises, (b) discuss Borrower's and each Guarantor's
business, assets, liabilities, financial condition, results of operations and
business prospects, insofar as the same are reasonably related to the rights of
Lender hereunder or under any of the Loan Documents, with Borrower's and each
Guarantor's (i) principal officers, (ii) independent accountants and other
professionals providing services to Borrower or such Guarantor, and (iii) any
other Person (except that any such discussion with any third parties shall be
conducted only in accordance with Lender's standard operating procedures
relating to the maintenance of confidentiality of confidential information of
borrowers), and (c) verify the amount, quantity, value and condition of, or any
other matter relating to, any of the Collateral and in this connection to
review, audit and make extracts from all records and files related to any of the
Collateral. Lender shall have full access to all records available to Borrower
or any Guarantor from any credit reporting service, bureau or similar service
and shall have the right to examine and make copies of any such records.
Borrower and each Guarantor hereby irrevocably authorize any such employees,
services, accountants and other professionals to rely upon the authority granted
hereunder in engaging in such discussions and making such information available
as provided herein. At Lender's request, Borrower and each Guarantor will
deliver to Lender express written authorization for any such discussions or for
access to any such information. Without limiting the foregoing, Lender and its
representatives will have the right at any reasonable time to enter and visit
the Real Estate of Borrower or any Subsidiary of Borrower and any other place
where any property of Borrower or any Subsidiary of Borrower is located for the
purposes of observing such Real Estate, taking and removing soil or groundwater
samples, and conducting tests on any part of such Real Estate. Lender is under
no duty, however, to visit or observe any Real Estate or to conduct tests, and
any such acts by Lender or its representatives will be solely for the purposes
of
73
protecting Lender's Security Interest and preserving Lender's rights under the
Loan Documents. No site visit, observation or testing by Lender will result in a
waiver of any Default or Event of Default or impose any liability on Lender. In
no event will any site visit, observation, or testing by Lender or its
representatives be a representation that hazardous substances are or are not
present in, on or under any Real Estate, or that there has been or will be
compliance with any Environmental Law. Neither Borrower nor any Subsidiary of
Borrower nor any other party is entitled to rely on any site visit, observation,
or testing by Lender or its representatives. Lender owes no duty of care to
protect Borrower or any Subsidiary of Borrower or any other party against, or to
inform Borrower or any Subsidiary of Borrower or any other party of, any
hazardous substances or any other adverse condition affecting Real Estate.
Lender may in its discretion disclose to Borrower or any Subsidiary of Borrower,
or to any other party if so required by law, any report or findings made as a
result of, or in connection with, any site visit, observation, or testing by
Lender or its representatives. Borrower understands and agrees that Lender makes
no warranty or representation to Borrower or any Subsidiary of Borrower or any
other party regarding the truth, accuracy, or completeness of any such report or
findings that may be disclosed. Borrower also understands that depending on the
results of any site visit, observation, or testing by Lender or its
representatives and disclosed to Borrower or any Subsidiary of Borrower ,
Borrower or any such Subsidiary may have a legal obligation to notify one or
more environmental agencies of the results, that such reporting requirements are
site-specific, and are to be evaluated by Borrower and/or such Subsidiary
without advice or assistance from Lender. Lender will make reasonable efforts to
avoid interfering with Borrower's or any such Subsidiary's use of Real Estate or
any other property in exercising any rights provided hereunder.
Section 7.13 Information and Reports.
-----------------------
(a) Schedule of Receivables. Borrower shall deliver to Lender, no
later than 30 days after the end of each calendar month, a Schedule of
Receivables as of the last Business Day of Borrower's immediately preceding
calendar month setting forth (A) a detailed aged trial balance of all then
existing Receivables, specifying the name of and the balance due from (and
any rebate due to) each Account Debtor obligated on a" Receivable so listed
and (B) a reconciliation to the Schedule of Receivables delivered in.
respect of the next preceding accounting month.
(b) Schedule of Inventory. Borrower shall deliver to Lender, no later
than the last day of each calendar month, a Schedule of Inventory (for
itself and each Guarantor) as of the last Business Day of the immediately
preceding calendar month, itemizing and describing the kind, type, quantity
and location of Inventory and the cost thereof.
(c) Schedule of Equipment. Borrower shall deliver to Lender on such
dates as may be requested by Lender, a Schedule of Equipment, describing
each item of Equipment (other than Equipment subject to the Lien of The
Catalyst Fund, Ltd. and/or Southwest/Catalyst Capital, Ltd., as listed in
Schedule 5.1(i) on the Agreement Date) and the location, cost and then
current book value thereof.
(d) Borrowing Base Certificate. Unless otherwise agreed, at least
weekly, and at such other times as Lender may request, Borrower shall
execute and deliver to Lender, in
74
form satisfactory to Lender, a Borrowing Base Certificate setting forth a
certification of Eligible Receivables and Eligible Inventory, and calculation of
the Borrowing Base, in form prescribed by Lender. Each Borrowing Base
Certificate shall include a reconciliation of the calculation of the Borrowing
Base as certified in the most recent Borrowing Base Certificate delivered to
Lender, and be accompanied by such documents and supporting information relating
to Eligible Receivables and Eligible Inventory as Lender may request. Borrower
and each Guarantor shall maintain and shall furnish to Lender at Lender's
request, such supporting documents or copies as Lender may require including,
but not limited to: a schedule of Eligible Receivables created, and Eligible
Inventory purchased and received, since the previous Borrowing Base Certificate
delivered to Lender; copies of invoices and supporting delivery or service
records in connection therewith; a schedule of collections received; copies of
credit memos or other advices of credit or reductions against amounts previously
billed; and such other reports as Lender may request from time to time. If any
of such records or reports are prepared by an accounting service, or other
agent, Borrower and each Guarantor hereby authorize such service or agent to
deliver such records, reports and related documents to Lender. Lender may
exhibit a copy of this Agreement to any such service or agent and such service
or agent is irrevocably authorized to rely on the provisions hereof in providing
such documentation to Lender. Each Borrowing Base Certificate shall bear a
signed statement by an authorized officer of Borrower and each Guarantor
certifying the accuracy and completeness of all information included therein and
shall incorporate therein by reference, as if fully set forth therein, all the
terms and provisions hereof. The execution and delivery of a Borrowing Base
Certificate shall in each instance constitute an agreement, representation and
warranty to Lender by Borrower and each Guarantor that, except for the security
interest of Lender therein: it is the sole owner of and has full unrestricted
power to grant to Lender a continuing security interest and lien in and to all
Collateral included therein free from any lien, security interest or
encumbrance; each account included therein is in existence, unconditional and
valid, and arose from a bona fide outright sale of Inventory in the ordinary
course of business for liquidated amounts as set forth in the Borrowing Base
Certificate, and such Inventory has been delivered or provided to the respective
account debtors; no account included therein arose in connection with a contract
or assignment which purports to make an assignment or security interest therein
void or conditions such assignment or security interest on consent of the
account debtor; no account is subject to any sale, assignment, claim or security
interest of any character and it will not make any sale or other assignment
thereof or, subject to Permitted Liens, create any other security interest
therein; it has not received any notice or other communication, and has no
knowledge, that any account is subject to any claim for credit, deduction,
allowance, extension or adjustment, defense, dispute, setoff or counterclaim,
except for discounts for early payment allowed in the ordinary course of
business as previously disclosed to Lender and as reflected on the face of the
invoice evidencing such account; all Inventory reflected in such Borrowing Base
Certificate is held for sale in the ordinary course of its business, and no such
Inventory is located at any location in breach of the requirements of this
Agreement and no negotiable documents have been issued in respect of any such
Inventory; and no Inventory reflected in such Borrowing Base Certificate is
returned Inventory (other than Inventory which is returned in the ordinary
course of business and which is in condition which is immediately resalable by
Borrower in the ordinary course of business) unless otherwise disclosed to
Lender in writing.
75
(e) Notice of Diminution of Value. Borrower and each Guarantor shall
-----------------------------
give prompt notice to Lender of any matter or event which has resulted in,
or may result in, the actual or potential diminution in excess of $200,000
in the value of any of the Collateral, except for any diminution in the
value of any Receivables or Inventory in the ordinary course of business
which has been appropriately reserved against, as reflected in the
financial statements previously delivered to Lender pursuant to Article 9.
(f) Certification. Each of the schedules delivered to Lender pursuant
-------------
to this Section 7.13 shall be certified by the Chief Financial Officer of
Borrower to be true, correct and complete as of the date indicated thereon.
(g) Other Information. Lender may, in its discretion, from time to
-----------------
time require Borrower to deliver the schedules described in Section
-------
7.13(a), (b), (c) and (d) more or less often and on different schedules
----------------- ---
than specified in such Section, and Borrower will comply with such
requests. Borrower and each Guarantor shall also furnish to Lender such
other information with respect to the Collateral as Lender may from time to
time reasonably request.
Section 7.14 Power of Attorney. Borrower and each Guarantor hereby appoint
-----------------
Lender as its attorney, with power (a) to endorse the name of Borrower or such
Guarantor on any checks, notes, acceptances, money orders, drafts or other forms
of payment or security that may come into Lender's possession, and (b) to sign
the name of Borrower or such Guarantor on any invoice or ▇▇▇▇ of lading relating
to any Receivables, Inventory or other Collateral, on any drafts against
customers related to letters of credit, on schedules and assignments of
Receivables furnished to Lender by Borrower or such Guarantor, on notices of
assignment, financing statements and other public records relating to the
perfection or priority of the Security Interest or verifications of account and
on notices to or from customers.
Section 7.15 Preservation of Lender's Rights. To the extent allowed by law,
-------------------------------
neither Lender nor any of its officers, directors, employees, and agents shall
be liable or responsible in any way for the safekeeping of any Collateral or for
any act or failure to act with respect to the Collateral, or for any loss or
damage thereto or any diminution in the value thereof, or for any act by any
other Person. In the case of any instruments and chattel paper included within
the Collateral, Lender shall have no duty or obligation to preserve rights
against prior parties. The Secured Obligations shall not be affected by any
failure of Lender to take any steps to perfect its security interests or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release Borrower from any of the Secured Obligations. Lender may
extend the time for payment of the Secured Obligations or modify or amend the
terms of any of the Loan Documents, or compromise or grant other indulgences,
renewals, extensions or releases, and take or omit to take any other action with
respect to the Secured Obligations or the Collateral, or any Person directly or
indirectly obligated in connection therewith, without impairing Lender's
security interests in the Collateral or any of Lender's rights under the Loan
Documents.
Section 7.16 Maintenance of Equipment. Borrower shall maintain and shall
------------------------
cause each of its Subsidiaries to maintain all Equipment in good and workable
condition in all material respects,
76
with reasonable allowance for wear and tear, and shall exercise proper custody
of all such Equipment.
ARTICLE 8 - AFFIRMATIVE COVENANTS
Until this Agreement has been terminated and all the Secured Obligations
have been indefeasibly paid in full, unless Lender shall otherwise consent in
the manner provided for in Section 12.11, Borrower will and will cause each of
-------------
its Subsidiaries to:
Section 8.1 Preservation of Corporate Existence and Similar Matters.
-------------------------------------------------------
Preserve and maintain its corporate existence, rights, franchises, licenses and
privileges in the jurisdiction of its incorporation and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
Section 8.2 Compliance with Applicable Law. Comply with all applicable
------------------------------
laws.
Section 8.3 Conduct of Business. Engage only in businesses in substantially
-------------------
the same fields as the businesses conducted on the Agreement Date.
Section 8.4 Payment of Taxes and Claims. Pay or discharge when due (a) all
---------------------------
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or upon any properties belonging to it, and (b) all lawful
claims of materialmen, mechanics, carriers, warehousemen and landlords for
labor, materials, supplies and rentals which, if unpaid, might become a Lien on
any properties of Borrower or such Subsidiary, except that this Section 8.4
-----------
shall not require the payment or discharge of any such tax, assessment, charge,
levy or claim which is being contested in good faith by appropriate proceedings
for which adequate reserves have been established on the appropriate books.
Borrower agrees that it shall immediately notify Lender of the initiation of any
such contests and advise Lender from time to time of the status thereof.
Borrower shall and shall cause each Subsidiary to promptly pay any amounts
adjudged to be due pursuant to any such contest, with all costs, penalties, and
interest thereon, before such judgment becomes final or any writ or order is
issued under which the Collateral, or any portion thereof, may become subject to
any lien or encumbrance. In any event, Lender shall have the right at any time
in its discretion to reserve the amount of any unpaid assessed taxes as provided
in Section 2.7.
-----------
Section 8.5 Accounting Methods and Financial Records. Maintain a system of
----------------------------------------
accounting, and keep such books, records and accounts (which shall be true and
complete), as may be required or as may be necessary to permit the preparation
of financial statements in accordance with GAAP consistently applied.
Section 8.6 Use of Proceeds. With respect to all Borrowings on and after
---------------
the Agreement Date, use the proceeds of:
(a) Revolving Credit Loans only for working capital and general
business purposes (including without limitation repurchase by Borrower of
its Capital Stock to the extent allowed by Section 10.6) and for Permitted
------------
Acquisitions;
77
(b) Capex Loans to (i) purchase Eligible Purchased Equipment or (ii)
refinance amounts outstanding under the Revolving Credit Facility
(including any such amounts that refinanced amounts previously outstanding
under the Prior Loan Agreement) which were incurred to finance the purchase
of Eligible Purchased Equipment, as detailed by Borrower to Lender in
writing pursuant to Section 4.2; and
------------
(c) Real Estate Term Loan B to complete expansion and improvement of
Eligible Term Loan B Real Estate and/or to refinance amounts outstanding
under the Revolving Credit Facility (including any such amounts that
refinanced amounts previously outstanding under the Prior Loan Agreement)
which were incurred for any such purpose as previously detailed by Borrower
to Lender in writing or hereafter pursuant to Section 4.3(b) and for
-------------
working capital purposes;
(d) Real Estate Term Loan C to acquire and improve the Eligible Term
Loan C Real Estate and/or to refinance Revolving Credit Loans previously
made for any such purpose as detailed by Borrower to Lender pursuant to
Section 4.3(b) and for working capital purposes; and
(e) Acquisition Loans to finance all or any portion of Permitted
Acquisitions as detailed by Borrower to Lender in writing pursuant to
Section 4.4;
and not use any part of any such proceeds to purchase or carry, or to reduce or
retire or refinance any credit incurred to purchase or carry, any margin stock
(within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System) or for any other purpose which would involve a violation of such
Regulation G or U or Regulation T or X of such Board of Governors or for any
other purpose prohibited by law or by the terms and conditions of this
Agreement.
Section 8.7 Hazardous Waste and Substances; Environmental Requirements.
----------------------------------------------------------
(a) In addition to, and not in derogation of, the requirements of
Section 8.2 and of the Security Documents, comply with all laws,
governmental standards and regulations applicable to Borrower or such
Subsidiary or to any of its assets in respect of occupational health and
safety laws, rules and regulations and Environmental Laws, promptly notify
Lender of its receipt of any notice of a violation of any such law, rule,
standard or regulation and indemnify and hold Lender harmless from all
loss, cost, damage, liability, claim and expense incurred by or imposed
upon Lender on account of Borrower's or such Subsidiary's failure to
perform its obligations under this Section 8.7. Borrower shall take prompt
-----------
and appropriate action to respond to any non-compliance, or notice of non-
compliance, with Environmental Laws with respect to Borrower or any
Subsidiary of Borrower and shall regularly report to Lender on such
response.
(b) Without limiting the generality of the foregoing, Borrower shall
submit to Lender annually, commencing on the first Anniversary Date, and on
each Anniversary Date thereafter, an update of the status of each
environmental compliance or liability issue. Lender may request copies of
technical reports prepared by Borrower and its communications
78
with any Governmental Authority to determine whether Borrower is proceeding
reasonably to correct, cure, or contest in good faith any alleged non-
compliance or environmental liability. Borrower shall, at Lender's request
and at Borrower's expense, (i) retain an independent environmental engineer
acceptable to Lender to evaluate the site, including tests if appropriate,
where the non-compliance or alleged non-compliance with Environmental Laws
has occurred and prepare and deliver to Lender a report setting forth the
results of such evaluation, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs
thereof, and (ii) provide to Lender a supplemental report of such engineer
whenever the scope of the environmental problems (if any), or the response
thereto or the estimated costs thereof, shall change in any material
respect.
(c) Whenever Borrower gives notice to Lender pursuant to this Section
-------
8.7 with respect to a matter that reasonably could be expected to result in
---
liability to Borrower or any Subsidiary in excess of $100,000 in the
aggregate, Borrower shall, at Lender's request and Borrower's expense, (i)
cause an independent environmental engineer acceptable to Lender to conduct
such tests of the site where the noncompliance or alleged noncompliance
with Environmental Laws has occurred and prepare and deliver to Lender a
report setting forth the results of such tests, a proposed plan to bring
Borrower or such Subsidiary into compliance with such Environmental Laws
and an estimate of the costs thereof, and (ii) provide to Lender a
supplemental report of such engineer whenever the scope of the
noncompliance or the response thereto or the estimated costs thereof shall
materially change.
Section 8.8 Accuracy of Information. All written information, reports,
-----------------------
statements and other papers and data furnished to Lender, whether pursuant to
Article 9 or any other provision of this Agreement or any of the other Loan
Documents, shall be, at the time the same is so furnished, complete and correct
in all material respects to the extent necessary to give Lender true and
accurate knowledge of the subject matter.
Section 8.9 Revisions or Updates to Schedules. Should any of the
---------------------------------
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, Borrower shall
provide promptly to Lender such revisions or updates to such Schedule(s) as may
be necessary or appropriate to update or correct such Schedule(s); provided that
no such revisions or updates to any Schedule(s) shall be deemed to have cured
any breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule(s) unless and until Lender, in its sole
discretion, shall have accepted in writing such revisions or updates to such
Schedule(s).
Section 8.10 Additional Subsidiaries and Pledge of Assets. Promptly upon
--------------------------------------------
creation or Acquisition of any Subsidiary of Borrower, Borrower shall cause such
new Subsidiary to execute an Additional Subsidiaries Supplement and thereby (i)
become party to this Agreement, (ii) grant to Lender a continuing security
interest, lien and collateral assignment in and to all right, title and interest
of such Subsidiary in all Collateral, then owned and thereafter acquired by such
Subsidiary and (iii) agree to become a Guarantor, in form and substance
satisfactory to Lender, all in form and substance satisfactory to Lender.
Borrower shall cause such new Subsidiary to execute and deliver to Lender such
other instruments, certificates, Financing Statements and agreements in
connection with the forgoing as Lender may request. Borrower will not propose
any Receivables or Inventory
79
of such Subsidiary for inclusion in the Borrowing Base, or propose any Equipment
or Real Estate of such Subsidiary as Eligible Purchased Equipment, Eligible
Acquired Equipment or Eligible Acquired Real Estate, as the case may be, without
first fully complying with the requirements of this Section 8.10.
------------
Section 8.11 Additional Real Estate and Leases. Promptly upon acquisition
---------------------------------
of any interest (including a leasehold interest) in any Real Estate, Borrower
shall notify Lender thereof and, if requested by Lender, as soon as reasonably
possible thereafter deliver to Lender each of the following items with respect
to such Real Estate, in each case in form and substance satisfactory to Lender:
(a) a Mortgage in proper form for recording in the jurisdiction in
which such Real Estate is located;
(b) an appraisal prepared by a credentialed appraiser acceptable to
Lender, on a valuation basis satisfactory to Lender, in form required by
Lender's internal policies and applicable laws and otherwise in form and
substance satisfactory to Lender
(c) a policy of mortgagee's title insurance in an amount acceptable to
Lender and containing no exceptions other than those which are acceptable
to Lender;
(d) a survey prepared by a credentialed surveyor acceptable to Lender,
certified to Lender as required by Lender's internal policies;
(e) environmental site assessments prepared by environmental
consultants acceptable to Lender; and
(f) such other information, documentation, and certifications, in form
and substance satisfactory to Lender, as may be required by Lender.
Section 8.12 Intercreditor Agreements. Borrower shall (i) deliver to Lender
------------------------
within thirty (30) days after the Agreement Date, an amendment, restatement or
other modification with respect to the certain Fourth Amended and Restated
Intercreditor Agreement dated January 28, 1998 among The Catalyst Fund, Ltd.,
Southwest/Catalyst Capital, Ltd. and NationsBank of Texas, N.A. (predecessor in
interest to Lender) and (ii) use its best efforts to deliver to Lender within
ninety (90) days after the Agreement Date, amendment, restatements or
modifications to such other subordination and/or intercreditor agreements as
Lender may request, in each such case in form and substance satisfactory to
Lender.
ARTICLE 9 - INFORMATION
Until this Agreement has been terminated and all the Secured Obligations
have been indefeasibly paid in full, unless Lender shall otherwise consent in
the manner set forth in Section 12.11, Borrower will furnish to Lender at
-------------
Lender's Office:
80
Section 9.1 Financial Statements.
--------------------
(a) Audited Year-End Statements. Within ten (10) days after the
Agreement Date, copies of the audited consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as at February 29, 2000, and
the related statements of income, shareholders' equity and cash flow for
such fiscal year. As soon as available, but in any event within 120 days
after the end of each subsequent fiscal year of Borrower, copies of the
audited consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such fiscal year and the related statements
of income, shareholders' equity and cash flow for such fiscal year, in each
case setting forth in comparative form the figures for the previous fiscal
year. Each of the foregoing shall be audited, without qualification, by
certified public accountants selected by Borrower and acceptable to Lender.
(b) Monthly Financial Statements. As soon as available, but in any
event within 30 days after the end of each calendar month, copies of the
unaudited consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such month and the related unaudited
consolidated and consolidating income statement and, if so requested, a
statement of cash flows for Borrower and its Subsidiaries for such month
and for the portion of the fiscal year of Borrower through such month,
certified by the chief financial officer of Borrower to the best of his
knowledge as presenting fairly the financial condition and results of
operations of Borrower and its Subsidiaries as at the date thereof and for
the periods ended on such date, subject to normal year end adjustments.
(c) Annual Projections. As soon as available, but in any event within
30 days after the end of each fiscal year, projections, on a consolidated
and consolidating basis, of Borrower's and the Subsidiaries anticipated
financial performance for the next year.
All such financial statements shall be complete and correct in all material
respects and prepared in accordance with GAAP (except, with respect to interim
financial statements, for the omission of footnotes) applied consistently
throughout the periods reflected therein.
Section 9.2 Officer's Certificate. Together with each delivery of financial
---------------------
statements required by Section 9.1(a) and (b), a certificate of Borrower's
-------------- ---
President or chief financial officer (a) stating that, based on an examination
sufficient to enable him to make an informed statement, no Default or Event of
Default exists or, if such is not the case, specifying such Default or Event of
Default and its nature, when it occurred, whether it is continuing and the steps
being taken by Borrower with respect to such Default or Event of Default, and
(b) setting forth the calculations necessary to establish whether or not
Borrower was in compliance with the covenants contained in Sections 10.1, 10.2,
-------------------
and 10.5 as of the date of such statements.
----
Section 9.3 Copies of Other Reports.
-----------------------
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to Borrower or any Subsidiary or its Board of Directors by its
independent public accountants, including, without limitation, all
management reports.
81
(b) From time to time and promptly upon each request, such forecasts,
data, certificates, reports, statements, opinions of counsel, documents or
further information regarding the business, assets, liabilities, financial
condition, results of operations or business prospects of Borrower or any
Subsidiary as Lender may reasonably request. The rights of Lender under
this Section 9.3(b) are in addition to and not in derogation of its rights
under any other provision of this Agreement or any Loan Document.
(c) If requested by Lender, statements in conformity with the
requirements of Federal Reserve Form G-1 or U-1 referred in Regulations G
or U, respectively, of the Board of Governors of the Federal Reserve
System.
Section 9.4 Notice of Litigation and Other Matters. Prompt notice of the
--------------------------------------
following:
(a) the commencement, to the extent Borrower is aware of the same, of
all proceedings and investigations by or before any governmental or non-
governmental body and all actions and proceedings in any court or before
any arbitrator against or in any other way relating adversely to, or
adversely affecting, Borrower, any Subsidiary or any Affiliate of Borrower,
any Subsidiary or any of their respective property, assets or businesses
that would be treated as a contingent liability under GAAP and is in an
amount in excess of $250,000, or might, singly or in the aggregate, cause a
Default or an Event of Default or have a Materially Adverse Effect.
(b) any amendment of the articles of incorporation or by-laws of
Borrower or any Subsidiary,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of Borrower or any
Affiliate of Borrower which has had or may have any Materially Adverse
Effect.
(d) (i) any Default or Event of Default, or (ii) event that
constitutes or that, with the passage of time or giving of notice or both,
would constitute a default or event of default by Borrower or such
Subsidiary under any material agreement (other than this Agreement) to
which Borrower or such Subsidiary is a party or by which Borrower or such
Subsidiary or any of its property may be bound if the exercise of remedies
thereunder by the other party to such agreement would have, either
individually or in the aggregate, a Materially Adverse Effect, or (iii)
Borrower is aware, or reasonably expects, that any covenant under this
Agreement will be breached,
(e) immediately after receipt of any written notice of any violation
by Borrower or any Subsidiary of Borrower of any Environmental Law which
could reasonably be expected to have a Materially Adverse Effect or that
any Governmental Authority has asserted in writing that Borrower or any
Subsidiary of Borrower is not in compliance with any Environmental Law or
is investigating Borrower's or any such Subsidiary's compliance therewith;
82
(f) Immediately after receipt of any written notice that Borrower or
any Subsidiary of Borrower is or may be liable to any Person as a result of
the Release or threatened Release of any Contaminant or that Borrower is
subject to investigation by any Governmental Authority evaluating whether
any remedial action is needed to respond to the Release or threatened
Release of any Contaminant which, in either case, is reasonably likely to
give rise to liability in excess of $250,000;
(g) Immediately after receipt of any written notice of the imposition
of any Environmental Lien against any property of Borrower or any
Subsidiary of Borrower;
(h) Borrower's or any Subsidiary's board of directors has authorized
the filing by Borrower or such Subsidiary of a petition in bankruptcy,
(i) Borrower is aware that any account debtor obligated on any
Receivables involving an amount in excess of $200,000 is in bankruptcy,
(j) Borrower has knowledge of any claim by any Person claiming past
due rent, fees or other charges in excess of $75,000 in respect of any
Collateral,
(k) any change in any other material fact or circumstance represented
or warranted in any of the Loan Documents, and
(l) any change in the executive officers of Borrower.
Section 9.5 ERISA. As soon as possible and in any event within 30 days
-----
after Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Benefit Plan has occurred
or will occur,
(b) the aggregate present value of the Unfunded Vested Accrued
Benefits under all Plans has increased to an amount in excess of $0, or
(c) Borrower or any Subsidiary is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
required by reason of its complete or partial withdrawal (as described in
Section 4203 or 4205 of ERISA) from such Multiemployer Plan, a certificate
of the President or the chief financial officer of Borrower or such
Subsidiary setting forth the details of such events described in clauses
(a) through (c) as applicable and the action which is proposed to be taken
with respect thereto and, simultaneously with the filing thereof, copies of
any notice or filing which may be required by the PBGC or other agency of
the United States government with respect to such of the events described
in clauses (a) through (c) as applicable.
83
ARTICLE 10 - NEGATIVE COVENANTS
Until this Agreement has been terminated and all the Secured Obligations
have been indefeasibly paid in full, unless Lender shall otherwise consent in
the manner set forth in Section 12.11, Borrower will not and will not permit any
-------------
Subsidiary to, directly or indirectly:
Section 10.1 Financial Ratios.
----------------
(a) Maximum Leverage Ratio. Permit the Leverage Ratio of Borrower and
----------------------
its Subsidiaries on a consolidated basis, at any time:
(i) from the Agreement Date through the fiscal year ending
February 28, 2001 to be greater than 5.0 to 1.00;
(ii) from March 1, 2001 to February 28, 2002 to be greater than
4.5 to 1.00; and
(iii) from and after March 1, 2002, to be greater than 4.25 to
1.00.
(b) Minimum Tangible Net Worth. Permit the Tangible Net Worth of
Borrower and its Subsidiaries, on a consolidated basis at any time to be
less than the sum of (i) $7,200,000, plus (ii) an amount equal to fifty
percent (50%) of the cumulative Adjusted Net Income of Borrower and its
Subsidiaries on a consolidated basis (for each fiscal month beginning with
the fiscal month ending April 30, 2000), plus the carrying value of Capital
Stock of Borrower acquired by Borrower after the Agreement Date and held as
treasury stock, in an aggregate amount not exceeding $2,000,000.
(c) Free Cash Flow to Fixed Charges. Permit the ratio of Free Cash
Flow to Fixed Charges, determined for Borrower and its Subsidiaries on a
consolidated basis as of the end of any fiscal quarter for the preceding
four fiscal quarters, to be less than the ratios specified as follows:
Fiscal Quarter Ending Minimum Ratio
--------------------- -------------
May 31, 2000 1.10 to 1.0
August 31, 2000 1.15 to 1.0
November 30, 2000 1.20 to 1.0
February 28, 2001 1.25 to 1.0
End of each fiscal quarter thereafter 1.35 to 1.0
Section 10.2 Indebtedness. Create, assume, or otherwise become or remain
------------
obligated in respect of, or permit or suffer to exist or to be created, assumed
or incurred or to be outstanding any Indebtedness for Money Borrowed, except for
Permitted Indebtedness for Money Borrowed.
Section 10.3 Guaranties. Become or remain liable with respect to any
----------
Guaranty of any obligation of any other Person, except for (i) Permitted
Guaranties, (ii) Guaranties by Borrower of
84
operating leases of Borrower's Subsidiaries listed in Schedule 5.1(h) and
---------------
existing as of the Agreement Date (and any renewals thereof, provided that the
amount payable by such Subsidiary is not increased by greater than ten percent
(10%) in any fiscal year in comparison to the previous fiscal year) or which are
hereafter entered into by any such Subsidiaries to the extent such operating
leases are allowed by Section 10.10 or (iii) Guaranties by Borrower of
-------------
obligations of its Subsidiaries under commercially reasonable supply
arrangements entered into by such Subsidiaries in the ordinary course of
business.
Section 10.4 Investments; Acquisitions. Make any Acquisition other than
-------------------------
Permitted Acquisitions; or Acquire any Investment, or permit any Investment to
be outstanding, other than Permitted Investments.
Section 10.5 Capital Expenditures. Make or incur any Capital Expenditures,
--------------------
except that Borrower may make or incur Capital Expenditures (i) with proceeds of
a Capex Loan or an Acquisition Loan and (ii) with proceeds of the Revolving
Credit Loan in any amount not exceed, in the aggregate, $1,100,000 during any
fiscal year.
Section 10.6 Restricted Distributions and Payments, Etc. Declare or make
-------------------------------------------
any Restricted Distribution or Restricted Payment, except payments for the
repurchase by Borrower of its Capital Stock in an aggregate amount not exceeding
$2,000,000, subject to Section 10.14 and provided, that no Default or Event of
Default exists at the time of, or after giving effect to, any such payment.
Section 10.7 Merger, Consolidation, Dissolution, and Sale of Assets. Enter
------------------------------------------------------
into any transaction of merger, reorganization, or consolidation, or transfer,
sell, assign, lease, or otherwise dispose of all or any part of its property, or
wind up, liquidate or dissolve, or agree to do any of the foregoing, except for
the following,: (a) sales of Inventory in the ordinary course of business, (b) a
merger or consolidation of a Subsidiary of Borrower with Borrower or another
Subsidiary of Borrower in a transaction in which the survivor is Borrower or a
Wholly-Owned Subsidiary of Borrower, provided that Lender shall have received at
--------
least thirty (30) days prior written notice thereof and such survivor shall
execute such agreements or provide such certifications in connection therewith
as may be requested by Lender and (c) dissolution of a Subsidiary of Borrower,
provided, that (i) no such Subsidiary has any material assets as of the time of
--------
such dissolution and is not material to any of the operations of Borrower, or of
Borrower and its Subsidiaries taken as a whole, and (ii) all assets, if any,
owned by such Subsidiary as of the time of such dissolution are transferred to
Borrower or a Wholly-Owned Subsidiary of Borrower; provided that, in the case of
--------
clauses (b) and (c), all proceeds and cash payments received by Borrower or any
----------- ---
Subsidiary of Borrower pursuant to any such transaction, net of reasonable costs
and expenses, shall be paid to Lender for application to the Secured Obligations
in such manner as Lender shall determine.
Section 10.8 Transactions with Affiliates. Enter into any transaction with
----------------------------
an Affiliate except in the ordinary course of business on terms no less
favorable to Borrower, nor more favorable to such Affiliate, than would be
obtainable in a comparable arm's length transaction with a Person who is not an
Affiliate except that inventory and fixed assets may be sold or transferred
between Guarantors. Borrower will not enter into any transaction with an
Affiliate unless such transaction is specifically approved by Borrower's board
of directors, or the duly authorized executive committee thereof, as being an
arm's length transaction on terms no less favorable to Borrower, nor more
85
favorable to such Affiliate, than would be obtainable in a comparable arm's
length transaction with a Person who is not an Affiliate.
Section 10.9 Liens. Create, assume or permit or suffer to exist or to be
-----
created or assumed any Lien on any of the property or assets of Borrower or such
Subsidiary, real, personal or mixed, tangible or intangible, except for
Permitted Liens.
Section 10.10 Operating Leases. Enter into any lease, or renewal of any
----------------
lease (other than a Capitalized Lease) which would cause the aggregate annual
payment obligations of Borrower and its Subsidiaries under all leases other than
leases of real property listed on Schedule 5.1(h) as of the Agreement Date and
existing Capitalized Leases to increase by more than $1,000,000 in the
aggregate.
Section 10.11 Benefit Plans. Permit, or take any action which would result
-------------
in, the aggregate present value of the Unfunded Vested Accrued Benefits under
all Benefit Plans of Borrower to exceed $0.
Section 10.12 Sales and Leasebacks. Without the prior written approval of
--------------------
Lender, which shall not be unreasonably withheld, enter into any arrangement
with any Person providing for the leasing from such Person of real or personal
property which has been or is to be sold or transferred, directly or indirectly,
by Borrower or any Subsidiary to such person.
Section 10.13 Amendments of Other Agreements. Amend in any way the interest
------------------------------
rate or principal amount or schedule of payments of principal and interest with
respect to any Indebtedness (other than the Secured Obligations) other than to
reduce the interest rate or extend the schedule of payments with respect
thereto.
Section 10.14 Minimum Availability. Permit the amount of the Borrowing Base
--------------------
less the sum of the outstanding principal balance of all Revolving Credit Loans
to be less than $500,000 during any period of six months following the date of
any payment made by Borrower for the repurchase of its Capital Stock as allowed
by Section 10.6.
------------
Section 10.15 Change in Business. Discontinue, or make any material change
------------------
in, its business as currently established, or enter any new or different line of
business not directly related to Borrower's or any Subsidiary's existing line of
business.
ARTICLE 11 - DEFAULT
Section 11.1 Events of Default. Each of the following shall constitute an
-----------------
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:
(a) Default in Payment of Revolving Credit Loans. Borrower shall
--------------------------------------------
default in any payment of principal of, or interest on, any of the Loans or
Notes when and as due (whether at maturity, by reason of acceleration or
otherwise).
86
(b) Other Payment Default. Borrower shall default in the payment, as
---------------------
and when due, of principal of or interest on, any other Secured Obligation,
and such default shall continue for ten days after written notice thereof
has been given to Borrower by Lender.
(c) Misrepresentation. Any representation or warranty made or deemed
-----------------
to be made by Borrower or any Guarantor under this Agreement or any Loan
Document or any amendment hereto or thereto shall at any time prove to have
been incorrect or misleading in any material respect when made.
(d) Default in Performance. Borrower shall default in the performance
----------------------
or observance of any term, covenant, condition or agreement contained in:
(i) Articles 6, 7, 8, 9 or 10, or
-------- - - - - --
(ii) this Agreement (other than as specifically provided for
otherwise in this Section 11.1) and such default shall continue for a
------------
period of ten days after written notice thereof has been given to
Borrower by Lender.
(e) Indebtedness Cross-Default. Borrower or any of its Subsidiaries
--------------------------
shall fail to pay when due and payable the principal of or interest on any
Indebtedness (other than the Loans or the Notes or trade accounts payable
to suppliers of goods or services to the. Borrower or any of its
Subsidiaries in the ordinary course of business) where the principal amount
of such Indebtedness is in excess of $50,000, or (ii) the maturity of any
such Indebtedness shall have (A) been accelerated in accordance with the
provisions of any indenture, contract or instrument providing for the
creation of or concerning such Indebtedness, or (B) been required to be
prepaid prior to the stated maturity thereof, or (iii) any event shall have
occurred and be continuing which, with or without the passage of time or
the giving of notice, or both, would permit any holder or holders of such
Indebtedness, any trustee or agent acting on behalf of such holder or
holders or any other Person so to accelerate such maturity.
(f) Other Cross-Defaults. Borrower or any of its Subsidiaries shall
default in any payment when due or in the performance or observance of any
material obligation or condition of any agreement, contract or lease (other
than the Security Documents) or any such agreement, contract or lease
relating to Indebtedness, if the exercise of remedies thereunder by the
other party to such agreement could have a Materially Adverse Effect.
(g) Voluntary Bankruptcy Proceeding. Borrower or any of its
-------------------------------
Subsidiaries shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) commence a proceeding
seeking to take advantage of any other laws, domestic or foreign, relating
to bankruptcy, insolvency, reorganization, winding up or composition for
adjustment of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case
under such bankruptcy laws or other laws, (iv) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator
of
87
itself or of a substantial part of its property, domestic or foreign, (v)
admit in writing its inability to pay its debts as they become due, (vi)
make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other proceeding
---------------------------------
shall be commenced against Borrower or any of its Subsidiaries in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy
laws (as now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency,. reorganization, winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of Borrower or any of its Subsidiaries or
of all or any substantial part of the assets, domestic or foreign, of
Borrower or any of its Subsidiaries, and such case or proceeding shall
continue undismissed or unstayed for a period of 60 consecutive calendar
days, or an order granting the relief requested in such case or proceeding
against Borrower or any of its Subsidiaries (including, but not limited to,
an order for relief under such federal bankruptcy laws) shall be entered.
(i) Failure of Agreements. Borrower, any Guarantor or any Affiliate of
---------------------
Borrower or any Guarantor shall challenge the validity and binding effect
of any provision of any Loan Document after delivery thereof hereunder or
shall state in writing its intention to make such a challenge, or any
Security Document, after delivery thereof hereunder, shall for any reason
(except to the extent permitted by the terms thereof) cease to create a
valid, exclusive (except for Permitted Liens) and perfected first priority
Lien on, or security interest in, any of the Collateral.
(j) Judgment. A judgment or order for the payment of money which
--------
exceeds $250,000 in amount not fully covered by insurance shall be entered
against Borrower or any of its Subsidiaries by any court and such judgment
or order shall continue undischarged or unstayed for 30 days.
(k) Attachment. The filing or commencement of any attachment,
----------
sequestration, garnishment, execution or other action against or with
respect to any of the Collateral involving an amount in controversy in
excess of $200,000; or the filing or commencement of any attachment,
sequestration, garnishment, execution or other action against or with
respect to Borrower's or any Subsidiary's property not included within the
Collateral if (a) the amount in controversy is in excess of $200,000 and
such attachment, sequestration, garnishment, execution or other action has
not been dismissed, or superseded by appropriate bond, within thirty (30)
days after the occurrence thereof, or (b) the outcome, pendency or effect
thereof is reasonably expected to result in or cause a Materially Adverse
Effect.
(l) ERISA. (i) Any Termination Event with respect to a Benefit Plan
-----
shall occur that, after taking into account the excess, if any, of (A) the
fair market value of the assets of any other Benefit Plan with respect to
which a Termination Event occurs on the same day (but only to the extent
that such excess is the property of Borrower or a Subsidiary of Borrower,
as applicable) over (B) the present value on such day of all vested
nonforfeitable benefits under such other Benefit Plan, results in an
Unfunded Vested Accrued Benefit in
88
excess of $0, (ii) any Benefit Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA)
for which a waiver has not been obtained in accordance with the applicable
provisions of the Code and ERISA, or (iii) Borrower or any of its
Subsidiaries is in "default" (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan resulting from Borrower's
or any of its Subsidiaries complete or partial withdrawal (as described in
Section 4203 or 4205 of ERISA) from such Multiemployer Plan.
(m) Qualified Audits. The independent certified public accountants
----------------
retained by Borrower shall refuse to deliver an opinion in accordance with
Section 9.1(a) with respect to the consolidated and consolidating annual
financial statements of Borrower and its Subsidiaries.
(n) Insecurity. Lender in good faith believes that the prospect for
----------
payment or performance of the Secured Obligations is impaired.
(o) Guarantor Revocation. Revocation or repudiation by any Person of
--------------------
its obligations under Guaranty of the Secured Obligations.
(p) Material Adverse Change. There occurs any act, omission, event,
-----------------------
undertaking or circumstance or series of acts, omissions, events,
undertakings or circumstances which have, or in the sole good faith
judgment of Lender would have, either individually or in the aggregate, a
Materially Adverse Effect.
(q) Change of Control. There occurs any Change of Control.
-----------------
(r) Payment of Subordinated Debt. Use of proceeds of Revolving Credit
----------------------------
Loan to prepay any Subordinated Debt.
Section 11.2 Remedies.
--------
(a) Automatic Acceleration and Termination of Facilities. Upon the
----------------------------------------------------
occurrence of an Event of Default specified in Section 11.1(g) or (h), (i)
the principal of and the interest on the Loans and the Notes at the time
outstanding, and all other amounts owed to Lender under this Agreement or
any of the Loan Documents and all other Secured Obligations, shall
thereupon become due and payable without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in
this Agreement or any of the Loan Documents to the contrary
notwithstanding, and (ii) the commitment of Lender to make advances
thereunder or under this Agreement shall immediately terminate.
(b) Other Remedies. If any Event of Default (other than as specified
--------------
in Section 11.1(g), (h) or (i)) shall have occurred and be continuing,
--------------- --- ----
Lender, in its sole and absolute discretion, may do any of the following:
(i) declare the principal of and interest on the Loans and the
Notes at the time outstanding, and all other amounts owed to Lender
under this Agreement or any
89
of the Loan Documents and all other Secured Obligations, to be
forthwith due and payable, whereupon the same shall immediately become
due and payable without presentment, demand, protest or other notice
of any kind, all of which are expressly waived, anything in this
Agreement or the Loan Documents to the contrary notwithstanding;
(ii) terminate any commitment of Lender to make Loans;
(iii) notify, or request Borrower or any Subsidiary of Borrower
to notify, in writing or otherwise, any Account Debtor or obligor with
respect to any one or more of the Receivables to make payment to
Lender or any agent or designee of Lender, at such address as may be
specified by Lender, and, if, notwithstanding the giving of any
notice, any Account Debtor or other such obligor shall make payments
to Borrower or any of its Subsidiaries, Borrower or such Subsidiary
shall hold all such payments it receives in trust for Lender, without
commingling the same with other funds or property of, or held by,
Borrower or such Subsidiary and shall deliver the same to Lender or
any such agent or designee immediately upon receipt by Borrower or
such Subsidiary in the identical form received, together with any
necessary endorsements;
(iv) settle or adjust disputes and claims directly with Account
Debtors and other obligors on Receivables for amounts and on terms
which Lender considers advisable and in all such cases only the net
amounts received by Lender in payment of such amounts, after
deductions of costs and attorneys' fees, shall constitute Collateral,
and neither Borrower nor any Subsidiary shall have any further right
to make any such settlements or adjustments or to accept any returns
of merchandise;
(v) enter upon any premises on which Inventory may be located
and, without resistance or interference by Borrower or such
Subsidiary, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any part
thereof to such other place or places as Lender shall choose, without
being liable to Borrower on account or such Subsidiary of any loss,
damage or depreciation that reasonably results therefrom;
(vi) require Borrower and its Subsidiaries to, and Borrower and
its Subsidiaries shall, without charge to Lender, assemble the
Inventory and Equipment and maintain or deliver it into the possession
of Lender or any agent or representative of Lender at such place or
places as Lender may designate;
(vii) at the expense of Borrower, cause any of the Inventory and
Equipment to be placed in a public or field warehouse, and Lender
shall not be liable to Borrower or any Subsidiary on account of any
loss, damage or depreciation that may occur as a result thereof,
except as is caused by Lender's gross negligence or willful
misconduct;
90
(viii) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of Borrower's or
any Subsidiary's premises and, without breach of the peace, until
Lender completes the enforcement of its rights in the Collateral, take
possession of such premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of
Borrower's equipment, for the purpose of (A) completing any work in
process, preparing any Inventory for disposition and disposing
thereof, and (B) collecting any Receivable, and Lender is hereby
granted a license or sublicense and all other rights as may be
necessary, appropriate or desirable to use the Intellectual Property
in connection with the foregoing, and the rights of Borrower under all
licenses and franchise agreements shall inure to Lender's benefit
(provided, however, that any use of any federally registered
trademarks as to any goods shall be subject to the control as to the
quality of such goods of the owner of such trademarks and the goodwill
of the business symbolized thereby);
(ix) exercise any and all of its rights under any and all of the
Security Documents.
(x) apply any cash Collateral to the payment of the Secured
Obligations in any order in which Lender may elect or use such cash in
connection with the exercise of any of its other rights hereunder or
under any of the Security Documents;
(xi) establish or cause to be established one or more Lockboxes
or other arrangement for the deposit of proceeds of Receivables, and,
in such case, Borrower shall cause and shall cause each of its
Subsidiaries to cause to be forwarded to Lender at Lender's Office, on
a daily basis, copies of all checks and other items of payment and
deposit slips related thereto deposited in such Lockboxes, together
with collection reports in form and substance satisfactory to Lender;
and
(xii) exercise all of the rights and remedies of a secured party
under the UCC (whether or not the UCC is applicable) and under any
other applicable law, including, without limitation, the right,
without notice except as specified below and with or without taking
the possession thereof, to sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any location chosen
by Lender, for cash, on credit or for future delivery and at such
price or prices and upon such other terms as Lender may deem
commercially reasonable. Borrower agrees that, to the extent notice of
sale shall be required by law, at least 10 days' notice to Borrower of
the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notice, but
notice given in any other reasonable manner or at any other reasonable
time shall also constitute reasonable notification. Lender shall not
be obligated to make any sale of Collateral regardless of notice of
sale having been given. Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
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(c) Cash Collateral; Injunctive Relief. All cash proceeds of
---------------
Collateral from time to time existing, including without limitation
collections and payments of Receivables and cash receipts, if any, for
other Collateral, whether consisting of cash, checks or other similar
items, at all times shall be subject to an express trust for the benefit of
Lender. All such proceeds shall be subject to Lender's continuing security
interests under this Agreement. Except as may be specifically allowed
otherwise by this Agreement, Borrower and its Subsidiaries are expressly
prohibited from using, spending, retaining or otherwise exercising any
dominion over such proceeds. Borrower acknowledges and agrees that an
action for damages against Borrower for any breach of such prohibitions
shall not be an adequate remedy at law. In the event of any such breach,
Borrower agrees to the fullest extent allowed by law that Lender shall be
entitled to injunctive relief to restrain such breach and require
compliance with the requirements of this Agreement.
(d) Refusal of Funding. Lender shall have no obligation to make any
------------------
Loan (i) at any time when any applicable condition for funding prescribed
under this Agreement has not been fulfilled to Lender's satisfaction, (ii)
at any time when any Default or Event of Default is in existence, (iii) if
Lender has received any notice under Section 9.4 or has knowledge of any
-----------
event or condition which would be the subject of any notice required
thereunder, or (iv) if Borrower or any Guarantor has repudiated or made any
anticipatory breach of any of its obligations under the Loan Documents. Any
Loan requested at any such time may be declined by Lender, in whole or in
part, in Lender's sole discretion without prior notice.
(e) Performance by Lender. Should Borrower or any Guarantor fail to
---------------------
perform any covenant, duty, or agreement required by the Loan Documents,
Lender may, at its sole option and election, perform or attempt to perform
same on behalf of Borrower or such Guarantor, at Borrower's cost and
expense, provided that Lender shall have no obligation or duty to take any
such action. Borrower agrees to reimburse Lender for such costs and
expenses on demand.
Section 11.3 Application of Proceeds. All proceeds from each sale of, or
-----------------------
other realization upon, all or any part of the Collateral following an Event of
Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses incurred in
-----
connection with such sale or other realization, including attorneys' fees,
(b) Second: to the payment of the Secured Obligations (with Borrower
------
remaining liable for any deficiency) in any order which Lender may elect,
(c) Third: to the creation of a cash collateral account in an amount
-----
equal to the Letter of Credit Reserve, which fund shall be held by Lender
as security for and applied to the payment of any amounts which may
thereafter become due under the Letter of Credit Facility, and
(d) Fourth: the balance (if any) of such proceeds shall be paid to
------
Borrower or, subject to any duty imposed by law or otherwise, to whomsoever
is entitled thereto.
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Borrower shall remain liable and will pay, on demand, any deficiency
remaining in respect of the Secured Obligations, together with interest thereon
at a rate per annum equal to the highest rate then payable hereunder on such
Secured Obligations, which interest shall constitute part of the Secured
Obligations.
Section 11.4 Power of Attorney. In addition to the authorizations granted
-----------------
to Lender under Section 7.14 or under any other provision of this Agreement or
------------
any of the Loan Documents: Borrower hereby irrevocably appoints Lender as its
agent and attorney-in-fact to take any action necessary to preserve and protect
the Collateral and Lender's interests under the Loan Documents. Borrower hereby
authorizes and appoints Lender as attorney in fact to sign and file any
financing statement or other document necessary to perfect Lender's security
interest in the Collateral. Lender shall have the right at any time to take in
good faith any of the following action, in its own name or in the name of
Borrower or any of its Subsidiaries, whether or not an Event of Default is in
existence: (i) make written or verbal requests for verification of amounts owing
on Receivables from any or all Persons which Lender believes may be account
debtors or obligors on Receivables; (ii) take possession and control of proceeds
of Receivables; (iii) redirect the deposit and disposition of collections and
proceeds of Receivables pursuant to Section 7.1 or Section 7.2; (iv) endorse
----------- -----------
checks, instruments or other evidences of payment on Receivables; (v) prepare,
sign and file any notice of lien or any proof of claim or other document in any
bankruptcy proceedings of any account debtor or obligor on Receivables; (vi)
access, copy or utilize any information recorded or contained in any computer or
data processing equipment or system in respect of the Receivables maintained by
Borrower or any Affiliate, or to which Borrower has access; (vii) enter onto
Borrower's or any of its Subsidiaries' premises and discuss Borrower's or any of
its Subsidiaries' affairs with Borrower's or any of its Subsidiaries' personnel
as may be reasonably necessary in connection with maintaining or enforcing
Lender's rights under the Loan Documents; (viii) access and utilize the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Receivables, Inventory or other
Collateral to which Borrower or any Subsidiary of Borrower has access; and (ix)
take all other action allowed by law as may be necessary to carry out the Loan
Documents and give effect to Lender's rights thereunder. In addition, Lender
shall have the right to take any of the following action, in its own name or in
the name of Borrower, at any time when any Event of Default is in existence; (x)
notify any or all Persons which Lender believes may be account debtors or
obligors on Receivables to make payments directly to Lender; (xi) settle,
adjust, compromise or discharge Receivables or extend time of payment upon such
terms as Lender may determine; (xii) take action to enforce collection of
Receivables; (xiii) open mail addressed to Borrower or any of its Subsidiaries
and take possession of and dispose of checks or other proceeds of Receivables in
accordance with this Agreement; and (xiv) direct the U.S. Postal service to
change the address to which Borrower's or any of its Subsidiaries' mail is
delivered. Should Lender at any time elect to exercise its right of verification
or notification with respect to the Receivables as provided in clause (i) or
----------
(ii) above, respectively, Lender shall have the right in its sole discretion to
----
direct such request for verification, or notification, as the case may be, to
all Persons which Lender believes may have transacted business with Borrower or
any of its Subsidiaries at any time, whether or not such Persons are then
indebted to Borrower, and Lender is hereby released and discharged from any
liability by reason of any such request for verification or notification. Costs
and expenses incurred by Lender in connection with any of such actions by
Lender, including attorneys' fees and out-of-pocket expenses, shall be
reimbursed to Lender on demand.
93
Section 11.5 Miscellaneous Provisions Concerning Remedies.
--------------------------------------------
(a) Rights Cumulative. The rights and remedies of Lender under this
-----------------
Agreement, the Note and each of the Loan Documents shall be cumulative and
not exclusive of any rights or remedies which it or they would otherwise
have. In exercising such rights and remedies, Lender may be selective and
no failure or delay by Lender in exercising any right shall operate as a
waiver of such right nor shall any single or partial exercise of any power
or right preclude its other or further exercise or the exercise of any
other power or right.
(b) Waiver of Marshaling. Borrower hereby waives any right to require
--------------------
any marshaling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this Article 11 or
-----------------------
elsewhere in this Agreement or in any of the Loan Documents shall be
construed as requiring or obligating Lender or any agent or designee of
Lender to make any demand or to make any inquiry as to the nature or
sufficiency of any payment received by it or to present or file any claim
or notice or take any action with respect to any Receivable or any other
Collateral or the moneys due or to become due thereunder or in connection
therewith or to take any steps necessary to preserve any rights against
prior parties, and neither Lender nor any of its agents or designees shall
have any liability to Borrower or any Guarantor for actions taken pursuant
to this Article 11, any other provision of this Agreement or any of the
Loan Documents, except as is caused by Lender's gross negligence or
intentional misconduct.
(d) Appointment of Receiver. In any action under this Article 11,
-----------------------
Lender shall be entitled to apply for the appointment of a receiver,
without notice of any kind whatsoever, to take possession of all or any
portion of the Collateral and to exercise such power as the court shall
confer upon such receiver.
(e) Waiver of Notices. Except as otherwise expressly provided in this
-----------------
Agreement, Borrower expressly waives presentment, demand, notice of
intention to accelerate, notice of acceleration, protest and any other
notices of any kind with respect to the Secured Obligations and the
remedies provided by the Loan Documents.
(f) Non-waiver. Forbearance or indulgence by Lender of any Default or
Event of Default or any other event or condition which is or would be the
subject of a required notice under Section 9.4, at any time from time to
time, shall not be deemed a waiver of any rights of Lender under the Loan
Documents. The acceptance by Lender at any time and from time to time of
any partial performance or partial payment of the Secured Obligations shall
not be deemed to be a waiver of any Event of Default then existing. No
delay or omission by Lender in exercising any right or remedy shall impair
such right or remedy, or be construed as a waiver thereof, nor shall any
single or partial exercise of any such rights or remedies preclude other or
further exercise thereof. Lender shall not be required or obligated to file
suit or otherwise pursue any other Person for enforcement or collection of
any of the Secured Obligations or to take any action to realize upon any of
the Collateral.
94
ARTICLE 12 - MISCELLANEOUS
Section 12.1 Notices.
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(a) Method of Communication. Except as specifically provided in this
-----------------------
Agreement or in any of the Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by telephone
subsequently confirmed in writing. Notices in writing shall be delivered
personally or sent by overnight courier service, by certified or registered
mail, postage pre-paid, or by facsimile transmission and shall be deemed
received, in the case of personal delivery, when delivered, in the case of
overnight courier service, on the next Business Day after delivery to such
service, in the case of mailing, on the third day after mailing (or, if
such day is a day on which deliveries of mail are not made, on the next
succeeding day on which deliveries of mail are made) and, in the case of
facsimile transmission, upon transmittal; provided that in the case of
notices to Lender, Lender shall be charged with knowledge of the contents
thereof only when such notice is actually received by Lender. A telephonic
notice to Lender as understood by Lender will be deemed to be the
controlling and proper notice in the event of a discrepancy with or failure
to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
---------------------
the following addresses, or any other address of which all the other
parties are notified in writing.
If to Borrower: ACR Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender:
Mailing address: Bank of America, N.A.
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Business Credit Regional Manager: URGENT
Address for personal
or courier delivery: Bank of America, N.A.
Bank of America Plaza, 6th Floor
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Credit Regional Manager: URGENT
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Lender's Office. Lender hereby designates its office located at
---------------
Bank of America Plaza, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or
any subsequent office
95
which shall have been specified for such purpose by written notice to
Borrower, as the office to which payments due are to be made and at which
Loans will be disbursed.
Section 12.2 Expenses. Borrower agrees to pay or reimburse on demand all
--------
costs and expenses incurred by Lender, including, without limitation, the
reasonable fees and disbursements of counsel, in connection with (a) the
negotiation, preparation, execution, delivery, administration, enforcement and
termination of this Agreement and each of the other Loan Documents, whenever the
same shall be executed and delivered, including, without limitation, (i) the
out-of-pocket costs and expenses incurred in connection with the administration
and interpretation of this Agreement and the other Loan Documents, (ii) the
costs and expenses of appraisals of the Collateral, (iii) the costs and expenses
of lien searches, (iv) fees and other charges of (a) filing Financing Statements
and continuation statements and the costs and expenses of taking other actions
to perfect, protect, and continue the Security Interest; (b) the preparation,
execution and delivery of any waiver, amendment, supplement or consent by Lender
relating to this Agreement or any of the Loan Documents; (c) sums paid or
obligations incurred in connection with the payment of any amount or taking any
action required of Borrower under the Loan Documents that Borrower fails to pay
or take; (d) costs of field examinations, inspections and verifications with
respect to the Collateral and Borrower's operations, books and records, by
Lender's agents up to three times per year and whenever an Event of Default
exists, at a rate of $750 per day per examiner plus associated out-of-pocket
expenses, including without limitation for travel, lodging, and meals; (e) costs
and expenses of forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining each Controlled Disbursement Account,
Agency Account and Lockbox; (f) costs and expenses of preserving and protecting
the Collateral; (g) costs and expenses (including attorneys' and paralegals'
fees and disbursements) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents and the transactions
contemplated thereby; (h) costs and expenses of lien and title searches and
title insurance; (i) taxes, fees, and other charges for recording the Mortgages;
(j) after the occurrence of a Default, consulting with and obtaining opinions
and appraisals from one or more Persons, including real estate and personal
property appraisers, accountants and lawyers, concerning the value of any
Collateral for the Secured Obligations or related to the nature, scope or value
of any right or remedy of Lender hereunder or under any of the Loan Documents,
including any review of factual matters in connection therewith, which expenses
shall include the fees and disbursements of such Persons; and (k) costs and
expenses paid or incurred to obtain payment of the Secured Obligations, enforce
the Security Interest, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of the Loan Documents, or to prosecute or
defend any claim in any way arising out of, related to or connected with, this
Agreement or any of the Loan Documents, which expenses shall include the
reasonable fees and disbursements of counsel and of experts and other
consultants retained by Lender. The foregoing shall not be construed to limit
any other provisions o(S)f the Loan Documents regarding costs and expenses to be
paid by Borrower. Borrower hereby authorizes Lender to debit Borrower's loan
accounts (by increasing the principal amount of the Revolving Credit Loans) in
the amount of any such costs and expenses owed by Borrower when due.
Section 12.3 Stamp and Other Taxes. Borrower will pay any and all stamp,
---------------------
registration, recordation and similar taxes, fees or charges and shall indemnify
Lender against any and all liabilities with respect to or resulting from any
delay in the payment or omission to pay any such taxes, fees or charges, which
may be payable or determined to be payable in connection with the
96
execution, delivery, performance or enforcement of this Agreement and any of the
Loan Documents or the perfection of any rights or security interest thereunder.
Section 12.4 Setoff. Borrower irrevocably authorizes Lender to charge any
------
account of Borrower or any Subsidiary of Borrower maintained with Lender with
such amount as may be necessary from time to time to pay any Secured Obligations
which are not timely paid when due as required by the Loan Documents. In
addition to any rights now or hereafter granted under applicable law, and not by
way of limitation of any such rights, upon and after the occurrence of any
Default or Event of Default, Lender and any participant with Lender in the Loans
are hereby authorized by Borrower at any time or from time to time, without
notice to Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, time or demand, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by Lender or any
participant to or for the credit or the account of Borrower or any Subsidiary of
Borrower against and on account of the Secured Obligations irrespective or
whether or not (a) Lender shall have made any demand under this Agreement or any
of the Loan Documents, or (b) Lender shall have declared any or all of the
Secured Obligations to be due and payable as permitted by Section 11.2 and
although such Secured Obligations shall be contingent or unmatured. Upon the
occurrence of an Event of Default and for so long as the same shall remain in
existence and not cured or waived, Lender shall be entitled in its discretion to
hold any such deposits or other sums pending acceleration of the Secured
Obligations.
Section 12.5 Litigation. EACH OF LENDER AND BORROWER HEREBY KNOWINGLY,
----------
INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST BORROWER OR LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY
ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN
BORROWER AND LENDER OF ANY KIND OR NATURE. EACH SUCH PARTY ACKNOWLEDGES THAT
SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE
RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF
ITS CHOOSING. BORROWER AND LENDER HEREBY AGREE THAT THE FEDERAL COURT OF THE
NORTHERN DISTRICT OF TEXAS OR, AT THE OPTION OF LENDER, ANY COURT IN WHICH
LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY AND WHICH SITS IN A
JURISDICTION IN WHICH BORROWER TRANSACTS BUSINESS SHALL HAVE NON-EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN
DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. BORROWER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED
IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS
AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO BORROWER AND ITS COUNSEL AT THE RESPECTIVE
97
ADDRESSES SET FORTH IN SECTION 12.1(B), WHICH SERVICE SHALL BE DEEMED MADE UPON
---------------
RECEIPT THEREOF. THE NON-EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN
ANY APPROPRIATE JURISDICTION.
Section 12.6 Continuing Rights of Lender in respect of Secured Obligations;
--------------------------------------------------------------
Reversal of Payments. In the event any amounts from time to time applied in
--------------------
reduction of the Secured Obligations are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, or Lender refunds or repays any such amount
pursuant to any applicable law or pursuant to any compromise or settlement of
any such claim, then, the Secured Obligations shall automatically be deemed to
be revived and increased to the extent of such amount and the same shall
continue to be secured by the Collateral as if such amount had not been so
applied. Lender shall have the continuing and exclusive right to apply, or
reverse and re-apply, any and all payments to any portion of the Secured
Obligations.
Section 12.7 Injunctive Relief. Borrower recognizes that, in the event
-----------------
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to Lender; therefore, Borrower agrees that Lender, at Lender's option,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages. The rights of Lender under this
Section 12.7 are cumulative of, and in addition to, those specified under
------------
Section 11.2(c).
---------------
Section 12.8 Accounting Matters. All financial and accounting calculations,
------------------
measurements and computations made for any purpose relating to this Agreement,
including, without limitation, all computations utilized by Borrower to
determine whether it is in compliance with any covenant contained herein, shall,
unless there is an express written direction or consent by Lender to the
contrary, be performed in accordance with GAAP.
Section 12.9 Assignment; Participation. All the provisions of this
-------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that Borrower may not assign
or transfer any of its rights under this Agreement. Lender may assign to one or
more Persons, or sell participations to one or more Persons in, all or a portion
of its rights and obligations hereunder and under the Notes and, in connection
with any such assignment or sale of a participation, may assign its rights and
obligations under the Security Documents. Lender may, in connection with any
assignment or proposed assignment or sale or proposed sale of a participation,
disclose to the assignee or proposed assignee or participant or proposed
participant any information relating to Borrower furnished to Lender by or on
behalf of Borrower. Lender agrees to notify Borrower in the event Lender has
assigned all of its right, title and interest in the Loans, provided, that
Lender shall not have any liability for any failure or delay in making such
notification nor shall any such failure or delay impair the validity of any such
assignment.
98
Section 12.10 Amendments. Any term, covenant, agreement or condition of
----------
this Agreement or any of the other Loan Documents may be amended or waived and
any departure therefrom may be consented to if, but only if, such amendment,
waiver or consent is in writing signed by Lender and, in the case of an
amendment, by Borrower. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
Section 12.11 Performance of Borrower's Duties. Borrower's obligations
--------------------------------
under this Agreement and each of the Loan Documents shall be performed by
Borrower at its sole cost and expense. If Borrower shall fail to do any act or
thing which it has covenanted to do under this Agreement or any of the Loan
Documents, Lender may (but shall not be obligated to) do the same or cause it to
be done either in the name of Lender or in the name and on behalf of Borrower,
and Borrower hereby irrevocably authorizes Lender so to act.
Section 12.12 INDEMNIFICATION. BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD
---------------
HARMLESS AND DEFEND ALL INDEMNIFIED PERSONS FROM AND AGAINST ANY AND ALL
INDEMNIFIED CLAIMS, EXCEPT IN THE CASE OF A DISPUTE BETWEEN BORROWER AND LENDER
IN WHICH BORROWER PREVAILS IN A FINAL UNAPPEALED OR UNAPPEALABLE JUDGMENT. UPON
NOTIFICATION AND DEMAND, BORROWER AGREES TO PROVIDE DEFENSE OF ANY INDEMNIFIED
CLAIM AND PAY ALL COSTS AND EXPENSES OF COUNSEL SELECTED BY BORROWER AND
REASONABLY ACCEPTABLE TO SUCH INDEMNIFIED PERSON IN RESPECT THEREOF. ANY
SETTLEMENT OR COMPROMISE OF ANY SUCH INDEMNIFIED CLAIM SHALL BE SUBJECT TO THE
CONSENT OF BORROWER AND SUCH INDEMNIFIED PERSON, IN WHICH EVENT THE OBLIGATIONS
OF SUCH INDEMNIFIED PERSON, IF ANY, PURSUANT TO ANY SUCH SETTLEMENT OR
COMPROMISE SHALL BE DEEMED INCLUDED WITHIN THE INDEMNIFIED CLAIMS. THE
INDEMNIFICATION PROVIDED FOR IN THIS SECTION 12.12 SHALL SURVIVE ANY TERMINATION
-------------
OF THIS AGREEMENT AND SHALL CONTINUE FOR THE BENEFIT OF ALL INDEMNIFIED PERSONS.
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, BORROWER WAIVES ALL NOTICES FROM ANY
INDEMNIFIED PERSON.
Section 12.13 All Powers Coupled with Interest. All powers of attorney and
--------------------------------
other authorizations granted to Lender and any Persons designated by Lender
pursuant to any provisions of this Agreement or any of the Loan Documents shall
be deemed coupled with an interest and shall be irrevocable so long as any of
the Secured Obligations remain unpaid or unsatisfied or the Revolving Credit
Facility has not been terminated.
Section 12.14 Survival. Notwithstanding any termination of this Agreement,
--------
(a) until all Secured Obligations have been paid in full and the Revolving
Credit Facility terminated, Lender shall retain its Security Interest and shall
retain an rights under this Agreement and each of the Security Documents with
respect to the Collateral as fully as though this Agreement had not been
terminated, and (b) the indemnities to which Lender is entitled under the
provisions of this Article 12 and any other provision of this Agreement and the
Loan Documents shall continue in full force and effect and shall protect Lender
against events arising after such termination as well as before.
99
Section 12.15 Severability of Provisions. Any provision of this Agreement
--------------------------
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 12.16 Governing Law. The Loan Documents, and all documents and
-------------
instruments executed in connection therewith shall be construed in accordance
with and governed by the law of the State of Texas, provided, that to the extent
--------
federal law would allow a higher rate of interest than would be allowed by the
laws of the State of Texas, then with respect to the provisions of any law which
purport to limit the amount of interest that may be contracted for, charged or
received in connection with any of the Secured Obligations, such federal law
shall apply.
Section 12.17 Acceptance and Performance. This Agreement shall become
--------------------------
effective only upon acceptance by Lender. The Secured Obligations are payable at
Lender's offices in Dallas, Dallas County, Texas.
Section 12.18 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 shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
Section 12.19 Reproduction of Documents. This Agreement, each of the Loan
-------------------------
Documents and all documents relating thereto, including, without limitation, (a)
consents, waivers and modifications that may hereafter be executed, (b)
documents received by Lender, and (c) financial statements, certificates and
other information previously or hereafter furnished to Lender, may be reproduced
by Lender by any photographic, photostatic, microcard, microfilm, miniature
photographic or other similar process, and Lender may destroy any original
document so reproduced. Each party hereto stipulates that, to the extent
permitted by applicable laws any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original shall be in existence and whether or not such
reproduction was made by such Lender in the regular course of business), and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
Section 12.20 Funds Transfer Services.
-----------------------
(a) Borrower acknowledges that Lender and its affiliates have made
available to it Wire Transfer Procedures a copy of which is attached hereto
as Exhibit K which include a description of security procedures regarding
funds transfers executed by Lender or an affiliate bank at the request of
Borrower (the "Security Procedures"). Borrower and Lender agree that the
-------------------
Security Procedures are commercially reasonable. Borrower further
acknowledges that the full scope of the Security Procedures which Lender or
such affiliate bank offers and strongly recommends for funds transfers is
available only if Borrower communicates directly with Lender or such
affiliate bank as applicable in accordance with
100
said procedures. If Borrower attempts to communicate by any other method or
otherwise not in accordance with the Security Procedures, Lender or such
affiliate bank, as applicable, shall not be required to execute such
instructions, but if Lender or such affiliate bank, as applicable, does so,
Borrower will be deemed to have refused the Security Procedures that Lender
or such affiliate bank, as applicable, offers and strongly recommends, and
Borrower will be bound by any funds transfer, whether or not authorized,
which is issued in Borrower's name and accepted by Lender or such affiliate
bank, as applicable, in good faith. Lender or such affiliate bank, as
applicable, may modify the Wire Transfer Procedures including, without
limitation, the Security Procedures at such time or times and in such
manner as Lender or such affiliate bank, as applicable, in its sole
discretion, deems appropriate to meet prevailing standards of good banking
practice. By continuing to use Lender's or such affiliate bank's as
applicable, wire transfer services after receipt of any modification of the
Wire Transfer Procedures including, without limitation, the Security
Procedures, Borrower agrees that the Wire Transfer Procedures including,
without limitation, the Security Procedures, as modified, are likewise
commercially reasonable. Borrower further agrees to establish and maintain
procedures to safeguard the Security Procedures and any information related
thereto. Neither Lender nor any affiliate bank is responsible for detecting
any error in any payment order sent by Borrower to Lender.
(b) Lender or such affiliate bank, as applicable, will generally use
the Fedwire funds transfer system for domestic funds transfers, and the
funds transfer system operated by the Society for Worldwide International
Financial Telecommunication (SWIFT) for international funds transfers.
International funds transfers may also be initiated through the Clearing
House InterBank Payment System (CHIPs) or international cable. However,
Lender or such affiliate bank, as applicable, may use any means and routes
that Lender or such affiliate bank, as applicable, in its sole discretion,
may consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system
rules and clearing arrangements, whether or not Lender or such affiliate
bank, as applicable, is a member of the system, clearinghouse or
arrangement and Borrower acknowledges that Lender's or such affiliate
bank's, as applicable, right to reverse, adjust, stop payment or delay
posting of an executed payment order is subject to the laws, regulations,
rules, circulars and arrangements described herein.
Section 12.21 Amendment and Restatement. This Agreement amends and restates
-------------------------
in its entirety the Prior Loan Agreement. All rights, benefits, indebtedness,
interest, liabilities, and obligations of Lender and Borrower under the Prior
Loan Agreement are hereby renewed, amended, restated, and superseded in their
entirety according to the terms and provisions of this Agreement. All "Secured
Obligations" as defined by the Prior Loan Documents are renewed and continued
and hereafter shall be included in the Secured Obligations and payable in
accordance with this Agreement. All security interests, liens, and collateral
assignments previously granted by Borrower pursuant to the Prior Loan Agreement
are hereby renewed and continued, and all such security interests, liens, and
collateral assignments shall remain in full force and effect, as security for
all Secured Obligations as provided by this Agreement. This Agreement shall not
result in or constitute a waiver of or a release, discharge, or forgiveness of
any amount payable pursuant to the Prior Loan Agreement, which such amounts are
payable pursuant to the terms of this Agreement. Borrower
101
represents and warrants that as of the date hereof there are no claims or
offsets against, or defenses or counterclaims to, its obligations under or in
connection with the Prior Loan Agreement or this Agreement. To induce Lender to
enter into this Agreement, Borrower hereby waives any and all such claims,
offsets, defenses, or counterclaims, whether known or unknown, arising prior to
the date hereof and relating to the Prior Loan Agreement.
Section 12.22 No Oral Agreements. THIS WRITTEN AGREEMENT REPRESENTS THE
------------------
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Remainder of Page Intentionally Left Blank]
102
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers in several counterparts all as of the
day and year first written above.
BORROWER:
ACR GROUP, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
LENDER:
BANK OF AMERICA, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
103
CONSENT AND AGREEMENT BY SUBSIDIARIES
Reference is made to the forgoing Amended and Restated Loan and Security
Agreement (the "Agreement"). Terms defined by the Agreement, where used herein,
---------
shall have the same meanings herein as are prescribed by the Agreement. For
value received, and in consideration of benefits to the undersigned under and
resulting from the Agreement and the other Loan Documents, each of the
undersigned Subsidiaries of Borrower hereby joins and agrees with, and agrees to
be bound by the Agreement the same as if such Subsidiary were party to the
Agreement. Without limiting the forgoing, each of the undersigned Subsidiaries
hereby (i) ratifies and confirms all security interests and liens previously
granted by it to or for the benefit of Lender and agrees that such security
interests and liens shall continue in full force and effect as security for the
Secured Obligations as provided by the Agreement and the Loan Documents, (ii) as
additional security for the Secured Obligations, hereby grants to Lender a
continuing security interest, lien and collateral assignment in and to all
right, title and interest in any Collateral now owned and hereafter acquired by
such Subsidiary, pursuant to and as provided by Section 6.1 of the Agreement,
-----------
(iii) ratifies and confirms any and all Guaranty agreements previously executed
by it for the benefit of Lender (or any predecessor of Lender) dated August 27,
1997, as being and continuing in full force and effect and agrees that the
indebtedness and obligations Guaranteed thereby shall include all Secured
Obligations as defined by the Agreement, (iv) agrees to comply with all
covenants provided by the Agreement which are applicable to a Subsidiary of
Borrower or to property of a Subsidiary of Borrower and (v) agrees to execute
such other and additional agreements and instruments and provide such other
certifications and information in connection with the Agreement and the forgoing
as Lender may request.
Signed by the undersigned Subsidiaries effective as of the Agreement Date.
ACR SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
TOTAL SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
HEATING AND COOLING SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
104
VALLEY SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
ENER-TECH INDUSTRIES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
FLORIDA COOLING SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
LIFETIME FILTER, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
WEST COAST HVAC SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
CONTRACTORS HEATING & SUPPLY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
105
TIME ENERGY SYSTEMS SOUTHWEST, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
106
SCHEDULE 5.1(a)
FOREIGN QUALIFICATIONS
ACR SUPPLY, INC. Louisiana
TOTAL SUPPLY, INC. Georgia
VALLEY SUPPLY, INC. Tennessee
FLORIDA COOLING SUPPLY, INC. Florida
WEST COAST HVAC SUPPLY, INC. California
CONTRACTORS HEATING & SUPPLY, INC. Colorado
New Mexico
SCHEDULE 5.1(b)
SUBSIDIARIES OF BORROWER
ACR Supply, Inc.
Total Supply, Inc.
Heating and Cooling Supply, Inc.
Valley Supply, Inc.
Ener-Tech Industries, Inc.
Florida Cooling Supply, Inc.
Lifetime Filter, Inc.
West Coast HVAC Supply, Inc.
Contractors Heating & Supply, Inc.
Time Energy Systems Southwest, Inc.
SCHEDULE 5.1(e)
BUSINESS OF BORROWER
Borrower and its subsidiaries are engaged in the manufacture and distribution
of products used in the heating, ventilation, air conditioning and refrigeration
("HVACR") industry.
SCHEDULE 5.1(f)
DISCLOSURE OF ENVIRONMENTAL MATTERS
ACR Supply, Inc. leases the premises located at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, which formerly contained underground storage tanks
containing hydrocarbon substances. Pursuant to the Texas Natural Resource
Conservation Commission, no further assessment or remedial activities are
necessary with respect to such tanks.
Small quantities of asbestos-containing materials have been found on the
premises which are to be remediated by the lessor.
SCHEDULE 5.1(h)
REAL ESTATE AND CERTAIN LEASES OF PERSONAL PROPERTY
List of owned real estate:
1. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
occupied by ACR Supply, Inc.
2. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
occupied by Lifetime Filter, Inc.
List of leased real estate:
1. All leased properties listed on Schedule 5.1(v)
2. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
occupied by ACR Group, Inc.
Lessor: Transwestern Westchase III, L.P.
3. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇
Lessor: ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇.
Lessee: Total Supply, Inc.
4. ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
Lessor: ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Lessee: Florida Cooling Supply, Inc.
List of leased personal property that is valued in excess of $100,000:
1. AS/400-e computer system and operating software
Property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Original cost - $190,160
Lessor: Matrix Funding Corporation
2. Sheet metal elbow machine
Property located at ▇▇▇▇ ▇. ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Original cost - $100,900
Lessor: Matrix Funding Corporation
Subleased properties:
1. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇
Lessee: Total Supply, Inc.
Sub-lessee: ▇▇▇▇ ▇▇▇▇▇▇▇ d/b/a Southern Warehousing Systems
2. ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
Lessee: Florida Cooling Supply, Inc.
Sub-lessee: Advanced A/C & Refrigeration, Inc.
3. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇, 114 and ▇▇▇
▇▇▇▇▇▇, ▇▇
Lessee: ACR Supply, Inc.
Sub-lessee: Swiff-Train Company
SCHEDULE 5.1(i)
LIENS
1. Liens securing promissory notes:
Original Principal
Principal Balance
Maker Payee Date Amount 5/1/2000
-------------------------------------------------------------------------------------------------------------------------
ACR Supply, Inc. The Catalyst Fund, Ltd. 5/26/93 $ 800,000 $ 87,247
Total Supply, Inc. The Catalyst Fund, Ltd. 5/26/93 100,000 10,906
Heating and Cooling Supply, Inc. The Catalyst Fund, Ltd. 5/26/93 100,000 10,906
West Coast HVAC Supply, Inc. The Catalyst Fund, Ltd. 4/14/97 450,000 300,000
Contractors Heating & Supply, Inc. Gambray, Inc. 9/9/97 1,200,000 400,000
ACR Group, Inc. The Catalyst Fund, Ltd. 1/28/98 440,000 302,500
ACR Group, Inc. Southwest/Catalyst Capital, Ltd. 1/28/98 1,100,000 687,500
2. Liens securing purchases by ACR Supply, Inc. from International Comfort
Supply, Inc., subject to Subordination Agreement between ACR Supply, Inc.,
Inter-City Products Corporation (USA), NationsBank of Texas, N.A., and The
Catalyst Fund, Ltd., dated March 8, 1994.
3. Liens granted to GMC Sales Corp. by Valley Supply, Inc., Total Supply, Inc.
(formerly Fabricated Systems, Inc.) and Heating and Cooling Supply, Inc.,
subject to Subordination Agreements between GMC Sales Corp. and NationsBank
of Texas, N.A. dated March 8, 1994.
4. Lien granted to ▇▇▇▇▇▇▇▇▇ Air Conditioning, Inc. by West Coast HVAC Supply,
Inc. dba ACH Supply, granting security interest in inventory purchased from
▇▇▇▇▇▇▇▇▇ by ACH Supply.
SCHEDULE 5.1(j)
INDEBTEDNESS FOR MONEY BORROWED
DESCRIPTION CURRENT LONG-TERM TOTAL
------------------------- ---------- ----------- ----------
ACR GROUP, INC.
Bank of America revolving line of credit 0 17,469,785 17,469,785
Bank of America mortgage 290,220 0 290,220
Bank of America term loan facility 94,596 141,893 236,489
SW/Catalyst Capital Partners note (subordinated) 250,000 437,500 687,500
SW/Catalyst Capital Partners warrant valuation (GAAP) 0 (28,333) (28,333)
The Catalyst Fund, Ltd. note (subordinated) 110,000 192,500 302,500
Toyota Motor Credit automobiles (2) 25,617 27,884 53,501
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ note (subordinated) 26,228 0 26,228
▇▇▇▇▇▇ ▇▇▇▇ note (subordinated) 19,671 0 19,671
▇▇▇▇▇▇▇ ▇▇▇▇▇ note (subordinated) 6,557 0 6,557
------- ---------- ----------
822,889 18,241,229 19,064,118
------- ---------- ----------
ACR SUPPLY, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ note (subordinated) 136,713 102,535 239,248
The Catalyst Fund, Ltd. note (subordinated) 0 87,247 87,247
Toyota Motor Credit forklifts (6) 18,366 20,824 39,190
Lease Plan USA trucks (6) 23,491 0 23,491
Enterprise Leasing trucks (4) 21,530 0 21,530
------- ---------- ----------
200,100 210,606 410,706
------- ---------- ----------
TOTAL SUPPLY, INC.
Toyota Motor Credit forklifts (4) 11,587 13,919 25,506
Enterprise Leasing trucks (3) 12,022 0 12,022
The Catalyst Fund, Ltd. note (subordinated) 0 10,906 10,906
Lease Plan USA trucks (2) 10,259 0 10,259
------- ---------- ----------
33,868 24,825 58,693
------- ---------- ----------
HEATING & COOLING SUPPLY, INC.
Zion Credit Corporation furniture/equipment 12,658 33,084 45,742
The Catalyst Fund, Ltd. note (subordinated) 0 10,906 10,906
Yale Financial Services forklift 4,035 4,670 8,705
------- ---------- ----------
16,693 48,660 65,353
------- ---------- ----------
VALLEY SUPPLY, INC.
Toyota Motor Credit forklifts (3) 10,632 15,254 25,886
Lease Plan USA truck 361 0 361
GE Capital copier 65 0 65
------- ---------- ----------
11,058 15,254 26,312
------- ---------- ----------
ENER-TECH INDUSTRIES, INC.
Advanta Leasing phone system 3,149 3,733 6,882
------- ---------- ----------
SCHEDULE 5.1(j)
INDEBTEDNESS FOR MONEY BORROWED
DESCRIPTION CURRENT LONG-TERM TOTAL
---------------------- ---------- ---------- --------
FLORIDA COOLING SUPPLY, INC.
Toyota Motor Credit forklifts (2) 6,994 22,771 29,765
Lease Plan USA trucks (4) 3,108 0 3,108
--------- ---------- ----------
10,102 22,771 32,873
--------- ---------- ----------
LIFETIME FILTER, INC.
Enterprise Leasing truck 5,730 0 5,730
--------- ---------- ----------
WEST COAST HVAC SUPPLY, INC.
The Catalyst Fund, Ltd. note (subordinated) 225,000 75,000 300,000
--------- ---------- ----------
CONTRACTORS HEATING & SUPPLY, INC.
Gambray, Inc. note (subordinated) 400,000 0 400,000
▇▇▇▇▇ ▇▇▇▇▇▇ note (subordinated) 50,667 101,333 152,000
Matrix Funding machinery 25,040 43,300 68,340
Toyota Motor Credit forklift 3,378 12,234 15,612
--------- ---------- ----------
479,085 156,867 635,952
--------- ---------- ----------
TOTAL INDEBTEDNESS AS OF APRIL 30, 2000 1,807,674 18,798,945 20,606,619
========= ========== ==========
Loans and notes, not subordinated 384,816 17,611,678 17,996,494
Loans and notes, subordinated 1,224,836 989,594 2,214,430
Capital Leases 198,022 197,673 395,695
--------- ---------- ----------
1,807,674 18,798,945 20,606,619
========= ========== ==========
SCHEDULE 5.1(p)
BENEFIT PLANS
ACR Group, Inc. Retirement Plan with ▇.▇. ▇▇▇▇▇▇▇, Inc.
401(k) plan with employer matching contributions and discretionary
employer additional contributions, for employees of all ACR Group, Inc.
companies.
Contractors Heating and Supply, Inc. Retirement Plan with Principal Financial
Group
401(k) plan for employer and employee contributions prior to the
effective date of the acquisition by ACR Group, Inc.
AH & L Group Plan #760546
Group health and dental insurance for employees of ACR Group, Inc. and
certain of its subsidiaries. The plan is self-funded up to specified
individual and aggregate limits and administered by AH & L Insurance.
Guarantee Life Insurance Company Group Policy No. GL ▇▇-▇▇▇▇▇▇▇
Group term life and short-term disability insurance policy covering
employees of ACR Group, Inc. and all subsidiaries except Contractors
Heating & Supply, Inc.
Guarantee Life Insurance Company Group Policy No. GL ▇▇-▇▇▇▇▇▇▇
Group term long-term disability insurance policy covering employees of
ACR Group, Inc. and all subsidiaries except Contractors Heating &
Supply, Inc.
UNUM Life Insurance Company of America Policy No. 027371
Group long-term care insurance covering certain groups of employees of
at all ACR Group, Inc. companies.
America United Life Insurance Company Policy No. GL00602129
Group voluntary term life insurance with accelerated life benefit
available to all employees of ACR Group, Inc. companies.
Continental Casualty Co. Policy No. SR-83072577
Group voluntary accidental death and dismemberment insurance available
to all employees of all ACR Group, Inc. companies except Contractors
Heating & Supply, Inc.
United Health Care Policy No. J8875 and 1J8876
Group health care insurance for employees of Contractors Heating &
Supply, Inc.
The plan is a fully insured preferred provider organization.
United Dental Care Policy No. 1962 and 92975
Group dental care insurance for employees of Contractors Heating &
Supply, Inc.
The Guardian - Policy No. 00313383
Group long-term disability for employees of Contractors Heating &
Supply, Inc.
SCHEDULE 5.1(p)
BENEFIT PLANS
Page 2 of 2
▇▇▇▇ ▇▇▇▇▇ Life Insurance Company Policy No. ▇▇▇▇▇▇▇▇▇▇
Group health insurance policy for employees at the El Paso, TX branch
of Contractors Heating & Supply, Inc.
Nevada Care Policy No. 131093
Group health care insurance for employees of Heating and Cooling Supply,
Inc.
Ameritas Life Insurance Company Policy No. BL329841-1
Group dental and vision care insurance for employees of Heating and
Cooling Supply, Inc.
SCHEDULE 5.1(u)
CHIEF EXECUTIVE OFFICE; LOCATION OF BOOKS AND RECORDS
ACR Group, Inc. Time Energy Systems Southwest, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ACR Supply, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Total Supply, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Heating and Cooling Supply, Inc. Prior to 1998:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Valley Supply, Inc. Prior to 1998:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ener-Tech Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Florida Cooling Supply, Inc. Prior to 1999:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Lifetime Filter, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇, ▇▇ ▇▇▇▇▇
West Coast HVAC Supply, Inc. Prior to 1998:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Contractors Heating & Supply, Inc.
▇▇ ▇▇▇▇▇ ▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 5.1(v)
LOCATION OF INVENTORY
Page 1 of 4
ESTIMATED
VALUE OF NAME OF LANDLORD
LOCATION INVENTORY (if applicable)
------------------------------------------------ ---------- ------------------------------------------
ACR SUPPLY, INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ $ 900,000 N/A
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3924 Dunvale $ 650,000 AMB Property II, L.P.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. $ 200,000 D&H Enterprises
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. $ 650,000 Coca-Cola Bottling
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. $ 600,000 Industrial Properties Corporation
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇. $ 900,000 ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ $ 650,000 Greenbriar K Investment Venture
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
1700 ▇▇▇▇▇▇▇▇ $ ▇▇▇,▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇. $ 250,000 ▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2402 South 57th $ 450,000 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Temple, TX 76504
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. $ 350,000 Security Capital Industrial Trust
San Antonio, TX 78217
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ $ 500,000 MIT Unsecured L.P.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 5.1(v)
LOCATION OF INVENTORY
Page 2 of 4
ESTIMATED
VALUE OF NAME OF LANDLORD
LOCATION INVENTORY (if applicable)
------------------------------------------------ ---------- ------------------------------------------
ACR SUPPLY, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $ 225,000 ▇▇▇▇▇▇▇ Family Limited Partnership
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ $ 275,000 DD&H Investments
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ $ 300,000 ▇.▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇. $ 200,000 M.O. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. $ 1,750,000 Houston Westpark-Westchase
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Associates
3936-A Dunvale $ 200,000 AMB Property II, L.P.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTAL SUPPLY, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇. $ ▇▇▇,▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇-▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ $ 200,000 St. ▇▇▇▇ Properties, Inc.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇ $ 300,000 ▇▇▇▇▇ Enterprises, Inc.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
1111 Purina Dr. $ 250,000 ▇▇▇▇▇▇ Family Properties, L.P.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ $ 250,000 K.G.F. Investments, L.L.C.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HEATING AND COOLING
SUPPLY, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇. $ 2,100,000 Sunset Warehouse, Inc.
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 5.1(v)
LOCATION OF INVENTORY
Page 3 of 4
ESTIMATED
VALUE OF NAME OF LANDLORD
LOCATION INVENTORY (if applicable)
------------------------------------------------ ---------- ------------------------------------------
VALLEY SUPPLY, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇. $ 250,000 Weston Memphis Partners
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4056 Homewood $ 50,000 ProLogis Trust
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. $ 300,000 ▇.▇. ▇▇▇▇▇, Trustee
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ENER-TECH INDUSTRIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇. $ ▇▇▇,▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FLORIDA COOLING SUPPLY, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ $ 550,000 Rowland E. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ $ 200,000 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Miranda Testamentary Trust
▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇. $ 700,000 ▇.▇. ▇▇▇▇▇▇▇, III d/b/a Park
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Investments
▇▇▇-▇ ▇▇▇▇▇▇ ▇▇▇▇ $ 600,000 SCI-Limited Partnership IV
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WEST COAST HVAC
SUPPLY, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ $ 625,000 CHP Properties
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ $ 300,000 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. $ 300,000 Bankruptcy Estate of ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 5.1(v)
LOCATION OF INVENTORY
Page 4 of 4
ESTIMATED
VALUE OF NAME OF LANDLORD
LOCATION INVENTORY (if applicable)
------------------------------------------------ ---------- ------------------------------------------
LIFETIME FILTER, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ $ 225,000 N/A
▇▇▇▇, ▇▇ ▇▇▇▇▇
CONTRACTORS HEATING AND
SUPPLY, INC.
▇▇ ▇▇▇▇▇ ▇▇ ▇▇. $ 850,000 Aspen Leaf, Inc.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4195 "E-H" Oneida Street $ 200,000 St. ▇▇▇▇ Properties, Inc.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇ ▇▇▇▇ $ 400,000 Aspen Leaf, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇ ▇▇▇▇ $ 350,000 Aspen Leaf, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ $ 225,000 ▇▇▇▇ Limited Liability Company
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. $ 300,000 5009 Fossil, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇. $ 500,000 Aspen Leaf, Inc.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇. $ 350,000 ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 5.1(w)
FICTITIOUS, ASSUMED NAMES
Total Supply - used in Tennessee as a trade name for Valley Supply, Inc.
ACH Supply - used in California as a trade name for West Coast HVAC Supply, Inc.
CONSIGNMENT INVENTORY
Inventory held on consignment:
1. HVACR equipment manufactured by ▇▇▇▇▇▇▇ Manufacturing Company is held on
consignment at the branches of Total Supply, Inc., Valley Supply, Inc. and
Contractors Heating and Supply, Inc. Such consigned inventory is excluded
from assets in the Company's financial statements.
Inventory sold on consignment:
1. The wholesale distributions operations of ACR Group, Inc., in the ordinary
course of business, have established "floor plan inventories" with certain
customers pursuant to which merchandise is shipped to the customers on
consignment. Such floor plans are inventoried by company representatives at
least monthly and product sold is invoiced to the customer at that time in
accordance with the Company's usual payment terms. Shipments of product on
consignment are not included in sales in the Company's financial
statements.
SCHEDULE 10.3
GUARANTIES OF BORROWER
Guaranties executed by ACR Group, Inc. to suppliers on behalf of subsidiaries:
Payee Subsidiaries
----------------------------------------------- ----------------------------------------
Alco Controls, Division of ▇▇▇▇▇▇▇ Electric Co. Florida Cooling Supply
American Distributors of Texas, Inc. ACR Supply
CertainTeed Corporation ACR Supply, Total Supply,
Heating and Cooling Supply
Enterprise Fleet Services ACR Supply
Evcon Industries, Inc. ACR Supply
GMC Sales Corp. Total Supply, Heating and Cooling
Supply, Valley Supply
▇▇▇▇▇▇▇ Manufacturing Company, L.P. Total Supply, Heating and Cooling
Supply
International Comfort Products, Inc. ACR Supply, Heating and Cooling
Supply, Florida Cooling Supply
▇▇▇▇▇ FiberGlass GmbH Florida Cooling Supply
▇▇▇▇▇▇▇ Industries, Inc. Valley Supply
Phoenix Manufacturing, Inc. Heating and Cooling Supply
Guaranties executed by ACR Group, Inc. to lessors on behalf of subsidiaries:
ACR Group, Inc. in the ordinary course of business has guaranteed lease
obligations of certain of its subsidiaries with respect to facilities occupied
by branch operations.
SCHEDULE 5.1(g) - Exceptions to Title
SCHEDULE 5.1(k) - Litigation
SCHEDULE 5.1(l) - Tax Return Exceptions
SCHEDULE 5.1(z) - Employee Relations
SCHEDULE 5.1(aa) - Intellectual Property