EXHIBIT 10.1
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EXTRUSION TECHNOLOGIES, INC.
and
MID-STATES PLASTICS, INC.,
as Borrowers
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LOAN AND SECURITY AGREEMENT
Dated: March 14, 2003
$25,000,000
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FLEET CAPITAL CORPORATION
Individually and as Agent for any Lender which is
or becomes a Party hereto
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TABLE OF CONTENTS
PAGE
SECTION 1. CREDIT FACILITY............................................................................1
1.1 Loans..........................................................................................1
1.2 Letters of Credit; LC Guaranties...............................................................3
1.3 Term Loan and Equipment Loans..................................................................3
SECTION 2. INTEREST, FEES AND CHARGES.................................................................5
2.1 Interest.......................................................................................5
2.2 Computation of Interest and Fees...............................................................5
2.3 Fee Letter.....................................................................................5
2.4 Letter of Credit and LC Guaranty Fees..........................................................5
2.5 Unused Line Fee................................................................................6
2.6 Prepayment Fee.................................................................................6
2.7 Audit Fees.....................................................................................7
2.8 Reimbursement of Expenses......................................................................7
2.9 Bank Charges...................................................................................7
2.10 Collateral Protection Expenses; Appraisals.....................................................8
2.11 Payment of Charges.............................................................................8
2.12 No Deductions..................................................................................8
SECTION 3. LOAN ADMINISTRATION........................................................................8
3.1 Manner of Borrowing Revolving Credit Loans/Equipment Loans/LIBOR Option........................8
3.2 Payments......................................................................................12
3.3 Mandatory and Optional Prepayments............................................................13
3.4 Application of Payments and Collections.......................................................16
3.5 All Loans to Constitute One Obligation........................................................16
3.6 Loan Account..................................................................................16
3.7 Statements of Account.........................................................................16
3.8 Increased Costs...............................................................................17
3.9 Basis for Determining Interest Rate Inadequate................................................18
3.10 Sharing of Payments, Etc......................................................................18
SECTION 4. TERM AND TERMINATION......................................................................19
4.1 Term of Agreement.............................................................................19
4.2 Termination...................................................................................19
SECTION 5. SECURITY INTERESTS........................................................................20
5.1 Security Interest in Collateral...............................................................20
5.2 Other Collateral..............................................................................21
5.3 Lien Perfection; Further Assurances...........................................................21
5.4 Lien on Realty................................................................................22
SECTION 6. COLLATERAL ADMINISTRATION.................................................................22
6.1 General.......................................................................................22
6.2 Administration of Accounts....................................................................23
6.3 Administration of Inventory...................................................................25
6.4 Administration of Equipment...................................................................25
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TABLE OF CONTENTS
(continued)
PAGE
6.5 Payment of Charges............................................................................25
SECTION 7. REPRESENTATIONS AND WARRANTIES............................................................26
7.1 General Representations and Warranties........................................................26
7.2 Continuous Nature of Representations and Warranties...........................................32
7.3 Survival of Representations and Warranties....................................................33
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS.......................................................33
8.1 Affirmative Covenants.........................................................................33
8.2 Negative Covenants............................................................................36
8.3 Specific Financial Covenants..................................................................41
SECTION 9. CONDITIONS PRECEDENT......................................................................41
9.1 Documentation.................................................................................41
9.2 No Default....................................................................................41
9.3 Other Conditions..............................................................................41
9.4 Borrowers' Availability.......................................................................41
9.5 PW Availability...............................................................................41
9.6 PW Equity Contribution........................................................................42
9.7 Acquisition...................................................................................42
9.8 Supply Contract...............................................................................42
9.9 Appraisals....................................................................................42
9.10 Phase I and Phase II Environmental Reviews....................................................42
9.11 No Litigation.................................................................................42
9.12 Material Adverse Effect.......................................................................42
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.........................................42
10.1 Events of Default.............................................................................42
10.2 Acceleration of the Obligations...............................................................45
10.3 Other Remedies................................................................................45
10.4 Set Off and Sharing of Payments...............................................................46
10.5 Remedies Cumulative; No Waiver................................................................46
SECTION 11. AGENT.....................................................................................47
11.1 Authorization and Action......................................................................47
11.2 Agent's Reliance, Etc.........................................................................47
11.3 Fleet and Affiliates..........................................................................48
11.4 Lender Credit Decision........................................................................48
11.5 Indemnification...............................................................................49
11.6 Rights and Remedies to be Exercised by Agent Only.............................................49
11.7 Agency Provisions Relating to Collateral......................................................49
11.8 Agent's Right to Purchase Commitments.........................................................50
11.9 Right of Sale, Assignment, Participations.....................................................50
11.10 Amendment.....................................................................................52
11.11 Resignation of Agent; Appointment of Successor................................................52
11.12 Audit and Examination Reports; Disclaimer by Lenders..........................................53
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TABLE OF CONTENTS
(continued)
PAGE
SECTION 12. MISCELLANEOUS.............................................................................53
12.1 Power of Attorney.............................................................................53
12.2 Indemnity.....................................................................................54
12.3 Sale of Interest..............................................................................54
12.4 Severability..................................................................................55
12.5 Successors and Assigns........................................................................55
12.6 Cumulative Effect; Conflict of Terms..........................................................55
12.7 Execution in Counterparts.....................................................................55
12.8 Notice........................................................................................55
12.9 Consent.......................................................................................56
12.10 Credit Inquiries..............................................................................56
12.11 Time of Essence...............................................................................57
12.12 Entire Agreement..............................................................................57
12.13 Interpretation................................................................................57
12.14 Confidentiality...............................................................................57
12.15 GOVERNING LAW; CONSENT TO FORUM...............................................................57
12.16 WAIVERS BY BORROWER...........................................................................58
12.17 Advertisement.................................................................................59
12.18 Reimbursement.................................................................................59
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LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT is made as of this 14th day of March, 2003, by
and among FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island corporation with
an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
individually as a Lender and as Agent ("Agent") for itself and any other
financial institution which is or becomes a party hereto (each such financial
institution, including Fleet, is referred to hereinafter individually as a
"Lender" and collectively as the "Lenders"), the LENDERS and EXTRUSION
TECHNOLOGIES, INC., a Colorado corporation with its chief executive office and
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("ETI") and MID-STATES PLASTICS, INC., a Kentucky corporation with its chief
executive office and principal place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Mid-States"). ETI and Mid-States are sometimes
hereinafter referred to individually as a "Borrower" and collectively as
"Borrowers." Capitalized terms used in this Agreement have the meanings assigned
to them in Appendix A, General Definitions. Accounting terms not otherwise
specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to Twenty-Five
Million Dollars ($25,000,000) available upon Borrowers' request therefor, as
follows:
1.1 Loans.
1.1.1 Revolving Credit Loans. Each Lender agrees, severally and
not jointly, for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Borrowers from time to time during the period from the
date hereof to but not including the last day of the Term, as requested by ETI,
on behalf of each Borrower, in the manner set forth in subsection 3.1.1 hereof,
up to a maximum principal amount at any time outstanding equal to the lesser of
(i) such Lender's Revolving Loan Commitment minus the product of such Lender's
Revolving Loan Percentage and the LC Amount minus the product of such Lender's
Revolving Loan Percentage and reserves, if any, minus the outstanding principal
balance of the Term Loan and the Equipment Loans owed to such Lender and (ii)
the product of such Lender's Revolving Loan Percentage and an amount equal to
the Borrowing Base at such time minus the LC Amount minus reserves, if any.
Agent shall have the right to establish reserves in such amounts, and with
respect to such matters, as Agent shall deem necessary or appropriate in its
sole judgment, against the amount of Revolving Credit Loans which ETI, on behalf
of each Borrower, may otherwise request under this subsection 1.1.1, including,
without limitation, with respect to (i) price adjustments, damages, unearned
discounts, returned products or other matters for which credit memoranda are
issued in the ordinary course of any Borrower's business; (ii) potential
dilution related to Accounts; (iii) shrinkage, spoilage and obsolescence of any
Borrower's Inventory; (iv) slow moving Inventory; (v) other sums chargeable
against Borrowers' Loan Account as Revolving Credit Loans under any section of
this Agreement; (vi) amounts owing by any Borrower to any Person to the extent
secured by a Lien on, or trust over, any Property of any Borrower; (vii) amounts
owing by any Borrower in connection with Product Obligations; and
(viii) such other specific events, conditions or contingencies as to which
Agent, in its sole judgment, determines reserves should be established from time
to time hereunder. The Revolving Credit Loans shall be repayable in accordance
with the terms of the Revolving Notes and shall be secured by all of the
Collateral.
1.1.2 Overadvances. Insofar as ETI, on behalf of each Borrower,
may request and Agent or Majority Lenders (as provided below) may be willing in
their sole and absolute discretion to make Revolving Credit Loans to Borrowers
at a time when the unpaid balance of Revolving Credit Loans plus the sum of the
LC Amount plus the amount of LC Obligations that have not been reimbursed by
Borrowers or funded with a Revolving Credit Loan, plus reserves, exceeds, or
would exceed with the making of any such Revolving Credit Loan, the Borrowing
Base (and such Loan or Loans being herein referred to individually as an
"Overadvance" and collectively, as "Overadvances"), Agent shall enter such
Overadvances as debits in the Loan Account. All Overadvances shall be repaid on
demand, shall be secured by the Collateral and shall bear interest as provided
in this Agreement for Revolving Credit Loans generally. Any Overadvance made
pursuant to the terms hereof shall be made by all Lenders ratably in accordance
with their respective Revolving Loan Percentages. Overadvances in the aggregate
amount of $250,000 or less may, unless a Default or Event of Default has
occurred and is continuing, be made in the sole and absolute discretion of
Agent. Overadvances in an aggregate amount of more than $250,000 but less than
$500,000 may, unless a Default or an Event of Default has occurred and is
continuing, be made in the sole and absolute discretion of the Majority Lenders.
Overadvances in an aggregate amount of $500,000 or more and Overadvances to be
made after the occurrence and during the continuation of a Default or an Event
of Default shall require the consent of all Lenders. The foregoing
notwithstanding, in no event, unless otherwise consented to by all Lenders, (w)
shall any Overadvances be outstanding for more than sixty (60) consecutive days,
(x) after all outstanding Overadvances have been repaid, shall Agent or Lenders
make any additional Overadvances unless sixty (60) days or more have expired
since the last date on which any Overadvances were outstanding, (y) shall
Overadvances be outstanding on more than ninety (90) days within any one hundred
eighty day (180) period or (z) shall Agent make Revolving Credit Loans on behalf
of Lenders under this subsection 1.1.2 to the extent such Revolving Credit Loans
would cause a Lender's share of the Revolving Credit Loans to exceed such
Lender's Revolving Loan Commitment minus such Lender's Revolving Loan Percentage
of the LC Amount.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used
solely for (i) satisfaction of Indebtedness of Borrowers owed under Borrowers'
existing senior credit facility, (ii) payment of a portion of the purchase price
due under the Acquisition Agreement, (iii) Borrowers' general operating capital
needs in a manner consistent with the provisions of this Agreement and all
applicable laws, and (iv) other purposes permitted under this Agreement.
1.1.4 Intentionally Omitted.
1.1.5 Agent Loans. Upon the occurrence and during the
continuance of an Event of Default, Agent, in its sole discretion, may make
Revolving Credit Loans on behalf of Lenders, in an aggregate amount not to
exceed $1,000,000, if Agent, in its reasonable business judgment, deems that
such Revolving Credit Loans are necessary or desirable (i) to protect all or any
portion of the Collateral, (ii) to enhance the likelihood, or maximize the
amount of,
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repayment of the Loans and the other Obligations, or (iii) to pay any other
amount chargeable to Borrowers pursuant to this Agreement, including without
limitation costs, fees and expenses as described in Sections 2.8 and 2.9
(hereinafter, "Agent Loans"); provided, that in no event shall (a) the maximum
principal amount of the Revolving Credit Loans exceed the aggregate Revolving
Loan Commitments and (b) Majority Lenders may at any time revoke Agent's
authorization to make Agent Loans. Any such revocation must be in writing and
shall become effective prospectively upon Agent's receipt thereof. Each Lender
shall be obligated to advance its Revolving Loan Percentage of each Agent Loan.
If Agent Loans are made pursuant to the preceding sentence, then (a) the
Borrowing Base shall be deemed increased by the amount of such permitted Agent
Loans, but only for so long as Agent allows such Agent Loans to be outstanding,
and (b) all Lenders that have committed to make Revolving Credit Loans shall be
bound to make, or permit to remain outstanding, such Agent Loans based upon
their Revolving Loan Percentages in accordance with the terms of this Agreement.
1.2 Letters of Credit; LC Guaranties. Agent agrees, for so long as no
Default or Event of Default exists and if requested by ETI, on behalf of each or
any Borrower, to (i) issue its, or cause to be issued by Bank or another
Affiliate of Agent, on the date requested by ETI, on behalf of each or any
Borrower, Letters of Credit for the account of any Borrower or (ii) execute LC
Guaranties by which Agent, Bank, or another Affiliate of Agent, on the date
requested by ETI, on behalf of each or any Borrower, shall guaranty the payment
or performance by Borrowers of their reimbursement obligations with respect to
letters of credit; provided that the LC Amount shall not exceed $1,000,000 at
any time. No Letter of Credit or LC Guaranty may have an expiration date after
the last day of the Term. Notwithstanding anything to the contrary contained
herein, Borrowers, Agent and Lenders hereby agree that all LC Obligations and
all obligations of Borrowers relating thereto shall be satisfied by the prompt
issuance of one or more Revolving Credit Loans that are Base Rate Portions,
which Borrowers hereby acknowledge are requested and Lenders hereby agree to
fund. In the event that Revolving Credit Loans are not, for any reason, promptly
made to satisfy all then existing LC Obligations, each Lender hereby agrees to
pay to Agent, on demand, an amount equal to such LC Obligations multiplied by
such Lender's Revolving Loan Percentage, and until so paid, such amount shall be
secured by the Collateral and shall bear interest and be payable at the same
rate and in the same manner as Base Rate Portions. Immediately upon the issuance
of a Letter of Credit or an LC Guaranty under this Agreement, each Lender shall
be deemed to have irrevocably and unconditionally purchased and received from
Agent, without recourse or warranty, an undivided interest and participation
therein equal to such LC Obligations multiplied by such Lender's Revolving Loan
Percentage.
1.3 Term Loan and Equipment Loans.
1.3.1 Term Loan. Each Lender, severally and not jointly, agrees
to make a term loan (collectively, the "Term Loan") to Borrowers on the Closing
Date, in the aggregate principal amount of such Lender's Term Loan Commitment,
which shall be repayable in accordance with the terms of the Term Loan Notes and
shall be secured by all of the Collateral. The proceeds of the Term Loan shall
be used solely for the purposes for which the proceeds of the Revolving Credit
Loans are authorized to be used. The aggregate amount of all Term Loan
Commitments is $5,000,000.
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1.3.2 Equipment Loans. Each Lender agrees, severally and not
jointly, for so long as no Default or Event of Default exists, to make Equipment
Loans from time to time to Borrowers as requested by ETI, on behalf of each
Borrower, in the manner set forth in subsection 3.1.1 hereof, up to a maximum
principal amount equal to the product of such Lender's Equipment Loan Percentage
multiplied by $1,500,000. The Equipment Loans shall be repayable in accordance
with the terms of the Equipment Loan Notes and shall be secured by all of the
Collateral. No repayment in respect of any Equipment Loan may be reborrowed.
Each Lender will make Equipment Loans only if each of the following conditions
is satisfied:
(a) Borrowers shall have provided evidence to Agent, in form and
substance reasonably satisfactory to Agent, that Borrowers will use the proceeds
of each requested Equipment Loan to purchase new production Equipment (i) used
in Borrowers' business operations, (ii) to be located at a location in
compliance with this Agreement, and (iii) subject to no Liens other than those
in favor of Agent;
(b) Agent shall have received the invoice from the seller of the
Equipment evidencing the cost of the Equipment Borrowers propose to purchase
with the proceeds of each Equipment Loan, and such invoice discloses that the
original principal amount of such requested Equipment Loan, when aggregated with
all other Equipment Loans (if any) with respect to such Equipment, does not
exceed eighty percent (80%) of the cost thereof, exclusive of transportation,
installation, taxes, perishable tooling and other soft costs (as determined by
Agent in its reasonable credit judgment) pertaining thereto;
(c) Agent shall have received, in form and substance reasonably
satisfactory to Agent, evidence of insurance covering the Equipment Borrowers
propose to purchase with the proceeds of each Equipment Loan;
(d) the requested Equipment Loan is in a minimum original principal
amount of $500,000;
(e) the requested Equipment Loan would be the only Equipment Loan funded
by Lenders during Borrowers' then existing fiscal quarter;
(f) Borrowers shall have delivered or caused to be delivered to Agent and
each Lender any and all documents, agreements and instruments deemed reasonably
necessary by Agent or any Lender in connection with the making of such Equipment
Loan; and
(g) after giving effect to any such Equipment Loan, no Overadvance would
exist and be continuing.
The proceeds of the Equipment Loans shall be used solely for the purposes
specified in this subsection 1.3.2.
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SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. Interest shall accrue on the principal
amount of the Base Rate Revolving Portions, the Base Rate Term Portions and Base
Rate Equipment Portions outstanding at the end of each day at a fluctuating rate
per annum equal to the Applicable Margin then in effect plus the Base Rate. Said
rate of interest shall increase or decrease by an amount equal to any increase
or decrease in the Base Rate, effective as of the opening of business on the day
that any such change in the Base Rate occurs. If Borrowers exercise their LIBOR
Option as provided in Section 3.1, interest shall accrue on the principal amount
of the LIBOR Revolving Portions, the LIBOR Term Portions and the LIBOR Equipment
Portions outstanding at the end of each day at a rate per annum equal to the
Applicable Margin then in effect plus the LIBOR applicable to each LIBOR Portion
for the corresponding Interest Period.
2.1.2 Default Rate of Interest. At the option of Agent or the
Majority Lenders, upon and after the occurrence of an Event of Default, and
during the continuation thereof, the principal amount of all Loans shall bear
interest at a rate per annum equal to 2.0% plus the interest rate otherwise
applicable thereto (the "Default Rate").
2.1.3 Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Notes and
charged or collected pursuant to the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
If any provisions of this Agreement or the Notes are in contravention of any
such law, such provisions shall be deemed amended to conform thereto (the
"Maximum Rate"). If at any time, the amount of interest paid hereunder is
limited by the Maximum Rate, and the amount at which interest accrues hereunder
is subsequently below the Maximum Rate, the rate at which interest accrues
hereunder shall remain at the Maximum Rate, until such time as the aggregate
interest paid hereunder equals the amount of interest that would have been paid
had the Maximum Rate not applied.
2.2 Computation of Interest and Fees. Interest, Letter of Credit and
LC Guaranty fees and Unused Line Fees hereunder shall be calculated daily and
shall be computed on the actual number of days elapsed over a year of 360 days.
2.3 Fee Letter. Borrowers shall pay to Agent certain fees and other
amounts in accordance with the terms of the fee letter between Borrower and
Agent (the "Fee Letter").
2.4 Letter of Credit and LC Guaranty Fees. Borrowers shall pay to Agent:
(i) for standby Letters of Credit and LC Guaranties of
standby letters of credit, for the ratable benefit of Lenders a per annum
fee equal to the Applicable Margin then in effect for LIBOR Revolving
Portions of the aggregate face amount of such Letters of Credit and LC
Guaranties outstanding from time to time during the term of this Agreement,
plus all normal and customary charges associated with the issuance thereof,
which fees and charges shall be deemed fully earned upon issuance of each
such Letter of Credit or LC Guaranty, shall be due and payable on the first
Business Day of
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each month and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason; and
(ii) for documentary Letters of Credit and LC Guaranties of
documentary letters of credit, for the ratable benefit of Lenders, a per annum
fee equal to the Applicable Margin then in effect for LIBOR Revolving Portions
of the face amount of each such Letter of Credit or LC Guaranty, payable upon
the issuance of such Letter of Credit or execution of such LC Guaranty and an
additional fee equal to the Applicable Margin then in effect for LIBOR Revolving
Portions per annum of the face amount of such Letters of Credit or LC Guaranty
payable upon each renewal thereof and each extension thereof plus all normal and
customary charges associated with the issuance and administration of each such
Letter of Credit or LC Guaranty (which fees and charges shall be fully earned
upon issuance, renewal or extension (as the case may be) of each such Letter of
Credit or LC Guaranty, shall be due and payable on the first Business Day of
each month, and shall not be subject to rebate or proration upon the termination
of this Agreement for any reason);
2.5 Unused Line Fee. Borrowers shall pay to Agent, for the ratable
benefit of Lenders, a fee (the "Unused Line Fee") equal to one-half of one
percent (1/2%) per annum multiplied by the average daily amount by which (x) (i)
the Revolving Credit Maximum Amount minus (ii) the unpaid principal balance of
the Term Loans and the Equipment Loans exceeds (y) the sum of (i) the
outstanding principal balance of the Revolving Credit Loans plus (ii) the LC
Amount. The Unused Line Fee shall be payable monthly in arrears on the first day
of each month hereafter.
2.6 Prepayment Fee. (a) At the effective date of termination of this
Agreement for any reason, Borrowers shall pay to Agent, for the ratable benefit
of Lenders (in addition to the then outstanding principal, accrued interest and
other charges owing under the terms of this Agreement and any of the other Loan
Documents) and any amounts owing pursuant to subsection 3.2.5, as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to one
percent (1%) of the Total Credit Facility if termination occurs during the first
12-month period of the Term (March 14, 2003 through March 13, 2004); and
one-half of one percent (1/2%) of the Total Credit Facility if termination
occurs during the second 12-month period of the Term (March 14, 2004 through
March 13, 2005). If termination occurs on or after March 14, 2005, no
termination charge shall be payable.
(b) Upon any prepayment of the Term Loan and the Equipment Loans, other
than a prepayment pursuant to subsection 3.3.1, 3.3.2 or 3.3.3 or Section 2.6(a)
above, Borrowers shall pay to Agent, for the ratable benefit of Lenders, as
liquidated damages for the loss of the bargain and not as a penalty, an amount
equal to one percent (1%) of the amount of the Term Loan and the Equipment Loans
so prepaid if prepayment occurs during the first twelve-month period of the Term
(March 14, 2003 through March 13, 2004); and one-half of one percent (1/2%) of
the amount of Term Loan and the Equipment Loans so prepaid if prepayment occurs
during the second 12-month period of the Term (March 14, 2004 through March 13,
2005). If any such prepayment occurs on or after March 14, 2005, no termination
charge shall be payable.
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2.7 Audit Fees. Borrowers shall pay to Agent audit fees in
accordance with Agent's current schedule of fees in effect from time to time in
connection with audits of the books and records and Properties of Borrowers and
their Subsidiaries and such other matters as Agent shall deem appropriate in its
sole judgment, plus all reasonable out-of-pocket expenses incurred by Agent in
connection with such audits, whether such audits are conducted by employees of
Agent or by third parties hired by Agent. Such audit fees and out-of-pocket
expenses shall be payable on the first day of the month following the date of
issuance by Agent of a request for payment thereof to Borrowers. Agent may, in
its discretion, provide for the payment of such amounts by making appropriate
Revolving Credit Loans to Borrowers and charging Borrowers' Loan Account
therefor.
2.8 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, (i) Agent incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with (1) the negotiation and preparation of this Agreement or any of the other
Loan Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents, or any syndication or attempted syndication of the
Obligations (including, without limitation, printing and distribution of
materials to prospective Lenders and all costs associated with bank meetings,
but excluding any closing fees paid to Lenders in connection therewith) or (2)
the administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; or (ii) Agent or any Lender incurs
legal or accounting expenses or any other costs or out-of-pocket expenses in
connection with (1) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Borrower or any other Person)
relating to the Collateral, this Agreement or any of the other Loan Documents or
any Borrower's, any of their Subsidiaries' or any Guarantor's affairs; (2) any
attempt to enforce any rights of Agent or any Lender against any Borrower or any
other Person which may be obligated to Agent or any Lender by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; or (3) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such legal and accounting expenses, other costs and out of
pocket expenses of Agent or any Lender, as applicable, shall be charged to
Borrowers; provided, that Borrowers shall not be responsible for such costs and
out-of-pocket expenses to the extent incurred because of the gross negligence or
willful misconduct of Agent or any Lender. All amounts chargeable to Borrowers
under this Section 2.8 shall be Obligations secured by all of the Collateral,
shall be payable on demand to Agent or such Lender, as the case may be, and
shall bear interest from the date such demand is made until paid in full at the
rate applicable to Base Rate Revolving Portions from time to time. Borrowers
shall also reimburse Agent for expenses incurred by Agent in its administration
of the Collateral to the extent and in the manner provided in Sections 2.9 and
2.10 hereof. The foregoing notwithstanding, Borrowers shall not be required to
reimburse Agent or any Lender for any costs or expenses incurred in any action
where there is entered a final non-appealable court order pursuant to which
Agent or Lenders are not the prevailing party (as determined by said order).
2.9 Bank Charges. Borrowers shall pay to Agent, on demand, any and
all fees, costs or expenses which Agent or any Lender pays to a bank or other
similar institution arising out of or in connection with (i) the forwarding to
any Borrower or any other Person on behalf of any Borrower, by Agent or any
Lender, of proceeds of Loans made to Borrowers pursuant to this
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Agreement and (ii) the depositing for collection by Agent or any Lender of any
check or item of payment received or delivered to Agent or any Lender on account
of the Obligations.
2.10 Collateral Protection Expenses; Appraisals. All out-of-pocket
expenses incurred in protecting, storing, warehousing, insuring, handling,
maintaining and shipping the Collateral, and any and all excise, property,
sales, and use taxes imposed by any state, federal, or local authority on any of
the Collateral or in respect of the sale thereof shall be borne and paid by
Borrowers. If Borrowers fail to promptly pay any portion thereof when due, Agent
may, at its option, but shall not be required to, pay the same and charge
Borrowers therefor. Additionally, from time to time, Agent may, at Borrowers'
expense, obtain appraisals from appraisers (who may be personnel of Agent),
stating the then current fair market value of all or any portion of the real
estate or personal property of Borrowers or any of their Subsidiaries, including
without limitation the Inventory of Borrowers and their Subsidiaries; provided
that unless an Event of Default has occurred and is continuing, Agent shall not
be permitted to obtain at Borrowers' expense more than one such appraisal, with
respect to each type or category of Borrowers' assets, per calendar year.
2.11 Payment of Charges. All amounts chargeable to Borrowers under
this Agreement shall be Obligations secured by all of the Collateral, shall be,
unless specifically otherwise provided, payable on demand and shall bear
interest from the date demand was made or such amount is due, as applicable,
until paid in full at the rate applicable to Base Rate Revolving Portions from
time to time.
2.12 No Deductions. Any and all payments or reimbursements made
hereunder shall be made free and clear of and without deduction for any and all
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto; excluding, however, the following: taxes imposed on the
income of Agent or any Lender or franchise taxes by the jurisdiction under the
laws of which Agent or any Lender is organized or doing business or any
political subdivision thereof and taxes imposed on its income by the
jurisdiction of Agent's or such Lender's applicable lending office or any
political subdivision thereof or franchise taxes (all such taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with respect
thereto excluding such taxes imposed on net income and franchise taxes, herein
"Tax Liabilities"). If any Borrower shall be required by law to deduct any such
Tax Liabilities from or in respect of any sum payable hereunder to Agent or any
Lender, then the sum payable hereunder shall be increased as may be necessary so
that, after all required deductions are made, Agent or such Lender receives an
amount equal to the sum it would have received had no such deductions been made.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans/Equipment Loans/LIBOR
Option. Borrowings under the credit facility established pursuant to Section 1
hereof shall be as follows:
3.1.1 Loan Requests.
(i) Revolving Credit Loans. A request for a Revolving
Credit Loan shall be made, or shall be deemed to be made, in the following
manner: (a) ETI, on
8
behalf of each Borrower, may give Agent notice of Borrowers' intention to
borrow, in which notice ETI, on behalf of each Borrower, shall specify the
amount of the proposed borrowing of a Revolving Credit Loan and the
proposed borrowing date, which shall be a Business Day, no later than 11:00
a.m. (Chicago, Illinois time) on the proposed borrowing date (or in
accordance with subsection 3.1.7, 3.1.8 or 3.1.9, as applicable, in the
case of a request for a LIBOR Revolving Portion), provided, however, that
no such request may be made at a time when there exists a Default or an
Event of Default; and (b) the becoming due of any amount required to be
paid under this Agreement, or the Notes, whether as interest or for any
other Obligation, shall be deemed irrevocably to be a request for a
Revolving Credit Loan on the due date in the amount required to pay such
interest or other Obligation.
(ii) Equipment Loans. A request for an Equipment Loan
shall be made in the following manner: ETI, on behalf of each Borrower, may
give Agent notice of the intention to borrow an Equipment Loan, in which
ETI, on behalf of each Borrower, shall specify the amount of the proposed
borrowing (consistent with subsection 1.3.2) and the proposed borrowing
date, which shall be a Business Day, no later than 11:00 a.m. (Chicago,
Illinois time) on the date 2 Business Days prior to such proposed borrowing
date (or in accordance with subsection 3.1.7, 3.1.8 or 3.1.9, as
applicable, in the case of a request for a LIBOR Equipment Portion);
provided, however, that no such request may be made at a time when there
exists a Default or an Event of Default. In addition, Borrowers shall also
comply with the requirements of subsection 1.3.2 with respect to such
Equipment Loan.
3.1.2 Disbursement. Borrowers hereby irrevocably authorize
Agent to disburse the proceeds of each Loan requested, or deemed to be
requested, pursuant to subsection 3.1.1(a) as follows: (i) the proceeds of each
Revolving Credit Loan requested under subsection 3.1.1(a) shall be disbursed by
Agent in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from Borrowers, and in the case of each subsequent
borrowing, by wire transfer to such bank account as may be agreed upon by
Borrowers and Agent from time to time or elsewhere if pursuant to a written
direction from Borrowers; (ii) the proceeds of each Revolving Credit Loan deemed
requested under subsection 3.1.1(b) shall be disbursed by Agent by way of direct
payment of the relevant interest or other Obligation; and (iii) the proceeds of
each Equipment Loan requested under subsection 3.1.1(ii) shall be disbursed by
Agent in lawful money of the United States of America in immediately available
funds, as directed by ETI, on behalf of each Borrower, in writing with respect
to such Equipment Loan. If at any time any Loan is funded by Agent or Lenders in
excess of the amount requested or deemed requested by Borrowers, Borrowers agree
to repay the excess to Agent immediately upon the earlier to occur of (a) any
Borrower's discovery of the error and (b) notice thereof to Borrowers from Agent
or any Lender.
3.1.3 Payment by Lenders. Agent shall give to each Lender prompt
written notice by facsimile, telex or cable of the receipt by Agent from ETI of
any request for a Revolving Credit Loan or Equipment Loan. Each such notice
shall specify the requested date and amount of such Revolving Credit Loan or
Equipment Loan, whether such Revolving Credit Loan or Equipment Loan shall be
subject to the LIBOR Option, and the amount of each Lender's
9
advance thereunder (in accordance with its applicable Revolving Loan Percentage
or Equipment Loan Percentage). Each Lender shall, not later than 12:00 p.m.
(Chicago time) on such requested date, wire to a bank designated by Agent the
amount of that Lender's Revolving Loan Percentage of the requested Revolving
Credit Loan or Equipment Loan Percentage of the requested Equipment Loan, as
applicable. The failure of any Lender to make the Revolving Credit Loans to be
made by it shall not release any other Lender of its obligations hereunder to
make its Revolving Credit Loan. Neither Agent nor any other Lender shall be
responsible for the failure of any other Lender to make the Revolving Credit
Loan to be made by such other Lender. The foregoing notwithstanding, Agent, in
its sole discretion, may from its own funds make a Revolving Credit Loan on
behalf of any Lender. In such event, the Lender on behalf of whom Agent made the
Revolving Credit Loan shall reimburse Agent for the amount of such Revolving
Credit Loan made on its behalf, on a weekly (or more frequent, as determined by
Agent in its sole discretion) basis. On each such settlement date, Agent will
pay to each Lender the net amount owing to such Lender in connection with such
settlement, including without limitation amounts relating to Loans, fees,
interest and other amounts payable hereunder. The entire amount of interest
attributable to such Revolving Credit Loan for the period from the date on which
such Revolving Credit Loan was made by Agent on such Lender's behalf until Agent
is reimbursed by such Lender, shall be paid to Agent for its own account.
3.1.4 Authorization. Borrowers hereby irrevocably authorize
Agent, in Agent's sole discretion, to advance to Borrowers, and to charge to
Borrowers' Loan Account hereunder as a Revolving Credit Loan (which shall be a
Base Rate Revolving Portion), a sum sufficient to pay all interest accrued on
the Obligations during the immediately preceding month and to pay all fees,
costs and expenses and other Obligations at any time owed by any Borrower to
Agent or any Lender hereunder.
3.1.5 Letter of Credit and LC Guaranty Requests. A request for
a Letter of Credit or LC Guaranty shall be made in the following manner: ETI, on
behalf of each Borrower, may give Agent and Bank a written notice of its request
for the issuance of a Letter of Credit or LC Guaranty, not later than 11:00 a.m.
(Chicago, Illinois time), one Business Day before the proposed issuance date
thereof, in which notice ETI, on behalf of each Borrower, shall specify the
proposed issuer, issuance date and format and wording for the Letter of Credit
or LC Guaranty being requested (which shall be satisfactory to Agent and the
Person being asked to issue such Letter of Credit or LC Guaranty); provided,
that no such request may be made at a time when there exists a Default or Event
of Default. Such request shall be accompanied by an executed application and
reimbursement agreement in form and substance satisfactory to Agent and the
Person being asked to issue the Letter of Credit or LC Guaranty, as well as any
required resolutions.
3.1.6 Method of Making Requests. As an accommodation to
Borrowers, unless a Default or an Event of Default is then in existence, (i)
Agent shall permit telephonic or electronic requests for Revolving Credit Loans
or Equipment Loans to Agent; provided that in the case of requested for
Equipment Loans, Borrowers have previously delivered to Agent the written
materials required pursuant to subsection 1.3.2, (ii) Agent and Bank may, in
their discretion, permit electronic transmittal of requests for Letters of
Credit and LC Guaranties to them, and (iii) Agent may, in Agent's discretion,
permit electronic transmittal of instructions, authorizations, agreements or
reports to Agent. Unless Borrowers specifically direct Agent or
10
Bank in writing not to accept or act upon telephonic or electronic
communications from any Borrower, neither Agent nor Bank shall have any
liability to Borrowers for any loss or damage suffered by any Borrower as a
result of Agent's or Bank's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Agent or Bank by a Borrower, and neither Agent nor Bank shall have any
duty to verify the origin of any such communication or the authority of the
Person sending it. Each telephonic request for a Revolving Credit Loan,
Equipment Loan, Letter of Credit or LC Guaranty accepted by Agent and Bank, if
applicable, hereunder shall be promptly followed by a written confirmation of
such request from ETI, on behalf of each Borrower, to Agent and Bank, if
applicable.
3.1.7 LIBOR Portions. Provided that as of both the date of the
LIBOR Request and the first day of the Interest Period, no Default or Event of
Default exists, in the event Borrowers desire to obtain a LIBOR Portion, ETI, on
behalf of each Borrower, shall give Agent a LIBOR Request no later than 11:00
a.m. (Chicago, Illinois time) on the third Business Day prior to the requested
borrowing date. Each LIBOR Request shall be irrevocable and binding on
Borrowers. In no event shall Borrowers be permitted to have outstanding at any
one time LIBOR Portions with more than three (3) different Interest Periods.
3.1.8 Conversion of Base Rate Portions. Provided that as of both
the date of the LIBOR Request and the first day of the Interest Period, no
Default or Event of Default exists, ETI, on behalf of each Borrower, may, on any
Business Day, convert any Base Rate Portion into a LIBOR Portion. If Borrowers
desire to convert a Base Rate Portion, ETI, on behalf of each Borrower, shall
give Agent a LIBOR Request no later then 11:00 a.m. (Chicago, Illinois time) on
the third Business Day prior to the requested conversion date. After giving
effect to any conversion of Base Rate Portions to LIBOR Portions, Borrowers
shall not be permitted to have outstanding at any one time LIBOR Portions with
more than three (3) different Interest Periods.
3.1.9 Continuation of LIBOR Portions. Provided that as of both the
date of the LIBOR Request and the first day of the Interest Period, no Default
or Event of Default exists, ETI, on behalf of each Borrower, may, on any
Business Day, continue any LIBOR Portions into a subsequent Interest Period of
the same or a different permitted duration. If Borrowers desire to continue a
LIBOR Portion, ETI, on behalf of each Borrower, shall give Agent a LIBOR Request
no later than 11:00 a.m. (Chicago, Illinois time) on the third Business Day
prior to the requested continuation date. After giving effect to any
continuation of LIBOR Portions, Borrowers shall not be permitted to have
outstanding at any one time LIBOR Portions with more than three (3) different
Interest Periods. If ETI, on behalf of each Borrower, shall fail to give timely
notice of its election to continue any LIBOR Portion or portion thereof as
provided above, or if such continuation shall not be permitted, such LIBOR
Portion or portion thereof, unless such LIBOR Portion shall be repaid, shall
automatically be converted into a Base Rate Portion at the end of the Interest
Period then in effect with respect to such LIBOR Portion.
3.1.10 Inability to Make LIBOR Portions. Notwithstanding any
other provision hereof, if any applicable law, treaty, regulation or directive,
or any change therein or in the interpretation or application thereof, shall
make it unlawful for any Lender (for purposes of this subsection 3.1.10, the
term "Lender" shall include the office or branch where such Lender or any
corporation or bank then controlling such Lender makes or maintains any LIBOR
Portions) to
11
make or maintain its LIBOR Portions, or if with respect to any
Interest Period, Agent is unable to determine the LIBOR relating thereto, or
adverse or unusual conditions in, or changes in applicable law relating to, the
London interbank market make it, in the reasonable judgment of Agent,
impracticable to fund therein any of the LIBOR Portions, or make the projected
LIBOR unreflective of the actual costs of funds therefor to any Lender, the
obligation of Agent and Lenders to make or continue LIBOR Portions or convert
Base Rate Portions to LIBOR Portions hereunder shall forthwith be suspended
during the pendency of such circumstances and Borrower shall, if any affected
LIBOR Portions are then outstanding, promptly upon request from Agent, convert
such affected LIBOR Portions into Base Rate Portions.
3.2 Payments. Except where evidenced by notes or other instruments issued
or made by any Borrower to any Lender and accepted by such Lender specifically
containing payment instructions that are in conflict with this Section 3.2 (in
which case the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal.
(i) Revolving Credit Loans. Principal on account of
Revolving Credit Loans shall be payable by Borrowers to Agent for the
ratable benefit of Lenders immediately upon the earliest of (i) the receipt
by Agent or any Borrower of any proceeds of any of the Collateral (except
as otherwise provided herein), including without limitation pursuant to
subsections 3.3.1 and 6.2.4, to the extent of said proceeds, subject to
Borrowers' rights to reborrow such amounts in compliance with subsection
1.1.1 hereof; (ii) the occurrence of an Event of Default in consequence of
which Agent or Majority Lenders elect to accelerate the maturity and
payment of the Obligations, or (iii) termination of this Agreement pursuant
to Section 4 hereof; provided, however, that, if an Overadvance shall exist
at any time, Borrowers shall, on demand, repay the Overadvance. Each
payment (including principal prepayment) by Borrowers on account of
principal of the Revolving Credit Loans shall be applied first to Base Rate
Revolving Portions and then to LIBOR Revolving Portions.
(ii) Term Loan. Principal payable on account of the Term
Loan shall be payable by Borrowers in accordance with the terms of the Term
Notes.
(iii) Equipment Loans. Principal payable on account of
the Equipment Loans shall be payable by Borrowers in accordance with the
terms of the Equipment Loans.
3.2.2 Interest.
(i) Base Rate Portion. Interest accrued on the Base
Rate Portion shall be due and payable on the earliest of (1) the first
calendar day of each month (for the immediately preceding month), computed
through the last calendar day of the preceding month, (2) the occurrence of
an Event of Default in consequence of which Agent or Majority Lenders elect
to accelerate the maturity and payment of the Obligations or (3)
termination of this Agreement pursuant to Section 4 hereof.
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(ii) LIBOR Portion. Interest accrued on each LIBOR
Portion shall be due and payable on each LIBOR Interest Payment Date and on
the earlier of (1) the occurrence of an Event of Default in consequence of
which Agent or Majority Lenders elect to accelerate the maturity and
payment of the Obligations or (2) termination of this Agreement pursuant to
Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrowers to Agent, as and when
provided in Section 2 or Section 3 hereof, as applicable to Agent or a Lender,
as applicable, or to any other Person designated by Agent or such Lender in
writing.
3.2.4 Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrowers to Agent
for distribution to Lenders, as appropriate, as and when provided in this
Agreement, the Other Agreements or the Security Documents, or on demand,
whichever is later.
3.2.5 Prepayment of/Failure to Borrow LIBOR Portions. Borrowers
may prepay a LIBOR Portion only upon at least three (3) Business Days prior
written notice to Agent (which notice shall be irrevocable). Borrowers shall pay
to each Lender, upon request of such Lender, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender) to compensate such Lender
for any loss, cost, or expense incurred as a result of: (i) any payment of a
LIBOR Portion on a date other than the last day of the Interest Period for such
LIBOR Portion; (ii) any failure by Borrowers to borrow a LIBOR Portion on the
date specified by Borrowers' LIBOR Request; or (iii) any failure by Borrowers to
pay a LIBOR Portion on the date for payment specified in Borrowers' written
notice. Without limiting the foregoing, Borrowers shall pay to each Lender a
"yield maintenance fee" in an amount computed as follows: the current rate for
United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the Interest
Period chosen pursuant to the LIBOR Portion as to which the prepayment is made,
shall be subtracted from the LIBOR in effect at the time of prepayment. If the
result is zero or a negative number, there shall be no yield maintenance fee. If
the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining in
the Interest Period chosen pursuant to the LIBOR Portion as to which the
prepayment is made. Said amount shall be reduced to present value calculated by
using the above referenced United States Treasury securities rate and the number
of days remaining in the term chosen pursuant to the LIBOR Portion as to which
prepayment is made. The resulting amount shall be the yield maintenance fee due
to the applicable Lender upon the prepayment of a LIBOR Portion. If by reason of
an Event of Default, Agent or Majority Lenders elect to declare the Obligations
to be immediately due and payable, then any yield maintenance fee with respect
to a LIBOR Portion shall become due and payable in the same manner as though
Borrowers had exercised such right of prepayment.
3.3 Mandatory and Optional Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral. Except as provided in subsections 6.4.2 and 8.2.9, if any Borrower
or any of its Subsidiaries sells
13
any of the Collateral or if any of the Collateral is lost or destroyed or taken
by condemnation, Borrowers shall, unless otherwise agreed by Majority Lenders,
pay to Agent for the ratable benefit of Lenders as and when received by such
Borrower or such Subsidiary and as a mandatory prepayment of the Loans, as
herein provided, a sum equal to the proceeds (including insurance payments but
net of costs and taxes incurred in connection with such sale or event) received
by such Borrower or such Subsidiary from such sale, loss, destruction or
condemnation. To the extent that the Collateral sold, lost, destroyed or
condemned consists of Equipment (other than Equipment that was financed with the
proceeds of Equipment Loans), real Property, or other Property other than
Accounts or Inventory, the applicable prepayment shall be applied first to the
installments of principal due under the Term Notes ratably, to be applied to
future installment payments in inverse order of maturity until paid in full,
second to the installments of principal due under the Equipment Loan Notes
ratably, to be applied to future installment payments in inverse order of
maturity until paid in full, and third to repay outstanding principal of
Revolving Credit Loans, on a pro rata basis. To the extent that Collateral sold,
lost, destroyed or condemned consists of Equipment that was financed with the
proceeds of Equipment Loans, the applicable prepayment shall be applied first to
the installments of principal due under the applicable Equipment Loan Notes,
ratably, to be applied to future installment payments in inverse order of
maturity until paid in full, second to installments of principal due under the
other Equipment Loan Notes, ratably, to be applied to future installment
payments in inverse order of maturity, third to installments of principal due
under the Term Notes, ratably, to be applied to future installment payments in
inverse order of maturity, and fourth to repay outstanding principal of
Revolving Credit Loans, on a pro rata basis. To the extent that the Collateral
sold, lost, destroyed or condemned consists of Accounts or Inventory, the
applicable prepayment shall be applied to reduce the outstanding principal
balance of the Revolving Credit Loans, but shall not permanently reduce the
Revolving Loan Commitments.
Notwithstanding the foregoing:
(x) if the proceeds of insurance (net of costs and taxes
incurred) with respect to any loss or destruction of Equipment, Inventory or
real Property (i) are less than $500,000, unless an Event of Default is then in
existence, such amounts shall be provisionally applied to reduce the outstanding
principal balance of the Revolving Credit Loans and provided no Default or Event
of Default shall have occurred and be continuing, Borrowers shall be permitted
within 180 days (or such longer period as reasonably consented to by Agent)
after the receipt by the applicable Borrower of such proceeds to reborrow such
proceeds in accordance with the terms of this Agreement for use in replacing or
repairing the damaged or lost Collateral. If such damaged or lost Collateral is
not replaced or repaired within such 180-day (or such longer period as
reasonably consented to by Agent) period, all such proceeds shall be applied to
installments of principal due under the Term Notes in the manner specified in
the second sentence of this Section 3.3.1 until payment thereof in full; and
(y) if (i) the net sales proceeds received by any Borrower
in connection with any sale of Equipment (other than Equipment purchased, in
part, with the proceeds of Equipment Loans) or real Property exceed 125% of the
most recent appraised value of such Equipment or real Property (as determined by
Agent in the reasonable exercise of its discretion), (ii) no Event of Default
has occurred and is continuing, and (iii) at the time of such sale, if average
Availability for the sixty (60) days immediately prior to such sale equals or
exceeds $6,000,000,
14
then the excess of such net sale proceeds over 125% of such appraised value of
the sold Equipment or real Property shall be applied to reduce the outstanding
principal balance of the Revolving Credit Loans.
3.3.2 Excess Cash Flow Recapture. Borrowers shall prepay the
Loans in amounts equal to Borrowers' Excess Cash Flow with respect to each
fiscal year of ETI during the Term hereof, commencing with the fiscal year
ending December 31, 2003, such prepayments to be based upon, and made within 5
Business Days following the due date for delivery by Borrowers to Agent of the
annual financial statements required by subsection 8.1.3(i) hereof and each such
prepayment shall be applied to the Loans in the manner specified in the second
sentence of subsection 3.3.1 until payment thereof in full; provided, however,
that the maximum amount of prepayments required pursuant to this subsection
3.3.2 shall be equal to $1,000,000.
3.3.3 Proceeds from Issuance of Additional Indebtedness or
Equity. If any Borrower issues any additional Indebtedness or obtains any
additional equity in a manner permitted under this Agreement, Borrowers shall
pay to Agent for the ratable benefit of Lenders, when and as received by such
Borrower and as a mandatory prepayment of the Obligations, a sum equal to one
hundred percent (100%) of the net proceeds to the applicable Borrower of the
issuance of such Indebtedness or equity. Any such prepayment shall be applied to
the Loans in the manner specified in the second sentence of subsection 3.3.1
until payment thereof in full.
3.3.4 LIBOR Portions. If the application of any payment made in
accordance with the provisions of this Section 3.3 at a time when no Event of
Default has occurred and is continuing would result in termination of a LIBOR
Portion prior to the last day of the Interest Period for such LIBOR Portion, the
amount of such prepayment shall not be applied to such LIBOR Portion, but will,
at Borrowers' option, be held by Agent in a non-interest bearing account at a
Lender or another bank satisfactory to Agent in its discretion, which account is
in the name of Agent and from which account only Agent can make any withdrawal,
in each case to be applied as such amount would otherwise have been applied
under this Section 3.3 at the earlier to occur of (i) the last day of the
relevant Interest Period or (ii) the occurrence of a Default or an Event of
Default.
3.3.5 Optional Prepayments. Borrowers may, at their option from
time to time upon not less than 3 days prior written notice to Agent, prepay
installments of the Term Notes or the Equipment Loan Notes, provided that the
amount of any such prepayment is at least $500,000 and in integral multiples of
$100,000 above $500,000, and that such prepayments are made ratably with respect
to all Term Notes or all Equipment Loan Notes, as applicable. Each such
prepayment shall be applied to the installments of principal due under the Term
Notes or Equipment Loan Notes, as applicable, in the inverse order of maturity.
Optional prepayments made on or prior to December 31, 2004, shall be applied to
Loans in the manner specified in the second sentence of subsection 3.3.1 until
payment thereof in full. Any such optional prepayment made after December 31,
2004 shall be credited against the amount of the mandatory prepayment required
under subsection 3.3.2 for the fiscal year in which such optional prepayment was
made. Except for charges under subsection 3.2.5 applicable to prepayments of
LIBOR Term Portions or LIBOR Equipment Portions, and except for charges under
Section 2.6, such prepayments shall be without premium or penalty.
15
3.4 Application of Payments and Collections.
3.4.1 Collections. All items of payment received by Agent by
12:00 noon, Chicago, Illinois, time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
Chicago, Illinois, time, on any Business Day shall be deemed received on the
following Business Day. If as the result of collections of Accounts as
authorized by subsection 6.2.4 hereof or otherwise, a credit balance exists in
the Loan Account, such credit balance shall not accrue interest in favor of
Borrowers, but shall be disbursed to Borrowers or otherwise at ETI's, on behalf
of each Borrower, direction in the manner set forth in subsection 3.1.2, upon
ETI's, on behalf of each Borrower, request at any time, so long as no Default or
Event of Default then exists. Agent may at its option, offset such credit
balance against any of the Obligations upon and during the continuance of an
Event of Default.
3.4.2 Apportionment, Application and Reversal of Payments.
Principal and interest payments shall be apportioned ratably among Lenders
(according to the unpaid principal balance of the Loans to which such payments
relate held by each Lender). All payments shall be remitted to Agent and all
such payments not relating to principal or interest of specific Loans, or not
constituting payment of specific fees, and all proceeds of Accounts, or, except
as provided in subsection 3.3.1, other Collateral received by Agent, shall be
applied, ratably, subject to the provisions of this Agreement, first, to pay any
fees, indemnities, or expense reimbursements (other than amounts related to
Product Obligations) then due to Agent or Lenders from Borrowers; second, to pay
interest due from Borrowers in respect of all Loans, including and Agent Loans;
third, to pay or prepay principal of Agent Loans; fourth, to pay or prepay
principal of the Revolving Credit Loans (other than Agent Loans) and unpaid
reimbursement obligations in respect of Letters of Credit; fifth, to pay an
amount to Agent equal to all outstanding Letter of Credit Obligations to be held
as cash Collateral for such Obligations; sixth, to pay or prepay principal of
the Term Loan; seventh, to pay or prepay principal of the Equipment Loans;
eighth, to the payment of any other Obligation (other than amounts related to
Product Obligations) due to Agent or any Lender by Borrowers; and ninth, to pay
any fees, indemnities or expense reimbursements related to Product Obligations.
After the occurrence and during the continuance of an Event of Default, Agent
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Agent or its
agent against the Obligations, in such manner as Agent may deem advisable,
notwithstanding any entry by Agent or any Lender upon any of its books and
records.
3.5 All Loans to Constitute One Obligation. The Loans and LC Guarantees
shall constitute one general Obligation of Borrowers, and shall be secured by
Agent's Lien upon all of the Collateral.
3.6 Loan Account. Agent shall enter all Loans as debits to a loan account
(the "Loan Account") and shall also record in the Loan Account all payments made
by Borrowers on any Obligations and all proceeds of Collateral which are finally
paid to Agent, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrowers.
3.7 Statements of Account. Agent will account to Borrowers monthly with a
statement of Loans, charges and payments made pursuant to this Agreement during
the
16
immediately preceding month, and such account rendered by Agent shall be
deemed final, binding and conclusive upon Borrowers absent demonstrable error
unless Agent is notified by ETI, on behalf of each Borrower, in writing to the
contrary within 30 days of the date each accounting is received by Borrowers.
Such notice shall only be deemed an objection to those items specifically
objected to therein.
3.8 Increased Costs. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) adopted or implemented after the date of this Agreement and having
general applicability to all banks or finance companies within the jurisdiction
in which any Lender operates (excluding, for the avoidance of doubt, the effect
of and phasing in of capital requirements or other regulations or guidelines
passed prior to the date of this Agreement), or any interpretation or
application thereof by any governmental authority charged with the
interpretation or application thereof, or the compliance of such Lender
therewith, shall:
(i) (1) subject such Lender to any tax with respect to this
Agreement (other than (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without limitation,
any franchise tax or any similar tax based on capital, net worth or
comparable basis for measurement and (b) any tax collected by a withholding
on payments and which neither is computed by reference to the net income of
the payee nor is in the nature of an advance collection of a tax based on
or measured by the net income of the payee) or (2) change the basis of
taxation of payments to such Lender of principal, fees, interest or any
other amount payable hereunder or under any Loan Documents (other than in
respect of (a) any tax based on or measured by net income or otherwise in
the nature of a net income tax, including, without limitation, any
franchise tax or any similar tax based on capital, net worth or comparable
basis for measurement and (b) any tax collected by a withholding on
payments and which neither is computed by reference to the net income of
the payee nor is in the nature of an advance collection of a tax based on
or measured by the net income of the payee);
(ii) impose, modify or hold applicable any reserve (except
any reserve taken into account in the determination of the applicable
LIBOR), special deposit, assessment or similar requirement against assets
held by, or deposits in or for the account of, advances or loans by, or
other credit extended by, any office of such Lender, including (without
limitation) pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or
(iii) impose on such Lender or the London interbank market any
other condition with respect to any Loan Document;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining Loans hereunder or the result of any of the
foregoing is to reduce the rate of return on such Lender's capital as a
consequence of its obligations hereunder, or the result of any of the foregoing
is to reduce the amount of any payment (whether of principal, interest or
otherwise) in respect of any of the Loans, then, in any such case, Borrowers
shall pay such Lender, upon demand and certification not later than sixty (60)
days following its receipt of notice of the imposition of such increased costs,
such additional amount as will compensate such
17
Lender for such additional cost or such reduction, as the case may be, to the
extent such Lender has not otherwise been compensated, with respect to a
particular Loan, for such increased cost as a result of an increase in the Base
Rate or the LIBOR. An officer of the applicable Lender shall determine the
amount of such additional cost or reduced amount using reasonable averaging and
attribution methods and shall certify the amount of such additional cost or
reduced amount to Borrowers, which certification shall include a written
explanation of such additional cost or reduction to Borrowers. Such
certification shall be conclusive absent demonstrable error. If a Lender claims
any additional cost or reduced amount pursuant to this Section 3.8, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different lending office or to file any certificate
or document reasonably requested by ETI, on behalf of each Borrower, if the
making of such designation or filing would avoid the need for, or reduce the
amount of, any such additional cost or reduced amount and would not, in the sole
discretion of such Lender, be otherwise disadvantageous to such Lender.
3.9 Basis for Determining Interest Rate Inadequate. In the event that
Agent or any Lender shall have determined that:
(i) reasonable means do not exist for ascertaining the LIBOR
for any Interest Period; or
(ii) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank market with
respect to a proposed LIBOR Portion, or a proposed conversion of a Base
Rate Portion into a LIBOR Portion; then
Agent or such Lender shall give Borrowers prompt written, telephonic or
electronic notice of the determination of such effect. If such notice is given,
(i) any such requested LIBOR Portion shall be made as a Base Rate Portion,
unless ETI, on behalf of each Borrower, shall notify Agent no later than 10:00
a.m. (Chicago, Illinois time) three (3) Business Days prior to the date of such
proposed borrowing that the request for such borrowing shall be canceled or made
as an unaffected type of LIBOR Portion, and (ii) any Base Rate Portion which was
to have been converted to an affected type of LIBOR Portion shall be continued
as or converted into a Base Rate Portion, or, if ETI, on behalf of each
Borrower, shall notify Agent, no later than 10:00 a.m. (Chicago, Illinois time)
three (3) Business Days prior to the proposed conversion, shall be maintained as
an unaffected type of LIBOR Portion.
3.10 Sharing of Payments, Etc. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of any Loan made by it in excess of its ratable share
of payments on account of Loans made by all Lenders, such Lender shall forthwith
purchase from each other Lender such participation in such Loan as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each other Lender; provided, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lenders the purchase price to the extent of such recovery, together with an
amount equal to such Lender's ratable share (according to the proportion of (i)
the amount of such Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the
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purchasing Lender in respect of the total amount so recovered. Borrowers agree
that any Lender so purchasing a participation from another Lender pursuant to
this Section 3.10 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation. Notwithstanding anything to the contrary
contained herein, all purchases and repayments to be made under this Section
3.10 shall be made through Agent.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to the right of Lenders to cease making
Loans to Borrowers during the continuance of any Default or Event of Default,
this Agreement shall be in effect for a period through and including August 20,
2005 (the "Term"), unless terminated as provided in Section 4.2 hereof.
4.2 Termination.
4.2.1 Termination by Lenders. Agent may, and at the direction of
Majority Lenders shall, terminate this Agreement without notice upon or after
the occurrence and during the continuance of an Event of Default.
4.2.2 Termination by Borrowers. Upon at least 90 days prior
written notice to Agent and Lenders, Borrowers may, at their option, terminate
this Agreement; provided, however, no such termination shall be effective until
Borrowers have paid or collateralized to Agent's satisfaction all of the
Obligations in immediately available funds, all Letters of Credit and LC
Guaranties have expired, terminated or have been cash collateralized to Agent's
satisfaction and Borrowers have complied with Section 2.6 and subsection 3.2.5.
Any notice of termination given by Borrowers shall be irrevocable unless all
Lenders otherwise agree in writing and no Lender shall have any obligation to
make any Loans or issue or procure any Letters of Credit or LC Guaranties on or
after the termination date stated in such notice. Borrowers may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly.
4.2.3 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrowers contained in the Loan Documents
shall survive any such termination and Agent shall retain its Liens in the
Collateral and Agent and each Lender shall retain all of its rights and remedies
under the Loan Documents notwithstanding such termination until all Obligations
have been discharged or paid, in full, in immediately available funds,
including, without limitation, all Obligations under Section 2.6 and subsection
3.2.5 resulting from such termination. Notwithstanding the foregoing or the
payment in full of the Obligations, Agent shall not be required to terminate its
Liens in the Collateral unless, with respect to any loss or damage Agent may
incur as a result of dishonored checks or other items of payment received by
Agent from any Borrower or any Account Debtor and applied to the Obligations,
Agent shall, at its option, (i) have received a written agreement satisfactory
to Agent, executed by Borrowers and by any Person whose loans or other advances
to Borrowers are used in whole or in part to satisfy the Obligations,
indemnifying Agent and each Lender from any such loss or damage or (ii) have
retained cash Collateral or other
19
Collateral for such period of time as Agent, in its discretion, may deem
necessary to protect Agent and each Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
grants to Agent for the benefit of itself and each Lender a continuing Lien upon
all of such Borrower's assets, including all of the following Property and
interests in Property of such Borrower, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including, any and all licenses, options, warranties,
service contracts, program services, test rights, maintenance rights,
support rights, improvement rights, renewal rights and indemnifications,
and any substitutions, replacements, additions or model conversions of any
of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment Intangibles
and Software;
(xii) Goods (including all of its Equipment, Fixtures and
Inventory), and all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property;
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(xvii) money (of every jurisdiction whatsoever);
(xviii) Letter-of-Credit Rights;
(xix) Payment Intangibles;
(xx) Security Entitlements;
(xxi) Software;
(xxii) Supporting Obligations;
(xxiii) Uncertificated Securities; and
(xxiv) to the extent not included in the foregoing, all
other personal property of any kind or description;
together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, or evidencing,
embodying, incorporating or referring to any of the foregoing, and all Proceeds,
products, offspring, rents, issues, profits and returns of and from any of the
foregoing.
5.2 Other Collateral.
5.2.1 Commercial Tort Claims. Borrowers shall promptly notify
Agent in writing upon any Borrower incurring or otherwise obtaining a Commercial
Tort Claim after the Closing Date against any third party and, upon request of
Agent, promptly enter into an amendment to this Agreement and do such other acts
or things deemed appropriate by Agent to give Agent a security interest in any
such Commercial Tort Claim. Borrowers represent and warrant that as of the date
of this Agreement, to their knowledge, no Borrower possesses any Commercial Tort
Claims.
5.2.2 Other Collateral. Borrowers shall promptly notify Agent in
writing upon any Borrower acquiring or otherwise obtaining any Collateral after
the date hereof consisting of Deposit Accounts, Investment Property,
Letter-of-Credit Rights or Electronic Chattel Paper and, upon the request of
Agent, promptly execute such other documents, and do such other acts or things
deemed appropriate by Agent to deliver to Agent control with respect to such
Collateral; promptly notify Agent in writing upon any Borrower acquiring or
otherwise obtaining any Collateral after the date hereof consisting of Documents
or Instruments and, upon the request of Agent, will promptly execute such other
documents, and do such other acts or things deemed appropriate by Agent to
deliver to Agent possession of such Documents which are negotiable and
Instruments, and, with respect to nonnegotiable Documents, to have such
nonnegotiable Documents issued in the name of Agent; and with respect to
Collateral in the possession of a third party, other than Certificated
Securities and Goods covered by a Document, obtain an acknowledgement from the
third party that it is holding the Collateral for the benefit of Agent.
5.3 Lien Perfection; Further Assurances. Each Borrower shall execute such
UCC-1 financing statements as are required by the UCC and such other
instruments, assignments or
21
documents as are necessary to perfect Agent's Lien upon any of the Collateral
and shall take such other action as may be required to perfect or to continue
the perfection of Agent's Lien upon the Collateral. Unless prohibited by
applicable law, Borrowers hereby authorize Agent to execute and file any such
financing statement, including, without limitation, financing statements that
indicate the Collateral (i) as all assets of any Borrower or words of similar
effect, or (ii) as being of an equal or lesser scope, or with greater or lesser
detail, than as set forth in Section 5.1, on any Borrower's behalf. Each
Borrower also hereby ratifies its authorization for Agent to have filed in any
jurisdiction any like financing statements or amendments thereto if filed prior
to the date hereof. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof. At Agent's request, each
Borrower shall also promptly execute or cause to be executed and shall deliver
to Agent any and all documents, instruments and agreements deemed necessary by
Agent, to give effect to or carry out the terms or intent of the Loan Documents.
5.4 Lien on Realty. The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by the Mortgages upon all
real Property of any Borrower described therein. If any Borrower shall acquire
at any time or times hereafter any fee simple interest in other real Property
(other than leasehold interests in sales offices or warehouses), such Borrower
agrees promptly to execute and deliver to Agent, for its benefit and the ratable
benefit of Lenders, as additional security and Collateral for the Obligations,
deeds of trust, security deeds, mortgages or other collateral assignments
reasonably satisfactory in form and substance to Agent and its counsel (herein
collectively referred to as "New Mortgages") covering such real Property. The
Mortgages and each New Mortgage shall be duly recorded (at Borrowers' expense)
in each office where such recording is required to constitute a valid Lien on
the real Property covered thereby. In respect to any Mortgage or any New
Mortgage, the applicable Borrower shall deliver to Agent, at Borrowers' expense,
mortgagee title insurance policies issued by a title insurance company
reasonably satisfactory to Agent, which policies shall be in form and substance
reasonably satisfactory to Agent and shall insure a valid Lien in favor of Agent
for the benefit of itself and each Lender on the Property covered thereby,
subject only to Permitted Liens and those other exceptions reasonably acceptable
to Agent and its counsel. The applicable Borrower shall also deliver to Agent
such other usual and customary documents, including, without limitation, ALTA
Surveys of the real Property described in the Mortgages or any New Mortgage, as
Agent and its counsel may reasonably request relating to the real Property
subject to the Mortgages or the New Mortgages.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General.
6.1.1 Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by each
Borrower and its Subsidiaries at one or more of the business locations set forth
in Exhibit 6.1.1 hereto, as updated by Borrowers providing prior written notice
to Agent of any new location.
6.1.2 Insurance of Collateral. Borrowers shall maintain and pay
for insurance upon all Collateral wherever located and with respect to the
business of Borrowers and each of their Subsidiaries, covering casualty, hazard,
public liability, workers' compensation and such
22
other risks in such amounts and with such insurance companies as are reasonably
satisfactory to Agent. Borrowers shall deliver certified copies of such policies
to Agent as promptly as practicable, with satisfactory lender's loss payable
endorsements, naming Agent as a loss payee, assignee or additional insured, as
appropriate, as its interest may appear, and showing only such other loss
payees, assignees and additional insureds as are satisfactory to Agent. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 10 days' prior written notice to Agent in the event of
cancellation of the policy for nonpayment of premium and not less than 30 days'
prior written notice to Agent in the event of cancellation of the policy for any
other reason whatsoever and a clause specifying that the interest of Agent shall
not be impaired or invalidated by any act or neglect of any Borrower, any of its
Subsidiaries or the owner of the Property or by the occupation of the premises
for purposes more hazardous than are permitted by said policy. Borrowers agree
to deliver to Agent, promptly as rendered, true copies of all reports made in
any reporting forms to insurance companies. All proceeds of business
interruption insurance (if any) of Borrowers and their Subsidiaries shall be
remitted to Agent for application to the outstanding balance of the Revolving
Credit Loans.
Unless Borrowers provide Agent with evidence of the insurance
coverage required by this Agreement, Agent may purchase insurance at Borrowers'
expense to protect Agent's interests in the Properties of Borrowers and their
Subsidiaries. This insurance may, but need not, protect the interests of
Borrowers and their Subsidiaries. The coverage that Agent purchases may not pay
any claim that any Borrower or any Subsidiary makes or any claim that is made
against any Borrower or any such Subsidiary in connection with said Property.
Borrowers may later cancel any insurance purchased by Agent, but only after
providing Agent with evidence that Borrowers and their Subsidiaries have
obtained insurance as required by this Agreement. If Agent purchases insurance,
Borrowers will be responsible for the costs of that insurance, including
interest and any other charges Agent may impose in connection with the placement
of insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs
of the insurance may be more than the cost of insurance that Borrowers and their
Subsidiaries may be able to obtain on their own.
6.1.3 Protection of Collateral. Neither Agent nor any Lender
shall be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except for reasonable care in the
custody thereof while any Collateral is in Agent's or any Lender's actual
possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrowers' sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrowers
shall keep accurate and complete records of their Accounts and all payments and
collections thereon and shall submit to Agent on such periodic basis as Agent
shall request a sales and collections report for the preceding period, in form
acceptable to Agent. Monthly, on or prior to the 15th day of each month for the
immediately prior month, or more frequently as requested by Agent, from and
after the date hereof, Borrowers shall deliver to Agent a detailed aged trial
balance of all of its Accounts, specifying the names, addresses, face values,
dates of invoices and due dates for
23
each Account Debtor obligated on an Account so listed ("Schedule of Accounts"),
and upon Agent's request therefor, copies of proof of delivery and the original
copy of all documents, including, without limitation, repayment histories and
present status reports relating to the Accounts so scheduled and such other
matters and information relating to the status of then existing Accounts as
Agent shall request. If requested by Agent, Borrowers shall execute and deliver
to Agent formal written assignments of all of its Accounts weekly or daily,
which shall include all Accounts that have been created since the date of the
last assignment, together with copies of invoices or invoice registers related
thereto.
6.2.2 Discounts, Allowances, Disputes. If any Borrower grants
any discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrowers shall report such discounts,
allowances or credits, as the case may be, to Agent as part of the next required
Schedule of Accounts.
6.2.3 Account Verification. Any of Agent's officers, employees
or agents shall have the right, at any time or times hereafter, in the name of
Agent, any designee of Agent or any Borrower, to verify the validity, amount or
any other matter relating to any Accounts by mail, telephone, electronic
communication or otherwise. Borrowers shall cooperate fully with Agent in an
effort to facilitate and promptly conclude any such verification process.
6.2.4 Maintenance of Dominion Account. Borrowers shall maintain
a Dominion Account or Accounts pursuant to lockbox and blocked account
arrangements acceptable to Agent with (x) for the period prior to June 30, 2003,
such banks as may be selected by Borrowers and be acceptable to Agent and (y)
for the period on and after July 1, 2003, Bank. Borrowers shall issue to any
such banks an irrevocable letter of instruction directing such banks to deposit
all payments or other remittances received in the lockbox and blocked accounts
to the Dominion Account for application on account of the Obligations as
provided in subsection 3.2.1. All funds deposited in any Dominion Account shall
immediately become the property of Agent, for the ratable benefit of Lenders,
and Borrowers shall obtain the agreement by such banks in favor of Agent to
waive any recoupment, setoff rights, and any security interest in, or against,
the funds so deposited. Agent assumes no responsibility for such lockbox and
blocked account arrangements, including, without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder.
6.2.5 Collection of Accounts, Proceeds of Collateral. Borrowers
agree that all invoices rendered and other requests made by any Borrower for
payment in respect of Accounts shall contain a written statement directing
payment in respect of such Accounts to be paid to a lockbox established pursuant
to subsection 6.2.4. To expedite collection, Borrowers shall endeavor in the
first instance to make collection of its Accounts for Agent. All remittances
received by any Borrower on account of Accounts, together with the proceeds of
any other Collateral, shall be held as Agent's property, for its benefit and the
benefit of Lenders, by Borrowers as trustee of an express trust for Agent's
benefit and Borrowers shall immediately deposit same in kind in the Dominion
Account. Agent retains the right at all times after the occurrence and during
the continuance of a Default or an Event of Default to notify Account Debtors
that Borrowers' Accounts have been assigned to Agent and to collect Borrowers'
Accounts directly in its own name, or in the name of Agent's agent, and to
charge the collection costs and expenses, including attorneys' fees, to
Borrowers.
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6.2.6 Taxes. If an Account includes a charge for any tax payable
to any governmental taxing authority, Agent is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of the applicable Borrower and to charge Borrowers therefor, except for
taxes that (i) are being actively contested in good faith and by appropriate
proceedings and with respect to which Borrowers maintain reasonable reserves on
their books therefor and (ii) would not reasonably be expected to result in any
Lien other than a Permitted Lien. In no event shall Agent or any Lender be
liable for any taxes to any governmental taxing authority that may be due by any
Borrower.
6.3 Administration of Inventory. Borrowers shall keep records of their
Inventory which records shall be complete and accurate and complete in all
material respects. Borrowers shall furnish to Agent Inventory reports
concurrently with the delivery of each Borrowing Base Certificate described in
subsection 8.1.4 monthly, on or before the 15th day of each month for the
immediately prior month, or more frequently as requested by Agent, which reports
will be in such other format and detail as Agent shall request and shall include
a current list of all locations of Borrowers' Inventory. Borrowers shall conduct
a physical inventory no less frequently than annually and shall provide to Agent
a report based on each such physical inventory promptly thereafter, together
with such supporting information as Agent shall reasonably request.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrowers shall keep
records of their Equipment which shall be complete and accurate in all material
respects itemizing and describing the kind, type, quality, quantity and book
value of its Equipment and all dispositions made in accordance with subsection
6.4.2 hereof, and Borrowers shall, and shall cause each of their Subsidiaries
to, furnish Agent with a current schedule containing the foregoing information
on at least an annual basis and more often if requested by Agent. Promptly after
the request therefor by Agent, Borrowers shall deliver to Agent any and all
evidence of ownership, if any, of any of their Equipment.
6.4.2 Dispositions of Equipment. Borrowers shall not, and shall
not permit any of their Subsidiaries to, sell, lease or otherwise dispose of or
transfer any of its respective Equipment or other fixed assets or any part
thereof without the prior written consent of Agent; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists and is continuing, to (i) dispositions of Equipment and other
fixed assets which, in the aggregate during any consecutive twelve-month period,
have a fair market value or a book value, whichever is less, of $50,000 or less,
provided that all proceeds thereof are remitted to Agent for application to the
Loans as provided in subsection 3.3.1, or (ii) replacements of Equipment or
other fixed assets that are substantially worn, damaged or obsolete with
Equipment or other fixed assets of like kind, function and value, provided that
the replacement Equipment or other fixed assets shall be acquired within 90 days
after any disposition of the Equipment or other fixed assets that are to be
replaced and the replacement Equipment or other fixed assets shall be free and
clear of Liens other than Permitted Liens that are not Purchase Money Liens.
6.5 Payment of Charges. All amounts chargeable to Borrowers under Section
6 hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall
25
bear interest from the date such advance was made until paid in full at the rate
applicable to Base Rate Revolving Portions from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Agent and each
Lender to enter into this Agreement and to make advances hereunder, each
Borrower warrants, represents and covenants to Agent and each Lender that:
7.1.1 Qualification. Each Borrower and each of its Subsidiaries
is a corporation, limited partnership or limited liability company duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization. Each Borrower and each
of its Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign limited liability company, limited partnership or
corporation, as applicable, in each state or jurisdiction listed on Exhibit
7.1.1 hereto and in all other states and jurisdictions in which the failure of
such Borrower or any of its Subsidiaries to be so qualified could reasonably be
expected to have a Material Adverse Effect.
7.1.2 Power and Authority. Each Borrower and each of its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate or
other relevant action and do not and will not: (i) require any consent or
approval of the shareholders of any Borrower or any of the shareholders,
partners or members, as the case may be, of any Subsidiary of any Borrower; (ii)
contravene any Borrower's or any of its Subsidiaries' charter, articles or
certificate of incorporation, partnership agreement, certificate of formation,
by-laws, limited liability agreement, operating agreement or other
organizational documents (as the case may be); (iii) violate, or cause any
Borrower or any of its Subsidiaries to be in default under, any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award in effect having applicability to any Borrower or any of its
Subsidiaries, the violation of which could reasonably be expected to have a
Material Adverse Effect; (iv) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which any Borrower or any of its Subsidiaries is a party or by
which it or its Properties may be bound or affected, the breach of or default
under which could reasonably be expected to have a Material Adverse Effect; or
(v) result in, or require, the creation or imposition of any Lien (other than
Permitted Liens) upon or with respect to any of the Properties now owned or
hereafter acquired by any Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each Borrower and each of its
Subsidiaries party thereto, enforceable against it in accordance with its
respective terms.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states, as of the
date hereof, (i) the correct name of each of the Subsidiaries of ETI, its
jurisdiction of incorporation or organization and the percentage of its Voting
Stock owned by ETI, (ii) the name of each Borrower's and each
26
of its Subsidiaries' corporate or joint venture relationships and the nature of
the relationship, (iii) the numbers and nature of all outstanding Securities of
ETI and the holder of Securities of each Subsidiary of ETI and (iv) the number
of authorized, issued and treasury Securities of ETI and each Subsidiary of ETI.
ETI has good title to all of the Securities it purports to own of each of such
Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such Securities have been duly issued and are fully paid and
non-assessable. Except as set forth on Exhibit 7.1.4, as of the date hereof,
there are no outstanding options to purchase, or any rights or warrants to
subscribe for, or any commitments or agreements to issue or sell any Securities
or obligations convertible into, or any powers of attorney relating to any
Securities of ETI or any of its Subsidiaries. Except as set forth on Exhibit
7.1.4, as of the date hereof, there are no outstanding agreements or instruments
binding upon any of ETI's or any of its Subsidiaries' partners, members or
shareholders, as the case may be, relating to the ownership of its Securities.
7.1.5 Names; Organization. Neither any Borrower nor any of its
Subsidiaries has been known as or has used any legal, fictitious or trade names
except those listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit
7.1.5, neither any Borrower nor any of its Subsidiaries has been the surviving
entity of a merger or consolidation or has acquired all or substantially all of
the assets of any Person. Each of each Borrower's and each of its Subsidiaries'
state(s) of incorporation or organization, Type of Organization and
Organizational I.D. Number is set forth on Exhibit 7.1.5. The exact legal name
of each Borrower and each of its Subsidiaries is set forth on Exhibit 7.1.5.
7.1.6 Business Locations; Agent for Process. Each of each
Borrower's and each of its Subsidiary's chief executive office, location of
books and records and other places of business are as listed on Exhibit 6.1.1
hereto, as updated from time to time by Borrowers in accordance with the
provisions of subsection 6.1.1. During the preceding one-year period, neither
any Borrower nor any of its Subsidiaries has had an office, place of business or
agent for service of process, other than as listed on Exhibit 6.1.1. All
tangible Collateral is and will at all times be kept by each Borrower and each
of its Subsidiaries in accordance with subsection 6.1.1. Except as shown on
Exhibit 6.1.1, as of the date hereof, no Inventory is stored with a bailee,
distributor, warehouseman or similar party, nor is any Inventory consigned to
any Person.
7.1.7 Title to Properties; Priority of Liens. Each Borrower and
each of its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its
real Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens. Each
Borrower and each of its Subsidiaries has paid or discharged all lawful claims
which, if unpaid, might become a Lien against any of any Borrower's or such
Subsidiary's Properties that is not a Permitted Lien. The Liens granted to Agent
under Section 5 hereof are first priority Liens, subject only to Permitted
Liens.
7.1.8 Accounts. Agent may rely, in determining which Accounts
are Eligible Accounts, on all statements and representations made by any
Borrower with respect to any Account or Accounts. With respect to each of any
Borrower's Accounts, whether or not such Account is an Eligible Account, unless
otherwise disclosed to Agent in writing:
27
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by a Borrower, in the ordinary
course of its business and in accordance with the terms and conditions of
all purchase orders, contracts or other documents relating thereto and
forming a part of the contract between the applicable Borrower and the
Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of
which has been furnished or is available to Agent;
(iv) There are no facts, events or occurrences which in any
way impair the validity or enforceability of any Accounts or tend to reduce
the amount payable thereunder from the face amount of the invoice and
statements delivered or made available to Agent with respect thereto;
(v) To the best of each Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (2) such
Account Debtor is Solvent; and
(vi) To the best of each Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against the Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
7.1.9 Equipment. The Equipment of each Borrower and each of its
Subsidiaries is in good operating condition and repair (other than with respect
to items of Equipment, which when taken in the aggregate, would not be material
to the operation of Borrowers' businesses) and all necessary replacements of and
repairs thereto shall be made so that the operating efficiency thereof shall be
maintained and preserved, reasonable wear and tear excepted. Neither any
Borrower nor any of its Subsidiaries will permit any Equipment to become affixed
to any real Property leased to any Borrower or any of its Subsidiaries so that
an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of and in form reasonably acceptable to
Agent, and Borrowers will not permit any of the Equipment of any Borrower or any
of its Subsidiaries to become an accession to any personal Property other than
Equipment that is subject to first priority (except for Permitted Liens) Liens
in favor of Agent.
7.1.10 Financial Statements; Fiscal Year. (a) The Consolidated
balance sheets of ETI and its Subsidiaries (including the accounts of all
Subsidiaries of ETI and its Subsidiaries for the respective periods during which
a Subsidiary relationship existed) as of January 31, 2003, and the related
statements of income, changes in shareholder's equity, and changes in financial
position for the periods ended on such dates, have been prepared in accordance
with GAAP, and present fairly in all material respects the financial positions
of Borrower and such Persons, at such dates and the results of ETI's and such
Persons' operations, for such periods. As of the date
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hereof, since January 31, 2003, there has been no material adverse change in the
financial position of Borrower and such other Persons, taken as a whole, as
reflected in the Consolidated balance sheet as of such date. As of the date
hereof, the fiscal year of Borrower and each of its Subsidiaries ends on
December 31 of each year.
(b) The Consolidated balance sheets of Uponor ETI Company and its
Subsidiaries (including the accounts of all Subsidiaries of Uponor ETI Company
and its Subsidiaries for the respective periods during which a Subsidiary
relationship existed) as of January 31, 2003, and the related statements of
income, changes in shareholder's equity, and changes in financial position for
the periods ended on such dates, have been prepared in accordance with GAAP, and
present fairly in all material respects the financial positions of Uponor ETI
Company and such Persons, at such dates and the results of Uponor ETI Company's
and such Persons' operations, for such periods. As of the date hereof, since
January 31, 2003, there has been no material adverse change in the financial
position of Uponor ETI Company and such other Persons, taken as a whole, as
reflected in the Consolidated balance sheet as of such date.
7.1.11 Full Disclosure. The financial statements referred to in
subsection 7.1.10 hereof do not, nor does this Agreement or any other written
statement of any Borrower to Agent or any Lender contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading.
7.1.12 Solvent Financial Condition. Each Borrower and each of its
Subsidiaries, is now and, after giving effect to the initial Loans to be made
and the initial Letters of Credit and LC Guaranties to be issued hereunder and
all related transactions including the consummation of the Acquisition, will be,
Solvent.
7.1.13 Surety Obligations. Except as set forth on Exhibit 7.1.13,
as of the date hereof, neither any Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract or has issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
7.1.14 Taxes. ETI's federal tax identification number is
84-087961. Mid-States' federal tax identification number is ▇▇-▇▇▇▇▇▇▇. The
federal tax identification number of each Subsidiary of each Borrower is shown
on Exhibit 7.1.14 hereto. Each Borrower and each of its Subsidiaries has filed
all federal, state and local tax returns and other reports relating to taxes it
is required by law to file, and has paid, or made provision for the payment of,
all taxes, assessments, fees, levies and other governmental charges upon it, its
income and Properties as and when such taxes, assessments, fees, levies and
charges are due and payable, unless and to the extent any thereof are being
actively contested in good faith and by appropriate proceedings and each
Borrower and each of its Subsidiaries maintains reasonable reserves on its books
therefor. The provision for taxes on the books of Borrowers and their
Subsidiaries is adequate for all years not closed by applicable statutes, and
for the current fiscal year.
7.1.15 Brokers. Except as shown on Exhibit 7.1.15 hereto, there
are no claims for brokerage commissions, finder's fees or investment banking
fees in connection with the transactions contemplated by this Agreement,
including, without limitation, the Acquisition.
29
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each
Borrower. and each of its Subsidiaries owns, possesses or licenses or has the
right to use all the patents, trademarks, service marks, trade names,
copyrights, licenses and other Intellectual Property necessary for the present
and planned future conduct of its business without any known conflict with the
rights of others, except for such conflicts as could not reasonably be expected
to have a Material Adverse Effect. All such patents, trademarks, service marks,
trade names, copyrights, licenses, and other similar rights are listed on
Exhibit 7.1.16 hereto. No claim has been asserted to any Borrower or any of its
Subsidiaries which is currently pending that their use of their Intellectual
Property or the conduct of their business does or may infringe upon the
Intellectual Property rights of any third party. To the knowledge of each
Borrower and except as set forth on Exhibit 7.1.16 hereto, as of the date
hereof, no Person is engaging in any activity that infringes in any material
respect upon any Borrower's or any of its Subsidiaries' material Intellectual
Property. Except as set forth on Exhibit 7.1.16, each Borrower's and each of its
Subsidiaries' (i) material trademarks, service marks, and copyrights are
registered with the U.S. Patent and Trademark Office or in the U.S. Copyright
Office, as applicable and (ii) material license agreements and similar
arrangements relating to its Inventory (1) permit, and do not restrict, the
assignment by any Borrower or any of its Subsidiaries to Agent, or any other
Person designated by Agent, of all of Borrowers' or such Subsidiary's, as
applicable, rights, title and interest pertaining to such license agreement or
such similar arrangement and (2) would permit the continued use by such Borrower
or such Subsidiary, or Agent or its assignee, of such license agreement or such
similar arrangement and the right to sell Inventory subject to such license
agreement for a period of no less than 6 months after a default or breach of
such agreement or arrangement. The consummation and performance of the
transactions and actions contemplated by this Agreement and the other Loan
Document, including without limitation, the exercise by Agent of any of its
rights or remedies under Section 10, will not result in the termination or
impairment of any of any Borrower's or any of its Subsidiaries' ownership or
rights relating to its Intellectual Property, except for such Intellectual
Property rights the loss or impairment of which could not reasonably be expected
to have a Material Adverse Effect. Except as listed on Exhibit 7.1.16 and except
as could not reasonably be expected to have a Material Adverse Effect, (i)
neither any Borrower nor any of its Subsidiaries is in breach of, or default
under, any term of any license or sublicense with respect to any of its
Intellectual Property and (ii) to the knowledge of each Borrower, no other party
to such license or sublicense is in breach thereof or default thereunder, and
such license is valid and enforceable.
7.1.17 Governmental Consents. Each Borrower and each of its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it, except where the failure to possess or
so maintain such rights could not reasonably be expected to have a Material
Adverse Effect.
7.1.18 Compliance with Laws. Each Borrower and each of its
Subsidiaries has duly complied, and its Properties, business operations and
leaseholds are in compliance with, the provisions of all federal, state and
local laws, rules and regulations applicable to such Borrower or such
Subsidiary, as applicable, its Properties or the conduct of its business, except
for such non-compliance as could not reasonably be expected to have a Material
Adverse Effect, and there have been no citations, notices or orders of
noncompliance issued to any Borrower or any
30
of its Subsidiaries under any such law, rule or regulation, except where such
noncompliance could not reasonably be expected to have a Material Adverse
Effect. Each Borrower and each of its Subsidiaries has established and maintains
an adequate monitoring system to insure that it remains in compliance in all
material respects with all federal, state and local rules, laws and regulations
applicable to it. No Inventory has been produced in violation of the Fair Labor
Standards Act (29 U.S.C. Section 201 et seq.), as amended.
7.1.19 Restrictions. Neither any Borrower nor any of its
Subsidiaries is a party or subject to any contract or agreement which restricts
its right or ability to incur Indebtedness, other than as set forth on Exhibit
7.1.19 hereto, none of which prohibit the execution of or compliance with this
Agreement or the other Loan Documents by any Borrower or any of its
Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit 7.1.20 hereto,
there are no actions, suits, proceedings or investigations pending, or to the
knowledge of Borrowers, threatened, against or affecting any Borrower or any of
its Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of any Borrower or any of its Subsidiaries which, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Neither any Borrower nor any of its Subsidiaries is in default with respect to
any order, writ, injunction, judgment, decree or rule of any court, governmental
authority or arbitration board or tribunal, which, singly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
7.1.21 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrowers' performance hereunder, constitute a Default or an Event of Default.
Neither any Borrower nor any of its Subsidiaries is in default in (and no event
has occurred and no condition exists which constitutes, or which the passage of
time or the giving of notice or both would constitute, a default in) the payment
of any Indebtedness to any Person for Money Borrowed in excess of $250,000.
7.1.22 Leases. Exhibit 7.1.22 hereto is a complete listing of all
capitalized and operating personal property leases of Borrowers and their
Subsidiaries and all real property leases of Borrowers and their Subsidiaries.
Each Borrower and each of its Subsidiaries is in full compliance with all of the
terms of each of its respective capitalized and operating leases, except where
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
7.1.23 Pension Plans. Except as disclosed on Exhibit 7.1.23
hereto, neither any Borrower nor any of its Subsidiaries has any Plan. Each
Borrower and each of its Subsidiaries is in compliance with the requirements of
ERISA and the regulations promulgated thereunder with respect to each Plan,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. No fact or situation that could reasonably be expected
to result in a material adverse change in the financial condition of Borrowers
and their Subsidiaries exists in connection with any Plan. Neither any Borrower
nor any of its Subsidiaries has any withdrawal liability in connection with a
Multiemployer Plan.
31
7.1.24 Trade Relations. There exists no actual or, to any
Borrower's knowledge, threatened termination, cancellation or limitation of, or
any modification or change in, the business relationship between any Borrower or
any of its Subsidiaries and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrowers and their Subsidiaries, or with any material supplier, except in each
case, where the same could not reasonably be expected to have a Material Adverse
Effect, and there exists no present condition or state of facts or circumstances
which would prevent any Borrower or any of its Subsidiaries from conducting such
business after the consummation of the transactions contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
7.1.25 Labor Relations. Except as described on Exhibit 7.1.25
hereto, as of the date hereof, neither any Borrower nor any of its Subsidiaries
is a party to any collective bargaining agreement. There are no material
grievances, disputes or controversies with any union or any other organization
of any Borrower's or any of its Subsidiaries' employees, or threats of strikes,
work stoppages or any asserted pending demands for collective bargaining by any
union or organization, except those that could not reasonably be expected to
have a Material Adverse Effect.
7.1.26 Acquisition. The Acquisition has been consummated pursuant
to the terms of the Acquisition Documents and in compliance with all applicable
laws.
7.1.27 Related Businesses. Borrowers are engaged in the
businesses of the manufacture and distribution of plastic pipe as of the Closing
Date, as well as in certain other businesses. These operations require financing
on a basis such that the credit supplied can be made available from time to time
to Borrowers, as required for the continued successful operation of Borrowers
taken as a whole. Borrowers have requested the Lenders to make credit available
hereunder primarily for the purposes of subsection 1.1.3 and generally for the
purposes of financing the operations of Borrowers. Each Borrower and each
Subsidiary of each Borrower expects to derive benefit (and the Board of
Directors of each Borrower and each Subsidiary of each Borrower has determined
that such Borrower or Subsidiary may reasonably be expected to derive benefit),
directly or indirectly, from a portion of the credit extended by Lenders
hereunder, both in its separate capacity and as a member of the group of
companies, since the successful operation and condition of each Borrower and
each Subsidiary of each Borrower is dependent on the continued successful
performance of the functions of the group as a whole. Each Borrower acknowledges
that, but for the agreement of each of the other Borrowers to execute and
deliver this Agreement, Agent and Lenders would not have made available the
credit facilities established hereby on the terms set forth herein.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrowers' or one of any Borrower's Subsidiary's
business or operations that would render the information in any exhibit attached
hereto or to any other Loan Document either inaccurate, incomplete or
misleading, so long as Majority Lenders have consented to such changes or such
changes are expressly permitted by this Agreement. Without limiting the
generality of the foregoing, each Loan request made or
32
deemed made pursuant to subsection 3.1.1 hereof shall constitute Borrowers'
reaffirmation, as of the date of each such loan request, of each representation,
warranty or other statement made or furnished to Agent or any Lender by or on
behalf of any Borrower, any Subsidiary of any Borrower, or any Guarantor in this
Agreement, any of the other Loan Documents, or any instrument, certificate or
financial statement furnished in compliance with or in reference thereto.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent
and each Lender and the parties thereto and the closing of the transactions
described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the Term, and thereafter for so long
as there are any Obligations outstanding, each Borrower covenants that, unless
otherwise consented to by Majority Lenders, in writing, it shall:
8.1.1 Visits and Inspections; Lender Meeting. Permit (i)
representatives of Agent, and during the continuation of any Default or Event of
Default any Lender, from time to time, as often as may be reasonably requested,
but only during normal business hours, to visit and inspect the Properties of
each Borrower and each of its Subsidiaries, inspect, audit and make extracts
from its books and records, and discuss with its officers, its employees and its
independent accountants, each Borrower's and each of its Subsidiaries' business,
assets, liabilities, financial condition, business prospects and results of
operations and (ii) appraisers engaged pursuant to Section 2.10 (whether or not
personnel of Agent), from time to time, as often as may be reasonably requested,
but only during normal business hours and subject to the limitations contained
in Section 2.10 of the Agreement, to visit and inspect the Properties of each
Borrower and each of its Subsidiaries, for the purpose of completing appraisals
pursuant to Section 2.10. Agent, if no Default or Event of Default then exists,
shall give Borrowers reasonable prior notice of any such inspection or audit.
Without limiting the foregoing, Borrowers will participate and will cause their
key management personnel to participate in a meeting with Agent and Lenders
periodically during each year, which meeting(s) shall be held at such times and
such places as may be reasonably requested by Agent.
8.1.2 Notices. Promptly notify Agent in writing of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading in any material respect as of the date made
or remade. In addition, Borrowers agree to provide Agent with prompt written
notice of any change in the information disclosed in any Exhibit hereto (other
than changes which are expressly permitted by this Agreement), in each case
after giving effect to the materiality limits and Material Adverse Effect
qualifications contained therein.
8.1.3 Financial Statements. Keep, and cause each of its
Subsidiaries to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with
customary accounting practices reflecting all its financial transactions; and
cause to be prepared and furnished to Agent and each Lender, the following, all
to be prepared in accordance with GAAP applied on a consistent basis, unless
ETI's certified
33
public accountants concur in any change therein and such change is
disclosed to Agent and is consistent with GAAP:
(i) not later than 90 days after the close of each fiscal
year of ETI, unqualified (except for a qualification for a change in
accounting principles with which the accountant concurs) audited financial
statements of ETI and its Subsidiaries as of the end of such year, on a
Consolidated and consolidating basis, certified by a firm of independent
certified public accountants of recognized standing selected by ETI but
acceptable to Agent and, within a reasonable time thereafter a copy of any
management letter issued in connection therewith;
(ii) not later than 30 days after the end of each month
hereafter, including the last month of ETI's fiscal year, unaudited interim
financial statements of ETI and its Subsidiaries as of the end of such
month and of the portion of the fiscal year then elapsed, on a
Consolidating and consolidated basis, certified by the principal financial
officer of ETI as prepared in accordance with GAAP and fairly presenting in
all material respects the financial position and results of operations of
ETI and its Subsidiaries for such month and period subject only to changes
from audit and year-end adjustments and except that such statements need
not contain notes;
(iii) together with each delivery of financial statements
pursuant to clause (i) of this subsection 8.1.3 and clause (ii) of this
subsection 8.1.3 for the months of March, June, September and December, a
management report (1) setting forth in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year and the
corresponding figures from the most recent Projections for the current
fiscal year delivered pursuant to subsection 8.1.7 and (2) identifying the
reasons for any significant variations. The information above shall be
presented in reasonable detail and shall be certified by the chief
financial officer of ETI to the effect that such information fairly
presents in all material respects the results of operation and financial
condition of ETI and its Subsidiaries as at the dates and for the periods
indicated;
(iv) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which ETI has made available to its Securities holders and copies
of any regular, periodic and special reports or registration statements
which ETI or any of its Subsidiaries files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor,
or any national securities exchange;
(v) upon request of Agent, copies of any annual report to be
filed with ERISA in connection with each Plan; and
(vi) such other data and information (financial and
otherwise) as Agent or any Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or ETI's or any of its
Subsidiaries' financial condition or results of operations.
34
The foregoing notwithstanding, Agent and Lenders agree that in respect to
operating divisions, Borrower shall only be required to deliver income
statements pursuant to clauses (i) and (ii) above.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, ETI shall forward to Agent a
copy of the accountants' letter to ETI's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to Agent a certificate of the aforesaid certified public
accountants certifying to Agent that, based upon their examination of the
financial statements of ETI and its Subsidiaries performed in connection with
their examination of said financial statements, they are not aware of any
Default or Event of Default, or, if they are aware of such Default or Event of
Default, specifying the nature thereof. Concurrently with the delivery of the
financial statements described in paragraph (i) and (ii) of this subsection
8.1.3, or more frequently if reasonably requested by Agent, ETI shall cause to
be prepared and furnished to Agent a Compliance Certificate in the form of
Exhibit 8.1.3 hereto executed by the Chief Financial Officer of ETI (a
"Compliance Certificate").
8.1.4 Borrowing Base Certificates. On or before each Tuesday of
each week from and after the date hereof, Borrowers shall deliver to Agent, in
form acceptable to Agent, a weekly Borrowing Base Certificate as of the last day
of the immediately preceding week, with such supporting materials as Agent shall
reasonably request. If Borrowers deem it advisable, or Agent shall request,
Borrowers shall execute and deliver to Agent Borrowing Base Certificates more
frequently than weekly.
8.1.5 Landlord, Processor and Storage Agreements. Provide Agent
with copies of all agreements between any Borrower or any of its Subsidiaries
and any landlord, warehouseman, processor, distributor or consignee which owns
or is the lessee of any premises at which any Collateral may, from time to time,
be kept. With respect to any lease (other than leases for sales offices),
warehousing agreement or any processing agreement in any case entered into after
the Closing Date, Borrowers shall provide Agent with landlord waivers, bailee
letters or processor letters with respect to such premises. Such landlord
waivers, bailee letters or processor letters shall be in a form supplied by
Agent to Borrowers with such reasonable revisions as are customarily accepted by
Agent or by similar financial institutions in similar financial transactions. In
the event that any Borrower fails to deliver any such landlord waiver, bailee
letter or processor letter with respect to applicable location, Borrower
acknowledges that Agent shall have the right to establish reserves pursuant to
subsection 1.1.1 to protect against any claim of any such landlord, bailee or
processor. Borrowers acknowledge that the initial amount of reserves established
by Agent to protect against claims of the landlord for Borrowers' Conroe, Texas
and Mt. Sterling Kentucky facilities shall be $342,000.
8.1.6 Projections. No later than 30 days prior to the end of
each fiscal year of ETI, deliver to Agent Projections of ETI and each of its
Subsidiaries for the forthcoming fiscal year, month by month.
8.1.7 Subsidiaries. Cause each Subsidiary of any Borrower (other
than Mid-States), whether now or hereafter in existence, promptly upon Agent's
request therefor, to execute and deliver to Agent a Guaranty Agreement and a
security agreement pursuant to which
35
such Subsidiary guaranties the payment of all Obligations and grants to Agent a
first priority Lien (subject only to Permitted Liens) on all of its Properties
of the types described in Section 5.1. Additionally, the applicable Borrower
shall execute and deliver to Agent a pledge agreement pursuant to which such
Borrower grants to Agent a first priority Lien (subject only to Permitted Liens)
with respect to all of the issued and outstanding Securities of each such
Subsidiary.
8.1.8 Deposit and Brokerage Accounts. For each deposit account
or brokerage account that any Borrower at any time opens or maintains, such
Borrower shall, at Agent's request and option, pursuant to an agreement in form
and substance reasonably satisfactory to Agent, cause the depository bank or
securities intermediary, as applicable, to agree to comply at any time with
instructions from Agent to such depository bank or securities intermediary, as
applicable, directing the disposition of funds from time to time credited to
such deposit or brokerage account, without further consent of Borrower.
8.1.9 Interest Rate Protection. On or prior to April 1, 2003,
Borrowers shall obtain from Bank and thereafter maintain with Bank interest rate
protection in form and on terms acceptable to Agent for a notional amount of not
less than $2,500,000.
8.1.10 Cash Management Services. Prior to June 30, 2003,
Borrowers shall enter into and maintain with Bank agreements for all or
substantially all of each Borrower's and each of its Subsidiaries' controlled
disbursements and lockbox cash management services; provided that Bank's charges
for such services are not substantially greater than prevailing market rates.
8.1.11 Supply Contract. On or prior to April 15, 2003, ETI and PW
shall have entered into a Supply Contract (or other comparable agreement) (the
"Supply Contract") with [___________], in form and substance reasonably
acceptable to Agent, which Supply Contract shall provide, inter alia, that ETI
and PW and their Subsidiaries shall have [________] payment terms for the period
from the Closing Date through August 20, 2005 and for credit limits in amounts
at least as large as available to Uponor ETI Company and PW prior to the Closing
Date.
8.1.12 Environmental Reviews. Complete or cause to be completed
in all material respects all environmental remediation procedures recommended in
the Environmental Reviews on or prior to the first anniversary of the Closing
Date.
8.2 Negative Covenants. During the Term, and thereafter for so long as
there are any Obligations outstanding, each Borrower covenants that, unless
otherwise consented to by Majority Lenders, in writing, it shall not:
8.2.1 Mergers; Consolidations; Acquisitions; Structural Changes.
Merge or consolidate, or permit any Subsidiary of any Borrower to merge or
consolidate, with any Person; nor change its or any of its Subsidiaries' state
of incorporation or organization, Type of Organization or Organizational I.D.
Number; nor change its or any of its Subsidiaries' legal name; nor acquire, nor
permit any of its Subsidiaries to acquire, all or any substantial part of the
Properties of any Person, except for:
[_____] confidential treatment requested.
36
(i) mergers of any Subsidiary of a Borrower into a
Borrower or another wholly-owned Subsidiary of a Borrower; and
(ii) acquisitions of assets consisting of fixed assets
or real property that constitute Capital Expenditures permitted under
subsection 8.2.8.
8.2.2 Loans. Except as provided in Section 8.2.7 hereof, make,
or permit any Subsidiary of any Borrower to make, any loans or other advances of
money (other than for salary, travel, advances, advances against commissions and
other similar advances in the ordinary course of business) to any Person.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any Subsidiary of any Borrower to create, incur or suffer to
exist, any Indebtedness, except:
(i) Obligations owing to Agent and Lenders;
(ii) Indebtedness of any Subsidiary of a Borrower to a
Borrower;
(iii) accounts payable to trade creditors and current
operating expenses (other than for Funded Debt) which are not aged more
than 30 days from the due date, in each case incurred in the ordinary
course of business and paid within such time period, unless the same are
being actively contested in good faith and by appropriate and lawful
proceedings; and such Borrower or such Subsidiary shall have set aside such
reserves, if any, with respect thereto as are required by GAAP and deemed
adequate by such Borrower or such Subsidiary and its independent
accountants;
(iv) Obligations to pay Rentals permitted by Section
8.2.18;
(v) Permitted Purchase Money Indebtedness;
(vi) contingent liabilities arising out of endorsements
of checks and other negotiable instruments for deposit or collection in the
ordinary course of business;
(vii) Indebtedness under Capitalized Leases listed on
Exhibit 7.1.22;
(viii) Indebtedness incurred in connection with
performance bonds, workmen's compensation bonds or the like;
(ix) Indebtedness incurred pursuant to the License
Agreement;
(x) Indebtedness incurred pursuant to the Subordinated
Note;
(xi) Indebtedness owed by ETI to ▇▇▇▇ ▇▇▇▇▇▇▇ or his
Affiliates in connection with the purchase by ETI of the capital stock of
Mid-States; provided that the amount of such Indebtedness does not exceed
$300,000; and
(xii) Indebtedness not included in paragraphs (i) through
(xi) above which does not exceed at any time, in the aggregate, the sum of
$100,000.
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8.2.4 Affiliate Transactions. Enter into, or be a party to, or
permit any Subsidiary of any Borrower to enter into or be a party to, any
transaction with any Affiliate of any Borrower or any holder of any Securities
of any Borrower or any Subsidiary of any Borrower, including without limitation
any management, consulting or similar fees, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's or such Subsidiary's
business and upon fair and reasonable terms which are fully disclosed to Agent
and are no less favorable to such Borrower or such Subsidiary than would be
obtained in a comparable arms-length transaction with a Person not an Affiliate
or Security holder of any Borrower. In addition to the foregoing, with respect
to any purchase, sale or exchange of goods or services between ETI and any of
its Subsidiaries on the one part and PW and its Subsidiaries (other than ETI and
its Subsidiaries) on the other part, (x) each such purchase, sale or exchange
shall be effected at fair market prices, (y) each such sale, purchase or
exchange shall have payment terms of 30 days or less and (z) the aggregate
outstanding amounts owed by Borrowers and their Subsidiaries to PW and its
Subsidiaries (other than Borrowers and their Subsidiaries), or vice versa, shall
not exceed $250,000. Without in any way limiting the generality of the
foregoing, Borrowers and their Subsidiaries may enter into a tax sharing
agreement with PW and its Subsidiaries and may make payments to PW to satisfy
Borrowers' and their Subsidiaries' tax obligations with respect thereto;
provided that such tax obligations payable by Borrowers and their Subsidiaries
with respect thereto do not exceed the amount of tax obligations Borrowers and
their Subsidiaries would pay on a stand-alone basis.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit
any Subsidiary of any Borrower to create or suffer to exist, any Lien upon any
of its Property, income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Agent for its
benefit and the ratable benefit of Lenders;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due, or being contested
in the manner described in Section 7.1.14 hereto, but only if in Agent's
judgment such Lien does not adversely affect Agent's or Lenders' rights or
the priority of Agent's Lien in the Collateral;
(iii) Liens arising in the ordinary course of any
Borrower's business by operation of law or regulation or to secure the
performance of contracts (other than for Funded Debt), statutory
obligations, surety, appeal bonds or the like, but only if payment in
respect of any such Lien is not at the time required and such Liens do not,
in the aggregate, materially detract from the value of the Property of any
Borrower or materially impair the use thereof in the operation of any
Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase
Money Indebtedness;
(v) Liens securing Indebtedness of one of a Borrower's
Subsidiaries to a Borrower or another such Subsidiary;
(vi) such other Liens as appear on Exhibit 8.2.5 hereto;
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(vii) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers, restrictions on
the use of property or minor irregularities of title (and with respect to
leasehold interest, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through or
under a landlord or owner of the leased Property, with or without consent
of the lessee) which do not in the aggregate impair the use of any Property
material to the operation of the business of Borrowers or their
Subsidiaries or the value of such Property for the purpose of the business
of Borrowers or their Subsidiaries;
(viii) such other Liens as Majority Lenders may hereafter
approve in writing; and
(ix) extensions, renewals and replacements of the Liens
referred to in paragraphs (i) through (viii) hereof.
8.2.6 Subordinated Debt; Other Indebtedness and Supply Contract.
Make, or permit any Subsidiary of any Borrower to make, any payment or
repurchase of any part or all of any Subordinated Debt (including, without
limitation, any Indebtedness owing by Borrowers or their Subsidiaries under the
License Agreement) or take any other action or omit to take any other action in
respect of any Subordinated Debt, except in accordance with any applicable
subordination agreement or the subordination provisions of the Standstill
Agreement. Modify or amend in any manner materially adverse to Borrowers, Agent
or Lenders, the Supply Contract.
8.2.7 Distributions. Declare or make, or permit any Subsidiary
of any Borrower to declare or make, any Distributions except for Distributions
by any Subsidiary of a Borrower to a Borrower and Distributions paid solely in
Securities of a Borrower or any of its Subsidiaries; provided that Borrowers and
their Subsidiaries may make Distributions to PW with respect to tax obligations
as contemplated by Section 8.2.4 of the Agreement.
8.2.8 Capital Expenditures. Make Capital Expenditures
(including, without limitation, by way of capitalized leases) which, in the
aggregate, as to Borrowers and their Subsidiaries during any fiscal year (or
other period) of Borrowers exceeds the amount set forth opposite such fiscal
year (or other period) in the following schedule:
FISCAL YEAR ENDING PERMITTED CAPITAL EXPENDITURE
------------------ -----------------------------
December 31, 2003 $2,750,000 plus Carryover Amount
December 31, 2004 and each $3,250,000 plus Carryover Amount
December 31 thereafter
For any fiscal year, Carryover Amount shall be the lesser of
$500,000 or the amount of permitted Capital Expenditures for the previous fiscal
year without giving effect to any Carryover Amount minus the actual amount of
Capital Expenditures made within such fiscal year.
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8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of
any of, or permit any Subsidiary of any Borrower to sell, lease or otherwise
dispose of any of, its Properties, including any disposition of Property as part
of a sale and leaseback transaction, to or in favor of any Person, except for:
(i) sales of Inventory in the ordinary course of
business;
(ii) transfers of Property to a Borrower by a Subsidiary
of a Borrower;
(iii) dispositions of Property that is substantially
worn, damaged, uneconomic or obsolete (subject to subsection 6.4.2 hereof);
(iv) dispositions of investments described in paragraphs
(iv), (v), (vi) and (vii) of the definition of the term "Restricted
Investments"; and
(v) other dispositions expressly authorized by this
Agreement.
8.2.10 Securities of Subsidiaries. Permit any of its Subsidiaries
to issue any additional Securities except to a Borrower and except for
director's qualifying Securities.
8.2.11 ▇▇▇▇-and-Hold Sales, Etc. Make, or permit any Subsidiary
of any Borrower to make, a sale to any customer on a ▇▇▇▇-and-hold, guaranteed
sale, sale and return, sale on approval, repurchase or return or consignment
basis.
8.2.12 Restricted Investment. Except as otherwise provided by
subsection 8.2.2 of the Agreement, make or have, or permit any Subsidiary of any
Borrower to make or have, any Restricted Investment.
8.2.13 Subsidiaries and Joint Ventures. Create, acquire or
otherwise suffer to exist, or permit any Subsidiary of any Borrower to create,
acquire or otherwise suffer to exist, any Subsidiary or joint venture
arrangement not in existence as of the date hereof.
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than another Borrower,
Borrowers' Subsidiaries or PW and its Subsidiaries.
8.2.15 Organizational Documents. Agree to, or suffer to occur,
any amendment, supplement or addition to any Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation, certificate of
formation, limited partnership agreement, bylaws, limited liability agreement,
operating agreement or other organizational documents (as the case may be), that
would reasonably be expected to have a Material Adverse Effect.
8.2.16 Fiscal Year End. Change, or permit any Subsidiary of any
Borrower to change, its fiscal year end.
8.2.17 Negative Pledges. Enter into any agreement limiting the
ability of any Borrower or any of its Subsidiaries to voluntarily create Liens
upon any of its Property.
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8.2.18 Leases. Become, or permit any of their Subsidiaries to
become, a lessee under any operating lease (other than a lease under which any
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future of 12 consecutive months under the
lease in question and all other leases under which Borrowers or any of their
Subsidiaries is then lessee would exceed $1,000,000. The term "Rentals" means,
as of the date of determination, all payments which the lessee is required to
make by the terms of any lease.
8.3 Specific Financial Covenants. During the Term, and thereafter for so
long as there are any Obligations outstanding, Borrowers covenant that, unless
otherwise consented to by Majority Lenders, in writing, they shall comply with
all of the financial covenants set forth in Exhibit 8.3 hereto. If GAAP changes
from the basis used in preparing the audited financial statements delivered to
Agent by Borrowers on or before the Closing Date, Borrowers will provide Agent
with certificates demonstrating compliance with such financial covenants and
will include, at the election of Borrowers or upon the request of Agent,
calculations setting forth the adjustments necessary to demonstrate how
Borrowers are also in compliance with such financial covenants based upon GAAP
as in effect on the Closing Date.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Agent or
any Lender under the other sections of this Agreement, no Lender shall be
required to make any Loan, nor shall Agent be required to or issue or procure
any Letter of Credit or LC Guaranty unless and until each of the following
conditions has been and continues to be satisfied:
9.1 Documentation. Agent shall have received, in form and substance
satisfactory to Agent and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments, opinions and certificates as Agent and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Agent and its counsel.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Conditions. Each of the conditions precedent set forth in the
Loan Documents shall have been satisfied.
9.4 Borrowers' Availability. Agent shall have determined that immediately
after Lenders have made the initial Loans and after Agent has issued or procured
the initial Letters of Credit and LC Guaranties contemplated hereby, and
Borrowers have paid (or, if accrued, treated as paid), all closing costs
incurred in connection with the transactions contemplated hereby (including
without limitation the Acquisition), and have reserved an amount sufficient to
pay all trade payables greater than 60 days past due, Availability shall not be
less than $4,000,000.
9.5 PW Availability. Agent shall have determined that, immediately after
PW shall have made a $7,000,000 equity contribution to ETI as provided in
Section 9.6 below, "Availability" (as defined in the PW Loan Agreement) shall
not be less than $13,000,000.
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9.6 PW Equity Contribution. PW shall have contributed at least
$7,000,000 to the equity of ETI and the "Majority Lenders" (as defined in the PW
Loan Agreement) and the required holders of the PW Subordinated Notes shall have
consented to such equity contribution.
9.7 Acquisition. The Acquisition shall have been consummated in
accordance with the terms of the Acquisition Documents and in compliance with
all applicable laws.
9.8 Supply Contract. ETI and PW shall have delivered to Agent a letter
from [_________] evidencing [_______]'s willingness to enter into the Supply
Contract and to extend credit terms to Borrowers and PW as described in Section
8.1.11.
9.9 Appraisals. Agent shall have received appraisals of Uponor ETI
Company's and Mid-States' Equipment and owned real Property in form and
substance reasonably acceptable to Agent.
9.10 Phase I and Phase II Environmental Reviews. Agent shall have received
Phase I Environmental Reviews and, at Agent's option, Phase II Environmental
Reviews with respect to each of Uponor ETI Company's and Mid-States' operating
facilities (collectively, the "Environmental Reviews"), which Environmental
Reviews shall be in form and substance reasonably acceptable to Agent.
9.11 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
9.12 Material Adverse Effect. As of the Closing Date, since January 31,
2003, there has not been any material adverse change in Borrowers', Uponor ETI
Company's or Mid-States' business, assets, financial condition, income or
prospects.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrowers shall fail to pay any of
the Obligations hereunder or under any Note on the due date thereof (whether due
at stated maturity, on demand, upon acceleration or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Agent or any Lender by or on behalf of any
Borrower, any Subsidiary of any Borrower or any Guarantor in this Agreement, any
of the other Loan Documents or any instrument, certificate or financial
statement furnished in compliance with or in reference thereto proves to have
been false or misleading in any material respect when made, furnished or
reaffirmed pursuant to Section 7.2 hereof.
10.1.3 Breach of Specific Covenants. Borrowers shall fail or
neglect to perform, keep or observe any covenant contained in Section or
subsection 5.2, 5.3, 5.4, 6.1.1, 6.1.2, 6.2.4,
[_____] confidential treatment requested.
42
6.2.5, 8.1.1, 8.1.4, 8.1.8, 8.2 or 8.3 hereof on the date that Borrowers are
required to perform, keep or observe such covenant or shall fail or neglect to
perform, keep or observe any covenant contained in Section 8.1.3 or 8.1.7 hereof
within 5 days following the date on which Borrowers are required to perform,
keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrowers or any Subsidiary of
any Borrower shall fail or neglect to perform, keep or observe any covenant
contained in this Agreement (other than a covenant which is dealt with
specifically elsewhere in Section 10.1 hereof) and the breach of such other
covenant is not cured to Majority Lenders' satisfaction within 5 days after the
sooner to occur of any Borrower's receipt of notice of such breach from Agent or
any Lender or the date on which such failure or neglect first becomes known to
any officer of any Borrower or any Subsidiary of any Borrower; provided,
however, that if a cure cannot be effected within such 5-day period, Borrowers
shall have 10 additional days to effect such cure if during such 10-day period
Borrowers are diligent in pursuing such a cure.
10.1.5 Default Under Security Documents or Other Agreements. Any
event of default shall occur under, or any Borrower or any of its Subsidiaries
shall default in the performance or observance of any term, covenant, condition
or agreement contained in, any of the Security Documents, or the Other
Agreements and such default shall continue beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or event of
default on the part of any Borrower or any Subsidiary of any Borrower under any
agreement, document or instrument to which any Borrower or such Subsidiary of
any Borrower is a party or by which any Borrower, such Subsidiary of such
Borrower or any of its Property is bound, evidencing or relating to any
Indebtedness (other than the Obligations) with an outstanding principal balance
in excess of $250,000, if the payment or maturity of such Indebtedness is or
could be accelerated in consequence of such event of default or demand for
payment of such Indebtedness is made or could be made in accordance with the
terms thereof.
10.1.7 Uninsured Losses. Any material loss, theft, damage or
destruction of any portion of the Collateral having a fair market value of
$100,000, in the aggregate, if not fully covered (subject to such deductibles
and self-insurance retentions as Agent shall have permitted) by insurance.
10.1.8 Insolvency and Related Proceedings. Any Borrower or any
Subsidiary of any Borrower shall cease to be Solvent or shall suffer the
appointment of a receiver, trustee, custodian or similar fiduciary, or shall
make an assignment for the benefit of creditors, or any petition for an order
for relief shall be filed by or against any Borrower or any Subsidiary of any
Borrower under U.S. federal bankruptcy laws (if against any Borrower or any
Subsidiary of any Borrower the continuation of such proceeding for more than 30
days), or any Borrower or any Subsidiary of any Borrower shall make any offer of
settlement, extension or composition to their respective unsecured creditors
generally.
10.1.9 Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of any Borrower or any
Subsidiary of any Borrower for a period which materially adversely affects such
Borrower's or such Subsidiary's capacity (taken as a
43
whole) to continue their business on a profitable basis; or any Borrower or any
Subsidiary of any Borrower shall suffer the loss or revocation of any material
license or permit now held or hereafter acquired by such Borrower or any
Subsidiary of any Borrower which is necessary to the continued or lawful
operation of its business; or any Borrower or any Subsidiary of any Borrower
shall be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which any Borrower or
any Subsidiary of any Borrower leases, uses or occupies any Property shall be
canceled or terminated prior to the expiration of its stated term, except any
such lease or agreement the cancellation or termination of which could not
reasonably be expected to have a Material Adverse Effect; or any material
portion of the Collateral shall be taken through condemnation or the value of
such Property shall be impaired through condemnation.
10.1.10 Change of Control. (i) PW shall cease to own and control,
beneficially and of record (directly or indirectly), 100% of the issued and
outstanding Securities and Voting Stock of ETI, (ii) any Borrower shall cease to
own and control, beneficially and of record (directly or indirectly), 100% of
the issued and outstanding Securities of each of its Subsidiaries, (iii) the
Spell Group shall cease to own and control, beneficially, at least ten percent
(10%) of the issued and outstanding capital stock of PW, on a fully diluted
basis after giving effect to the exercise of all options and warrants or (iv) a
Change of Control occurs.
10.1.11 ERISA. A Reportable Event shall occur which, in Agent's
reasonable determination, constitutes grounds for the termination by the Pension
Benefit Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or any Plan
shall be terminated or any such trustee shall be requested or appointed, or if
any Borrower or any Subsidiary of any Borrower is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Borrower's or such Subsidiary's complete or partial
withdrawal from such Plan and any such event could reasonably be expected to
have a Material Adverse Effect.
10.1.12 Challenge to Agreement. Any Borrower or any Subsidiary of
any Borrower, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Agent.
10.1.13 Criminal Forfeiture. Any Borrower or any Subsidiary of any
Borrower any other Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of such Borrower or any
Subsidiary of such Borrower.
10.1.14 Judgments. Any money judgments, writ of attachment or
similar processes (collectively, "Judgments") are issued or rendered against any
Borrower or any Subsidiary of any Borrower, or any of their respective Property
(i) in the case of money judgments, in an amount of $150,000 or more for all
such judgments, attachments or processes in the aggregate, in each case in
excess of any applicable insurance with respect to which the insurer has
admitted liability, and (ii) in the case of non-monetary Judgments, such
Judgment or
44
Judgments (in the aggregate) could reasonably be expected to have a
Material Adverse Effect, in each case which Judgment is not stayed, released or
discharged within 30 days.
10.2 Acceleration of the Obligations. Upon or at any time after the
occurrence and during the continuance of an Event of Default, (i) the Revolving
Loan Commitments and the Equipment Loan Commitments shall, at the option of
Agent or Majority Lenders be terminated and/or (ii) Agent or Majority Lenders
may declare all or any portion of the Obligations at once due and payable
without presentment, demand protest or further notice by Agent or any Lender,
and Borrowers shall forthwith pay to Agent, the full amount of such Obligations,
provided, that upon the occurrence of an Event of Default specified in
subsection 10.1.8 hereof, the Revolving Loan Commitments and the Equipment Loan
Commitments shall automatically be terminated and all of the Obligations shall
become automatically due and payable, in each case without declaration, notice
or demand by Agent or any Lender.
10.3 Other Remedies. Upon the occurrence and during the continuance of an
Event of Default, Agent shall have and may exercise from time to time the
following other rights and remedies:
10.3.1 All of the rights and remedies of a secured party under
the UCC or under other applicable law, and all other legal and equitable rights
to which Agent or Lenders may be entitled, all of which rights and remedies
shall be cumulative and shall be in addition to any other rights or remedies
contained in this Agreement or any of the other Loan Documents, and none of
which shall be exclusive.
10.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrowers and each of their Subsidiaries to assemble the
Collateral, at Borrowers' expense, and make it available to Agent at a place
designated by Agent which is reasonably convenient to both parties, and (ii)
enter any premises where any of the Collateral shall be located and to keep and
store the Collateral on said premises until sold (and if said premises be the
Property of a Borrower or any Subsidiary of a Borrower, such Borrower agrees not
to charge, or permit any of its Subsidiaries to charge, Agent for storage
thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Agent, in
its sole discretion, may deem advisable. Agent may, at Agent's option, disclaim
any and all warranties regarding the Collateral in connection with any such
sale. Borrowers agree that 10 days' written notice to Borrowers or any of their
Subsidiaries of any public or private sale or other disposition of Collateral
shall be reasonable notice thereof, and such sale shall be at such locations as
Agent may designate in said notice. Agent shall have the right to conduct such
sales on any Borrower's or any of its Subsidiaries' premises, without charge
therefor, and such sales may be adjourned from time to time in accordance with
applicable law. Agent shall have the right to sell, lease or otherwise dispose
of the Collateral, or any part thereof, for cash, credit or any combination
thereof, and Agent, on behalf of Lenders, may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any Collateral
may be applied, after allowing 2 Business Days for
45
collection, first to the costs, expenses and attorneys' fees incurred by Agent
in collecting the Obligations, in enforcing the rights of Agent and Lenders
under the Loan Documents and in collecting, retaking, completing, protecting,
removing, storing, advertising for sale, selling and delivering any Collateral,
second to the interest due upon any of the Obligations; and third, to the
principal of the Obligations. If any deficiency shall arise, each Borrower and
each Guarantor (if any) shall remain jointly and severally liable to Agent and
Lenders therefor.
10.3.4 Agent is hereby granted a license or other right to use,
without charge, each Borrower's and each of its Subsidiary's labels, patents,
copyrights, licenses, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any Property of a similar nature, as it
pertains to the Collateral, in completing, advertising for sale and selling any
Collateral and each Borrower's and each of its Subsidiary's rights under all
licenses and all franchise agreements shall inure to Agent's benefit.
10.3.5 Agent may, at its option, require Borrowers to deposit
with Agent funds equal to the LC Amount and, if Borrowers fail to promptly make
such deposit, Agent may advance such amount as a Revolving Credit Loan (whether
or not an Overadvance is created thereby). Each such Revolving Credit Loan shall
be secured by all of the Collateral and shall constitute a Base Rate Revolving
Portion. Any such deposit or advance shall be held by Agent as a reserve to fund
future payments on such LC Guaranties and future drawings against such Letters
of Credit. At such time as all LC Guaranties have been paid or terminated and
all Letters of Credit have been drawn upon or expired, any amounts remaining in
such reserve shall be applied against any outstanding Obligations, or, if all
Obligations have been indefeasibly paid in full, returned to Borrowers.
10.4 Set Off and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, during the continuance of any Event of Default, each Lender is hereby
authorized by Borrowers at any time or from time to time, with prior written
consent of Agent and with reasonably prompt subsequent notice to Borrowers (any
prior or contemporaneous notice to Borrowers being hereby expressly waived) to
set off and to appropriate and to apply any and all (i) balances held by such
Lender at any of its offices for the account of any Borrower or any of its
Subsidiaries (regardless of whether such balances are then due to such Borrower
or its Subsidiaries), and (ii) other property at any time held or owing by such
Lender to or for the credit or for the account of any Borrower or any of its
Subsidiaries, against and on account of any of the Obligations. Any Lender
exercising a right to set off shall, to the extent the amount of any such set
off exceeds its Revolving Loan Percentage of the amount set off, purchase for
cash (and the other Lenders shall sell) interests in each such other Lender's
pro rata share of the Obligations as would be necessary to cause such Lender to
share such excess with each other Lender in accordance with their respective
Revolving Loan Percentages. Each Borrower agrees, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with respect
to amounts in excess of its pro rata share of the Obligations and upon doing so
shall deliver such excess to Agent for the benefit of all Lenders in accordance
with each such Lender's Aggregate Percentage.
10.5 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrowers contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in
46
any agreement supplementary hereto or in any schedule or in any Guaranty
Agreement given to Agent or any Lender or contained in any other agreement
between any Lender and any Borrower or between Agent and any Borrower
heretofore, concurrently, or hereafter entered into, shall be deemed cumulative
to and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of any Borrower herein contained. The failure or delay
of Agent or any Lender to require strict performance by any Borrower of any
provision of this Agreement or to exercise or enforce any rights, Liens, powers,
or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such
performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Loans and other Obligations owing or to become owing from Borrowers to
Agent and each Lender have been fully satisfied. None of the undertakings,
agreements, warranties, covenants and representations of Borrowers contained in
this Agreement or any of the other Loan Documents and no Default or Event of
Default by Borrowers under this Agreement or any other Loan Documents shall be
deemed to have been suspended or waived by Lenders, unless such suspension or
waiver is by an instrument in writing specifying such suspension or waiver and
is signed by a duly authorized representative of Agent and directed to
Borrowers.
SECTION 11. AGENT
11.1 Authorization and Action. Each Lender hereby appoints and authorizes
Agent to take such action on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. Each Lender hereby acknowledges that Agent shall not have by reason of
this Agreement assumed a fiduciary relationship in respect of any Lender. In
performing its functions and duties under this Agreement, Agent shall act solely
as agent of Lenders and shall not assume, or be deemed to have assumed, any
obligation toward, or relationship of agency or trust with or for, Borrowers. As
to any matters not expressly provided for by this Agreement and the other Loan
Documents (including without limitation enforcement and collection of the
Notes), Agent may, but shall not be required to, exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, whenever such instruction shall be requested by Agent or
required hereunder, or a greater or lesser number of Lenders if so required
hereunder, and such instructions shall be binding upon all Lenders; provided,
that Agent shall be fully justified in failing or refusing to take any action
which exposes Agent to any liability or which is contrary to this Agreement, the
other Loan Documents or applicable law, unless Agent is indemnified to its
satisfaction by the other Lenders against any and all liability and expense
which it may incur by reason of taking or continuing to take any such action. If
Agent seeks the consent or approval of the Majority Lenders (or a greater or
lesser number of Lenders as required in this Agreement), with respect to any
action hereunder, Agent shall send notice thereof to each Lender and shall
notify each Lender at any time that the Majority Lenders (or such greater or
lesser number of Lenders) have instructed Agent to act or refrain from acting
pursuant hereto.
11.2 Agent's Reliance, Etc. Neither Agent, any Affiliate of Agent, nor any
of their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan
47
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, Agent: (i) may treat each
Lender party hereto as the holder of Obligations until Agent receives written
notice of the assignment or transfer or such lender's portion of the Obligations
signed by such Lender and in form reasonably satisfactory to Agent; (ii) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, (iii) makes no warranties or representations to any
Lender and shall not be responsible to any Lender for any recitals, statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Documents; (iv) shall not have any duty beyond Agent's customary
practices in respect of loans in which Agent is the only lender, to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the part of any
Borrower, to inspect the property (including the books and records) of any
Borrower, to monitor the financial condition of any Borrower or to ascertain the
existence or possible existence or continuation of any Default or Event of
Default; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (vi) shall not be liable to any Lender for
any action taken, or inaction, by Agent upon the instructions of Majority
Lenders pursuant to Section 11.1 hereof or refraining to take any action pending
such instructions; (vii) shall not be liable for any apportionment or
distributions of payments made by it in good faith pursuant to Section 3 hereof;
(viii) shall incur no liability under or in respect of this Agreement or the
other Loan Documents by acting upon any notice, consent, certificate, message or
other instrument or writing (which may be by telephone, facsimile, telegram,
cable or telex) believed in good faith by it to be genuine and signed or sent by
the proper party or parties; and (ix) may assume that no Event of Default has
occurred and is continuing, unless Agent has actual knowledge of the Event of
Default, has received notice from Borrowers or Borrowers' independent certified
public accounts stating the nature of the Event of Default, or has received
notice from a Lender stating the nature of the Event of Default and that such
Lender considers the Event of Default to have occurred and to be continuing. In
the event any apportionment or distribution described in clause (vii) above is
determined to have been made in error, the sole recourse of any Person to whom
payment was due but not made shall be to recover from the recipients of such
payments any payment in excess of the amount to which they are determined to
have been entitled.
11.3 Fleet and Affiliates. With respect to its commitment hereunder to
make Loans, Fleet shall have the same rights and powers under this Agreement and
the other Loan Documents as any other Lender and may exercise the same as though
it were not Agent; and the terms "Lender," "Lenders" or "Majority Lenders"
shall, unless otherwise expressly indicated, include Fleet in its individual
capacity as a Lender. Fleet and its Affiliates may lend money to, and generally
engage in any kind of business with, any Borrower, and any Person who may do
business with or own Securities of any Borrower all as if Fleet were not Agent
and without any duty to account therefor to any other Lender.
11.4 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to herein and such other documents and
information as it has deemed appropriate, made
48
its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement. Agent shall not have any duty or
responsibility, either initially or on an ongoing basis, to provide any Lender
with any credit or other similar information regarding Borrowers.
11.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers), in accordance with their respective Aggregate
Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Agent in any way relating to or arising out of this Agreement
or any other Loan Document or any action taken or omitted by Agent under this
Agreement; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share, as set forth above,
of any out-of-pocket expenses (including attorneys' fees) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Borrowers. The
obligations of Lenders under this Section 11.5 shall survive the payment in full
of all Obligations and the termination of this Agreement. If after payment and
distribution of any amount by Agent to Lenders, any Lender or any other Person,
including Borrowers, any creditor of any Borrower, a liquidator, administrator
or trustee in bankruptcy, recovers from Agent any amount found to have been
wrongfully paid to Agent or disbursed by Agent to Lenders, then Lenders, in
accordance with their respective Aggregate Percentages, shall reimburse Agent
for all such amounts.
11.6 Rights and Remedies to be Exercised by Agent Only. Each Lender agrees
that, except as set forth in Section 10.4, no Lender shall have any right
individually (i) to realize upon the security created by this Agreement or any
other Loan Document, (ii) to enforce any provision of this Agreement or any
other Loan Document, or (iii) to make demand under this Agreement or any other
Loan Document.
11.7 Agency Provisions Relating to Collateral. Each Lender authorizes and
ratifies Agent's entry into this Agreement and the Security Documents for the
benefit of Lenders. Each Lender agrees that any action taken by Agent with
respect to the Collateral in accordance with the provisions of this Agreement or
the Security Documents, and the exercise by Agent of the powers set forth herein
or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders. Agent is hereby
authorized on behalf of all Lenders, without the necessity of any notice to or
further consent from any Lender to take any action with respect to any
Collateral or the Loan Documents which may be necessary to perfect and maintain
perfected Agent's Liens upon the Collateral, for its benefit and the ratable
benefit of Lenders. Lenders hereby irrevocably authorize Agent, at its option
and in its discretion, to release any Lien granted to or held by Agent upon any
Collateral (i) upon termination of the Agreement and payment and satisfaction of
all Obligations; or (ii) constituting
49
property being sold or disposed of if Borrowers certify to Agent that the sale
or disposition is made in compliance with subsection 8.2.9 hereof (and Agent may
rely conclusively on any such certificate, without further inquiry); or (iii)
constituting property in which any Borrower owned no interest at the time the
Lien was granted or at any time thereafter; or (iv) in connection with any
foreclosure sale or other disposition of Collateral after the occurrence and
during the continuation of an Event of Default; or (v) if approved, authorized
or ratified in writing by Agent at the direction of all Lenders. Upon request by
Agent at any time, Lenders will confirm in writing Agent's authority to release
particular types or items of Collateral pursuant hereto. Agent shall have no
obligation whatsoever to any Lender or to any other Person to assure that the
Collateral exists or is owned by any Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent herein or
pursuant to the Security Documents have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of its
rights, authorities and powers granted or available to Agent in this Section
11.7 or in any of the Loan Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its sole discretion, but
consistent with the provisions of this Agreement, including given Agent's own
interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any Lender.
11.8 Agent's Right to Purchase Commitments. Agent shall have the right,
but shall not be obligated, at any time upon written notice to any Lender and
with the consent of such Lender, which may be granted or withheld in such
Lender's sole discretion, to purchase for Agent's own account all of such
Lender's interests in this Agreement, the other Loan Documents and the
Obligations, for the face amount of the outstanding Obligations owed to such
Lender, including without limitation all accrued and unpaid interest and fees.
11.9 Right of Sale, Assignment, Participations. Each Borrower hereby
consents to any Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, such Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder subject to the terms and conditions set forth below:
11.9.1 Sales, Assignments. Each Lender hereby agrees that, with
respect to any sale or assignment (i) no such sale or assignment shall be for an
amount of less than $5,000,000, (ii) each such sale or assignment shall be made
on terms and conditions which are customary in the industry at the time of the
transaction, (iii) Agent and, in the absence of a Default or Event of Default,
Borrowers must consent, such consent not to be unreasonably withheld, to each
such assignment to a Person that is not an original signatory to this Agreement,
(iv) the assigning Lender shall pay to Agent a processing and recordation fee of
$3,500 and any out-of-pocket attorneys' fees and expenses incurred by Agent in
connection with any such sale or assignment and (v) Agent, the assigning Lender
and the assignee Lender shall each have executed and delivered an Assignment and
Acceptance Agreement. After such sale or assignment has been consummated (x) the
assignee Lender thereupon shall become a "Lender" for all purposes of this
Agreement and (y) the assigning Lender shall have no further liability for
funding the portion of Revolving Loan Commitments or Equipment Loan Commitments
assumed by such other Lender.
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11.9.2 Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other Lender or other lending institution
(a "Participant"), provided that (i) no such participation shall be for an
amount of less than $5,000,000, (ii) no Participant shall thereby acquire any
direct rights under this Agreement, (iii) no Participant shall be granted any
right to consent to any amendment, except to the extent any of the same pertain
to (1) reducing the aggregate principal amount of, or interest rate on, or fees
applicable to, any Loan or (2) extending the final stated maturity of any Loan
or the stated maturity of any portion of any payment of principal of, or
interest or fees applicable to, any of the Loans; provided, that the rights
described in this subclause (2) shall not be deemed to include the right to
consent to any amendment with respect to or which has the effect of requiring
any mandatory prepayment of any portion of any Loan or any amendment or waiver
of any Default or Event of Default, (iv) no sale of a participation in
extensions of credit shall in any manner relieve the originating Lender of its
obligations hereunder, (v) the originating Lender shall remain solely
responsible for the performance of such obligations, (vi) Borrowers and Agent
shall continue to deal solely and directly with the originating Lender in
connection with the originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (vii) in no event shall any financial
institution purchasing the participation grant a participation in its
participation interest in the Loans without the prior written consent of Agent,
and, in the absence of a Default or an Event of Default, Borrowers which
consents shall not unreasonably be withheld and (viii) all amounts payable by
Borrowers hereunder shall be determined as if the originating Lender had not
sold any such participation.
11.9.3 Certain Agreements of Borrowers. Each Borrower agrees that
(i) it will use commercially reasonable best efforts to assist and cooperate
with each Lender in any manner reasonably requested by such Lender to effect the
sale of participation in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation, assisting in
the preparation of appropriate disclosure documents and making members of
management available at reasonable times and upon reasonable notice to meet with
and answer questions of potential assignees and Participants; and (ii) subject
to the provisions of Section 12.14 hereof, such Lender may disclose credit
information regarding any Borrower to any potential Participant or assignee.
11.9.4 Non U.S. Resident Transferees. If, pursuant to this
Section 11.9, any interest in this Agreement or any Loans is transferred to any
transferee which is organized under the laws of any jurisdiction other than the
United States or any state thereof, the transferor Lender shall cause such
transferee (other than any Participant), and may cause any Participant,
concurrently with and as a condition precedent to the effectiveness of such
transfer, to (i) represent to the transferor Lender (for the benefit of the
transferor Lender, Agent, and Borrowers) that under applicable law and treaties
no taxes will be required to be withheld by Agent, Borrowers or the transferor
Lender with respect to any payments to be made to such transferee in respect of
the interest so transferred, (ii) furnish to the transferor Lender, Agent and
Borrowers either United States Internal Revenue Service Form W-8BEN or United
States Internal Revenue Service Form W-8ECI (wherein such transferee claims
entitlement to complete exemption from United States federal withholding tax on
all interest payments hereunder), and (iii) agree (for the benefit of the
transferor Lender, Agent and Borrowers) to provide the transferor Lender, Agent
and Borrowers a new Form W-8BEN or Form W-8ECI upon the obsolescence of any
previously delivered form and comparable statements in accordance with
51
applicable United States laws and regulations and amendments duly executed and
completed by such transferee, and to comply from time to time with all
applicable United States laws and regulations with regard to such withholding
tax exemption.
11.10 Amendment. No amendment or waiver of any provision of this Agreement
or any other Loan Document (including without limitation any Note), nor consent
to any departure by any Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Majority Lenders and
Borrowers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, that
no amendment, waiver or consent shall be effective, unless (i) in writing and
signed by each Lender, to any of the following: (1) increase or decrease the
aggregate Loan Commitments, or any Lender's Revolving Loan Commitment, Equipment
Loan Commitment or Term Loan Commitment, (2) reduce the principal of, or
interest on, any amount payable hereunder or under any Note, other than those
payable only to Fleet in its capacity as Agent, which may be reduced by Fleet
unilaterally, (3) increase or decrease any interest rate payable hereunder, (4)
postpone any date fixed for any payment of principal of, or interest on, any
amounts payable hereunder or under any Note, other than those payable only to
Fleet in its capacity as Agent, which may be postponed by Fleet unilaterally,
(5) increase any advance percentage contained in the definition of the term
Borrowing Base, (6) reduce the number of Lenders that shall be required for
Lenders or any of them to take any action hereunder, (7) release or discharge
any Person liable for the performance of any obligations of Borrower hereunder
or under any of the Loan Documents, (8) amend any provision of this Agreement
that requires the consent of all Lenders or consent to or waive any breach
thereof, (9) amend the definition of the term "Majority Lenders", (10) amend
this Section 11.10 or (11) release any substantial portion of the Collateral,
unless otherwise permitted pursuant to Section 11.7 hereof; or (ii) in writing
and signed by Agent in addition to the Lenders required above to affect the
rights or duties of Agent under this Agreement, any Note or any other Loan
Document.
11.11 Resignation of Agent; Appointment of Successor. Agent may resign as
Agent by giving not less than thirty (30) days' prior written notice to Lenders
and Borrowers. If Agent shall resign under this Agreement, then, (i) subject to
the consent of Borrowers (which consent shall not be unreasonably withheld and
which consent shall not be required during any period in which a Default or an
Event of Default exists), Majority Lenders shall appoint from among Lenders a
successor agent for Lenders or (ii) if a successor agent shall not be so
appointed and approved within the thirty (30) day period following Agent's
notice to Lenders and Borrowers of its resignation, then Agent shall appoint a
successor agent who shall serve as Agent until such time as Majority Lenders
appoint a successor agent, subject to Borrowers' consent as set forth above.
Upon its appointment, such successor agent shall succeed to the rights, powers
and duties of Agent and the term "Agent" shall mean such successor effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement. After the resignation of
any Agent hereunder, the provisions of this Section 11 shall inure to the
benefit of such former Agent and such former Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or not
taken by it while it was an Agent under this Agreement.
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11.12 Audit and Examination Reports; Disclaimer by Lenders. By signing
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender, promptly
after it becomes available, a copy of each audit or examination report (each a
"Report" and collectively, "Reports") prepared by or on behalf of Agent;
(b) expressly agrees and acknowledges that Agent (i) does not make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrowers
and will rely significantly upon Borrowers' books and records, as well as on
representations of Borrowers' personnel;
(d) agrees to keep all Reports confidential and strictly for its internal
use, and not to distribute except to its participants, or use any Report in any
other manner, in accordance with the provisions of Section 12.14; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or conclusion the indemnifying Lender may reach or draw from any Report
in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrowers, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of Borrowers; and (ii) to pay and protect, and indemnify, defend and hold
Agent and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses and other amounts
(including attorney's fees and expenses) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.
SECTION 12. MISCELLANEOUS
12.1 Power of Attorney. Each Borrower hereby irrevocably designates,
makes, constitutes and appoints Agent (and all Persons designated by Agent) as
such Borrower's true and lawful attorney (and agent-in-fact), solely with
respect to the matters set forth in this Section 12.1, and Agent, or Agent's
agent, may, without notice to such Borrower and in such Borrower's or Agent's
name, but at the cost and expense of Borrowers:
12.1.1 At such time or times as Agent or said agent, in its sole
discretion, may determine, endorse any Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Agent or under Agent's
control.
12.1.2 At such time or times upon or after the occurrence and
during the continuance of an Event of Default (provided that the occurrence of
an Event of Default shall not
53
be required with respect to clauses (iv), (vi), (viii) and (ix) below), as Agent
or its agent in its sole discretion may determine: (i) demand payment of the
Accounts from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of any Borrower's rights
and remedies with respect to the collection of the Accounts; (ii) settle,
adjust, compromise, discharge or release any of the Accounts or other Collateral
or any legal proceedings brought to collect any of the Accounts or other
Collateral; (iii) sell or assign any of the Accounts and other Collateral upon
such terms, for such amounts and at such time or times as Agent deems advisable,
and at Agent's option, with all warranties regarding the Collateral disclaimed;
(iv) take control, in any manner, of any item of payment or proceeds relating to
any Collateral; (v) prepare, file and sign any Borrower's name to a proof of
claim in bankruptcy or similar document against any Account Debtor or to any
notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to any Borrower and notify postal authorities to change the
address for delivery thereof to such address as Agent may designate; (vii)
endorse the name of any Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
account of the Obligations; (viii) endorse the name of any Borrower upon any
chattel paper, document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or
similar document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use any Borrower's stationery and sign the name of any Borrower
to verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
Computer Hardware and Software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Agent's
determination, to fulfill any Borrower's obligations under this Agreement.
The power of attorney granted hereby shall constitute a power
coupled with an interest and shall be irrevocable.
12.2 Indemnity. Each Borrower hereby agrees to indemnify Agent and each
Lender (and each of their Affiliates) and hold Agent and each Lender (and each
of their Affiliates) harmless from and against any liability, loss, damage,
suit, action or proceeding ever suffered or incurred by any such Person
(including reasonable attorneys fees and legal expenses) as the result of any
Borrower's failure to observe, perform or discharge any Borrower's duties
hereunder. In addition, each Borrower shall defend Agent and each Lender (and
each of their Affiliates) against and save it harmless from all claims of any
Person with respect to the Collateral (except those resulting from the gross
negligence or intentional misconduct of Agent, any Lender or any Affiliate of
Agent or any Lender, as applicable). Without limiting the generality of the
foregoing, these indemnities shall extend to any claims asserted against Agent
or any Lender (and each of their Affiliates) by any Person under any
Environmental Laws by reason of any Borrower's or any other Person's failure to
comply with laws applicable to solid or hazardous waste materials or other toxic
substances. Notwithstanding any contrary provision in this Agreement, the
obligation of Borrowers under this Section 12.2 shall survive the payment in
full of the Obligations and the termination of this Agreement.
12.3 Sale of Interest. No Borrower may sell, assign or transfer any
interest in this Agreement, any of the other Loan Documents, or any of the
Obligations, or any portion thereof,
54
including, without limitation, such Borrower's rights, title, interests,
remedies, powers, and duties hereunder or thereunder.
12.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.5 Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of each Borrower, Agent and each Lender permitted under
Section 11.9 hereof.
12.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in any of the other
Loan Documents by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in direct conflict
with, or inconsistent with, any provision in any of the other Loan Documents,
the provision contained in this Agreement shall govern and control.
12.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
12.8 Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing, and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given, delivered or received immediately when delivered against receipt,
three (3) Business Days' after deposit in the mail, postage prepaid, one (1)
Business Day after deposit with an overnight courier or, in the case of
facsimile notice, when sent with respect to machine confirmed, addressed as
follows:
If to Agent: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
55
With a copy to: Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrowers: c/o PW Eagle, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President and COO
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: [PW Eagle, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇]
and
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: K. ▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; provided, however, that any notice,
request or demand to or upon Agent or a Lender pursuant to subsection 3.1.1 or
4.2.2 hereof shall not be effective until received by Agent or such Lender.
12.9 Consent. Whenever Agent's, Majority Lenders' or all Lenders' consent
is required to be obtained under this Agreement, any of the Other Agreements or
any of the Security Documents as a condition to any action, inaction, condition
or event, except as otherwise specifically provided herein, Agent, Majority
Lenders or all Lenders, as applicable, shall be authorized to give or withhold
such consent in their sole and absolute discretion and to condition its consent
upon the giving of additional Collateral security for the Obligations, the
payment of money or any other matter.
12.10 Credit Inquiries. Each Borrower hereby authorizes and permits Agent
and each Lender to respond to usual and customary credit inquiries from third
parties concerning any Borrower or any of its Subsidiaries.
56
12.11 Time of Essence. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
12.12 Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
12.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
12.14 Confidentiality. Agent and each Lender shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement in
accordance with Agent's and such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices and in any event may make disclosure reasonably required by a
prospective participant or assignee in connection with the contemplated
participation or assignment or as required or requested by any governmental
authority or representative thereof or pursuant to legal process and shall
require any such participant or assignee to agree to comply with this Section
12.14.
12.15 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED IN AND SHALL BE DEEMED TO HAVE BEEN MADE IN CHICAGO,
ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF AGENT'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER, AGENT OR ANY
LENDER, EACH BORROWER HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF ▇▇▇▇
COUNTY, ILLINOIS, OR, AT AGENT'S OPTION, THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS ON
THE ONE HAND AND AGENT OR ANY LENDER ON THE OTHER HAND PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY
OBJECTION
57
WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH
BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWERS' ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY LENDER OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.16 WAIVERS BY BORROWER. EACH BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH AGENT AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL
PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY AGENT OR ANY LENDER ON WHICH ANY BORROWER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR ANY LENDER
MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO AGENT'S TAKING POSSESSION OR
CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY
COURT PRIOR TO ALLOWING AGENT TO EXERCISE ANY OF AGENT'S REMEDIES; (iv) THE
BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (v) NOTICE OF
ACCEPTANCE HEREOF AND (vi) EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM OR
RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER ACKNOWLEDGES THAT
THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER. EACH BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
58
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12.17 Advertisement. Each Borrower hereby authorizes Agent to publish the
name of Borrower and the amount of the credit facility provided hereunder in any
"tombstone" or comparable advertisement which Agent elects to publish.
12.18 Reimbursement. The undertaking by Borrowers to repay the Obligations
and each representation, warranty or covenant of each Borrower are and shall be
joint and several. To the extent that any Borrower shall be required to pay a
portion of the Obligations which shall exceed the amount of loans, advances or
other extensions of credit received by such Borrower and all interest, costs,
fees and expenses attributable to such loans, advances or other extensions of
credit, then such Borrower shall be reimbursed by the other Borrowers for the
amount of such excess. This Section 12.18 is intended only to define the
relative rights of Borrowers, and nothing set forth in Section 12.18 is intended
or shall impair the obligations of each Borrower, jointly and severally, to pay
to Agent and Lenders the Obligations as and when the same shall become due and
payable in accordance with the terms hereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
(Signature Page Follows)
59
(Signature Page to Loan and Security Agreement)
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning of this Agreement.
EXTRUSION TECHNOLOGIES, INC., as a Borrower
By: /s/ ▇▇▇▇▇▇ West
----------------------------------------
Name: ▇▇▇▇▇▇ West
--------------------------------------
Title: Secretary
-------------------------------------
MID-STATES PLASTICS, INC., as a Borrower
By: /s/ ▇▇▇▇▇▇ West
----------------------------------------
Name: ▇▇▇▇▇▇ West
--------------------------------------
Title: Secretary
-------------------------------------
(Signature Page to Loan and Security Agreement)
FLEET CAPITAL CORPORATION, as Agent and as a
Lender
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President
-------------------------------------
Revolving Loan Commitment: $15,080,000 (60.32%)
Term Loan Commitment: $3,016,000 (60.32%)
Equipment Loan Commitment: $904,800 (60.32%)
THE CIT GROUP/BUSINESS CREDIT, INC., as Lender
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: Vice President
-------------------------------------
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Regional Credit Manager
-----------------------------------
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Revolving Loan Commitment: ($9,920,000)(39.68%)
Term Loan Commitment: $1,984,000 (39.68%)
Equipment Loan Commitment: $595,200 (39.68%)
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of March 14,
2003, by and among Fleet Capital Corporation, individually and as Agent, the
other financial institutions which are or become parties thereto and Extrusion
Technologies, Inc. and Mid-States Plastics, Inc., (a) the terms Account,
Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Account,
Document, Electronic Chattel Paper, Equipment, Financial Asset, Fixture, General
Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Payment Intangibles, Proceeds, Security, Security
Entitlement, Software, Supporting Obligations, Tangible Chattel Paper and
Uncertificated Security have the respective meanings assigned thereto under the
UCC; (b) all terms reflecting Collateral having the meanings assigned thereto
under the UCC shall be deemed to mean such Property, whether now owned or
hereafter created or acquired by any Borrower or in which any Borrower now has
or hereafter acquires any interest; (c) capitalized terms which are not
otherwise defined have the respective meanings assigned thereto in said Loan and
Security Agreement; and (d) the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of any Account, Contract Right, Chattel Paper or General Intangible.
Acquisition - the purchase by ETI of 100% of the issued and
outstanding capital stock of Uponor ETI Company pursuant to the Acquisition
Documents.
Acquisition Agreement and Acquisition Documents - that certain Stock
Purchase Agreement ("Acquisition Agreement") dated on or about March 14, 2003 by
and among ETI, Uponor ETI Company, a Colorado corporation and Uponor North
America, Inc., a Delaware corporation, and all schedules and exhibits and other
documents and agreements delivered in connection therewith.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; (ii) which beneficially owns or holds 5%
or more of any class of the Voting Stock of a Person; or (iii) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by a Person or a
Subsidiary of a Person.
Agent - Fleet Capital Corporation in its capacity as agent for the
Lenders under the Agreement and any successor in that capacity appointed
pursuant to subsection 11.11 of the Agreement.
Agent Loans - as defined in subsection 1.1.5 of the Agreement.
Aggregate Percentage - with respect to each Lender, the percentage
equal to the quotient of (i) such Lender's Loan Commitment divided by (ii) the
aggregate of all Loan Commitments.
A-1
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits and Schedules thereto and this
Appendix A, as each of the same may be amended from time to time.
ALTA Survey - a survey prepared in accordance with the standards
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1997, known as the "Minimum Standard Detail
Requirements of Land Title Surveys". The ALTA Survey shall be in sufficient form
to satisfy the requirements of First American Title Insurance Company to provide
extended coverage over survey defects and shall also show the location of all
easements, utilities, and covenants of record, dimensions of all improvements,
encroachments from any adjoining property, and certify as to the location of any
flood plain area affecting the subject real estate. The ALTA Survey shall
contain the following certification: "[name of applicable Borrower], Fleet
Capital Corporation, as Agent, and First American Title Insurance Company. This
is to certify that this map of plat and the survey on which it is based were
made in accordance with the "Minimum Standard Detail Requirements for Land Title
Surveys" jointly established and adopted by ALTA and ACSM in 1997. (signed
(SEAL) License No. __________".
Applicable Margin - from the Closing Date to, but not including, the
first Adjustment Date (as hereinafter defined) the percentages set forth below
with respect to the Base Rate Revolving Portion, the Base Rate Term Portion, the
LIBOR Revolving Portion and the LIBOR Term Portion:
Base Rate Revolving Portion .50%
Base Rate Term Portion 1.00%
Base Rate Equipment Portion 1.00%
LIBOR Revolving Portion 2.75%
LIBOR Term Portion 3.25%
LIBOR Equipment Portion 3.25%
The percentages set forth above will be adjusted on the first day of
the month following delivery by Borrowers to Agent of the financial statements
required to be delivered pursuant to subsection 8.1.3(ii) of the Agreement for
each December 31, March 31, June 30 and September 30 during the Term, commencing
with the month ending December 31, 2003 (each such date an "Adjustment Date"),
effective prospectively, by reference to the applicable "Financial Measurement"
(as defined below) for the four quarters most recently ending in accordance with
the following:
A-2
Base Rate Base Rate Base Rate LIBOR LIBOR LIBOR
Financial Revolving Term Equipment Revolving Term Equipment
Measurement Portion Portion Portion Portion Portion Portion
----------- ------- ------- ------- ------- ------- -------
* 1.30 to 1 .25% .75% .75% 2.50% 3.00% 3.00%
*** 1.30 to 1, but .50% 1.00% 1.00% 2.75% 3.25% 3.25%
** 1.20 to 1
*** 1.20 to 1 .75% 1.25% 1.25% 3.00% 3.50% 3.50%
* Less than
** Greater than
*** Less than or equal to
provided that, (i) if ETI's audited financial statements for any fiscal year
delivered pursuant to subsection 8.1.3(i) of the Agreement reflect a Financial
Measurement that yields a higher Applicable Margin than that yielded by the
monthly financial statements previously delivered pursuant to subsection
8.1.3(ii) of the Agreement for the last month of such fiscal year, the
Applicable Margin shall be readjusted retroactively for the period that was
incorrectly calculated and (ii) if Borrowers fail to deliver the financial
statements required to be delivered pursuant to subsection 8.1.3(i) or
subsection 8.1.3(ii) of the Agreement on or before the due date thereof, and
such failure has not been cured to Agent's reasonable satisfaction, the
Applicable Margin shall automatically adjust to the highest interest rate set
forth above, effective prospectively from such due date until the next
Adjustment Date. For purposes hereof, "Financial Measurement" shall mean the
Fixed Charge Coverage Ratio.
The foregoing notwithstanding, with respect to all interest accruing
on the Term Loan and the Equipment Loans on or after the date on which Borrowers
have made Term Loan principal payments pursuant to Section 3.3.2 (Excess Cash
Flow) of the Agreement in aggregate amounts equal to or in excess of $1,000,000,
then, so long as no Default or Event of Default has occurred and is continuing,
the Applicable Margins for the Base Rate Term Portion, the Base Rate Equipment
Portion, the LIBOR Term Portion and the LIBOR Equipment Portion shall be reduced
by .25% from the rates specified above.
Assignment and Acceptance Agreement - an assignment and acceptance
agreement in form and content reasonably acceptable to Agent pursuant to which a
Lender assigns to another Lender all or any portion of any of such Lender's
Loans, Revolving Loan Commitment, Equipment Loan Commitment or Term Loan
Commitment, as permitted pursuant to the terms of this Agreement.
Availability - the amount of additional money which Borrowers are
entitled to borrow from time to time as Revolving Credit Loans, such amount
being the difference derived when the sum of the principal amount of Revolving
Credit Loans then outstanding (including any amounts which Agent or any Lender
may have paid for the account of any Borrower pursuant to any of the Loan
Documents and which have not been reimbursed by a Borrower), the LC Amount and
any reserves is subtracted from the Borrowing Base. If the amount outstanding is
equal to or greater than the Borrowing Base, Availability is 0.
Bank - Fleet National Bank.
A-3
Base Rate - the rate of interest announced or quoted by Bank from time
to time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if such prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
Base Rate Portion - a Base Rate Term Portion, a Base Rate Equipment
Portion or a Base Rate Revolving Portion.
Base Rate Equipment Portion - that portion of the Equipment Loans that
is not subject to a LIBOR Option.
Base Rate Revolving Portion - that portion of the Revolving Credit
Loans that is not subject to a LIBOR Option.
Base Rate Term Portion - that portion of the Term Loan that is not
subject to a LIBOR Option.
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(i) the Revolving Credit Maximum Amount minus the unpaid
principal balance of the Term Loan and the Equipment Loans at such date; or
(ii) an amount equal to:
(a) the sum of eighty-five percent (85%) of the net
amount of Eligible Accounts outstanding at such date;
PLUS
(b) the lesser of (1) Nine Million Dollars
($9,000,000); or (2) fifty-five percent (55%) of the value of Eligible Inventory
at such date calculated on the basis of the lower of cost or market with the
cost of raw materials and finished goods calculated on a first-in, first-out
basis;
MINUS (subtract from the lesser of (i) or (ii) above)
(iii) an amount equal to the sum of (a) the LC Amount plus (b) the
amount of any reserve established by Agent pursuant to Section 1.1.1 above.
For purposes hereof, the net amount of Eligible Accounts at any time
shall be the face amount of such Eligible Accounts less any and all returns,
rebates, discounts (which may, at Agent's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed Account Debtors, granted, outstanding or payable in connection
with such Accounts at such time. Agent and Lenders agree that Accounts derived
from sales on items of "FOB Seller's (a Borrower's) plant" (or the equivalent)
may be included within Eligible Accounts from the date of any such sale.
A-4
Borrowing Base Certificate - a certificate by a responsible officer of
Borrowers, substantially in the form of Exhibit 8.1.4 (or another form
acceptable to Agent) setting forth the calculation of the Borrowing Base,
including a calculation of each component thereof, all in such detail as shall
be satisfactory to Agent. All calculations of the Borrowing Base in connection
with the preparation of any Borrowing Base Certificate shall originally be made
by Borrowers and certified to Agent; provided, that Agent shall have the right
to review and adjust, in the exercise of its credit judgment, any such
calculation after giving notice thereof to Borrower, (1) to reflect its
reasonable estimate of declines in value of any of the Collateral described
therein, and (2) to the extent that Agent determines that such calculation is
not in accordance with this Agreement.
Business Day - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of Wisconsin or the State of
Illinois or is a day on which banking institutions located in either of such
states are closed.
Capital Expenditures - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Change of Control - means the occurrence of any of the following
events: (i) all or substantially all of ETI's or PW's assets, on a consolidated
basis, are sold as an entirety to any Person or related group of Persons or
there shall be consummated any consolidation or merger of PW (A) in which PW is
not the continuing or surviving company (other than a consolidation or merger
with a wholly owned Subsidiary in which all shares of PW Common Stock
outstanding immediately prior to the effectiveness thereof are changed into or
exchanged for the same consideration) or (B) pursuant to which the PW Common
Stock would be converted into cash, securities or other property, in any case,
other than a sale of assets or consolidation or merger of PW in which the
holders of the PW Common Stock immediately prior to the sale of assets or
consolidation or merger have, directly or indirectly, at least a majority of the
PW Common Stock of the transferee or continuing or surviving company immediately
after such sale of assets or consolidation or merger, (ii) any "person"(as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) other than the
Spell Group, is or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 of the Exchange Act provided that such person shall be deemed to have
"beneficial ownership" of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power of the
outstanding voting securities of PW; (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of PW (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of PW, as the
case may be, was approved by a vote of at least a majority of the directors of
PW then still in office) who were either directors at the beginning of such
period or whose election or nomination for election was previously so approved
cease for any reason to constitute a majority of the Board of Directors of
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PW then in office; or (iv) a "Change of Control" (as defined in the PW
Subordinated Debt Documents) shall occur.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied or waived and the New Term Loan is made
under the Agreement.
Collateral - all of the Property and interests in Property described
in Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
Compliance Certificate - as defined in subsection 8.1.3 of the
Agreement.
Computer Hardware and Software - all of any Borrower's rights
(including rights as licensee and lessee) with respect to (i) computer and other
electronic data processing hardware, including all integrated computer systems,
central processing units, memory units, display terminals, printers, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware; (ii) all Software and
all software programs designed for use on the computers and electronic data
processing hardware described in clause (i) above, including all operating
system software, utilities and application programs in any form (source code and
object code in magnetic tape, disk or hard copy format or any other listings
whatsoever); (iii) any firmware associated with any of the foregoing; and (iv)
any documentation for hardware, Software and firmware described in clauses (i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals,
specifications, training materials, charts and pseudo codes.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Contract Right - any right of any Borrower to payment under a contract
for the sale or lease of goods or the rendering of services, which right is at
the time not yet earned by performance.
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Derivative Obligations - every obligation of a Person under any
forward contract, futures contract, exchange contract, swap, option or other
financing agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices.
Distribution - in respect of any Person means and includes: (i) the
payment of any dividends or other distributions on Securities (except
distributions in such Securities) and (ii) the redemption or acquisition of
Securities of such Person, as the case may be, unless made contemporaneously
from the net proceeds of the sale of Securities.
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Dominion Account - a special bank account or accounts of Agent
established by a Borrower pursuant to subsection 6.2.4 of the Agreement at banks
selected by Borrowers, but acceptable to Agent in its discretion, and over which
Agent shall have sole and exclusive access and control for withdrawal purposes.
EBITDA - as defined in Exhibit 8.3 to the Agreement.
Eligible Account - an Account arising in the ordinary course of the
business of any Borrower from the sale of goods or rendition of services which
Agent, in its reasonable judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if:
(i) it arises out of a sale made by a Borrower to a Subsidiary
or an Affiliate (including, without limitation, PW and its Subsidiaries) of a
Borrower or to a Person controlled by an Affiliate of a Borrower; or
(ii) it is unpaid for more than 60 days after the original due
date shown on the invoice; or
(iii) it is due or unpaid more than 90 days after the original
invoice date; or
(iv) 25% or more of the Accounts from the Account Debtor are not
deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor exceed 20%
of the net amount of all Eligible Accounts, to the extent of such excess; or
(vi) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vii) the Account Debtor is also a Borrower's creditor or
supplier, or the Account Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with respect to any other
Account due from such Account Debtor to a Borrower, or the Account otherwise is
or may become subject to any right of setoff by the Account Debtor; or
(viii) the Account Debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other petition or other application for
relief under the federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended business, ceased to be
Solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or
(ix) it arises from a sale to an Account Debtor outside the
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ or any other province of Canada in which the
Personal Property Security Act has been adopted in substantially the same form
as currently in effect in Ontario, unless the sale is on
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letter of credit, guaranty or acceptance terms in each case acceptable to Agent
in its sole discretion; or
(x) it arises from a sale to the Account Debtor on a
▇▇▇▇-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or
any other repurchase or return basis; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the applicable Borrower
assigns its right to payment of such Account to Agent, for its benefit and the
ratable benefit of Lenders, in a manner satisfactory to Agent so as to comply
with the Assignment of Claims Act of 1940 (31 U.S.C. Section203 et seq., as
amended); or
(xii) the Account is subject to a Lien other than a Permitted
Lien; or
(xiii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving rise to
such Account have not been performed by the applicable Borrower and accepted by
the Account Debtor or the Account otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument
of any kind, or has been reduced to judgment; or
(xv) any Borrower has made any agreement with the Account Debtor
for any deduction therefrom, except for discounts or allowances which are made
in the ordinary course of business for prompt payment and which discounts or
allowances are reflected in the calculation of the face value of each invoice
related to such Account; or
(xvi) the Account is not at all times subject to Agent's duly
perfected, first priority security interest and no other Lien except a Permitted
Lien; or
(xvii) any Borrower has made an agreement with the Account Debtor
to extend the time of payment thereof.
Eligible Inventory - such Inventory of any Borrower (other than
packaging materials, supplies, consigned Inventory, ropes and reels) which Agent
in its reasonable credit judgments deems to be Eligible Inventory. Without
limiting the generality of the foregoing, no Inventory shall be Eligible
Inventory if:
(xviii) it is not raw materials or finished goods that is, in
Agent's opinion, readily marketable in its current form; or
(xix) it is not in good, new and saleable condition; or
(xx) it is slow-moving, obsolete or unmerchantable; or
(xxi) it does not meet all standards imposed by any governmental
agency or authority; or
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(xxii) it does not conform in all respects to the warranties and
representations set forth in the Agreement; or
(xxiii) it is not at all times subject to Agent's duly perfected,
first priority security interest and no other Lien except a Permitted Lien; or
(xxiv) it is not situated at a location in compliance with the
Agreement or is in transit; or
(xxv) it is not situated at a location in the United States of
America.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, orders and consent decrees relating to health, safety
and environmental matters.
Equipment Loans - the Loans described in subsection 1.3.2 of the
Agreement.
Environmental Review - as defined in Section 9.10 of the Agreement.
Equipment Loan Commitment - with respect to any Lender, the amount of
such Lender's Equipment Loan Commitment pursuant to subsection 1.3.2 of the
Agreement, as set forth below such Lender's name on the signature pages hereof
or any Assignment and Acceptance Agreement executed by such Lender, minus all
Equipment Loan payments paid to such Lender.
Equipment Loan Notes - the Secured Promissory Notes to be executed by
Borrowers from time to time in favor of each applicable Lender to evidence its
Equipment Loan Percentage of any Equipment Loans, which shall be in the form of
Exhibit 1.3B to the Agreement, together with any replacement or successor notes
therefor.
Equipment Loan Percentage - with respect to each Lender, the
percentage equal to the quotient of such Lender's Equipment Loan Commitment
divided by the aggregate of all Equipment Loan Commitments.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute, and all rules and regulations from time to
time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Excess Cash Flow - with respect to any fiscal year of Borrowers,
commencing with the fiscal year ending December 31, 2003, 50% of the amount
equal to EBITDA for such fiscal year minus the sum of (i) Borrowers' and their
Subsidiaries' Capital Expenditures which are not financed for such fiscal year,
(ii) income taxes paid by Borrowers or their Subsidiaries in cash within such
fiscal year, (iii) regularly scheduled payments of principal on Funded Debt made
by Borrowers or their Subsidiaries within such fiscal year and (iv) interest on
Funded Debt paid by Borrowers or their Subsidiaries in cash within such period.
Fee Letter - as defined in Section 2.3 of the Agreement.
Funded Debt - as defined in Exhibit 8.3 of the Agreement.
▇-▇
▇▇▇▇ - generally accepted accounting principles in the United States
of America in effect from time to time.
Guarantors - any Subsidiary of any Borrower and each other Person who
now or hereafter guarantees payment or performance of the whole or any part of
the Obligations.
Guaranty Agreements - any Guaranty Agreement which is to be executed
by any Subsidiary of any Borrower or any other Guarantor, in form and substance
acceptable to Agent.
Indebtedness - as applied to a Person means, without duplication:
(xxvi) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease Obligations;
(xxvii) all obligations of other Persons which such Person has
guaranteed;
(xxviii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such Person;
(xxix) Derivative Obligations; and
(xxx) in the case of Borrowers (without duplication), the
Obligations.
Intellectual Property - means: all past, present and future: trade
secrets, know-how and other proprietary information; trademarks, internet domain
names, service marks, trade dress, trade names, business names, designs, logos,
slogans (and all translations, adaptations, derivations and combinations of the
foregoing) indicia and other source and/or business identifiers, and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights, unpatented inventions (whether or not
patentable); patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to ▇▇▇ for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.
Interest Period - as applicable to any LIBOR Portion, a period
commencing on the date such LIBOR Portion is advanced, continued or converted,
and ending on the date which is one (1) month, two (2) months, three (3) months,
or six (6) months later, as may then be requested by Borrowers; provided that
(i) any Interest Period which would otherwise end on a day which is not a
Business Day shall end in the next preceding or succeeding Business Day as is
Agent's custom in the market to which such LIBOR Portion relates; (ii) there
remains a minimum of one
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(1) month, two (2) months, three (3) months or six (6) months (depending upon
which Interest Period Borrower selects) in the Term, unless Borrowers and
Lenders have agreed to an extension of the Term beyond the expiration of the
Interest Period in question; (iii) all Interest Periods of the same duration
which commence on the same date shall end on the same date; and (iv) with
respect to any LIBOR Term Portion or LIBOR Equipment Portion, no applicable
Interest Period shall extend beyond the scheduled installment payment date for
such LIBOR Term Portion or Equipment Portion, as applicable; provided that
Borrowers shall not be required to pay double interest even though the preceding
Interest Period ends and all new Interest Period begins on the same day.
LC Amount - at any time, the aggregate undrawn face amount of all
Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Agent or any Affiliate of
Agent shall guaranty the payment or performance by Borrower of its reimbursement
obligation under any letter of credit.
LC Obligations - Any Obligations that arise from any draw against any
Letter of Credit or against any Letter of Credit supported by an LC Guaranty.
Letter of Credit - any standby or documentary letter of credit issued
by Agent or any Affiliate of Agent for the account of any Borrower.
LIBOR - as applicable to any LIBOR Portion, for the applicable
Interest Period, the rate per annum (rounded upward, if necessary, to the
nearest 1/8 of one percent) as determined on the basis of the offered rates for
deposits in U.S. dollars, for a period of time comparable to such Interest
Period which appears on the Telerate page 3750 as of 11:00 a.m. (London time) on
the day that is two (2) London Banking Days preceding the first day of such
Interest Period; provided, however, if the rate described above does not appear
on the Telerate System on any applicable interest determination date, the LIBOR
shall be the rate (rounded upwards as described above, if necessary) for
deposits in U.S. dollars for a period substantially equal to the Interest Period
on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on
that service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on the day that is two (2) London Banking Days prior to the first day of
such Interest Period. If both the Telerate and Reuters systems are unavailable,
then the rate for that date will be determined on the basis of the offered rates
for deposits in U.S. dollars for a period of time comparable to such Interest
Period which are offered by four (4) major banks in the London interbank market
at approximately 11:00 a.m. (London time), on the day that is two (2) London
Banking Days preceding the first day of such Interest Period as selected by
Agent. The principal London office of each of the major London banks so selected
will be requested to provide a quotation of its U.S. dollar deposit offered
rate. If at least two (2) such quotations are provided, the rate for that date
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate for that date will be determined on the basis of
the rates quoted for loans in U.S. dollars to leading European banks for a
period of time comparable to such Interest Period offered by major banks in New
York City at approximately 11:00 a.m. (New York City time), on the day that is
two (2) London Banking Days preceding the first day of such Interest Period. In
the event that Agent is unable to obtain any such quotation as provided above,
A-11
it will be determined that LIBOR pursuant to an Interest Period cannot be
determined. In the event that the Board of Governors of the Federal Reserve
System shall impose a Reserve Percentage with respect to LIBOR deposits of Bank
then for any period during which such Reserve Percentage shall apply, LIBOR
shall be equal to the amount determined above divided by an amount equal to 1
minus the Reserve Percentage.
LIBOR Equipment Portion - that portion of the Equipment Loans
specified in a LIBOR Request and, which, as of the date of the LIBOR Request
specifying such LIBOR Equipment Portion, has met the conditions for basing
interest on the LIBOR in Section 3.1 of the Agreement and the Interest Period of
which has not terminated.
LIBOR Interest Payment Date - the first day of each calendar month
during and immediately following the applicable Interest Period.
LIBOR Option - the option granted pursuant to Section 3.1 of the
Agreement to have the interest on all or any portion of the principal amount of
the Revolving Credit Loans, Equipment Loans or the Term Loan based on the LIBOR.
LIBOR Portion - a LIBOR Revolving Portion, a LIBOR Term Portion or a
LIBOR Equipment Portion.
LIBOR Request - a notice in writing (or by telephone confirmed
electronically or by telecopy or other facsimile transmission on the same day as
the telephone request) from Borrower to Agent requesting that interest on a
Revolving Credit Loan or all or any portion of the Term Loan or the Equipment
Loans be based on the LIBOR, specifying: (i) the first day of the Interest
Period (which shall be a Business Day); (ii) the length of the Interest Period;
(iii) whether the LIBOR Portion is a new Loan, a conversion of a Base Rate
Portion, or a continuation of a LIBOR Portion, and (iv) the dollar amount of the
LIBOR Revolving Portion, LIBOR Term Portion or LIBOR Equipment Portion, which
shall be in an amount not less than $1,000,000 or an integral multiple of
$100,000 in excess thereof.
LIBOR Revolving Portion - that portion of the Revolving Credit Loans
specified in a LIBOR Request (including any portion of Revolving Credit Loans
which is being borrowed by Borrower concurrently with such LIBOR Request) which,
as of the date of the LIBOR Request specifying such LIBOR Revolving Portion, has
met the conditions for basing interest on the LIBOR in Section 3.1 of the
Agreement and the Interest Period of which has not terminated.
LIBOR Term Portion - that portion of the Term Loan specified in a
LIBOR Request which, as of the date of the LIBOR Request specifying such LIBOR
Term Portion, has met the conditions for basing interest on the LIBOR in Section
3.1 of the Agreement and the Interest Period of which has not terminated.
License Agreement - collectively, the "Non-Exclusive License
Agreement" and the "Sublicense Agreement" as such terms are defined in the
Acquisition Agreement.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on common law, statute or contract. The term "Lien" shall also include
rights of seller under conditional sales contracts or
A-12
title retention agreements, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement or other arrangement
pursuant to which title to the Property has been retained by or vested in some
other Person for security purposes.
Loan Account - the loan account established on the books of Agent
pursuant to Section 3.6 of the Agreement.
Loan Commitment - with respect to any Lender, the amount of such
Lender's Revolving Loan Commitment plus such Lender's Term Loan Commitment.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - all loans and advances of any kind made by Agent, any Lender,
or any Affiliate of Agent or any Lender, pursuant to the Agreement.
London Banking Day - any date on which commercial banks are open for
business in London, England.
Majority Lenders - as of any date, Lenders holding 66-2/3% of the Term
Loan, Equipment Loans, Equipment Loan Commitments and Revolving Loan Commitments
determined on a combined basis and following the termination of the Revolving
Loan Commitments and Equipment Loan Commitments, Lenders holding 66-2/3% or more
of the outstanding Loans, LC Amounts and LC Obligations not yet reimbursed by
Borrower or funded with a Revolving Credit Loan; provided, that (i) in each
case, if there are 2 or more Lenders with outstanding Loans, LC Amounts,
unfunded and unreimbursed LC Obligations, Revolving Loan Commitments or
Equipment Loan Commitments, at least 2 Lenders shall be required to constitute
Majority Lenders; (ii) if there are 2 or fewer Lenders with outstanding Loans,
LC Amounts, unfunded and unreimbursed LC Obligations, Revolving Loan Commitments
or Equipment Loan Commitments, at least 2 Lenders shall be required to
constitute Majority Lenders; and (iii) prior to termination of the Revolving
Loan Commitments and/or Equipment Loan Commitments, if any Lender breaches its
obligation to fund any requested Revolving Credit Loan or Equipment Loan, for so
long as such breach exists, its voting rights hereunder shall be calculated with
reference to its outstanding Loans, LC Amounts and unfunded and unreimbursed LC
Obligations, rather than its Revolving Loan Commitment and Equipment Loan
Commitment.
Material Adverse Effect - (i) a material adverse effect on the
business, condition (financial or otherwise), operation, performance or
properties of Borrowers, (ii) a material adverse effect on the rights and
remedies of Agent or Lenders under the Loan Documents, or (iii) the material
impairment of the ability of Borrowers or any of their Subsidiaries to perform
its obligations hereunder or under any Loan Document.
Money Borrowed - means, (i) Indebtedness arising from the lending of
money by any Person to any Borrower or any of its Subsidiaries; (ii)
Indebtedness, whether or not in any such case arising from the lending by any
Person of money to any Borrower or any of its Subsidiaries,
A-13
(1) which is represented by notes payable or drafts accepted that evidence
extensions of credit, (2) which constitutes obligations evidenced by bonds,
debentures, notes or similar instruments, or (3) upon which interest charges are
customarily paid (other than accounts payable) or that was issued or assumed as
full or partial payment for Property; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with respect to
letters of credit or guaranties of letters of credit and (v) Indebtedness of any
Borrower or any of its Subsidiaries under any guaranty of obligations that would
constitute Indebtedness for Money Borrowed under clauses (i) through (iii)
hereof, if owed directly by any Borrower or any of its Subsidiaries. Money
Borrowed shall not include trade payables or accrued expenses.
Mortgages - the mortgages, deeds of trust, security deeds and/or
leasehold mortgages executed prior to the Closing Date by a Borrower (or a
predecessor-in-interest to a Borrower by merger) in favor of Agent as security
for the Obligations, a Lien upon the real Property located in or at (i) Conroe,
Texas; (ii) Buckhannon, West Virginia; (iii) Columbia, Missouri; and (iv) Mt.
Sterling, Kentucky.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
of ERISA.
New Mortgages - as defined in Section 5.4 of the Agreement.
Notes - the Revolving Notes, the Term Notes and the Equipment Notes.
Obligations - all Loans, all LC Obligations and all other advances,
debts, liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or payable from
any Borrower to Agent, for its own benefit, from any Borrower to Agent for the
benefit of any Lender, from any Borrower to any Lender or from any Borrower to
Bank or any other Affiliate of Agent, of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, whether
arising under the Agreement or any of the other Loan Documents or otherwise,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired, including without limitation any Product
Obligations owing to Agent, any Lender, Bank or any Affiliate of Bank or Agent.
Organizational I.D. Number - with respect to any Person, the
organizational identification number assigned to such Person by the applicable
governmental unit or agency of the jurisdiction of organization of such Person.
Original Closing Date - the "Closing Date" as defined in the Original
Loan Agreement.
Original Lenders - as defined in Section 1.3 of the Agreement.
Other Agreements - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other third
party and delivered to Agent or any Lender in respect of the transactions
contemplated by the Agreement.
Overadvance - as defined in subsection 1.1.2 of the Agreement.
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Patent Assignment - the Patent Security Agreements executed by each
Borrower on or about the Closing Date in favor of Agent and by which such
Borrower shall assign to Agent and grant to Agent a security interest in, as
security for all of the Obligations, all of such Borrower's rights, title and
interest in and to all of its patents, as the same may be amended from time to
time.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of
the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrowers incurred after the date hereof which is secured by a Purchase Money
Lien and the principal amount of which, when aggregated with the principal
amount of all other such Indebtedness and Capitalized Lease Obligations of
Borrowers and their Subsidiaries at the time outstanding, does not exceed
$750,000. For the purposes of this definition, the principal amount of any
Purchase Money Indebtedness consisting of capitalized leases (as opposed to
operating leases) shall be computed as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of any Borrower or any of its Subsidiaries that is covered by Title IV
of ERISA.
Product Obligations - every obligation of any Borrower under and in
respect of any one or more of the following types of services or facilities
extended to such Borrower by Bank, Agent, any Lender or any Affiliate of Bank or
Agent: (i) credit cards, (ii) cash management or related services including the
automatic clearing house transfer of funds for the account of such Borrower
pursuant to agreement or overdraft, (iii) cash management, including controlled
disbursement services and (iv) Derivative Obligations.
Projections - Borrowers' forecasted Consolidated and consolidating (i)
balance sheets, (ii) profit and loss statements, (iii) cash flow statements, and
(iv) capitalization statements, all prepared on a consistent basis with the
historical financial statements of Borrowers and their Subsidiaries, together
with appropriate supporting details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the purchase
price of any fixed assets, (ii) any Indebtedness (other than the Obligations)
incurred at the time of or within 10 days prior to or after the acquisition of
any fixed assets for the purpose of financing all or any part of the purchase
price thereof, and (iii) any renewals, extensions or refinancings thereof, but
not any increases in the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the
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purchase price of which was financed through the incurrence of the Purchase
Money Indebtedness secured by such Lien.
PW - PW Eagle, Inc., a Minnesota corporation, which owns 100% of the
issued and outstanding capital stock and securities of ETI.
PW Common Stock - (i) the Common Stock, $.01 par value, of PW, (ii)
the Class B common stock, $0.01 par value, of PW and (iii) any other class of
capital stock of PW hereafter authorized that is not limited to a fixed sum or
percentage of par or stated or liquidation value with respect to the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon any liquidation, dissolution or winding up of PW.
PW Loan Agreement - that certain Third Amended and Restated Loan and
Security Agreement dated September 30, 2002 by and among PW Eagle, Inc., the
lender signatories thereto and Fleet Capital Corporation as agent for said
lenders, as the same may be amended from time to time.
PW Subordinated Debt Documents - the "Subordinated Debt Documents" as
defined in the PW Loan Agreement.
PW Subordinated Notes - the "Subordinated Note" as defined in the PW
Loan Agreement.
Rentals - as defined in subsection 8.2.18 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(c) of
ERISA.
Reserve Percentage - the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed on member banks of the Federal Reserve System against "Euro-currency
Liabilities" as defined in Regulation D.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(xxxi) investments by any Borrower, to the extent existing on the
Closing Date, in one or more Subsidiaries of Borrower;
(xxxii) Property to be used in the ordinary course of business;
(xxxiii) Current Assets arising from the sale of goods and services
in the ordinary course of business of any Borrower or any of its Subsidiaries;
(xxxiv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United States of
America, provided that such obligations mature within one year from the date of
acquisition thereof;
A-16
(xxxv) investments in certificates of deposit maturing within one
year from the date of acquisition and fully insured by the Federal Deposit
Insurance Corporation;
(xxxvi) investments in commercial paper given the highest rating by
a national credit rating agency and maturing not more than 270 days from the
date of creation thereof;
(xxxvii) investments in money market, mutual or similar funds having
assets in excess of $100,000,000 and the investments of which are limited to
investment grade securities;
(xxxviii) investments existing on the date hereof and listed on
Exhibit 8.2.12 hereto; and
(xxxix) investments otherwise expressly permitted pursuant to the
Agreement.
Revolving Credit Loan - a Loan made by any Lender pursuant to Section
1.1 of the Agreement.
Revolving Credit Maximum Amount -Twenty-Five Million Dollars
($25,000,000).
Revolving Loan Commitment - with respect to any Lender, the amount of
such Lender's Revolving Loan Commitment pursuant to subsection 1.1.1 of the
Agreement, as set forth below such Lender's name on the signature page hereof or
any Assignment and Acceptance Agreement executed by such Lender.
Revolving Loan Percentage - with respect to each Lender, the
percentage equal to the quotient of such Lender's Revolving Loan Commitment
divided by the aggregate of all Revolving Loan Commitments.
Revolving Notes - the Secured Promissory Notes to be executed by
Borrowers on or about the Closing Date in favor of each Lender to evidence the
Revolving Credit Loans, which shall be in the form of Exhibit 1.1 to the
Agreement, together with any replacement or successor notes therefor.
Security - all shares of stock, partnership interests, membership
interests, membership units or other ownership interests in any other Person and
all warrants, options or other rights to acquire the same.
Security Documents - the Mortgages, any New Mortgage, the Patent
Assignment, the Stock Pledge Agreement, the Trademark Assignment and all other
instruments and agreement now or at any time hereafter securing the whole or any
part of the Obligations.
Solvent - as to any Person, that such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all of
its Indebtedness as such Indebtedness matures and (iii) has capital sufficient
to carry on its business and transactions and all business and transactions in
which it is about to engage.
A-17
Spell Group shall mean collectively (i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and (ii)
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and, in either case, any
of their spouses or any family trust which is controlled by any of the
foregoing.
Standstill Agreement - that certain Standstill Agreement of even date
herewith by and between Agent, on behalf of Lenders, and Uponor North America,
Inc., Uponor Innovation AB and Uponor Oyj.
Stock Pledge Agreement - the Stock Pledge Agreement executed by ETI on
or about the Closing Date in favor of Agent for the benefit of itself and
Lenders pursuant to the priorities set forth in the Agreement, as such Stock
Pledge Agreement may be amended from time to time.
Subordinated Debt - Indebtedness of any Borrower or any Subsidiary of
any Borrower that is subordinated to the Obligations in a manner satisfactory to
Agent, and contains terms, including without limitation, payment terms,
satisfactory to Agent, including, without limitation, Indebtedness owed by ETI
pursuant to the License Agreement or the Subordinated Note.
Subordinated Note - shall mean that certain unsecured promissory note
in the original principal amount of $243,439 dated as of March 11, 2003 and
executed by ETI in favor of Uponor North America, Inc.
Subsidiary - any Person of which another Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting Stock
at the time of determination.
Supply Contract - as defined in Section 8.1.11 of the Agreement.
Term - as defined in Section 4.1 of the Agreement.
Term Loan - the Loan described in subsection 1.3.1 of the Agreement.
Term Loan Commitment - with respect to any Lender, the amount of such
Lender's Term Loan Commitment pursuant to subsection 1.3.1 of the Agreement, as
set forth below such Lender's name on the signature pages hereof or any
Assignment and Acceptance Agreement executed by such Lender, minus all Term Loan
payments paid to such Lender.
Term Loan Notes - the Secured Promissory Notes to be executed by
Borrowers on or about the Closing Date in favor of each applicable Lender to
evidence its Term Loan, which shall be in the form of Exhibit 1.3A to the
Agreement, together with any replacement or successor notes therefor.
Term Loan Percentage - with respect to each Lender, the percentage
equal to the quotient of such Lender's Term Loan Commitment divided by the
aggregate of all Term Loan Commitments.
Total Credit Facility -Twenty-Five Million Dollars ($25,000,000), as
reduced from time to time pursuant to the terms of the Agreement.
A-18
Trademark Assignment- the Trademark Security Agreements executed by
each Borrower on or about the Closing Date in favor of Agent and by which such
Borrower shall assign to Agent, and grant to Agent a security interest in, as
security for the Obligations all of such Borrower's rights, title and interest
in and to all of its trademarks, as the same may be amended from time to time.
Type of Organization - with respect to any Person, the kind or type of
entity by which such Person is organized, such as a corporation or limited
liability company.
UCC - the Uniform Commercial Code as in effect in the State of
Illinois on the date of this Agreement, as it may be amended or otherwise
modified.
Unused Line Fee - as defined in Section 2.5 of the Agreement.
Voting Stock - Securities of any class or classes of a corporation,
limited partnership or limited liability company or any other entity the holders
of which are ordinarily, in the absence of contingencies, entitled to vote with
respect to the election of corporate directors (or Persons performing similar
functions).
Other Terms. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the UCC to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
A-19
LIST OF EXHIBITS AND SCHEDULES
Exhibit 1.1 Form of Revolving Note
Exhibit 1.3A Form of Term Loan Note
Exhibit 1.3B Form of Equipment Loan Note
Exhibit 6.1.1 Business Locations
Exhibit 7.1.1 Jurisdictions in which each Borrower and each
Subsidiary is Authorized to do Business
Exhibit 7.1.4 Capital Structure of each Borrower and each
Subsidiary
Exhibit 7.1.5 Names; Organization
Exhibit 7.1.13 Surety Obligations
Exhibit 7.1.14 Tax Identification Numbers of Subsidiaries
Exhibit 7.1.15 Brokers' Fees
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19 Contracts Restricting Right to Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.22 Capitalized and Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.25 Labor Relations
Exhibit 8.1.3 Form of Compliance Certificate
Exhibit 8.1.4 Form of Borrowing Base Certificate
Exhibit 8.2.3 Existing Indebtedness
Exhibit 8.2.5 Permitted Liens
Exhibit 8.2.12 Permitted Investments
Exhibit 8.3 Financial Covenants
List of Exhibits and Schedules
EXHIBIT 1.1
FORM OF REVOLVING NOTE
$____________________ __________________, 20__
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, (hereinafter "Borrowers"), hereby
PROMISE TO PAY to the order of ___________________________, a ___________
corporation ("Lender"), or its registered assigns, at the principal office of
Fleet Capital Corporation, as agent for such Lender, or at such other place in
the United States of America as the holder of this Note may designate from time
to time in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of ________________
($_________), or such lesser principal amount as may be outstanding pursuant to
the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit
Loan, together with interest on the unpaid principal amount of this Note
outstanding from time to time.
This Note is one of the Revolving Credit Notes referred to in, and
issued pursuant to, that certain Loan and Security Agreement dated as of March
14, 2003, by and among Borrowers, the lender signatories thereto (including
Lender) and Fleet Capital Corporation ("FCC"), as agent for such Lenders (FCC in
such capacity "Agent") (hereinafter amended from time to time, the "Loan
Agreement"), and is entitled to the benefit and security of the Loan Agreement.
All of the terms, covenants and conditions of the Loan Agreement and the
Security Documents are hereby made a part of this Note and are deemed
incorporated herein in full. All capitalized terms herein, unless otherwise
defined, unless otherwise specifically defined in this Note, shall have the
meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement and, if
not sooner paid in full, on August 20, 2005, unless the term hereof is extended
in accordance with the Loan Agreement. Interest thereon shall be paid until such
principal amount is paid in full at such interest rates and at such times as are
specified in the Loan Agreement.
Upon and after the occurrence, and during the continuation, of an
Event of Default, this Note shall or may, as provided in the Loan Agreement,
become or be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrowers.
Exhibit 1.1 - Page 1
This Note shall be interpreted, governed by, and construed in
accordance with, the internal laws of the State of Illinois.
EXTRUSION TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
--------------------------------
MID-STATES PLASTICS, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Exhibit 1.1 - Page 2
EXHIBIT 1.3A
FORM OF TERM LOAN NOTE
(Term Note)
$____________________ __________________, 20__
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrowers"), hereby
promise to pay to the order of _______________________, a ________________
corporation (hereinafter "Lender"), or its registered assigns at the office of
Fleet Capital Corporation, as agent for such Lender, or at such other place in
the United States of America as the holder of this Note may designate from time
to time in writing, in lawful money of the United States, in immediately
available funds, at the time of payment, the principal sum of
______________________ ($___________), together with interest from and after the
date hereof on the unpaid principal balance outstanding from time to time.
This Secured Promissory Note (the "Note") is one of the Term Notes
referred to in, and is issued pursuant to, that certain Loan and Security
Agreement dated as of March 14, 2003, by and among Borrowers, the lender
signatories thereto (including Lender) and Fleet Capital Corporation ("FCC") as
Agent for said lenders (FCC in such capacity "Agent") (hereinafter, as amended
from time to time, the "Loan Agreement"), and is entitled to all of the benefits
and security of the Loan Agreement. All of the terms, covenants and conditions
of the Loan Agreement and the Security Documents are hereby made a part of this
Note and are deemed incorporated herein in full. All capitalized terms used
herein, unless otherwise specifically defined in this Note, shall have the
meanings ascribed to them in the Loan Agreement.
For so long as no Event of Default shall have occurred and be
continuing the principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) Interest on the unpaid principal balance outstanding from time
to time shall be paid at such interest rates and at such times as are specified
in the Loan Agreement;
(b) Principal shall be due and payable quarterly commencing on June
30, 2003 and continuing on each, September 30, December 31, March 31 and June 30
thereafter to and including June 30, 2005, in installments equal to [aggregate
$250,000].
(c) The entire remaining principal amount then outstanding, together
with any and all other amounts due hereunder, shall be due and payable on August
20, 2005.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and payable immediately upon any
termination of the Loan Agreement pursuant to Section 4 thereof.
Exhibit 1.3A - Page 1
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.3 of the Loan Agreement. Borrowers may also prepay
this Note in the manner provided in Section 4 of the Loan Agreement.
Upon the occurrence, and during the continuation, of an Event of
Default, this Note shall or may, as provided in the Loan Agreement, become or be
declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrowers.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois.
EXTRUSION TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
--------------------------------
MID-STATES PLASTICS, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Exhibit 1.3A - Page 2
EXHIBIT 1.3B
FORM OF EQUIPMENT LOAN NOTE
(Equipment Note)
$_____________ __________________, 200_
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrowers"), hereby
promise to pay to the order of ___________________, a __________________
corporation (hereinafter "Lender"), or its registered assigns at the office of
Fleet Capital Corporation, as agent for such Lender, or at such other place in
the United States of America as the holder of this Note may designate from time
to time in writing, in lawful money of the United States, in immediately
available funds, at the time of payment, the principal sum of _________________
Dollars ($____________) or such lesser principal amount of as may be outstanding
pursuant to the Loan Agreement (as hereinafter defined) with respect to
Equipment Loans, together with interest from and after the date hereof on the
unpaid principal balance outstanding from time to time.
This Secured Promissory Note (the "Note") is one of the Equipment
Notes referred to in, and is issued pursuant to, that certain Loan and Security
Agreement dated as of March 14, 2003, by and among Borrowers, the lender
signatories thereto (including Lender) and Fleet Capital Corporation ("FCC") as
Agent for said lenders (FCC in such capacity "Agent") (hereinafter, as amended
from time to time, the "Loan Agreement"), and is entitled to all of the benefits
and security of the Loan Agreement. All of the terms, covenants and conditions
of the Loan Agreement and the Security Documents are hereby made a part of this
Note and are deemed incorporated herein in full. All capitalized terms used
herein, unless otherwise specifically defined in this Note, shall have the
meanings ascribed to them in the Loan Agreement.
For so long as no Event of Default shall have occurred and be
continuing the principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) Interest on the unpaid principal balance outstanding from time
to time shall be paid at such interest rates and at such times as are specified
in the Loan Agreement; and
(b) Principal shall be due and payable monthly commencing on the
first day of the month in which the first Equipment Loan is made and continuing
on the first day of each month thereafter to August 1, 2005, in installments
equal to one sixtieth (1/60) of the aggregate amount of all Equipment Loans made
by Lender to Borrowers on or after March 7, 2003; and
(c) The entire remaining principal amount then outstanding, together
with any and all other amounts due hereunder, shall be due and payable on August
20, 2005.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and payable immediately upon any
termination of the Loan Agreement pursuant to Section 4 thereof.
Exhibit 1.3B - Page 1
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.3 of the Loan Agreement. Borrowers may also prepay
this Note in the manner provided in Section 4 of the Loan Agreement.
Upon the occurrence and during the continuation of an Event of
Default, this Note shall or may, as provided in the Loan Agreement, become or be
declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrowers.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois.
EXTRUSION TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
MID-STATES PLASTICS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Exhibit 1.3B - Page 2
EXHIBIT 8.3
FINANCIAL COVENANTS
Consolidated Net Income means, with respect to ETI and its
Subsidiaries for any fiscal period, the net income (or loss) of ETI and its
Subsidiaries for such period taken as a whole (determined in accordance with
GAAP on a consolidated basis), but excluding in any event: (a) any gains or
losses on the sale or other disposition of Investments or fixed or capital
assets or from any transaction classified as extraordinary under GAAP, any taxes
on such excluded gains and any tax deductions or credits on account of any such
excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings
and losses of any business entity, substantially all the assets of which have
been acquired in any manner by ETI, realized by such business entity prior to
the date of such acquisition; (d) net earnings and losses of any business entity
which shall have merged into ETI earned or incurred prior to the date of such
merger; (e) net earnings of any business entity (other than a Consolidated
Subsidiary) in which ETI has an ownership interest unless such net earnings
shall have been received by ETI in the form of cash distributions; (f) earnings
resulting from a reappraisal, revaluation or write-up of assets; (g) any charge
to net earnings resulting from the amortization of the value of stock options
given to employees to the extent required by FASB 25; (h) any increase or
decrease of net income arising from a change in ETI's accounting methods; (i)
any gains resulting from the forgiveness of Funded Debt or the retirement of
Funded Debt at a discount; (j) any gain arising from the acquisition of any
Securities of ETI; and (k) any reversal of any contingency reserve, except that
provision for such contingency reserve shall have been made from income arising
during such period.
EBIT - With respect to any fiscal period, the sum of ETI's
Consolidated Net Income plus amounts deducted in determining Consolidated Net
Income in respect of: (a) any provision for (or less any benefit from) income
taxes whether current or deferred; and (b) Interest Expense for such period.
EBITDA - With respect to any fiscal period, the sum of ETI's
Consolidated Net Income plus amounts deducted in determining Consolidated Net
Income in respect of: (a) any provision for (or less any benefit from) income
taxes whether current or deferred; (b) amortization and depreciation expense;
and (c) Interest Expense for such period.
Fixed Charge Coverage Ratio - With respect to any period of
determination, the ratio of (i) EBITDA of ETI for such period minus income taxes
paid in cash and non-financed Capital Expenditures during such period to (ii)
Fixed Charges.
Fixed Charges - For any period of determination, the sum of (a)
scheduled principal payments of Funded Debt (including the principal portion of
scheduled payments of Capital Lease Obligations), (b) Interest Expense paid in
cash included in the determination of Consolidated Net Income, and (c) dividends
paid on ETI's capital stock.
Exhibit 8.3 - Page 1
Funded Debt - means: (i) Indebtedness arising from the lending of
money by any Person to any Borrower, including, without limitation, the
Obligations; (ii) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to any Borrower (A) which is represented by notes
payable or drafts accepted that evidence extensions of credit, (B) which
constitutes obligations evidenced by bonds, debentures, notes or similar
instruments, or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment for
Property; (iii) Indebtedness that constitutes a Capitalized Lease Obligation;
provided that any guaranty of obligations that would constitute Funded Debt
under clauses (i) through (iv) hereof if owed directly by any Borrower or any
guaranty having the economic effect of guaranteeing any of the obligations of
any other Person shall only be included within Funded Debt if the underlying
obligation so guaranteed is not included within Funded Debt.
Funded Debt to Ebitda Ratio - With respect to any date, the ratio of
(i) total funded Funded Debt as of such date to (ii) with respect to the four
month period ending June 30, 2003, the product of EBITDA for such four month
period multiplied by 3, (x) with respect to the seven month period ending
September 30, 2003, the product of EBITDA for such period multiplied by 12/7ths,
(y) with respect to the ten month period ending December 31, 2003, the product
of EBITDA for such period multiplied by 12/10ths, and (z) with respect to the
twelve month period ending March 31, 2004 and each June 30, September 30,
December 31 and March 31 thereafter, EBITDA for such twelve month period.
Interest Coverage Ratio - With respect to any period of determination,
the ratio of (i) EBIT for such period to (ii) Interest Expense paid in cash for
such period, all as determined in accordance with GAAP.
Interest Expense - With respect to any fiscal period, the interest
expense incurred for such period excluding interest income as determined in
accordance with GAAP.
Interest Coverage Ratio - Borrowers shall not permit the Interest
Coverage Ratio as of the last date of the period set forth below to be less than
the ratio set forth opposite such period below:
Period Ratio
---------------------------------------------- -------------------------------
Four Months Ending June 30, 2003 6.25 to 1
---------------------------------------------- -------------------------------
Seven Months Ending September 30, 2003 6.50 to 1
---------------------------------------------- -------------------------------
Ten Months Ending December 31, 2003 5.50 to 1
---------------------------------------------- -------------------------------
Twelve Months Ending March 31, 2004 and
each June 30,September 30, December 31 2.00 to 1
and March 31 thereafter
Exhibit 8.3 - Page 2
Fixed Charge Coverage Ratio - Borrowers shall not permit the Fixed
Charge Coverage Ratio as of the last date of the period set forth below to be
less than the ratio set forth opposite such period below:
Period Ratio
---------------------------------------------- -------------------------------
Four Months Ending June 30, 2003 2.80 to 1
---------------------------------------------- -------------------------------
Seven Months Ending September 30, 2003 2.50 to 1
---------------------------------------------- -------------------------------
Ten Months Ending December 31, 2003 2.20 to 1
---------------------------------------------- -------------------------------
Twelve Months Ending March 31, 2004 and
each June 30, September 30, December 31 1.10 to 1
and March 31 thereafter
Funded Debt to EBITDA Ratio - Borrowers shall not permit the Funded
Debt to EBITDA Ratio for any period set forth below to be greater than the ratio
set forth opposite such period below:
Period Ratio
---------------------------------------------- -------------------------------
Four Months Ending June 30, 2003 3.00 to 1
---------------------------------------------- -------------------------------
Seven Months Ending September 30, 2003 3.00 to 1
---------------------------------------------- -------------------------------
Ten Months Ending December 31, 2003 3.00 to 1
---------------------------------------------- -------------------------------
Twelve Months Ending March 31, 2004 and
each June 30, September 30, December 31 3.50 to 1
and March 31 thereafter
Minimum Availability - Borrowers shall maintain at all times within
the Term, Availability of at least $500,000.
Exhibit 8.3 - Page 3