EXHIBIT 10.4
CREDIT AGREEMENT
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STATE STREET BANK AND TRUST COMPANY
(FOR ITSELF AND AS AGENT FOR)
CORESTATES BANK, N.A.
AND
MAC-GRAY II, INC., ▇▇▇-▇▇▇▇ CO., INC., SUN SERVICES OF AMERICA, INC.
AND ▇▇▇- ▇▇▇▇ ACQUISITION CORP. (AND ITS SUCCESSOR-IN-INTEREST,
▇. ▇▇▇▇▇▇ COIN-OP LAUNDRY, INC.)
$50,000,000 SENIOR SECURED CREDIT FACILITIES
($45,000,000 REVOLVING CREDIT AND TERM LOAN FACILITY)
($5,000,000 REVOLVING WORKING CAPITAL LINE OF CREDIT FACILITY)
APRIL 17, 1997
TABLE OF CONTENTS
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PAGE
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ARTICLE I - THE CREDIT FACILITIES...................................................... 1
1.01. The Credit Facilities........................................................... 1
(a) Revolving Line of Credit and Term Loan Facility; Revolving
Loans........................................................................... 1
(b) Revolving Working Capital Line of Credit Facility; Working Capital
Loans........................................................................... 2
(c) Request for Loans............................................................... 2
(d) Repayment of Principal; Premium................................................. 2
(e) Interest Payments............................................................... 3
(f) Commitment Fee.................................................................. 3
(g) Use of Loan Proceeds............................................................ 3
(h) Letters of Credit............................................................... 3
1.02. Interest Rate Options........................................................... 4
(a) Interest Rate Options........................................................... 4
(b) Rate Quotations................................................................. 4
1.03. Interest Periods................................................................ 5
1.04. Interest After Default.......................................................... 5
1.05. LIBOR Unascertainable........................................................... 5
1.06. Selection of Interest Rate Options.............................................. 6
1.07. Payments........................................................................ 6
1.08. Pro Rata Treatment of Banks..................................................... 7
1.09. Availability.................................................................... 7
1.10. Charges Against Accounts........................................................ 7
1.11. Payment on Non-Business Days.................................................... 7
1.12. Security Documents.............................................................. 7
1.13. Additional Compensation in Certain Circumstances................................ 8
(a) Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc............................................ 8
(b) Indemnity....................................................................... 9
1.14. Renewal......................................................................... 9
ARTICLE II - CONDITIONS................................................................ 10
2.01. Conditions to Closing........................................................... 10
(a) Documents....................................................................... 10
(b) Warranties, Covenants True...................................................... 10
(c) Closing Certificate............................................................. 10
(d) Results of Searches............................................................. 10
(e) Insurance....................................................................... 10
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(f) Financial Statements............................................................. 10
(g) Acquisition Documents and Approvals.............................................. 11
(h) Other Documents.................................................................. 11
(i) No Adverse Change................................................................ 12
(j) Closing Fee...................................................................... 12
(k) Legal Expenses................................................................... 12
(l) Legal Opinion.................................................................... 12
2.02. Conditions of Making Loans....................................................... 12
(a) Representations and Warranties................................................... 12
(b) Performance...................................................................... 12
ARTICLE III - REPRESENTATIONS AND WARRANTIES............................................ 13
3.01. Organization..................................................................... 13
3.02. Authority........................................................................ 13
3.03. Approvals........................................................................ 14
3.04. Valid Obligations................................................................ 14
3.05. Security Interest................................................................ 14
3.06. Assets........................................................................... 14
3.07. Agreements....................................................................... 14
3.08. Insurance........................................................................ 15
3.09. Litigation; Claims............................................................... 15
3.10. Labor Matters.................................................................... 15
3.11. ERISA............................................................................ 15
3.12. Financial Statements............................................................. 16
3.13. Taxes............................................................................ 16
3.14. Investments...................................................................... 17
3.15. Investment Company............................................................... 17
3.16. Indebtedness..................................................................... 17
3.17. Environmental Protection......................................................... 17
3.18. Margin Stock..................................................................... 18
3.19. Representations Accurate......................................................... 18
ARTICLE IV - COVENANTS.................................................................. 18
4.01. Affirmative Covenants Other Than Financial Covenants and Reporting Requirements.. 18
(a) Property; Insurance.............................................................. 18
(b) Maintain Rights.................................................................. 19
(c) Books and Records; Inspection.................................................... 19
(d) Operating Accounts............................................................... 19
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(e) Conduct of Business.............................................................. 19
(f) Financing Statements............................................................. 19
4.02. Negative Covenants............................................................... 19
(a) Indebtedness..................................................................... 20
(b) Liens............................................................................ 20
(c) Guaranties....................................................................... 21
(d) Transfers........................................................................ 21
(e) Mergers.......................................................................... 21
(f) Investments...................................................................... 21
(g) Principal Office................................................................. 22
(h) Write Up of Assets............................................................... 22
(i) Dividends........................................................................ 23
(j) Environmental Matters............................................................ 23
(k) ERISA............................................................................ 23
(l) Waiver of Rights................................................................. 23
(m) Sale Leaseback................................................................... 23
(n) Subsidiaries..................................................................... 23
(o) Agreements with Affiliated Person................................................ 23
4.03. Financial Covenants.............................................................. 24
(a) Maximum Leverage................................................................. 24
(b) Minimum Shareholders Equity...................................................... 24
(c) Capital Expenditures............................................................. 24
(d) Minimum Quarterly EBITDA......................................................... 24
(e) Minimum Fixed Charge Coverage Ratio.............................................. 24
(f) Minimum Annual Net Income........................................................ 24
(g) Excess Cash Flow Recapture....................................................... 25
4.04. Reporting Requirements........................................................... 25
(a) Financial Reports................................................................ 25
(b) Other Financial Reports.......................................................... 26
(c) Notices.......................................................................... 26
ARTICLE V - EVENTS OF DEFAULT; REMEDIES................................................. 27
5.01. Events of Default................................................................ 27
(a) Representations and Warranties................................................... 27
(b) Covenants........................................................................ 27
(c) Security Documents............................................................... 27
(d) Other Defaults................................................................... 28
(e) Displacement of Management....................................................... 28
(f) Liens............................................................................ 28
(g) Seizure of Assets................................................................ 28
(h) Judgments........................................................................ 28
(i) Insolvency....................................................................... 28
(j) Loss; Material Adverse Change.................................................... 28
(k) ERISA............................................................................ 28
(l) Security Interest................................................................ 28
(m) Management....................................................................... 29
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5.02. Remedies......................................................................... 29
5.03. Set-off.......................................................................... 30
ARTICLE VI - AGENCY..................................................................... 30
6.01. Authorization of Agent and Relationship.......................................... 30
6.02. Disclaimer of Agent.............................................................. 31
6.03. Bank's Funding Obligations....................................................... 31
6.04. Payments by the Borrowers........................................................ 32
6.05. Payments by Agent................................................................ 33
6.06. Direct Payments.................................................................. 33
6.07. Administration of the Loans...................................................... 34
6.08. Unanimous Consent of Banks....................................................... 34
6.09. Reliance by Borrowers............................................................ 35
6.10. Rights of Agent.................................................................. 35
6.11. Acknowledgments, Representations and Covenants of Banks.......................... 36
6.12. Collective Action of the Banks................................................... 37
6.13. Successor Agent.................................................................. 37
6.14. Provisions Operative Between Banks and Agent Only................................ 38
ARTICLE VII - MISCELLANEOUS............................................................. 38
7.01. Further Assurances............................................................... 38
7.02. Right to Cure.................................................................... 39
7.03. Environmental Matters............................................................ 39
7.04. Waivers; Release of Pledge Agreements of Certain Stockholders.................... 39
7.05. Delays........................................................................... 40
7.06. Notices.......................................................................... 40
7.07. Jurisdiction..................................................................... 40
7.08. Execution........................................................................ 41
7.09. Governing Law.................................................................... 41
7.10. Fees............................................................................. 41
7.11. Binding Nature................................................................... 41
7.12. Severability..................................................................... 41
7.13. Under Seal....................................................................... 41
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ARTICLE VIII - DEFINITIONS.............................................................. 41
8.01. Definitions...................................................................... 41
8.02. Use of Defined Terms............................................................. 47
8.03. Accounting Terms................................................................. 47
EXHIBITS
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Exhibit A Form of Notes
Exhibit B Form of Security Agreement
Exhibit C Form of Corporate Pledge Agreement
Exhibit D Form of Individual and Trust Pledge Agreement
Exhibit E Landlord's Waiver
SCHEDULES
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Schedule 3.01 Foreign Qualifications
Schedule 3.03 Required Authorizations
Schedule 3.05 Liens
Schedule 3.06 Locations
Schedule 3.07 Agreements with Affiliates
Schedule 3.08 Insurance
Schedule 3.09 Litigation; Claims
Schedule 3.12 Financial Statements
Schedule 3.14 Investments
Schedule 3.16 Indebtedness
Schedule 3.17 Environmental Protection
Schedule 4.02(c) Guaranties
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This Credit Agreement (the "Agreement") is made as of April 17, 1997
between STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company with
its Principal Office at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, for
itself and as agent for the Banks (as hereinafter defined), CORESTATES BANK,
N.A., a national banking association with its head office at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (each, a "Bank" and collectively, the
"Banks") and MAC-GRAY II, INC., ▇▇▇-▇▇▇▇ CO., INC., SUN SERVICES OF AMERICA,
INC. AND ▇▇▇-▇▇▇▇ ACQUISITION CORP. (AND ITS SUCCESSOR-IN-INTEREST, ▇. ▇▇▇▇▇▇
COIN-OP LAUNDRY, INC.), each a Delaware corporation with their designated
Principal Office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (each a
"Borrower" and collectively the "Borrowers").
WHEREAS, each Borrower has requested that the Banks provide, and subject to
the terms and conditions of this Agreement and of the other agreements and
documents referred to herein, the Banks have agreed to provide, to the Borrowers
senior secured credit facilities (the "Credit Facilities") of up to $50,000,000
to provide for the financing of acquisitions, restructurings and working capital
requirements of the Borrowers.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Borrowers, in
order to induce the Banks to provide the Credit Facilities, and intending to be
legally bound, hereby jointly and severally agree with the Banks as follows:
ARTICLE I
THE CREDIT FACILITIES
1.01. The Credit Facilities. The Credit Facilities shall consist of
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(i) a revolving line of credit and term loan facility; and (ii) a revolving
working capital line of credit facility pursuant to which the Banks may from
time to time make Loans to the Borrowers and/or issue Letters of Credit on
behalf of the Borrowers.
(a) Revolving Line of Credit and Term Loan Facility; Revolving
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Loans. Subject to the terms and conditions hereinafter set forth, the Banks
shall make loans to the Borrowers under the Revolving Line of Credit and Term
Loan Facility (the "Revolving Loans") to the Borrowers and/or issue Letters of
Credit on behalf of the Borrowers at the Principal Office of the Agent, on any
Business Day prior to the Termination Date, in such amounts as the Borrowers may
request; provided, however, that the aggregate of all Revolving Loans and all
Letters of Credit outstanding shall at no time exceed $45,000,000. Within the
foregoing limits, subject to the terms and conditions of this Agreement, the
Borrowers may obtain Revolving Loans and/or Letters of Credit, repay Revolving
Loans in whole or in part and obtain Revolving Loans again on one or more
occasions. Each Revolving Loan advanced upon the Prime Rate Option shall be in
the principal amount of Ten Thousand Dollars ($10,000) or an integral multiple
thereof. Each Revolving Loan advanced upon the LIBOR Option shall be in the
principal amount of Ten Thousand Dollars ($10,000) or an integral multiple
thereof. The Revolving Loans shall be evidenced by the Revolving Note of the
Borrowers, dated as of the date on which the initial Revolving Loan is made. The
Borrowers hereby irrevocably authorize each Bank to make or cause to be made, on
a schedule attached to the Revolving Note or on the books of each Bank, at or
following the time of making each Revolving Loan and of receiving any payment of
principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid principal balance of
the Revolving Loans. The amount so noted shall constitute prima facie evidence
as to the amount owed by the Borrowers with respect to principal of the
Revolving Loans. Failure of any Bank to make any such notation shall not,
however, affect any obligation of the Borrowers hereunder or under the Revolving
Note.
(b) Revolving Working Capital Line of Credit Facility; Working
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Capital Loans. Subject to the terms and conditions hereinafter set forth, the
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Agent shall, upon the request of the Borrower pursuant to the terms hereof, make
Working Capital ("WC") Loans to the Borrower pursuant to a Five Million
($5,000,00) Revolving Working Capital Line of Credit (the "Working Capital Line
of Credit" or "WC Line of Credit") at the Principal Office of the Agent on any
Business Day prior to the Termination Date in such amounts as the Borrower may
so request; provided, that the aggregate of all WC Loans outstanding shall at no
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time exceed $5,000,000. Within the foregoing limit, subject to the terms and
conditions of this Agreement, the Borrower may obtain WC Loans, repay WC Loans
in whole or in part and obtain WC Loans again on one or more occasions. Each WC
Loan shall be in the principal amount of Ten Thousand Dollars ($10,000) or an
integral multiple thereof. The WC Loans shall be evidenced by the Working
Capital Line of Credit Note ("WC Note") of the Borrower, dated as of the date on
which the initial WC Loan is made. The Borrower hereby irrevocably authorizes
each Agent to make or cause to be made, on a schedule attached to the WC Credit
Note or on the books of each Agent, at or following the time of making each WC
Loan and of receiving any payment of principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid principal balance of
the WC Loans. The amount so noted shall constitute presumptive evidence as to
the amount owed by the Borrower with respect to principal of the WC Loans.
Failure of either Agent to make any such notation shall not, however, affect any
obligation of the Borrower hereunder or under the WC Credit Note.
(c) Request for Loans. The Borrowers will give the Agent two (2)
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Business Days' prior telephonic or written notice for LIBOR Loans, each such
notice specifying the amount, date and Interest Rate Option (and for a LIBOR
Loan, the LIBOR Interest Period) of each Loan requested. Any telephonic notice
given under this Section will be followed by written notice given not later than
the next following Business Day. The Agent may rely in good faith in the
identity and authority of any person providing such telephonic notice.
(d) Repayment of Principal; Premium. The Borrowers shall repay in
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full all Loans and all interest thereon and all other changes incurred in
connection therewith upon the Termination Date except for any Loans converted to
a six-year amortization schedule as provided in Section 1.01(i). The Borrowers
may prepay, at any time, without penalty, the whole or any portion of any Prime
Rate Loan except for any Loans converted to a six-year amortization schedule as
provided in Section 1.01(i); provided that each such prepayment, if less than
the aggregate amount of all Prime Rate Loans then outstanding, shall be in the
amount of Ten Thousand Dollars ($10,000) or an integral multiple thereof and on
the last day of the applicable LIBOR Interest Period with respect to Loans to
which a LIBOR Option applies. In the event that at any time the Loans
outstanding are in an amount which exceeds the aggregate amount of all Loans and
Letters of Credit permissible hereunder, the Borrowers will forthwith prepay so
much of the Loans as may be required so that the aggregate of all Loans and
Letters of Credit outstanding will not exceed the amount permissible hereunder.
The Banks may, at their discretion, renew the senior secured credit facility
described in this Agreement by extending the Termination Date. Neither the
inclusion in this Agreement of financial covenants relating to periods after the
Termination Date or any other terms and provisions hereof, however, will be
deemed to create any implication that the Banks are required to renew such
revolving line of credit. In the event that Borrowers prepay all
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principal and all interest outstanding under these credit facilities using the
proceeds of any transaction other than the sale to the public of Mac-Gray II,
Inc.'s equity securities, or otherwise terminate these facilities prematurely
without the express consent of the Banks, then, in such event, a premium shall
be due and payable as follows:
(i) If prepaid within first year of the Closing Date, two
percent (2%) of the aggregate amount of the combined facilities;
(ii) If prepaid within the second year after the Closing Date,
one percent (1%) of the aggregate amount of the combined facilities.
(e) Interest Payments. The Borrowers will pay interest on the
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principal amount of the aggregate Loans outstanding from time to time, from the
date of the initial Loan until payment of all Loans and the Notes in full and
the termination of this Agreement, such interest to be payable monthly in
arrears on each Payment Date, commencing with the first such Payment Date after
the date of this Agreement, and at the end of each LIBOR Interest Period, but
not less than quarterly, with regard to LIBOR Loans, and on the date of payment
of the Loans in full.
(f) Commitment Fee. The Borrowers shall pay to the Agent, in
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connection with the establishment and maintenance of the revolving line of
credit, a commitment fee (the "Commitment Fee") equal to one-half of one percent
(0.5%) per annum of the average daily unused portion of both facilities during
the preceding calendar quarter (or such shorter period as has elapsed from the
Closing Date to the end of the current calendar quarter). The Commitment Fee
shall be payable in arrears, on the first day of each of the months of April,
July, October and January in each year, commencing April 1, 1997.
(g) Use of Loan Proceeds. The proceeds of each Revolving Loan
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will be used by the Borrowers solely to (i) refinance the secured indebtedness
of ▇▇▇-▇▇▇▇, Co., ▇▇▇-▇▇▇▇, ▇.▇. and Mac-Gray II, Inc.; (ii) fund the
acquisition of Sun Services of America, Inc. and ▇. ▇▇▇▇▇▇ Coin-Op Laundry,
Inc.; (iii) fund one or more standby letters of credit; (iv) support general
working capital needs; and (v) for Permitted Acquisitions. The proceeds of the
WC Line of Credit shall be used for the Borrowers' short-term working capital
purposes but for no other purpose absent the prior consent of the Banks.
(h) Letters of Credit. As part of the Credit Facility, the Agent
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will issue on behalf of the Borrowers, at the request of the Borrowers, one or
more standby letters of credit; provided, however, that (a) each such letter of
credit issued by the Agent on behalf of the Borrower (individually a "Letter of
Credit" and collectively the "Letters of Credit") shall by its terms expire no
later than the earlier of (i) one year from the date of issuance thereof or (ii)
30 days prior to the Termination Date, and (b) the aggregate amount of
outstanding Letters of Credit shall not exceed $15,000,000 at any time. Upon the
issuance of any Letter of Credit in an amount greater than $50,000 by the Agent,
the Agent will promptly notify each Bank of the date of issuance, amount and
expiration date of each such Letter of Credit. As a condition of the issuance of
each such Letter of Credit, the Borrowers shall (1) execute the Agent's
prevailing letter of credit documentation, as in effect from time to time, and
(2) pay to the Agent the Agent's prevailing letter of credit issuance,
maintenance, commission and negotiation fee(s), as in effect from time to time.
Any and all amounts which the Agent is required to advance pursuant to the
Letters of Credit shall become, at the time the amounts are advanced, Prime Rate
Loans from the Banks. The
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Agent will notify the Banks of the amount required to be advanced pursuant to
the Letters of Credit. Before 12:00 noon (Boston time) on the date of any
advance that the Agent is required to make pursuant to the Letters of Credit,
each Bank shall make available such Bank's Proportionate Share of such advance
in immediately-available funds to the Agent. The Borrowers agree to be bound by
the terms of the Agent's application and/or agreement for Letters of Credit and
the Agent's written regulations and customary practices relating to Letters of
Credit.
(i) Amortization. Beginning on the second anniversary of the
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Closing, the principal amounts of any and all Revolving Loans then outstanding
shall be converted to a six-year amortization schedule. On and after such
conversion, the Borrowers will retain the right to select Interest Rate Options
in accordance with Section 1.02.
1.02. Interest Rate Options. The Borrowers shall pay interest in respect
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of the outstanding unpaid principal amount of the Loans as selected by it at the
Prime Rate Option or LIBOR Option set forth below applicable to the Loans. The
Agent's determination of a rate of interest and any change therein shall in the
absence of manifest error be conclusive and binding upon all parties hereto. If
at any time the designated rate applicable to any Loan made by any Bank exceeds
such Bank's highest lawful rate, the rate of interest on such Bank's Loan shall
be limited to such Bank's highest lawful rate.
(a) Interest Rate Options. The Borrowers shall have the right to
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select from the following Interest Rate Options applicable to the Loans:
(i) Prime Rate Option: A fluctuating rate per annum
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(computed on the basis of a year of 360 days, as the case may be, and actual
days elapsed) equal to the Prime Rate plus 0.5%, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Prime Rate.
(ii) LIBOR Option: A rate per annum (computed on the basis
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of a year of 360 days and actual days elapsed) equal to LIBOR plus two hundred
and fifty basis points.
(iii) Notwithstanding the foregoing clauses (i) and (ii), if
Mac-Gray II, Inc. shall close a public offering of its capital stock and receive
net proceeds in such offering of $15,000,000 or more prior to the second
anniversary of the Closing Date, then, upon and after such event, the interest
rate for the Prime Rate Option shall be reduced to the Prime Rate minus 0.5%
(with the rate to be adjusted and calculated as described in clause (i)) and the
interest rate for the LIBOR Option Loans advanced subsequent to such event shall
be reduced to LIBOR plus two hundred basis points (with the rate to be
calculated as described in clause (ii)).
(b) Rate Quotations. The Borrowers may call the Agent on or before
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the date on which a Loan request is to be delivered to receive an indication of
the rates then in effect, but it is acknowledged that such indication shall not
be binding on the Agent or the Banks nor affect the rate of interest which
thereafter is actually in effect when the election is made.
1.03. Interest Periods. At any time when the Borrowers shall select,
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convert to or renew a LIBOR Loan, the Borrowers shall notify the Agent thereof
at least two (2) Business Days prior to the effective date of such LIBOR Loan by
submitting a Loan request. The loan request shall specify an
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interest period during which such LIBOR Loan Option shall apply, such periods to
be one, two, three, four, five, six, twelve, eighteen, and twenty-four months
("LIBOR Interest Period"), provided, that:
(a) any LIBOR Interest Period which would otherwise end on a date
which is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in the next calendar month, in which case
such LIBOR Interest Period shall end on the next preceding Business Day;
(b) any LIBOR Interest Period which begins on the last day of a
calendar month for which there is no numerically corresponding day in the
subsequent calendar month during which such LIBOR Interest Period is to end
shall end on the last Business Day of such subsequent month;
(c) the Borrowers shall not select, convert to or renew a LIBOR
Interest Period for any portion of the Loans that would end after the
Termination Date; and
(d) in the case of the renewal of a LIBOR Loan at the end of a
LIBOR Interest Period, the first day of the new LIBOR Interest Period shall be
the last day of the preceding LIBOR Interest Period, without duplication in
payment of interest for such day.
1.04. Interest After Default. To the extent permitted by applicable law,
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upon the occurrence and during the continuation of an Event of Default, any
principal, interest, fee or other amount payable hereunder shall bear interest
for each day thereafter until paid in full (before and after judgment) at a rate
per annum which shall be equal to four percentage points (4%) above the rate of
interest otherwise applicable with respect to such amount or the Prime Rate if
no rate of interest is otherwise applicable, but in no event in excess of the
highest rate permitted under applicable law. The Borrowers acknowledge that such
increased interest rate reflects, among other things, the fact that such Loans
or other amounts have become a substantially greater risk given their default
status and that the Banks are entitled to additional compensation for such risk.
1.05. LIBOR Unascertainable. If
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(a) on any date on which LIBOR would otherwise be determined,
either Bank shall have determined (which determination shall be conclusive
absent manifest error) that:
(i) adequate and reasonable means do not exist for
ascertaining LIBOR, or
(ii) a contingency has occurred which materially and adversely
affects the London interbank market relating to LIBOR, or
(b) if at any time any Bank shall have determined (which
determination shall be conclusive absent manifest error) that:
(i) the making, maintenance or funding of any LIBOR Loan has
been made impracticable or unlawful by compliance by such Bank in good faith
with any law or any interpretation or application thereof by any official body
or with any request or directive of any such official body (whether or not
having the force of law), or
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(ii) LIBOR will not adequately and fairly reflect the cost to
such Bank of the establishment or maintenance of any LIBOR Loan, or
(iii) after making all reasonable efforts, deposits of the
relevant amount in U.S. Dollars for the relevant LIBOR Interest Period for a
LIBOR Loan are not available to such Bank with respect to a proposed LIBOR Loan
in the London interbank market,
(iv) then in the case of any event specified in subsection (a)
above, either Bank shall promptly so notify the Agent and the Borrowers thereof
and in the case of any event specified in subsection (b) above, such Bank shall
promptly so notify the Agent in writing as to the specific circumstances of such
event, and the Agent shall promptly send copies of such notice to the other
Banks and the Borrowers. Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given) the obligation
of (A) the Banks in the case of such notice given by the Agent or (B) such Bank
in the case of such notice given by such Bank the right of the Borrowers to
select, convert to or renew a LIBOR Loan shall be suspended until the Agent
shall have later notified the Borrowers or such Bank shall have later notified
the Agent, of the Agent's or such Bank's, as the case may be, determination
(which determination shall be conclusive absent manifest error) that the
circumstances giving rise to such previous determination no longer exist. If at
any time the Agent makes a determination under subsection (a) or (b) of this
Section 1.05, and the Borrowers have previously notified the Agent of their
selection of, conversion to or renewal of a LIBOR Loan and such LIBOR Loan has
not yet gone into effect, such notification shall be deemed to provide for
selection of, conversion to or renewal of the Prime Rate Option otherwise
available with respect to such Loans. If any Bank notifies the Agent of a
determination under subsection (b) of this Section 1.05, the Borrowers shall,
subject to the Borrowers' indemnification obligations under Section 1.13(b), as
to any LIBOR Loan of the Banks on the date specified in such notice either
convert such LIBOR Loan to a Prime Rate Loan otherwise available with respect to
such Loan or prepay such Loan in accordance with the provisions of this
Agreement. Absent due notice from the Borrower of conversion or prepayment such
Loan shall automatically be converted to a Prime Rate Loan upon such specified
date.
1.06. Selection of Interest Rate Options. If the Borrowers fail to
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select a LIBOR Interest Period in accordance with the provisions of Section 1.03
in the case of renewal of a LIBOR Loan, the Borrowers shall be deemed to have
converted such Loan or portion thereof to a Prime Rate Loan commencing upon the
last day of that LIBOR Interest Period. If an Event of Default shall occur and
be continuing, the Agent may in its discretion limit the Borrowers to the Prime
Rate Option.
1.07. Payments. All payments and prepayments to be made in respect
--------
of principal, interest, commitment fees, closing fee, Letter of Credit fees,
Agent's fees or other fees or amounts due from the Borrowers hereunder shall be
payable prior to 12:00 noon (Boston time) on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrowers, and without setoff, counterclaim or other
deduction of any nature. Such payments shall be made to the Agent at the
Principal Office of the Agent for the ratable accounts of the Banks with respect
to the Loans in U.S. dollars and in immediately available funds, and the Agent
shall promptly distribute such amounts to the Banks in immediately available
funds in accordance with Section 6.04 hereunder. All monies received by the
Banks hereunder shall be applied (i) first to reasonable fees, charges, costs
and expenses payable to the Banks under this Agreement, any of the Security
Documents or any Letter of Credit documents; (ii) next to interest then accrued
on account of the Loans; and only thereafter (iii) to principal of the Loans;
and finally (iv) to any and all other obligations and liabilities owing to
either
-6-
Bank by the Borrower, however or whenever arising. Interest shall be calculated
on the basis of the actual number of days and a year of 360 days.
1.08. Pro Rata Treatment of Banks. Each borrowing, and each selection
---------------------------
of, conversion to or renewal of any Loan or Interest Rate Option and each
payment or prepayment by the Borrower with respect to principal, interest,
commitment fees, closing fee, Letter of Credit fees, or other fees or amounts
due from the Borrower hereunder to the Banks with respect to the Loans, except
for the Agent's fees, shall be made in proportion to the Loans outstanding from
each Bank and if no such Loans are then outstanding, in proportion to the
Proportionate Share of each Bank.
(a) Pursuant to Section 1.01(d) and except as otherwise provided
herein, the Borrower shall have the right at its option from time to time to
prepay the Loans in whole or part.
(i) at any time with respect to any Loan to which the Prime
Rate Option applies, provided that such prepayment, if less than the aggregate
of all Prime Rate Loans, shall be in the amount of $10,000 or an integral
multiple thereof;
(ii) on the last day of the applicable LIBOR Interest Period
with respect to Loans to which a LIBOR Option applies.
1.09. Availability. The proceeds of all Loans shall be credited by the
------------
Agent to a general deposit account of any of the Borrowers with the Agent.
1.10. Charges Against Accounts. The Agent may charge any general deposit
------------------------
account of any of the Borrowers at the Agent with the amount of all payments of
interest, principal and other sums due, from time to time, under this Agreement,
the Notes and/or any Letter of Credit or documents relating thereto and will
thereafter notify the Borrowers of the amount so charged. The failure of the
Agent so to charge any account or to give any such notice shall not affect the
obligation of the Borrowers to pay interest, principal or other sums as provided
herein, in the Notes and/or any Letter of Credit or documents relating thereto.
1.11. Payment on Non-Business Days. Whenever any payment to be made to
----------------------------
to the Agent or any Bank hereunder or under the Notes shall be stated to be due
on a day which is not a Business Day, such payment may be made on the next
succeeding Business Day, and interest payable on each such date shall include
the amount thereof which shall accrue during the period of such extension of
time.
1.12. Security Documents. Payment of the principal and interest
------------------
under the Notes and of all other obligations of the Borrower under this
Agreement or any Letter of Credit documents shall be secured by the following:
(a) A security interest in all assets now or hereafter owned by the
Borrowers, as more fully set forth in a Security Agreement substantially in the
form of Exhibit B hereto;
---------
(b) A pledge of the capital stock owned by Mac-Gray II, Inc. of
each of the other Borrowers, as more fully set forth in the Pledge Agreement
substantially in the form of Exhibit C hereto;
---------
-7-
(c) A pledge of the capital stock owned by each of the stockholders
(except for ▇▇. ▇. ▇▇▇▇▇▇▇) of the Borrowers, as more fully set forth in the
Pledge Agreement substantially in the form of Exhibit D hereto;
---------
(d) A landlord's waiver, in substantially the form of Exhibit E
---------
hereto (the "Landlord's Waiver"), which each Borrower shall use its best efforts
to cause the Landlord of each Borrower's Principal Office to execute and deliver
to the Agent within ninety (90) days after the closing date, and such other
consents, UCC financing statements, and other documents as the Banks or their
counsel may reasonably request to permit, secure, and perfect the security
interests provided for hereunder; and
(e) All such other security agreements or assignments, if any, with
respect to patents, copyrights, trademarks, and other intellectual property of
the Borrowers and any of its subsidiaries, as the Bank may now or hereafter
reasonably request to create and perfect its security interest therein.
(Collectively, all of the foregoing documents now or hereafter delivered
pursuant to the terms of this Section 1.12, together with the Notes, being
referred to herein as the "Security Documents").
1.13. Additional Compensation in Certain Circumstances.
------------------------------------------------
(a) Increased Costs or Reduced Return Resulting From Taxes,
------------------------------------------------------
Reserves, Capital Adequacy Requirements, Expenses, Etc.. If any Law,
-------------------------------------------------
guideline or interpretation or any change in any Law, guideline or
interpretation or application thereof by any official body charged with the
interpretation or administration thereof or compliance with any request or
directive (whether or not having the force of Law) of any central bank or other
official body:
(i) subjects any Bank to any tax or changes the basis of
taxation with respect to this Agreement, the Notes, the Loans or payments by the
Borrower of principal, interest, commitment fees, or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall net
income of such Bank), imposes, modifies or deems applicable any reserve, special
deposit or similar requirement against credits or commitments to extend credit
extended by, or assets (funded or contingent) of, deposits with or for the
account of, or other acquisitions of funds by, any Bank, or
(ii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or contingent) of, or
letters of credit, other credits or commitments to extend credit extended by,
any Bank, or (B) otherwise applicable to the obligations of any Bank under this
Agreement, and
(iii) the result of any of the foregoing is to increase the
cost to, reduce the income receivable by, or impose any expense (including loss
of margin) upon any Bank with respect to this Agreement, the Notes or the
making, maintenance or funding of any part of the Loans (or, in the case of any
capital adequacy or similar requirement, to have the effect of reducing the rate
of return on any Bank's capital, taking into consideration such Bank's customary
policies with respect to capital adequacy) by an amount which such Bank in its
reasonable discretion deems to be material, such Bank shall from time to time
notify the Borrower and the Agent of the amount determined in good faith (using
-8-
any averaging and attribution method employed in good faith) by such Bank (which
determination shall be conclusive absent manifest error) to be necessary to
compensate such Bank for such increase in cost, reduction of income or
additional expense. Such notice shall set forth in reasonable detail the basis
for such determination. Such amount shall be due and payable by the Borrower to
such Bank ten (10) Business Days after such notice is given.
(b) Indemnity. In addition to the compensation required by
---------
subsection (a) of this Section 1.13, the Borrower shall indemnify each Bank
against all liabilities, losses or expenses (including loss of margin, any loss
or expense incurred in liquidating or employing deposits from third parties and
any loss or expense incurred in connection with funds acquired by a Bank to fund
or maintain LIBOR Loans subject to the LIBOR Option) which such Bank sustains or
incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any LIBOR
Loan on a day-other than--the last day of the corresponding LIBOR Interest
Period -(whether or not such payment or prepayment is mandatory, voluntary or
automatic and whether or not such payment or prepayment is then due),
(ii) attempt by the Borrowers to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice relating to Loan
requests or prepayments; or
(iii) default by the Borrowers in the performance or observance
of any covenant or condition contained in this Agreement or any other Loan
Document, including without limitation any failure of the Borrowers to pay when
due (by acceleration or otherwise) any principal, interest, commitment fee or
any other amount due hereunder.
(iv) If any Bank sustains or incurs any such loss or expense
it shall from time to time notify the Borrowers and the Agent of the amount
determined in good faith by such Bank (which determination shall be conclusive
absent manifest error and may include such assumptions, allocations of costs and
expenses and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify such Bank for such loss or expense.
Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrowers to such
Bank ten (10) Business Days after such notice is given.
1.14. Renewal. The Banks may, at their discretion, renew the revolving
-------
line of credit described in this Agreement by extending the Termination Date.
Neither the inclusion in this Agreement of financial covenants relating to
periods after the Termination Date or any other terms and provisions hereof,
however, will be deemed to create any implication that the Banks are required to
renew such revolving line of credit.
-9-
ARTICLE II
CONDITIONS
2.01. Conditions to Closing. The obligations of the Banks to perform any
---------------------
of their obligations under this Agreement, any Security Documents or any Letter
of Credit documents is subject to the satisfaction of all of the following
conditions:
(a) Documents. The Agent shall have received this Agreement and
---------
all of the Security Documents, duly executed and delivered by all parties
thereto, and all actions contemplated by the foregoing documents shall have been
accomplished to the reasonable satisfaction of the Agent and its special
counsel.
(b) Warranties, Covenants True. All representations and
--------------------------
warranties of the Borrowers in this Agreement and the Security Documents shall
be true and accurate on the Closing Date in all material respects as if then
given, and the Borrowers shall have performed or observed all of the terms,
covenants, conditions and obligations under this Agreement and the Security
Documents which are required to be performed or observed by it or them on or
prior to the Closing Date.
(c) Closing Certificate. The Agent shall have received a
-------------------
certificate, dated as of the Closing Date and executed by the Chief Financial
Officer of each Borrower, in form and content satisfactory to the Bank, stating
the substance of Section 2.01(b).
(d) Results of Searches. The Agent shall have received written
-------------------
results of searches of the records of filing offices, dated as of a date as
close to the Closing Date as practicable, stating that with respect to each
jurisdiction in which Collateral is kept or maintained and with respect to each
filing office where a filing is required to perfect the Banks' security interest
in the Collateral or where a filing may be made which may affect the priority of
the Banks' security interest in such Collateral, there are no financing
statements, assignments or notices of tax liens on file against or with respect
to any such Collateral, other than financing statements in which the Banks are
named as the secured party, and financing statements as to leased equipment
disclosed on Schedule 3.05 hereto.
-------------
(e) Insurance. The Agent shall have received insurance binders or
---------
certificates of insurance coverage indicating that each Borrower has obtained
insurance as required by Section 4.01(c) of this Agreement.
(f) Financial Statements. Each Bank shall have received copies of
--------------------
the unaudited consolidated balance sheet of ▇▇▇-▇▇▇▇ Co., Inc. as at December
31, 1996, together with the related unaudited consolidated statement of income
for the two-month period ended February 28, 1997, with such unaudited statement,
certified by the chief financial officer or treasurer of the Borrowers as
presenting fairly the financial condition and results of operations of the
Borrowers, in conformity with GAAP (subject to normal year-end audit adjustments
and to the fact that the unaudited financial statements may be condensed and may
not include footnotes).
(g) Acquisition Documents and Approvals. The Agent shall have
-----------------------------------
received (i) approval of the proposed mergers between Mac-Gray II, Inc. and Sun
Services of America, Inc. and ▇▇▇-▇▇▇▇ Acquisition Corp. and ▇. ▇▇▇▇▇▇ Coin-Op
Laundry, Inc. by the Board of Directors or
-10-
Shareholders as applicable of each party to the respective mergers; and (ii)
documents satisfactory to counsel for the Banks substantiating the completion of
the mergers and acquisitions.
(h) Other Documents. The Agent shall have received all other
---------------
documents and assurances required hereunder or which it may have heretofore
reasonably requested in connection with the transactions contemplated by this
Agreement, and such documents shall be certified, when appropriate, by the
proper authorities or corporate officers, including without limitation the
following, and all such documents and all proceedings to be taken in connection
with such transactions shall be reasonably satisfactory in form and substance to
the Agent and its special counsel:
(i) Certified copies of the resolutions of the Board of
Directors of each Borrower (and its subsidiaries) evidencing approval of this
Agreement, the Security Documents and the other matters contemplated hereby and
certified copies of all documents evidencing other necessary corporate action or
approvals, if any, with respect to this Agreement, the Security Documents and
such other matters, including, without limitation, any required approvals of
governmental authorities and other persons or entities.
(ii) A certificate, signed by the Secretary or Assistant
Secretary of each Borrower, setting forth the names of the officers of such
Borrower authorized to sign this Agreement, the Security Documents and any and
all certificates, notices and reports referred to herein; such certificate shall
contain the true signatures of such officers.
(iii) A copy of the By-laws of each Borrower, as amended to
date, as certified by its Secretary; certificates of corporate legal existence
and good standing for each Borrower (and each of its subsidiaries) issued as of
a recent date by the appropriate public officials of the State of Delaware, the
Commonwealth of Massachusetts, and other appropriate authorities, as the case
may be.
(iv) Uniform Commercial Code financing statements and any such
other documents as shall be reasonably requested by the Banks to vest in the
Banks a first priority security interest in and to all of the Collateral subject
only to Permitted Liens.
(v) Such documents which, in the reasonable opinion of the
Banks or their special counsel, are required to be obtained in connection with
the Loans under the revolving line of credit by reason of the provisions of any
law or regulation applicable to the Banks (including, without limitation,
executed Forms U-1), and the statements made in such documents shall be such as,
in the opinion of the Banks, will permit such Loans in accordance with such laws
and regulations.
(vi) A certificate from the chief financial officer of Mac-
Gray II, Inc. certifying that as of the Closing Date, that the Borrowers (on a
consolidated basis) (A) have Shareholder's Equity in excess of $23,000,000,
assuming, on a pro forma basis, the acquisition of Sun Services of America, Inc.
and ▇. ▇▇▇▇▇▇ Coin-Op Laundry, Inc.; and (B) a certificate from the chief
financial officer of each Borrower certifying that as of the Closing Date each
Borrower has paid all applicable material taxes then due and owing or has duly
obtained extensions with respect thereto.
(i) No Adverse Change. There shall have occurred no material
-----------------
adverse change in the business, properties or financial condition of the
Borrowers on a consolidated basis, since the earlier of their respective date of
organization or December 31, 1996.
-11-
(j) Closing Fee. At the Closing, the Borrowers shall have paid
-----------
to the Banks, or authorized the Agent to charge against their accounts, (i) a
closing fee in the amount of $250,000 which is to be distributed to the Banks
based upon their Proportionate Share; and (ii) an Agent's fee in the amount of
$50,000 and $25,000 each year hereafter.
(k) Legal Expenses. At the Closing, the Borrowers shall have paid
--------------
to the Banks, or authorized the Agent to charge against any of their accounts,
all reasonable costs and expenses (including reasonable legal fees and
disbursements of the Banks' special counsel) of the Banks in connection with the
preparation and execution of this Agreement and the Security Documents.
(l) Legal Opinion. All legal matters incident to this Agreement
-------------
shall be reasonably satisfactory to the Banks' special counsel, and the Bank
shall have received at the Closing the legal opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇
LLP, counsel to the Borrowers, in form and substance reasonably satisfactory to
the Banks and their special counsel.
2.02. Conditions of Making Loans. The obligation of the Banks to make any
--------------------------
Loans or issue any Letters of Credit on or subsequent to the Closing Date is
subject to the satisfaction of the following conditions precedent on or before
the date of making each such Loan or issuing each such Letter of Credit (the
"Borrowing Date"):
(a) Representations and Warranties. The representations and
------------------------------
warranties contained in Article III hereof and in the Security Documents and
otherwise made by the Borrowers in writing in connection with the transactions
contemplated by this Agreement shall have been correct in all material respects
as of the date on which made and shall also be correct in all material respects
at and as of such Borrowing Date with the same effect as if made at and as of
such time, except as may have been disclosed in writing to the Banks by the
Borrowers and to which the Banks have consented in writing and to the extent
that the facts upon which such representations and warranties are based may in
the ordinary course be changed by the transactions permitted or contemplated
hereby.
(b) Performance. The Borrowers shall have performed and complied
-----------
in all material respects with all terms and conditions herein required to be
performed or complied with by it prior to or on such Borrowing Date, and on such
Borrowing Date there shall exist no Event of Default or condition which would,
with either or both the giving of notice or the lapse of time, result in an
Event of Default upon consummation of the subsequent Loan to be made or Letter
of Credit to be issued on such Borrowing Date.
Each request by the Borrowers for a Loan or the issuance of a Letter of
Credit subsequent to the Closing Date shall constitute certification by the
Borrowers that the conditions specified in this Section 2.02 will be duly
satisfied on the date of the making of such Loan or the issuance of such Letter
of Credit.
-12-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrowers incorporate herein all of the representations and warranties
set forth in the Security Documents. In addition, the Borrowers represent and
warrant, jointly and severally, to the Banks as follows:
3.01. Organization. Each Borrower is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware.
Each Borrower: (i) is duly qualified to do business and in good standing in each
jurisdiction where such qualification is required, except those jurisdictions
where the failure to so qualify will not have a material adverse effect on the
Borrowers' business, prospects or financial condition, on a consolidated basis,
(a list of the jurisdictions where each Borrower is so qualified as of the date
hereof being set forth on Schedule 3.01 hereto); (ii) and it has all requisite
-------------
corporate power and authority to conduct its business as presently being
conducted and as proposed to be conducted after the Closing and to own its
properties now and after the Closing; and (iii) and it has all requisite
corporate power and authority to execute and deliver, and to perform all of its
obligations under, this Agreement and the other Loan Documents.
3.02. Authority. The execution, delivery and performance by each Borrower
---------
of this Agreement and the other Loan Documents: (i) have been duly authorized by
all necessary corporate action; (ii) do not contravene any provision of such
Borrower's Certificate of Incorporation or by-laws, each as amended to date;
(iii) do not violate any provision of any law, rule or regulation or any
judgment, determination or award applicable to such Borrower; (iv) do not and
will not result in a material breach or constitute a material default (or
constitute an event which with the passage of time or giving of notice or both
could constitute an event of default) under any agreement to which such Borrower
is a party or by which any of its properties are bound, including, without
limitation, any loan or credit agreement, lease, indenture, debt instrument or
mortgage; and (v) do not and will not result in or require the creation or
imposition of any lien, security interest, mortgage, deed of trust, pledge or
other charge or encumbrance of any nature upon or with respect to any of the
properties of such Borrower, except the security interests and liens granted to
the Banks under the Security Documents. Each Borrower is not in default in any
material respect under any law, rule or regulation, order, writ, judgment,
injunction, decree, determination or award referred to above, or to such
Borrower's knowledge under any loan or credit agreement, lease, indenture, debt
instrument or mortgage referred to above, and such Borrower will not be in any
such default which would have a material adverse effect on the Borrowers'
business or financial condition, on a consolidated basis, by virtue of the
transactions to be entered into at the Closing.
3.03. Approvals. No authorization, consent, approval, license or
---------
exemption of, or filing a registration with, any court or governmental
department or commission, board, bureau, agency, instrumentality or other person
or entity, domestic or foreign, is or will be necessary for the valid execution,
delivery or performance by each Borrower of this Agreement or any of the other
Loan Documents, other than filings which have already been made and consents or
approvals which have already been received, and filings required to perfect
under applicable law the security interests and liens granted to the Banks
pursuant to the Security Documents. Set forth on Schedule 3.03 hereto is a list
-------------
of all material licenses, permits, certificates and other governmental
authorizations required as of the date hereof for the conduct of the business of
each Borrower. As of the date hereof, each Borrower is the lawful holder of the
licenses, permits, certificates and governmental authorizations set forth on
such Schedule 3.03. Each Borrower has no reason to believe that any such
-------------
material license, permit, certificate
-13-
or other governmental authorization will be revoked, canceled, rescinded,
terminated, modified or lost to the extent such revocation, cancellation,
rescission, termination, modification or loss would have a material adverse
effect on the Borrowers' business or financial condition, on a consolidated
basis.
3.04. Valid Obligations. This Agreement and the other Loan Documents
-----------------
have been duly executed and delivered by each Borrower and constitute legal,
valid and binding obligations of such Borrower, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except as enforceability may be
subject to general principles of equity, whether such principles are applied in
a court of equity or at law.
3.05. Security Interest. The Banks' security interest in the
-----------------
Collateral has been duly perfected to the extent that such security interest may
be perfected by filing UCC-1 financing statements with the Secretary of State of
the Commonwealth of Massachusetts and the Clerk of the City of Cambridge,
Massachusetts. Except as set forth on Schedule 3.05 hereto, no security
-------------
interest, lien, mortgage, deed of trust, pledge, levy, attachment, claim or
other charge or encumbrance shall exist at the Closing with respect to any of
the assets or properties of any Borrower (including, without limitation, the
Collateral), other than the security interests granted to the Banks under the
Security Documents or Permitted Liens.
3.06. Assets. Each Borrower has good and valid title to all of its
------
assets and properties (including without limitation, the Collateral), in each
case subject to no security interests, lien, mortgage, pledge, lease,
encumbrance, charge, easement, or encroachment except for Permitted Liens and
for defects and claims which, in the aggregate, could not have a material
adverse effect on the business, operations, property or financial condition of
the Borrowers, on a consolidated basis. Each Borrower enjoys peaceful and
undisturbed possession under all leases under which it is operating, and all
said leases are valid and subsisting and in full force and effect in all
material respects. Each Borrower's principal place of business is maintained at
the designated Principal Office at the location indicated in the preamble to
this Agreement. Attached as Schedule 3.06 is a complete list of all locations
-------------
where each Borrower keeps or maintains its assets, properties, books and/or
records other than equipment loaned or consigned to customers or prospective
customers in the ordinary course of such Borrower's business.
3.07. Agreements.
----------
(a) Attached as Schedule 3.07 hereto is a list of all material
-------------
agreements (including all amendments thereto), oral or written, in effect as of
the date hereof between each Borrower and any director, officer, shareholder or
Affiliated Person of such Borrower, including without limitation, all leases and
management, maintenance, brokerage, supply and service contracts and any
contract, agreement or other arrangement providing for the employment of,
furnishing of services to or by, rental of real or personal property to or from
or otherwise requiring payments to or by such Borrower, any director, officer or
shareholder thereof, or any affiliate of any of the foregoing. True, correct
and complete copies of all of the agreements (including all amendments, exhibits
and schedules thereto) set forth on Schedule 3.07 have previously been made
-------------
available to the Bank and its special counsel.
(b) Each Borrower is not in violation of any term of its charter or
by-laws, as now in effect, or of any material term of any mortgage, indenture,
judgment, decree, order, instrument, contract or agreement or, to its knowledge,
of any term of any statute, ordinance, administrative determination, or
-14-
governmental rule or regulation applicable to it where such violation would have
a material adverse effect on the Borrowers' business or financial condition, on
a consolidated basis.
3.08. Insurance. Attached hereto as Schedule 3.08 is a complete and
--------- -------------
accurate list of all insurance policies of the Borrowers covering their
respective properties and assets as of the date hereof. Each Borrower has
previously made available or on the Closing Date shall make available to the
Agent complete and accurate copies of all insurance policies (or certificates of
insurance) listed on Schedule 3.08. All insurance policies listed on Schedule
------------- --------
3.08 are in full force and effect, with the premiums due thereon paid, and no
----
Borrower is in default with respect to any such policy.
3.09. Litigation; Claims. Except as set forth on Schedule 3.09 hereto,
------------------ -------------
as of the date hereof, there are no actions, suits, proceedings or
investigations pending or, to any Borrower's knowledge, threatened against any
Borrower before any court or any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which could prevent or
hinder the consummation of the transactions contemplated hereby or purport by
its terms to challenge the validity or enforceability of this Agreement, any of
the other Loan Documents or any action taken or to be taken in connection with
the transactions contemplated hereby or thereby, or which in any single case or
in the aggregate is likely to result in any material adverse change in the
business, condition, affairs or operation of the Borrowers, on a consolidated
basis, or any material impairment of the right or ability of the Borrowers, on a
consolidated basis, to carry on their operations as now conducted or proposed to
be conducted.
3.10. Labor Matters. Each Borrower is not a party to any collective
-------------
bargaining or similar agreement on the date hereof and has complied in all
material respects with all applicable state and federal laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours and other laws related to employment of employees of such Borrower,
and there are no arrears in the payment of wages, withholding or social security
taxes, unemployment insurance premiums or other similar obligations of such
Borrower other than in the ordinary course of business where such arrears would
have a material adverse effect on the Borrowers' consolidated business or
financial condition.
3.11. ERISA.
-----
(a) Each "employee pension benefit plan" and "employee welfare
benefit plan" of each Borrower has been maintained and operated in compliance in
all material respects with its terms and with applicable provisions of ERISA,
the Code, all regulations, rulings and other authority issued thereunder, and
all other applicable governmental laws and regulations, including without
limitation bonding requirements and requirements for the filing of applicable
reports, documents, and notices with the Secretary of Labor or the Secretary of
the Treasury and the furnishing of documents to the participants and
beneficiaries of each such plan (as each of the quoted terms is defined or used
in ERISA, and the Code) except where the failure to be in compliance therewith
would not have a material adverse effect on such Borrower's business or
financial condition.
(b) No "prohibited transaction" or "accumulated funding deficiency" or
"reportable event" has occurred with respect to any "single employer plan" of
such Borrower which would have a material adverse effect on such Borrower's
business or financial condition. No Borrower, predecessor to the Borrowers or
"commonly controlled entity" has ever been included in a "multiemployer plan" as
to which such Borrower or any "commonly controlled entity" would have liability
if such Borrower or any
-15-
"commonly controlled entity" were to withdraw therefrom (as each of the quoted
terms is defined or used in ERISA and the Code) which would have a material
adverse effect on such Borrower's business or financial condition.
3.12. Financial Statements. Attached as Schedule 3.12 hereto are the
-------------------- -------------
the unaudited consolidated financial statements of ▇▇▇-▇▇▇▇ Co., Inc., including
consolidated balance sheets, statements of income and retained earnings and cash
flows (collectively, together with the financial statements to be delivered by
the Borrower pursuant to Section 2.01(f) hereof, the "Financial Statements") for
the fiscal year ended December 31, 1996 (the "Statement Dates"). The Financial
Statements are complete and accurate in all material respects and fairly present
the financial performance and condition of ▇▇▇-▇▇▇▇ Co., Inc. through and as of
the respective Statement Dates, in accordance with GAAP consistently applied,
provided that the Financial Statements are subject to normal year-end audit
adjustments. ▇▇▇-▇▇▇▇ Co., Inc. has no liability, contingent or otherwise, not
disclosed in the Financial Statements or in any notes thereto that could
materially adversely affect the financial condition of the Borrowers. Since the
last Statement Date there has not been a material adverse change in the business
or operations of ▇▇▇-▇▇▇▇ Co., Inc.
3.13. Taxes. Each Borrower has filed all federal, foreign state,
-----
local and other tax returns, reports and estimates which are required to be
filed and has paid all taxes, fees and other governmental charges shown on such
returns, reports and estimates and on all assessments received by it, to the
extent that such taxes have become due, except for any tax or assessment which
is being contested by such Borrower in good faith and by appropriate proceedings
and such Borrower has set aside on its books sufficient reserves with respect
thereto or with respect to which such Borrower has duly obtained an extension.
All of such tax returns are accurate and complete in all material respects. All
other taxes and assessments of any nature with respect to which such Borrower is
obligated and which have become due are being paid or adequate accruals have
been set up therefor. Each Borrower is not delinquent in the payment of any
material tax, assessment or governmental charge and such Borrower has not
requested any extension of time within which to file any tax return, which
return has not since been filed, and no deficiencies for any material tax,
assessment or governmental charge have been asserted or assessed, and such
Borrower knows of no material liability or basis therefor.
3.14. Investments. Except as set forth on Schedule 3.14, as of the
----------- -------------
date hereof, each Borrower does not own any securities or other equity or debt
interests in any corporation, partnership or other business entity. To the best
of each Borrower's knowledge, all of the Affiliated Persons of such Borrower as
of the date hereof are set forth on Schedule 3.14.
-------------
3.15. Investment Company. Each Borrower is not an "investment company"
------------------
(as defined in the Investment Company Act of 1940, as amended).
3.16. Indebtedness. Attached as Schedule 3.16 hereto is a list of all
------------ -------------
material Indebtedness of the Borrowers as of the Closing Date indicating, as
applicable, the outstanding principal amount of each borrowing or debt, the
current amount due thereon, the terms and schedule for payments in respect
thereof and the security given therefor or in connection therewith.
-16-
3.17. Environmental Protection. Except as disclosed in Schedule
------------------------ --------
3.17,
----
(a) To their knowledge, each Borrower has not caused or allowed the
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substances (as defined below) in connection with the operations of its
business or otherwise, at any real property that such Borrower owns, leases, or
otherwise occupies or uses (the "Premises"), nor has such Borrower released,
disposed of or transported or contracted with any party for the disposal or
transport of any Hazardous Substances at sites other than the Premises, in each
such case except in compliance with all Environmental Laws (as defined below),
except where the failure to so comply results from a minor infraction which will
not give rise to the assessment of any fine or penalty against such Borrower or
the imposition of any lien against any of the properties or assets of such
Borrower, and which could not have a material adverse effect on the business,
operations, property or financial condition of the Borrowers, on a consolidated
basis.
(b) To their knowledge, each Borrower has not received any
citation, directive, letter or other communication, written or oral, or any
notice of any proceedings, claims or lawsuits under any Environmental Laws (each
an "Environmental Complaint"), from any person, entity or governmental authority
arising out of the ownership, occupation, or conduct of its operations on the
Premises, nor is it aware of any basis therefor.
(c) Each Borrower has obtained and maintained in full force and
effect all necessary permits, licenses and approvals required by any
Environmental Laws applicable to the business operations conducted on the
Premises and is in compliance with all such permits, licenses and approvals,
except where the failure to so comply will not give rise to the imposition of
any lien against any of the properties or assets of such Borrower and which
could not have a material adverse effect on the business, operations, property
or financial condition of the Borrowers, on a consolidated basis.
The term "Environmental Laws" shall mean any federal, foreign, state, local
or other law, ordinance or regulation pertaining to the protection of the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq.,
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., Massachusetts Oil and Hazardous Material Release Prevention and Response
Act, M.G.L. Chapter 21E, and Massachusetts Hazardous Waste Management Act,
M.G.L. Chapter 21C.
The term "Hazardous Substance" includes oil and petroleum products,
asbestos, polychlorinated biphenyls and urea formaldehyde, and any other
materials classified as hazardous or toxic under any Environmental Laws.
3.18. Margin Stock. Each Borrower is not engaged in the business of
------------
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Notes will be used to purchase or
carry any margin security or to extend credit to others for the purpose of
purchasing or carrying any margin security or in any other manner which would
involve a violation of any of the regulations of the Board of Governors of the
Federal Reserve System.
3.19. Representations Accurate. No representation or warranty made by
------------------------
each Borrower herein or in any other Loan Document contains any
misrepresentation of a material fact or omits to state any
-17-
material fact necessary to make such representation or warranty not misleading
when made. Each Borrower is not aware of any condition specific to the business
of the Borrowers, on a consolidated basis, which materially adversely affects,
or which is likely in the future to materially adversely affect, the business,
operations, property or financial condition of such Borrower, and which has not
been set forth in this Agreement or in the other Loan Documents or otherwise
disclosed in writing to the Banks on or prior to the date hereof.
ARTICLE IV
COVENANTS
4.01. Affirmative Covenants Other Than Financial Covenants and
--------------------------------------------------------
Reporting Requirements. Without limiting any other covenants and provisions
----------------------
hereof, each Borrower covenants and agrees that, so long as the Notes, any Loan
or any obligation of any Borrower to the Banks, in any capacity, remains unpaid
or any Letter of Credit remains outstanding:
(a) Property; Insurance. Each Borrower will keep all of its
-------------------
property reasonably necessary for the continued operation of its business in
good working order and condition, ordinary wear and tear excepted. Each Borrower
will maintain with financially sound and reputable insurance companies insurance
thereon in at least such amounts and with such deductibles and against at least
such risks (including hazard) as may be reasonably requested by the Banks from
time to time, and such Borrower will furnish to the Banks, upon its written
request, full information with respect to any insurance carried. All property
damage insurance policies maintained by such Borrower shall name the Agent as
loss payee as its interest may appear. No such policy may be terminated without
at least 20 days' prior written notice to the Agent.
(b) Maintain Rights. Each Borrower (and ▇. ▇▇▇▇▇▇ Coin-Op Laundry,
---------------
Inc. the proposed successor-in-interest to ▇▇▇-▇▇▇▇ Acquisition Corp.) will,
except in contemplation of any Permitted Acquisition:
(i) keep in full force and effect its corporate existence;
(ii) keep in full force and effect all material rights,
licenses, leases and franchises reasonably necessary to the conduct of its
business except for such rights, licenses, leases and franchises the loss of
which would not have a material adverse effect on such Borrower's business or
financial condition; provided that nothing in this Section 4.01(d)(ii) shall
prevent the abandonment or termination of any right, license, lease or
franchise, if such Borrower shall have determined that such abandonment or
termination is in the best interest of such Borrower and not disadvantageous to
the Banks; and
(iii) duly observe and conform to all applicable material laws,
statutes, regulations, decrees, judgments, orders, writs and other requirements
of all governmental authorities in any way relating to it or the conduct of its
business, except where the failure to so comply would not have a material
adverse affect on the business, operations, property or financial condition of
such Borrower.
-18-
(c) Books and Records; Inspection. Each Borrower will (i) keep
-----------------------------
proper books of record and account in which entries therein are full, true and
correct in all material respects in conformity with GAAP and all requirements of
law, and (ii) permit representatives of either Bank to visit and inspect any of
its properties and to examine and make abstracts from any of its books of record
and account upon reasonable notice, at any reasonable time during normal
business hours and as often as may reasonably be desired, and to discuss the
business, operations, properties and financial condition of such Borrower with
its officers and authorized employees and with its independent certified public
accountants.
(d) Operating Accounts. Each Borrower will maintain the Agent as
------------------
its principal bank of deposit and account.
(e) Conduct of Business. Each Borrower will conduct in the
-------------------
ordinary course the business in which it is presently engaged. Each Borrower
will not enter into any other lines of business, businesses or ventures which
are not related to its existing business.
(f) Financing Statements. Each Borrower, at its expense, shall
--------------------
execute, file and record all such further instruments, and perform such other
acts, as the Agent may reasonably determine are necessary or advisable to
maintain the priority of the liens and security interests in favor of the Banks
purported to be created by the Security Documents to which the Borrower is a
party on all property subject thereto.
4.02. Negative Covenants. Without limiting any other covenants and
------------------
provisions hereof, each Borrower covenants and agrees that, so long as any
Notes, Loan, Letter of Credit or any obligation of any Borrower to the Banks, in
any capacity, has not been fully performed:
(a) Indebtedness. Each Borrower will not create, incur, assume,
------------
agree to purchase or repurchase or provide funds in respect of or otherwise
become or be or remain liable with respect to any Indebtedness of any type
whatsoever owed to any person or entity, except:
(i) with respect to any Indebtedness incurred pursuant to the
terms of this Agreement or outstanding on the date hereof and listed on Schedule
--------
3.16 hereto;
----
(ii) Indebtedness of such Borrower for taxes, assessments and
governmental charges or levies, to the extent payment thereof shall not at the
time be required under this Agreement;
(iii) unsecured Current Liabilities of such Borrower (other
than for money borrowed or for the deferred purchase of property) incurred upon
customary terms in the ordinary course of business;
(iv) Indebtedness for capital leases in a maximum cumulative
aggregate amount not to exceed $4,000,000;
(v) Indebtedness for the purchase price of capital assets
incurred in the ordinary course of business, exclusive of capital assets and
indebtedness associated with capital leases referred to in Section 4.02 (a)(iv)
hereof, and any extensions or renewals thereof, provided that such Indebtedness
is either unsecured or secured only by the capital assets so purchased, and
provided further
-19-
that the aggregate amount of such Indebtedness outstanding does not exceed
$2,000,000 in any twelve-month period; and
(vi) guaranties permitted under this Agreement.
(b) Liens. Each Borrower will not create, incur, assume or suffer
-----
to exist any security interest, lien, mortgage, deed of trust, pledge, levy,
attachment, claim or other charge or encumbrance of any nature whatsoever upon
or with respect to any of its property, assets or revenues, whether now owned or
hereafter acquired, or assign or otherwise convey any right to receive income,
except for the following ("Permitted Liens"):
(i) liens in favor of the Banks;
(ii) liens existing on the assets or properties of such
Borrower as of the date hereof and identified on Schedule 3.05 attached hereto;
-------------
(iii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like liens arising in the ordinary course of
business in respect of obligations not overdue for a period of more than 60 days
or which are being contested in good faith by appropriate proceedings in a
manner which will not jeopardize or diminish the interest of the Banks in any of
the Collateral subject to the Security Documents;
(iv) liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, social security, retirement benefits
or similar legislation;
(v) liens for taxes or assessments or governmental charges or
levies that are either not due and payable or that are being contested in
accordance with this Agreement, so long as the enforcement of such lien is
effectively stayed within fifteen days of its imposition;
(vi) liens or encumbrances securing capital leases permitted
by Section 4.02(a)(iv) or the purchase price of capital assets to the extent
such purchase is permitted by Section 4.02(a)(v) hereof, provided that (a) each
such lien or encumbrance is given solely to secure the purchase price of such
property, does not extend to any other property, and (b) the Indebtedness
secured thereby does not exceed the cost of such property; and
(vii) attachments, seizures or levies aggregating less than
$500,000 and which remain undischarged for not longer than sixty (60) days after
filing unless the Borrower shall be proceeding diligently and in good faith to
obtain discharges thereof.
(c) Guaranties. Except as set forth on Schedule 4.02(c), each
----------
Borrower will not assume, guarantee, endorse or otherwise become directly or
contingently liable (including without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payments, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) in connection with any Indebtedness of any other person or entity,
except guaranties by endorsement or similar transactions such as bid or
performance bonds in the ordinary course of business.
-20-
(d) Transfers. Except in the case of Permitted Acquisitions, each
---------
Borrower will not sell, lease, transfer or otherwise dispose of any material
portion of the Collateral or any other assets necessary for the effective or
efficient operation or proper maintenance of its business, except (i) for sales
of inventory and obsolete, returned, replaced or worn-out equipment in the
ordinary course of such Borrower's business; and (ii) transfers of Collateral by
and between such Borrower. Each Borrower will not waste or destroy or suffer
the waste or destruction of the Collateral or any material portion thereof; and
such Borrower will not use any of the Collateral in violation of any policy of
insurance thereon. Each Borrower will not sell, assign (other than an
assignment to the Banks), discount or dispose in any way of any Receivables with
or without recourse, except for an assignment for collection in ordinary course
of business.
(e) Mergers. Except in the case of Permitted Acquisitions, each
-------
Borrower will not enter into any transaction of merger or consolidation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution); nor will such Borrower acquire by purchase or otherwise, all or
substantially all of the business, property or fixed assets of, or stock or
other evidence of beneficial ownership of, any person or entity, without the
prior written consent of the Banks.
(f) Investments. Except in the case of Permitted Acquisitions,
-----------
each Borrower will not make or permit to exist any investments or loans,
directly or indirectly (in the form of any acquisition of assets other than in
the ordinary course of business or in the form of any acquisition of stock,
securities, indebtedness or obligation of, or any loan, advance, capital
contribution or transfer of property to, or any guarantee or other commitment on
behalf of, any person, or otherwise), other than:
(i) marketable direct full faith and credit obligations of,
and marketable obligations guaranteed by, the United States of America, or any
agency or instrumentality thereof, which mature within one year from the date of
acquisition thereof;
(ii) marketable direct full faith and credit obligations of
any state of the United States of America, or any county, city, town, township
or other governmental subdivision of any such state, which mature within one
year from the date of acquisition thereof, provided that such obligations are
accorded a rating within one of the three highest graded by ▇▇▇▇▇'▇ Investors
Service, Inc. or Standard & Poor's Inc.;
(iii) certificates of deposit, notes, acceptance and repurchase
agreements having a maturity of not more than one year from the date of
acquisition issued by the Banks or by any bank organized in the United States
having capital, surplus and undivided profits of at least $10,000,000,000 and
interest-bearing accounts in the Banks or any such other bank;
(iv) commercial paper which has received one of the three
highest categories of ratings from either ▇▇▇▇▇'▇ Investors Services, Inc. or
Standard & Poor's, Inc.;
(v) accounts in any "money market" mutual fund having total
assets in excess of $1,000,000,000;
(vi) advances to the officers, employees, and salesman of the
Borrower with respect to reasonable expenses incurred by such officers,
employees and salesmen which expenses are properly reimbursable by such
Borrower;
-21-
(vii) other loans and advances to the employees of such
Borrower which do not exceed $250,000 in the aggregate outstanding at any one
time;
(viii) guarantees permitted by this Agreement;
(ix) contributions to the capital of and loans to
subsidiaries of the Borrower; and
(x) investments of such Borrower existing on the date hereof
and identified on Schedule 3.14 hereto.
-------------
(g) Principal Office. Each Borrower will not move its Principal
----------------
Office until no less than ten days after delivery of written notice thereof to
the Agent, provided that such Borrower shall furnish to the Agent all
documentation that the Agent reasonably requests as being necessary or desirable
to obtain, maintain, perfect and confirm the first priority security interests
granted herein.
(h) Write Up of Assets. Each Borrower will not write up (by
------------------
creating an appraisal surplus or otherwise) the value of its assets above their
cost to such Borrower less the depreciation regularly allowable thereon, without
the prior written consent of the Agent, which shall not be unreasonably
withheld.
(i) Dividends. Mac-Gray II, Inc. will not declare, make or pay any
---------
dividend or other distribution on any shares of its capital stock (except
dividends payable solely in shares of capital stock or rights to acquire its
capital stock), or any payment on account of the purchase, redemption,
retirement or acquisition of any shares of its capital stock or any option or
warrant therefor absent the prior written consent of the Banks, provided,
however, that it may repurchase or redeem shares or options therefor from its
employees upon termination of employment as permitted under its 1997 Stock
Option and Incentive Plan, and provided, further that notwithstanding the
foregoing, so long as Mac-Gray II, Inc. is an "S" corporation for federal
Internal Revenue Code and/or state taxation purposes Mac-Gray II, Inc. may make
distributions from earnings in an amount necessary to satisfy the federal and
state income tax obligations, as the case may be, of its shareholders with
respect to such earnings.
(j) Environmental Matters. Each Borrower will not store,
---------------------
transport, release or dispose of any Hazardous Materials on the Premises except
in compliance in all material respects with all Environmental Laws. Each
Borrower shall promptly after obtaining knowledge thereof provide the Agent with
written notice of each of the following: (i) any potential or known release or
threat of release of any Hazardous Material at or from the Premises, and (ii)
any incurrence of any expense or loss by any governmental authority in
connection with the assessment, containment or removal of any Hazardous Material
for which expense or loss the Borrower may be liable.
(k) ERISA. Each Borrower will not establish any new pension or
-----
defined benefit plan or materially modify any such existing plan for employees
subject to ERISA, which plan provides any benefits based on past service,
without the prior written consent of the Banks to the amount of the aggregate
past service liability thereby created.
-22-
(l) Waiver of Rights. Each Borrower will not waive any material debt
----------------
or claim, except in the ordinary course of its business.
(m) Sale Leaseback. Each Borrower will not enter into any sale
--------------
leaseback transaction without the prior written consent of the Bank, which shall
not be unreasonably withheld.
(n) Subsidiaries. Except as set forth on Schedule 4.02(o) hereto,
------------
each Borrower will not organize or form any new subsidiaries, or become a member
of any new partnership or joint venture without the prior written consent of the
Agent, which shall not be unreasonably withheld.
(o) Agreements with Affiliated Person. Except as set forth on
---------------------------------
Schedule 3.07, each Borrower shall not enter into any material agreement of any
nature whatsoever with any director, officer, shareholder or Affiliated Person
of such Borrower, including without limitation any agreement which constitutes
or effects a material modification of any agreement to which such Borrower is a
party as of the date hereof, other than in the ordinary course of its business
unless such agreement is on terms and conditions that are not substantially less
favorable than those that such Borrower could obtain from an unrelated third
party at such time.
4.03. Financial Covenants. Without limiting any other covenants and
-------------------
provisions hereof, each Borrower covenants and agrees that, so long as any Loan
or Letter of Credit is outstanding or any obligation of any Borrower to the
Banks, in any capacity, remains unpaid:
(a) Maximum Leverage. The Borrowers, on a consolidated basis, shall
----------------
maintain at all times a ratio of Senior Liabilities to EBITDA, measured as of
the end of each fiscal quarter for the prior four consecutive fiscal quarters
then completed of the Borrowers, of not more than 3.5:1 throughout fiscal year
1997, declining to 2.5:1 beginning as of the end of the first quarter of fiscal
year 1998.
(b) Minimum Shareholders Equity. The Borrowers, on a consolidated
---------------------------
basis and measured as of the end of each fiscal quarter within each fiscal year,
shall have a Minimum Shareholders Equity of $23,000,000 as of December 31, 1996
(assuming, on a pro forma basis, the acquisition of Sun Services of America,
Inc.), increasing by $4,000,000 per fiscal year to $43,000,000 in fiscal year
2001.
(c) Capital Expenditures. The aggregate Capital Expenditures of the
--------------------
Borrowers, on a consolidated basis, for each of its fiscal years beginning with
fiscal year 1997, during the term of this Agreement, shall not exceed the
following:
Fiscal 1996 $7,000,000
Fiscal 1997 $8,000,000
Fiscal 1998 and thereafter $9,000,000
(d) Minimum Quarterly EBITDA. The Borrowers, on a consolidated basis,
------------------------
shall have minimum EBITDA of $4,000,000 per quarter during fiscal year 1996 and
during each fiscal year thereafter, measured as of the end of each fiscal
quarter thereafter.
(e) Minimum Fixed Charge Coverage Ratio. Borrowers will achieve on an
-----------------------------------
annualized and consolidated basis, tested on the last day of each fiscal quarter
of the Borrowers (each a "Determination Date") a ratio of (x) EBITDA for the
prior four consecutive fiscal quarters then
-23-
completed to (y) the sum of all scheduled principal payments plus all interest
on any Indebtedness paid or payable by the Borrowers during such period, which
ratio shall not be less than:
Quarters During
Fiscal Year Ratio
----------------- -------
1996 1.3:1
1997 1.1:1
1998 and thereafter 1.3:1
(f) Minimum Annual Net Income. The Borrowers shall, on a consolidated
-------------------------
basis, have an Annual Net Income of at least $4,000,000, in each fiscal year
beginning in fiscal year 1996, to be measured annually at the end of each such
fiscal year.
(g) Excess Cash Flow Recapture. Beginning on April 1, 2000, the
--------------------------
Borrowers, on a consolidated basis, shall calculate their combined Excess Cash
Flow for the preceding fiscal year and shall pay over to the Banks fifty percent
(50%) of such Excess Cash Flow, and such amounts will be applied, at the
discretion of the Banks, to maturities in inverse order.
4.04. Reporting Requirements. So long as any Loan or Letter of Credit
----------------------
shall be outstanding or any other obligation of any Borrower to the Banks, in
any capacity, shall remain unpaid, each Borrower shall furnish to each Bank the
following reports and information:
(a) Financial Reports. Each Borrower will furnish to each Bank:
-----------------
(i) as soon as available, but in any event within 90 days after
the end of each fiscal year of such Borrower, a copy of the audited consolidated
and unaudited consolidating balance sheet of such Borrower as at the end of such
fiscal year and the related audited consolidated statements of income,
stockholders' equity and cash flows for such fiscal year, in each case setting
forth in comparative form the figures for the previous year, reported on without
exception or qualification as to the scope of the audit by Price Waterhouse or
other independent certified public accountants of nationally recognized standing
or otherwise reasonably acceptable to the Bank, together with any letter from
the management of the Borrower prepared in connection with such Borrower's
annual audit report;
(ii) as soon as available, but in any event within 30 days after
the end of each month, copies of the unaudited consolidated and unaudited
consolidating balance sheet of such Borrower as at the end of such month,
together with the related unaudited consolidated statement of income for such
month and for the portion of the fiscal year of such Borrower through such
month; all such financial statements to be complete and correct in all material
respects and prepared in reasonable detail and in conformity with GAAP applied
consistently throughout the periods reflected therein;
(iii) as soon as available, but in any event within 45 days after
the beginning of each fiscal year of such Borrower, a budget for such fiscal
year, together with a projected consolidated and unaudited consolidating balance
sheet, projected consolidated cash flow statement and projected consolidated
profit and loss statement of such Borrower for the forthcoming fiscal year, in
all cases setting forth such financial information on a month by month basis for
such forthcoming fiscal year; and
-24-
(iv) On or before June 30, 1997, the Borrowers shall deliver the
audited consolidated financial statements of ▇▇▇-▇▇▇▇ Co., Inc., including
consolidated balance sheets, statements of income, and retained earnings and
cash flows (the "Financial Statements") for the fiscal year ended December 31,
1996, as at December 31, 1996. The Financial Statements for the fiscal year
ended December 31, 1996 shall have been audited by and shall include the
unqualified opinion of Price Waterhouse, certified public accountants.
(b) Other Financial Reports. Each Borrower will also furnish to
-----------------------
each Bank :
(i) concurrently with the delivery of each set of the quarterly
financial statements referred to above, a certificate of the Chief Financial
Officer of such Borrower stating that, to the best of such person's knowledge,
during the period covered by such set of financial statements such Borrower has
observed or performed in all material respects all of its covenants and
agreements contained in this Agreement and the other Loan Documents to be
observed, performed or satisfied by it, and that such Chief Financial Officer
has obtained no knowledge of any default or Event of Default (except as
specified in such certificate);
(ii) promptly after the same are sent and received, copies of
all financial statements, reports and notices which such Borrower sends to
holders of any class of capital stock of such Borrower generally;
(iii) promptly, such additional financial and other information
as the Bank may from time to time reasonably request; and
(iv) as soon as available, a copy of each other report submitted
to such Borrower by its certified public accountants in connection with any
annual, interim or special audit made by them of the books of such Borrower.
(c) Notices. Each Borrower will give notice to the Agent, within five
-------
days of knowledge thereof, of:
(i) the occurrence of any Event of Default under this
Agreement;
(ii) any default or event of default under any other contractual
obligations of any Borrower which, if not paid or remedied by such Borrower
within 30 days of such default or event of default or waived by the obligee
thereon, could result in liability to such Borrower in excess of $200,000 in any
single instance or $750,000 in the aggregate;
(iii) any pending or threatened litigation, investigation or
proceeding of which any Borrower has knowledge which may exist at any time
between any Borrower and any other party (including without limitation any
governmental authority) which may have a material adverse effect on the
business, operations, property or financial condition of the Borrowers, on a
consolidated basis, or any litigation or proceeding affecting any Borrower which
may have a material adverse effect upon the Borrowers, on a consolidated basis;
(iv) the following events, as soon as possible and in any event
within 15 days after any Borrower knows thereof: (x) the occurrence of any
"reportable event" with respect to any
-25-
"single employer plan" which in the reasonable judgment of any Borrower could be
expected to have a material adverse effect on any Borrower or its business, (y)
the institution of proceedings or the taking or expected taking of any other
action by any Borrower or any "commonly controlled entity" to terminate any
"single employer plan" with respect to which there exists any vested unfunded
pension liabilities at the time of such termination, or (z) the "reorganization"
or "insolvency" of any "multiemployer plan" which may reasonably be expected to
have a material adverse effect on the business, operations, property or
financial condition of the Borrowers, on a consolidated basis, (as each of the
quoted terms is defined or used in ERISA or the Code);
(v) a material adverse change in the business, operations,
property or financial condition of any Borrower;
(vi) the revocation, expiration or loss of any material license,
permit or other governmental authorization of any Borrower which would have a
material adverse effect on any Borrowers' consolidated business or financial
condition;
(vii) the issuance, grant or award to or on behalf of any
Borrower of any patent or letters patent, or the registration in the name of or
on behalf of any Borrower of any copyright, trademark trade name or any other
form of intellectual property whatsoever, or the filing, recording or approval
of any application by or on behalf of any Borrower for any of the foregoing; and
(viii) each notice pursuant to paragraphs (i) through (vii) of
this Section 4.04 to be accompanied by a statement of the chief financial
officer of any Borrower setting forth details of the occurrence referred to
therein and stating what action, if any, any Borrower proposes to take with
respect thereto.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
5.01. Events of Default. The occurrence of each of the following shall
-----------------
constitute an Event of Default under this Agreement and under the Security
Documents:
(a) Representations and Warranties. Any representation or warranty
------------------------------
made by any Borrower in this Agreement or in any other Loan Document shall prove
to have been incorrect in any material respect when made, or any information
furnished in writing, whether in this Agreement or in any other Loan Document
shall prove to be untrue in any material respect on the date on which it is or
was given.
(b) Covenants. Any Borrower shall fail to perform or observe any
---------
covenant or condition contained or referred to in this Agreement, including
without limitation the failure to make any payment of principal or interest on
the Notes when due or any payment of the Commitment Fee hereunder when due;
provided, however, that any failure to perform under any of Sections 4.01(b),
(c), (d), (e), (f), 4.02 (b) (with respect to involuntary encumbrances only),
4.02(k), , 4.02(a), 4.02(g), 4.02(o), and 404 hereof shall not constitute an
Event of Default under this Agreement until such failure shall have continued
uncured for thirty days.
-26-
(c) Security Documents. Any default or event of default shall occur
------------------
under any of the Security Documents, which default or event of default is not
otherwise described in this Section 5.01 and is continuing for thirty (30) days.
(d) Other Defaults. Any default shall exist and remain unwaived or
--------------
uncured for a period of thirty days or more with respect to Indebtedness of any
Borrower in excess of $400,000 in the aggregate, or any event occurs which
permits the acceleration of the maturity of any such Indebtedness.
(e) Displacement of Management. There shall occur any seizure,
--------------------------
vesting or intervention by or under the authority of a governmental authority or
other entity by which the management of any Borrower is displaced or its
authority in the conduct of its business is materially curtailed.
(f) Liens. Any involuntary lien, levy or assessment (other than a
-----
Permitted Lien) is filed or recorded with respect to the assets of any Borrower
valued at $250,000 or more and is not released, canceled, revoked, removed,
repealed or otherwise terminated within thirty (30) days after such filing or
recording.
(g) Seizure of Assets. Any material portion of the Collateral becomes
-----------------
the subject of an attachment or comes within the lawful possession of any
receiver, trustee, custodian or assignee for the benefit of creditors.
(h) Judgments. Any judgment, order or writ in excess of $500,000 is
---------
rendered or entered against any Borrower and not paid, satisfied or otherwise
discharged within 90 days of the date such judgment, order or writ becomes final
and non-appealable.
(i) Insolvency. Any Borrower shall be generally unable to pay its
----------
debts as they become due; the dissolution, termination of existence, cessation
of normal business operations or insolvency of any Borrower; the appointment of
a receiver of any material part of the property of, legal or equitable
assignment, conveyance or transfer of property for the benefit of creditors by,
or the commencement of any proceedings under any bankruptcy or insolvency laws
by or against, any Borrower, provided that any Borrower shall have 45 days after
the commencement thereof to obtain a dismissal or stay of any involuntary
proceedings against such Borrower under any bankruptcy laws.
(j) Loss; Material Adverse Change. The Borrowers, on a consolidated
-----------------------------
basis, shall suffer a material adverse change in their business, properties, or
financial condition since the date of this Agreement.
(k) ERISA. Any Borrower shall fail to meet its minimum funding
-----
requirements under ERISA with respect to any employee benefit plan (or other
class of benefit which the Pension Benefit Guaranty Corporation has elected to
insure) or any such plan shall be the subject of termination proceedings
(whether voluntary of involuntary) and there shall result from such termination
proceedings a liability of such Borrower to the Pension Benefit Guaranty
Corporation which in the reasonable opinion of the Bank has material adverse
effect upon the business, operations or financial condition of any Borrower.
-27-
(l) Security Interest. The security interest and lien of the Banks in
-----------------
and on any of the Collateral shall not be in full force and effect as a fully
perfected first priority lien except as otherwise expressly permitted herein or
in the Security Agreement.
(m) Management. The Chief Executive Officer of Mac-Gray II, Inc. shall
----------
cease to hold such office or a similar executive-level position with such
Borrower and a suitable replacement, satisfactory to the Banks has not been
appointed within a 90-day period.
5.02. Remedies. Upon the occurrence of any Event of Default and at any
--------
time thereafter so long as such Event of Default continues uncured or unwaived,
in addition to any other rights and remedies available to the Agent on behalf of
the Banks hereunder or otherwise, the Agent on behalf of the Banks may exercise
any one or more of the following rights and remedies (all of which shall be
cumulative):
(a) Declare the entire unpaid principal amount of the Notes then
outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this Agreement, and all other Indebtedness of the Borrower to the
Banks, forthwith due and payable, whereupon the same shall become forthwith due
and payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Borrower.
(b) Terminate the revolving line of credit established by Section
1.01 of this Agreement.
(c) Exercise all of the rights and remedies of a secured party under
the Uniform Commercial Code. The Agent may enter upon the Premises or any of
same and may take physical possession of the Collateral or render the Collateral
unusable by process of law or peaceably without process of law. Each Borrower
shall peaceably surrender the Collateral and shall upon the request from the
Agent assemble it and make it available to the Agent at a place or places
designated by the Agent which is or are reasonably convenient to such Borrower
and the Agent. To the extent permitted by law, the Agent may maintain
possession of any Collateral on any property owned, leased by or licensed to
such Borrower, or remove same or any part thereof to such place or places as the
Bank may elect. The Borrowers will also deliver to the Agent upon request all
documents of title and other instruments relating to the Collateral. Each
Borrower waives all rights which it would otherwise have had under law to
prohibit entry to any premises or to require notice of any replevin or retaking,
all to the extent that the same is permitted by law. The Agent may with only
such demand, advertising or notice as may be required by law, sell and deliver
any and all Collateral held by it for its account at any time or times in one or
more private or public sales, for cash or credit or otherwise, at such price and
upon such terms as the Agent deems advisable in its sole discretion. Notice of
any public sale shall be sufficient if it describes the Collateral to be sold in
general terms, stating the amounts thereof and the location and nature of the
properties covered by the security interests and the prior liens thereon, and is
published, at least once, not less than ten (10) days prior to the sale in any
newspaper of general circulation in the greater Boston, Massachusetts
metropolitan area and such other metropolitan area which the Agent may elect.
All requirements of reasonable notice to the Borrowers shall be met if such
notice is sent to the Borrower, in the manner provided in this Agreement below,
at least ten (10) days before the time of such sale or disposition. The Banks
may be the purchasers at any such sale, if it is public, free from any right of
redemption. The proceeds of sale shall be applied first to the costs of
retaking, refurbishing, storing and selling any Collateral hereunder and to
other costs of collection, and then to the payment of
-28-
obligations of the Borrowers to the Banks. The Banks shall be entitled to apply
any collections on account of the Notes first to reasonable fees, costs and
charges accrued to the date of receipt, next to accrued interest and only
thereafter to principal. Any excess shall be returned to the Borrowers, and the
Borrowers shall remain jointly and severally liable for any deficiency.
(d) Enforce the provisions of this Agreement by appropriate legal
proceedings, and the Banks may recover damages caused by any breach by any
Borrower of the provisions of this Agreement, including court costs, reasonable
attorneys' fees and other reasonable costs and expenses incurred in the
enforcement of the obligations of any Borrower hereunder.
(e) Exercise all rights and remedies hereunder, under each of the
other Loan Documents and under any other agreement with the Banks; and exercise
all other rights and remedies which the Banks may have under applicable law.
(f) Notwithstanding anything to the contrary contained herein, upon
the occurrence of an Event of Default, described in Section 5.01(i) hereof, the
entire unpaid principal amount of the Notes then outstanding, together with all
interest accrued and unpaid on all such amounts, and all other amounts payable
under this Agreement, shall be immediately due and payable without presentment,
demand, protest, or notice of any kind.
5.03. Set-off. In addition to any rights now or hereafter granted under
-------
applicable law and not by way of limitation of any rights, upon the occurrence
and continuance of any Default by any Borrower, the Banks are hereby authorized
at any time or from time to time, without presentment, demand, protest or other
notice of any kind to any Borrower or to any other person or entity, all of
which are hereby expressly waived, to set off and to appropriate and apply any
and all deposits and any other Indebtedness at any time held or owing by either
Bank to or for the credit or the account of any Borrower against and on account
of the obligations and liabilities of any Borrower to either Bank under this
Agreement or otherwise, irrespective of whether or not the Bank shall have made
any demand hereunder and although said obligations, liabilities or claims, or
any of them, may then be contingent or unmatured and without regard for the
availability or adequacy of other Collateral. Each Borrower also grants to the
Banks a security interest in and to all its deposits and all securities or other
property in the possession of the Banks from time to time, to secure the prompt
and full payment and performance of any and all obligations to the Banks, and,
upon the occurrence of any Event of Default, the Banks may exercise all rights
and remedies of a secured party under the Uniform Commercial Code.
ARTICLE VI
AGENCY
6.01. Authorization of Agent and Relationship. Each Bank hereby appoints
---------------------------------------
State Street Bank and Trust Company as Agent and State Street Bank and Trust
Company hereby accepts such appointment. The appointment may only be terminated
as expressly provided in this Agreement. Each Bank hereby authorizes the Agent
to take all action on its behalf and to exercise such powers and perform such
duties under this Agreement as are expressly delegated to the Agent by its
terms, together with all powers reasonably incidental hereto. The Agent shall
have only those duties and responsibilities which are of a solely mechanical and
administrative nature and which are expressly specified in this Agreement, and
it may perform such duties by or through its agents or employees, but shall not
by reason
-29-
of this Agreement have a fiduciary duty in respect of any Bank. As to any
matters not expressly provided for by this Agreement, the Agent is not required
to exercise any discretion or to take any action, but is required to act or to
refrain from acting (and is fully protected in so acting or refraining from
acting) upon the instructions of the Banks, as the case may be. Those
instructions shall be binding upon all Banks, but the Agent is not required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law.
Without limiting the foregoing, each of the Banks hereby grants to the
Agent a power of attorney, and also grants to the Agent the right to delegate
its authority as attorney to any other person, whether or not an officer or
employee of the Agent.
6.02. Disclaimer of Agent. The Agent makes no representation or
-------------------
warranty, and assumes no responsibility with respect to the due execution,
legality, validity, sufficiency, enforceability or collectability of this
Agreement or any other Security Document. The Agent assumes no responsibility
for the financial condition of the Borrower, or for the performance of the
obligations of the Borrower under this Agreement or any other Security Document.
The Agent assumes no responsibility with respect to the accuracy, authenticity,
legality, validity, sufficiency or enforceability of any documents, papers,
materials or other information furnished by the Borrower to the Agent on behalf
of the Banks. The Agent shall not be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or as to the use of the proceeds of the Loans or
(unless the officers or employees of the Agent acting in their capacity as
officers or employees on the Borrower's accounts have actual knowledge thereof,
or have been notified thereof in writing by the Borrower) of the existence or
possible existence of any Event of Default. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with the
Agreement except for its or their own negligence or willful misconduct. The
Agent shall have the same rights and powers hereunder as any other Bank, and may
exercise the same as though it were not performing the duties and functions
delegated to it as Agent hereunder.
6.03. Bank's Funding Obligations.
--------------------------
(a) Each Bank shall advance to the Agent prior to 12:00 p.m. (Boston
time), in immediately-available funds, such Bank's Proportionate Share in the
portion of the Loan to be advanced by the Agent. If such funds are not received
at such time, but all applicable conditions set forth in Article I hereof have
been satisfied, each Bank authorizes and requests the Agent to advance for the
Bank's account, pursuant to the terms hereof, the Bank's respective
Proportionate Share in such portion of the Loan and agrees to reimburse the
Agent in immediately-available funds for the amount thereof prior to 2:00 p.m.
(Boston time) on the day any portion of the Loan is advanced hereunder;
provided, however, that the Agent is not authorized to make any such advance for
the account of any Bank who has previously notified the Agent in writing that
such Bank will not be performing its obligations to make further advances
hereunder; and provided, further, that the Agent shall be under no obligation to
make any such advance.
(b) Unless the Agent has actual knowledge that a Bank has not made or
will not make available to the Agent the applicable loan amount required from
such Bank, the Agent shall be entitled to assume that such amount has been or
will be received from such Bank when so due and the Agent may (but shall not be
obligated to), in reliance upon such assumption, make available to the
-30-
Borrower a corresponding amount. If such amount is not in fact received by the
Agent from such Bank and the Agent has made available a corresponding loan
amount to the Borrower as aforesaid, such Bank shall pay to the Agent on demand
an amount equal to the product of (i) the Prime Rate per annum multiplied by
(ii) the amount that should have been paid to the Agent by such Bank on such
Loan Date and was not, multiplied by (iii) a fraction, the numerator of which is
the number of days that have elapsed from and including such Loan Date to but
excluding the date on which the amount is received by the Agent from such Bank
and the denominator of which is 360. A certificate of the Agent containing
details of the amount owing by a Bank under this Section shall be binding and
conclusive in the absence of manifest error.
(c) Notwithstanding the provisions of Section 6.03(b), if any Bank
fails to make available to the Agent its Proportionate Share of any Loan (such
Bank being herein called the "Defaulting Bank"), the Agent shall forthwith give
notice of such failure by the Defaulting Bank to the Borrower and the other
Banks. The Agent shall then forthwith give notice to the other Banks that any
Bank may make available to the Agent all or any portion of the Defaulting Bank's
Proportionate Share of such Loan in the place of the Defaulting Bank, but in no
way shall any other Bank or the Agent be obligated to do so. If more than one
Bank gives notice that it is prepared to make funds available in the place of a
Defaulting Bank in such circumstances and the aggregate of the funds which such
Banks (herein collectively called the "Contributing Banks") and individually
called the "Contributing Bank") are prepared to make available exceeds the
amount of the Loan which the Defaulting Bank failed to make, then each
Contributing Bank shall be deemed to have given notice that it is prepared to
make available its Proportionate Share of such Loan based on the Contributing
Banks' relative commitments to advance in such circumstances. If any
Contributing Bank makes funds available in the place of a Defaulting Bank in
such circumstances, then the Defaulting Bank shall pay to any Contributing Bank
making the funds available in its place, forthwith on demand, any amount
advanced on its behalf together with interest thereon at the rate applicable to
such Loan from the date of advance to the date of payment, against payment by
the Contributing Bank making the funds available of all interest received in
respect of the Loan from the Borrower. The failure of any Bank to make
available to the Agent its Proportionate Share of any Loan as required herein
shall not relieve any other Bank of its obligations to make available to the
Agent is Proportionate Share of any Loan as required herein.
6.04. Payments by the Borrowers. All payments (except the Agent's
-------------------------
fees) made by or on behalf of the Borrowers pursuant to this Agreement shall be
made to and received by the Agent and shall be distributed by the Agent to the
Banks as soon as possible upon receipt by the Agent and in any event within five
(5) business days of receipt. Subject to Section 6.05, the Agent shall
distribute:
(a) payments of interest in accordance with each Bank's Proportionate
Share of the Loans;
(b) repayments of principal in accordance with each Bank's
Proportionate Share of the Loans; or
(c) all other payments received by the Agent (except the Agent's fees)
including, without limitation, amounts received upon the realization of
Collateral, in accordance with each Bank's Proportionate Share of the Loans
provided, however, that with respect to proceeds of realization, no Bank shall
receive an amount in excess of the amounts owing to it in respect of the
Obligations.
-31-
6.05. Payments by Agent. The following provisions shall apply to any and
-----------------
all payments made by the Agent to the Banks hereunder:
(a) the Agent shall be under no obligation to make any payment
(whether in respect of principal, interest, fees or otherwise) to any Bank until
an amount in respect of such payment has been received by the Agent from the
Borrowers;
(b) If the Agent receives less than the full amount of any payment of
principal, interest, fees or other amount owing by the Borrowers under this
Agreement, the Agent shall have no obligation to remit to each Bank any amount
other than such Bank's Proportionate Share of that amount which is the amount
actually received by the Agent;
(c) if any Bank advances more or less than its Proportionate Share of
the Loans, such Bank's entitlement to such payment shall be increased or
reduced, as the case may be, in proportion to the amount actually advanced by
such Bank;
(d) the Agent acting reasonably in good faith shall, after
consultation with the Banks in the case of any dispute, determine in all cases
the amount of all payments to which each Bank is entitled and such determination
shall, in the absence of manifest effort, be binding and conclusive; and
(e) upon request, the Agent shall deliver a statement detailing any of
the payments to the Banks referred to herein.
Unless the Agent has actual knowledge that the Borrowers have not made or
will not make a payment to the Agent for value on the date in respect of which
such Borrower has notified the Agent that the payment will be made, the Agent
shall be entitled to assume that such payment has been or will be received from
such Borrower when due and the Agent may (but shall not be obliged to), in
reliance upon such assumption, pay the Banks corresponding amounts. If the
payment by such Borrower is in fact not received by the Agent on the required
date and the Agent has made available corresponding amounts to the Banks, the
Borrowers shall, without limiting their other obligations under this Agreement,
indemnify the Agent against any and liabilities, obligations, losses, damages,
penalties, costs, expenses or disbursements of any kind or nature whatsoever
that may be imposed on or incurred by the Agent as a result. A certificate of
the Agent with respect to any amount owing by any Borrower under this Section
shall be prima facie evidence of the amount owing in the absence of manifest
error.
6.06. Direct Payments. The Banks agree among themselves that, except as
---------------
otherwise provided for in this Agreement, all sums received by a Bank relating
to this Agreement by virtue of the Collateral, whether received by voluntary
payment, by the exercise of the right of set-off or compensation or by
counterclaim, cross-action or as proceeds of realization of any Collateral or
otherwise, shall be shared by each Bank in its Proportionate Share under the
Loans and each Bank undertakes to do all such things as may be reasonable
required to give full effect to this Section, including without limitation, the
purchase from other Banks of such notes or a portion thereof by the Bank who has
received an amount in excess of the Proportionate Share under the Loans as shall
be necessary to cause such purchasing Bank to share the excess amount ratably in
its Proportionate Share under the Loans with the other Banks. If any such which
is so shares is later recovered from the Banks who originally received it, the
Bank shall restore its Proportionate Share under the Loans of such sum to such
Banks, without interest. If any Bank (a "Receiving Bank") shall obtain any
payment of monies due under this Agreement as referred to above,
-32-
the Receiving Bank shall forthwith remit such payment to the Agent and, upon
receipt, the Agent shall distribute such payment in accordance with the
provisions of Section 6.05.
6.07. Administration of the Loans. The Agent may take the following
---------------------------
actions upon notice to the Banks, unless otherwise specified in this Agreement:
(a) subject to Section 6.08, exercise any and all rights of approval
conferred upon the Banks by this Agreement;
(b) give prompt and timely written notice to the Borrowers in respect
of any amounts due or overdue under the terms of this Agreement and of any other
matter in respect of which notice may be required, permitted, necessary or
desirable in accordance with or pursuant to this Agreement;
(c) amend, modify or waive any of the terms of this Agreement
(including waiver of an Event of Default) if such amendment, modification or
waiver would not have a material adverse effect on the rights of the Banks
thereunder and if such action is not otherwise provided for in Section 6.08.1;
(d) engage a professional as permitted by Section 6.10(a);
(e) decide to accelerate the amounts outstanding under this Agreement
or the Security Documents as permitted thereby; and
(f) pay insurance premiums, taxes and any other sums as may be
reasonably required to protect the interests of the Banks.
6.08. Unanimous Consent of Banks. The Agent may take the following
--------------------------
actions only if the prior unanimous consent of the Banks is obtained, unless
otherwise specified herein:
(a) amend, modify, discharge, terminate or waive any of the terms of
this Agreement or the Security Documents if such amendment, modification,
discharge, termination or waiver would have a material adverse effect on the
Collateral or on the rights of the Banks under this Agreement or the Security
Agreement;
(b) amend, modify, discharge, terminate or waive any of the term of
this Agreement if such amendment, modification, discharge, termination or waiver
would increase the amount of a Loan, amend the purpose of a Loan, reduce the
interest rate applicable to a Loan, reduce the fees payable with respect to a
Loan, extend any date fixed for payment of principal or interest relating to a
Loan or extend the Maturity Date of the Loan;
(c) amend Section 6.08; and
(d) declare an Event of Default or take action to enforce performance
of the Obligations of the Borrower and to realize upon the Collateral including
the appointment of a receiver, lease or sale given by the Security Agreement or
by law and take foreclosure proceedings and/or pursue any other legal remedy
necessary provided, however, that in the event the Banks are unable to agree
-------- -------
unanimously upon any of the foregoing actions, either Bank, fifteen days
subsequent to such Bank's
-33-
notification to all other Banks of such Bank's intention to so act, may, subject
to all applicable provisions to this Agreement or, any of the Security
Documents, proceed unilaterally with any of the items described in this Section
6.08 absent the unanimous consent of the Banks.
6.09. Reliance by Borrowers. As between the Borrowers, on the one hand,
---------------------
and the Agent and the Banks, on the other hand:
(a) all statements, certificates, consents and other documents which
the Agent purports to deliver on behalf of the Banks shall be binding on each of
the Banks, and the Borrower shall not be required to ascertain or confirm the
authority of the Agent in delivering such documents;
(b) all certificates, statements, notices and other documents which
are delivered by the Borrower to the Agent in accordance with this Agreement
shall be deemed to have been duly delivered to each of the Banks;
(c) all payments which are delivered by the Borrower to the Agent in
accordance with this Agreement shall be deemed to have been duly delivered to
each of the Banks;
(d) unless an Event of Default has occurred and is continuing, the
Borrower's consent to the appointment of any Successor Agent must be obtained,
but the Borrower's consent shall not be unreasonably withheld.
6.10. Rights of Agent.
----------------
(a) In administering the Loans, the Agent may retain, at the expense
of the Banks if such expenses are not recoverable from the Borrowers, such
counsel, auditors and other experts and agents as the Agent may select, in its
sole discretion, acting reasonably and in good faith after consultation with the
Banks.
(b) The Agent shall be entitled to rely on any communication,
instrument or document believed by it to be genuine and correct and to have been
signed by the proper individual or individuals, and shall be entitled to rely
and shall be protected in relying as to legal matters upon opinions of
independent legal advisors selected by it. The Agent may also assume that any
representation made by the Borrowers is true and that no Event of Default has
occurred unless the officers or employees of the Bank acting as Agent, acting in
their capacity as officers or employees responsible for the Borrowers' accounts
have actual knowledge to the contrary or have received notice to the contrary
from any other party to this Agreement.
(c) The Agent may, without any liability to account, accept deposits
from and lend money to and generally engage in any kind of banking, or other
business with the Borrower, as if it were not the Agent.
(d) Except in its own right as a Bank, the Agent shall not be required
to advance its own funds for any purpose, and in particular shall not be
required to pay with its own funds insurance premiums, taxes or public utility
charges or the cost of repairs or maintenance with respect to the assets which
are the subject matter of the Security Agreement, nor shall it be required to
pay with its own funds the fees of counsel, auditors, experts or agents engaged
by it as permitted hereby.
-34-
(e) The Agent shall be entitled to receive a fee for acting as Agent,
as agreed between the Agent and the Borrowers from time to time.
6.11. Acknowledgments, Representations and Covenants of Banks.
-------------------------------------------------------
(a) It is acknowledged and agreed by each Bank that it has itself
been, and will continue to be, solely responsible for making its own independent
appraisal of and investigations into the financial condition, creditworthiness,
property, affairs, status and nature of the Borrowers. Accordingly, each Bank
confirms to the Agent that it has not relied, and will not hereafter rely, on
the Agent (a) to check or inquire on its behalf into the adequacy or
completeness of any information provided by the Borrowers under or in connection
with this Agreement or the transactions herein contemplated (whether or not such
information has been or is hereafter distributed to such Bank by the Agent) or
(b) to assess to keep under review on its behalf the financial condition,
creditworthiness, property, affairs, status or nature of the Borrowers.
(b) Each Bank represents and warrants that it has the legal capacity
to enter into this Agreement pursuant to its charter and any applicable law and
has not violated its charter, bylaw or other documents or any applicable law by
so doing.
(c) Each Bank agrees to indemnify the Agent (to the extent not
reimbursed by the Borrowers), ratably according to its Proportionate Share 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 the
Agent in any way relating to or arising out of this Agreement or related
Documents or the transactions therein contemplated, provided that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. Without limiting the
generality of the foregoing, each Bank agrees to reimburse the Agent promptly
upon demand for its Proportionate Share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preservation of any
rights of the Agent or the Banks under, or the enforcement of, or legal advice
in respect of rights or responsibilities under this Agreement, to the extent
that the Agent is not reimbursed for such expenses by the Borrowers. The
obligation of the Banks to indemnify the Agent shall survive the termination of
this Agreement.
(d) Each of the Banks acknowledges and confirms that in the event the
Agent does not receive payment in accordance with this Agreement, it shall not
be the obligation of the Agent to maintain the Loans in good standing nor shall
any Bank have recourse to the Agent in respect of any amounts owing to such Bank
under this Agreement.
(e) Each Bank acknowledges and agrees that its obligation to advance
its Proportionate Share of Loans in accordance with the terms of this Agreement
is independent and in no way related to the obligation of any other Bank
hereunder.
(f) Except to the extent recovered by the Agent from the Borrowers,
promptly following demand therefor, each Bank shall pay to the Agent an amount
equal to such Bank's Proportionate Share of any and all reasonable costs,
expenses, claims, losses and liabilities incurred by
-35-
the Agent in connection with this Agreement and the Security Documents
(including, without limitation, the collection or enforcement thereof), except
for those incurred by reason of the Agent's negligence or willful misconduct.
(g) Notwithstanding any provisions of this Credit Agreement to the
contrary, the Banks (other than the Agent) shall not be entitled to participate
to the full extent of their Proportionate Share with respect to any Revolving
Loan arising from any Letter of Credit issued for the account of the Borrowers
in an amount less than $50,000. The Banks further agree that any Letter of
Credit fees paid by the Borrowers to the Agent on account of that certain
standby Letter of Credit issued in favor of ▇▇▇▇ ▇▇▇▇▇▇▇ for the account of the
Borrowers shall be shared by the Banks as follows: Agent shall receive and
retain a fee equal to 25 basis points (as an additional Agent's fee), and the
remaining basis points shall be distributed to the Banks in accordance with
their Proportionate Share.
6.12. Collective Action of the Banks. Except as otherwise provided
------------------------------
herein, each of the Banks hereby acknowledges that to the extent permitted by
applicable law, the Security Agreement and the remedies provided under the
Security Documents to the Banks are for the benefit of the Banks collectively
and acting together and not severally and further acknowledges that its rights
hereunder and under the Security Agreement are to be exercised not severally,
but by the Agent upon the decision of the Banks as required by this Agreement.
Accordingly, notwithstanding any of the provisions contained herein or in the
Security Agreement, each of the Banks hereby covenants and agrees that it shall
not be entitled to take any action hereunder or thereunder including, without
limitation, any declaration of default hereunder or thereunder but that any such
action shall be taken only by the Agent with the prior written agreement of the
Banks. Each of the Banks hereby further covenants and agrees that upon any such
written agreement being given by the Banks, it shall co-operate fully with the
Agent to the extent requested by the Agent. Notwithstanding the foregoing, in
the absence of instructions from the Banks and where in the sole opinion of the
Agent, acting reasonably and in good faith, the exigencies of the situation
warrant such action, the Agent may without notice to or consent of the Banks
take such action on behalf of the Banks as it deems appropriate or desirable in
the interest of the Banks.
6.13. Successor Agent. Subject to the appointment and acceptance of a
---------------
Successor Agent as provided in this Section, and subject to Section 6.07.4, the
Agent may resign at any time by giving 30 days' written notice thereof to the
Banks and the Borrowers, and may be removed at any time by the Banks upon 30
days' written notice. Upon receipt of notice by the Banks of the resignation of
the Agent, or upon giving notice of termination to the Agent, the Banks may,
within 21 days, appoint a successor from among the Banks or, if no Bank is
willing to accept such an appointment, from among other institutions which each
have combined capital and reserves in excess of $250,000,000. If no Successor
Agent has been so appointed and has accepted such appointment within 21 days
after the retiring Agent's giving of notice of resignation or receiving of
notice of termination, then the retiring Agent may, on behalf of the Banks,
appoint a Successor Agent. Upon the acceptance of any appointment as Agent
hereunder by a Successor Agent, the retiring Agent shall pay the Successor Agent
any unearned portion of any fee paid to the Agent for acting as such, and the
Successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its further duties and obligations as Agent under this Agreement
and the other Security Documents. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article shall continue to inure to
its benefit and be binding upon it as to any actions taken or omitted to be
taken by it while it was Agent hereunder.
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6.14. Provisions Operative Between Banks and Agent Only. Except as
-------------------------------------------------
otherwise provided herein, the provisions of this Article relating to the
rights and obligations of the Banks and the Agent inter se shall be operative as
between the Banks and the Agent only, and the Borrowers shall not have any
rights or obligations under or be entitled to rely for any purpose upon such
provisions.
ARTICLE VII
MISCELLANEOUS
7.01. Further Assurances. Each Borrower shall do all things and deliver
------------------
all instruments reasonably requested by the Agent to protect or perfect any
security interest granted or intended to be granted hereunder. If any Borrower
fails promptly to comply with any such request, or if any Event of Default shall
have occurred hereunder, such Borrower authorizes the Agent to execute, in the
name or on behalf of such Borrower, any financing statement or other document or
instrument that the Agent may require to perfect, protect or establish any
security interest or lien interest to which the Bank may be then entitled
hereunder and further authorizes the Agent to sign the Borrower's name on the
same. Each Borrower appoints (but only for the purposes of protecting the Banks'
interests in the Collateral or the Banks' rights to receive payments under this
Agreement or the Notes or otherwise exercising any of its rights hereunder or
causing the performance and fulfillment of the obligations and agreements
intended to be performed and fulfilled by the Borrower under this Agreement) the
Agent as such Borrower's attorney-in-fact with the power: at any time when an
Event of Default has occurred and is continuing, to endorse the name of the
Borrower on any checks, notes, drafts, or other forms of payment or security
relating to any Collateral that may come into the possession of the Banks; at
any time when an Event of Default has occurred and is continuing, to sign the
name of such Borrower on invoices or bills of lading, drafts against customers,
notices of assignment, verifications and schedules; at any time when an Event of
Default has occurred and is continuing, to demand, collect, receive payment of,
receipt for, settle, compromise or adjust and give discharges and releases in
respect of the Receivables or any of them; at any time when an Event of Default
has occurred and is continuing, to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Receivables or any of them and to enforce any other rights in
respect thereof or in respect of the goods which have given rise thereto; at any
when an Event of Default has occurred and is continuing, to defend any suit,
action or proceeding brought against such Borrower in respect of any Receivables
or the goods which have given rise thereto, to settle, compromise or adjust any
suit, action or proceeding hereinbefore described and, in connection therewith,
to give such discharges or releases as the Agent may deem appropriate; at any
time when an Event of Default has occurred and is continuing, to notify the U.S.
Postal Service authorities to change the address of delivery of mail to an
address designated by the Agent and to open and dispose of mail addressed to
such Borrower; and, generally, to do all things necessary to carry out the
intent of this Agreement. This power, being coupled with an interest, is
irrevocable, and such Borrower approves all such acts of such attorney-in-fact.
The powers conferred on the Agent by this Agreement are solely to protect the
interest of the Bank and shall not impose any duty upon the Agent to exercise
any such power, and neither the Agent nor such attorney-in-fact shall be liable
for any act or omission, error in judgment or mistake of law, except for its
gross negligence, willful misconduct or bad faith. Except as otherwise required
by applicable law with respect to the preservation of Collateral in the
possession of the Banks, the Banks shall have no duty as to the collection or
protection of any Collateral and shall have no duty as to the preservation of
rights against prior parties or any other rights pertaining thereto, except as
provided by applicable law.
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7.02. Right to Cure. In the event that any Borrower shall fail to
-------------
purchase or maintain insurance, to pay any tax, assessment, governmental charge
or levy, except as the same may be otherwise permitted hereunder, or in the
event that any lien, encumbrance or security interest prohibited hereby shall
not be paid in full or discharged, or in the event that any Borrower shall fail
to pay or comply with any other obligation hereunder, the Banks may, but shall
not be required to, pay, satisfy, perform, discharge or bond the same for the
account of such Borrower, and all moneys so paid by the Banks shall be payable
on demand and shall bear interest at the lesser of (i) a floating rate per annum
equal to five percent (5%) plus the Prime Rate with a change in such rate of
interest to become effective on the same day on which any change in the Prime
Rate is effective, or (ii) the maximum rate permitted by the applicable law.
7.03. Environmental Matters.
---------------------
(a) The Borrowers hereby agree, jointly and severally, to indemnify
the Banks and hold the Banks harmless from and against any and all losses,
liabilities (including strict liability), damages, injuries, expenses (including
reasonable attorneys' fees, costs of any settlement or judgment) and claims of
any and every kind whatsoever paid, incurred or suffered by, or asserted or
levied against, the Banks by any person or entity for, with respect to, or in
connection with any Environmental Laws or the use, storage, transportation,
release or disposition of any Hazardous Substances or the clean-up or
remediation thereof with respect to or in connection with the Borrowers, their
business or operations or the Premises; provided, however, that notwithstanding
anything in this Section 6.03 to the contrary, the Borrowers shall not be
required to indemnify the Banks for any losses, liabilities, damages, injuries,
expenses or claims resulting from the Banks' gross negligence or willful
misconduct.
(b) After the occurrence of any environmental complaint brought
against any Borrower arising under any Environmental Laws, the Banks shall have
the right, in its sole discretion, to require the Borrowers to perform (at the
Borrowers' expense) an environmental audit and, if reasonably deemed necessary
by the Banks, an environmental risk assessment, each reasonably satisfactory to
the Bank, and to implement the recommendations set forth in such audit and/or
risk assessment.
7.04. Waivers; Release of Pledge Agreements of Certain Stockholders.
-------------------------------------------------------------
(a) This Agreement and the other Loan Documents may not be changed, waived,
discharged or terminated orally. This Agreement or any Security Document may be
amended and the performance or observance by any Borrower of any term of this
Agreement or any other Loan Document may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the prior written consent of the Banks. The rights and remedies expressed
in this Agreement and in the other Loan Documents are cumulative and not
exclusive of any right or remedy which the Bank may otherwise have. The Banks
may release or surrender, exchange or substitute any real estate or personal
property, or both, or other collateral security now or hereafter held as
security for the payment of the Notes or any other obligations of each Borrower
to the Banks under this Agreement or however arising and may extend the time for
payment or otherwise modify the terms of payment of any part or the whole of the
Notes.
(b) In the event that Mac-Gray II, Inc. shall commence an underwritten
public offering of its Common Stock, the Banks agree to relinquish possession of
any Common Stock of Mac-Gray II, Inc. in their possession and to release,
cancel, and terminate any Pledge Agreements of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust;
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. Trust; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Family
Trust, f/b/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Family Trust, f/b/o ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ Family Trust, f/b/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., executed and delivered in favor of the Banks in
connection with the Credit Facilities with respect to such Common Stock.
7.05. Delays. No delay on the part of the Banks in exercising any right,
------
power or privilege hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any partial exercise or waiver of any privilege or
right hereunder preclude any further exercise of such privilege or right or the
exercise of any other right, power or privilege.
7.06. Notices. Any notices, consents or other communications to be given
-------
under this Agreement or under the other Loan Documents shall be in writing and
shall be deemed given when mailed to the respective parties by overnight courier
or by registered mail addressed as set forth on the first page of this
Agreement, with all such notices, consents and other communications (a) to the
Banks to be sent to the attention of ▇▇▇▇▇▇▇ St. ▇▇▇▇, Vice President, State
Street Bank and Trust Company, and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President, CoreStates
Bank, N.A., FC 1-8-4-2, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to ▇▇▇▇ ▇. Smith, Testa, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street
Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (b) to each Borrower to be sent to the
attention of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, C.E.O., Mac-Gray Co., Inc. ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or to such other addresses as either
party may from time to time designate for that purpose. Section headings and
defined terms in this Agreement and the other Loan Documents are included for
convenience only and are not intended to modify or define any term or provision
of any such instrument.
7.07. Jurisdiction. Each Borrower irrevocably submits to the
------------
jurisdiction of the courts of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts for the purpose of any
suit, action or other proceeding brought by the Banks arising out of or relating
to this Agreement or any other Loan Document, and each Borrower waives and
agrees not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that each Borrower is not personally
subject to the jurisdiction of the courts of the Commonwealth of Massachusetts,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper.
7.08. Execution. This Agreement may be signed in any number of
---------
counterparts, which together will be one and the same instrument. This
Agreement shall become effective whenever each party shall have signed at least
one such counterpart.
7.09. Governing Law. This Agreement shall be governed by the laws of
-------------
the Commonwealth of Massachusetts and for all purposes shall be construed in
accordance with the laws of such Commonwealth.
7.10. Fees. Whether or not any funds are disbursed hereunder, the
----
Borrowers shall pay all of the Bank's reasonable costs and expenses in
connection with the preparation, execution, delivery, review, and enforcement of
this Agreement and the other Loan Documents, and in connection with any
subsequent amendments thereto or waivers thereof, including reasonable legal
fees and disbursements.
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7.11. Binding Nature. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the rights and obligations under this Agreement
and under any of the other Loan Documents may not be assigned by any Borrower
without the prior written consent of the Bank. Notwithstanding anything to the
contrary herein or in any of the Loan Documents, the Banks may freely assign,
pledge, hypothecate, transfer or convey part or all of their respective
interests hereunder to the Federal Reserve without notification to the
Borrowers, or to other financial institutions upon the written consent of the
Banks and the Borrowers, which consent will not be unreasonably withheld.
7.12. Severability. In the event that any provision of this Agreement
------------
or the application hereof to any person, entity property or circumstances shall
be held to any extent to be invalid or unenforceable, the remainder of this
Agreement, and the application of such provision to persons, entities,
properties or circumstances other than those as to which it has been held
invalid or enforceable, shall not be affected thereby, and each provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
7.13. Under Seal. This Agreement shall be deemed to be an instrument
----------
under seal and shall continue in full force and effect so long as any
Indebtedness of the Borrowers to the Banks remains unpaid.
This Agreement shall supersede and replace all prior agreements, whether
written or oral, expressed or implied, by and among (i) State Street Bank and
Trust Company and any Borrower, or (ii) CoreStates Bank, N.A. and any Borrower.
ARTICLE VIII
DEFINITIONS
8.01. Definitions. All defined terms used in this Agreement which are
-----------
not otherwise defined herein shall have the respective meanings assigned to them
in the other Loan Documents. For purposes of this Agreement and of the other
Loan Documents, the following additional definitions shall apply:
"Affiliated Person" shall mean any person or entity controlling,
controlled by or under common control with any Borrower.
"Agent" in such capacity shall mean State Street Bank & Trust
Company.
"Banks," "Bank" in the plural shall mean State Street Bank and
Trust Company and CoreStates Bank, N.A.; in the singular, each a Bank.
"Borrower," "Borrowers" shall have the meaning specified in the
preamble to this Agreement.
"Borrowing Date" shall mean the date on which any advance of loans
is made by either Bank to any Borrower.
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"Business Day" shall mean any day which is not a Saturday, or a
Sunday or a public holiday under the laws of the United States of America or the
Commonwealth of Massachusetts applicable to a national banking association.
"Capital Expenditure" shall mean any payment made or required to be
made, directly or indirectly, by any Borrower for the purposes of acquiring or
constructing fixed assets, real property or equipment which, in accordance with
GAAP, would be added as a debit to the fixed asset account of such Borrower,
including, without limitation, amounts paid or payable under and conditional
sale or other title retention agreement or under any lease or other periodic
payment agreement which is of such a nature that payment obligations of such
Borrower thereunder would be required by GAAP to be capitalized and shown as
liabilities on the balance sheet of the Borrower.
"Cash Equivalents" shall mean those investments which, under GAAP,
are treated as equivalent to cash.
"Closing" shall mean a closing held at 11:00 a.m., in the offices
of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on April 17, 1997, or such other date, time and place as
the parties hereto mutually agree.
"Closing Date" shall mean the date on which the Closing shall
occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations issued pursuant thereto.
"Collateral" shall have the meaning specified in Section 2 of the
Security Agreement.
"Consent" shall mean the written consent of the Agent or the Banks.
"Credit Facility" or "Credit Facilities" shall have the meaning(s)
specified in the preamble to this Agreement.
"Current Assets" shall mean all assets of any corporation or other
entity which would, in accordance with generally accepted accounting principles,
be classified as current assets of an entity conducting a business the same as
or similar to that of such entity; excluding, however, (i) assets which have
been pledged, assigned, mortgaged, hypothecated or otherwise encumbered to
secure any Indebtedness which is not included in Current Liabilities and (ii)
any and all amounts due from affiliated entities.
"Current Liabilities" shall mean all liabilities of any corporation
or other entity which would, in accordance with generally accepted accounting
principles, be classified as current liabilities of an entity conducting a
business the same as or similar to that of such entity, including, without
limitation, all capitalized lease payments and other payments under capitalized
leases and fixed prepayments of, and sinking fund payments with respect to,
Indebtedness required to be made within one year from the date of determination,
plus all Indebtedness in respect of Revolving Loans without regard to the date
of maturity of any such Loans.
-41-
"EBITDA" shall mean for any period, the Net Income (or Net Loss,
expressed as a negative number) of the Borrowers (on a consolidated basis) for
such period, plus each of the following items, without duplication: (i) the
amount of the provision for depreciation and/or amortization actually deducted
on the books of the Borrowers (on a consolidated basis) for the purposes of
computation of such Net Income (or Net Loss) for the period involved, (ii) all
federal and state income taxes (but not ad valorem property taxes, sales taxes
or taxes in the nature of an excise tax) paid by the Borrowers (on a
consolidated basis) with respect to such period, and (iii) all interest on any
Indebtedness paid or accrued during such period and actually deducted on the
Consolidated books of the Borrowers (on a consolidated basis) for the purposes
of computation of such Pre-Tax Net Income (or Net Loss) for the period involved.
"Environmental Laws" shall have the meaning specified in Section
3.18 of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations issued pursuant thereto.
"Event of Default" shall have the meaning specified in Section 5.01
hereof.
"Excess Cash Flow" shall mean, without duplication, for any fiscal
year being tested, EBITDA minus (i) Capital Expenditures actually made on a cash
-----
basis during such fiscal year being tested (to the extent made in cash and not
financed), (ii) income taxes paid on a cash basis during such fiscal year being
tested, and (iii) scheduled payments of the principal portion of Indebtedness
for borrowed money during such fiscal year being tested to the extent actually
paid.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Indebtedness" shall mean with respect to each Borrower (i) all
indebtedness or other obligations of such Borrower for borrowed money or for the
deferred purchase price of property or services, other than for trade accounts
payable incurred in the ordinary course of such Borrower's business, (ii) all
indebtedness or other obligations of any other person for borrowed money or for
the deferred purchase price of property or services, other than for trade
accounts payable incurred in the ordinary course of such Borrower's business, in
respect of which such Borrower is liable, contingently or otherwise, to pay or
advance money or property as guarantor, endorser or otherwise (except as
endorser for collection in the ordinary course of business), or which such
Borrower has agreed to purchase or otherwise acquire, and (iii) all lease
obligations of such Borrower which are required, in accordance with GAAP, to be
capitalized on the books of the lessee.
"Interest Period" shall mean with respect to any Loan:
(i) initially, the period commencing on the Borrowing Date
with respect to such Loan and ending one to six months thereafter, as
selected by the Borrowers in their notice of borrowing given with respect
thereto; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Loan and ending one
to twelve months thereafter, as selected
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by the Borrowers by irrevocable notice to the Banks not less than three
Business Days prior to the last day of the then-current Interest Period
with respect thereto;
provided, that, all of the foregoing provisions relating to
--------
Interest Periods are subject to the following:
(a) if any Interest Period pertaining to a Loan would otherwise
end on a day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately
preceding Business Day;
(b) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date except as provided in
Section 1.01(d); and
(c) any Interest Period pertaining to a Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month.
"Interest Rate Option" shall mean either the LIBOR Option or the Prime
Rate Option.
"Letters of Credit" shall have the meaning specified in Section
1.01(g) of this Agreement.
"Liabilities" shall mean all liabilities of each Borrower, including,
without limitation, all lease rental payments and other payments under capital
leases and fixed prepayments of, and sinking fund payments with respect to,
Indebtedness (including Indebtedness evidenced by the Notes).
"LIBOR" or "LIBOR Rate" shall mean with respect to the Loans
comprising any borrowings to which the LIBOR Option applies for any LIBOR
Interest Period, which rate shall be determined by the Agent by dividing (i) the
rate of interest (as determined by the Agent in accordance with its usual
procedures) at which LIBOR deposits, in an amount equal to the portion of the
Loans as to which a LIBOR Interest Option has been elected and which have a term
corresponding to the LIBOR Interest Period in question, which are offered to the
Agent by first-class banks in the London Interbank Office on the first day of
such LIBOR Interest Period as determined by the Agent at approximately 11:00
a.m. (London time) two Banking Days prior to the date upon which the LIBOR
Interest Period in question is to commence, (which determination by the Agent
shall, in the absence of manifest error, be conclusive,) by (ii) a number equal
to 1.00 minus the LIBOR Reserve Percentage. The LIBOR Rate may also be
expressed by the following formula:
LIBOR Rate = London Interbank Office
(by a first class bank)
-----------------------
1.00 - LIBOR Reserve Percentage
The LIBOR Rate shall be adjusted with respect to any LIBOR-Rate Option
outstanding on the effective date of any change in the LIBOR-Rate Reserve
Percentage as of such effective date. The Agent shall
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give prompt notice to the Borrower of the LIBOR-Rate as determined or adjusted
in accordance herewith, which determination shall be conclusive absent manifest
error.
"LIBOR Interest Period" shall have the meaning assigned to that term
in Section 1.03 hereof.
"LIBOR Loans" shall mean Loans subject to the LIBOR Option.
"LIBOR Reserve Percentage" shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent (which determination shall be conclusive absent manifest error)
which is in effect during any relevant period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
reserve requirements (including, without limitation, supplemental, marginal, and
emergency reserve requirements) with respect to LIBOR currency funding
(currently referred to as "LIBOR Currency Liabilities") of a member bank in such
System.
"Loan Documents" shall mean this Agreement, the Notes, the Security
Documents and all other agreements, instruments, documents and certificates
executed or delivered in connection with the transactions contemplated therein.
"Loans" shall mean collectively, the WC Loans and the Revolving Loans
whether such Loans are Prime Rate Loans and/or the LIBOR Loans made by the Bank
to any Borrower pursuant to Section 1.01 of this Agreement.
"Net Income" or "Net Loss" for any fiscal period shall mean net income
(or net loss, expressed as a negative number), after deduction of or credit for
applicable income taxes, as such net income after taxes or net loss would be set
forth on an income statement for such fiscal period prepared in accordance with
GAAP.
"Nominee" shall mean a business entity, formed or appointed by Agent
to own or manage any Collateral in the possession or control of Lenders.
"Notes" means the Revolving Line of Credit Note and the WC Note of the
Borrowers in the form of Exhibit A attached hereto.
---------
"Payment Date" shall mean the first day of each month on which the
Agent is open for business in the Commonwealth of Massachusetts from and after
the Closing Date.
"Permitted Acquisition" shall mean an acquisition (by purchase or
merger) by such Borrower (a) of the assets or 100% of the outstanding capital
stock or joint venture or partnership interests of any entity engaged in a
business directly related to that of such Borrower, (b) of route contracts for
the servicing or operation of coin operated laundry locations, or (c) to which
the Banks have given its prior written consent.
"Permitted Lien" shall have the meaning given that term in Section
4.02(b) hereof.
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"Pledge Agreement" shall mean the Pledge Agreement of the Borrowers in
the form of Exhibit C hereto.
"Pre-Tax Net Income" for any fiscal period shall mean net income (or
net loss, expressed as a negative number), before deduction of or credit for
applicable income taxes, as such pre-tax net income or net loss would be set
forth on an income statement for such fiscal period prepared in accordance with
GAAP.
"Prime Rate Loans" shall mean Loans subject to the Prime Rate Option.
"Prime Rate" shall mean the rate of interest announced by the Agent
from time to time as its "Prime Rate" or "Base Rate"; provided, however, that
such rate is not necessarily the lowest rate charged by the Bank to its
customers.
"Principal Office" of the Agent or the Borrowers shall mean the
respective office(s) located at the address set forth on the first page hereof.
"Proportionate Share" shall mean each Bank's commitment to fund Loans;
in the case of State Street Bank and Trust Company, 50.00%; and in the case of
CoreStates Bank, N.A., 50.00%.
"Receivables" shall mean all of the present and future accounts,
accounts receivable and notes, drafts, acceptances and other instruments
representing or evidencing a right to payment for goods sold or for services
rendered of any Borrower, including all right, title and interest of any
Borrower in the goods or services which have given rise thereto and any right of
stoppage in transit, whether the same are now owned or hereafter acquired or
arising.
"Security Agreement" shall mean the Security Agreement in the form of
Exhibit B hereto.
---------
"Security Documents" shall have the meaning specified in Section 1.13
of this Agreement.
"Senior Liabilities" shall mean all Liabilities of the Borrowers to
the Banks arising hereunder or under the Notes.
"Shareholder's Equity" shall mean shareholder's equity (determined in
accordance with GAAP), including all assets that would be considered intangibles
under GAAP including, without limitation, good will.
"Tangible Net Worth" shall mean stockholders' equity (determined in
accordance with GAAP) minus all assets that would be considered intangibles
under GAAP, such intangible assets including, without limitation, such items as
goodwill, trademarks, tradenames, copyrights, patents, licenses and rights in
any thereof, unamortized debt discount, capitalized software development or
acquisition costs, costs or value of purchased software and all write-ups in the
book value of any asset.
"Termination Date" shall mean the earlier of (i) April 17, 1999, (ii)
such earlier date on which the Banks make a declaration in accordance with the
provisions of Section 5.02(a) hereof or
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(iii) the payment and satisfaction in full of all obligations of any Borrower to
Banks hereunder, under the Security Documents, or in connection herewith or
therewith. The Bank may, at its discretion, renew or extend the lines of credit
by extending the Termination Date. Neither the inclusion in this Agreement of
financial covenants relating to periods after the Termination Date or any other
terms and provisions hereof shall be deemed to create any implication that the
Banks are required to renew or extend such revolving line of credit.
8.02. Use of Defined Terms. Any defined term used in the plural preceded
--------------------
by the definite article shall be taken to encompass all members of the relevant
class. Any defined term used in the singular preceded by "any" shall be taken
to indicate any number of the members of the relevant class.
8.03. Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with United States generally accepted
accounting principles consistently applied on the basis used by the concerned
entity in prior years.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the Borrowers and the Banks have caused this
Credit Agreement to be executed by their duly authorized officers as of the date
first above written.
THE BORROWERS:
MAC-GRAY II, INC.
By: /s/
----------------------------------
Name:
----------------------------
Title:
---------------------------
SUN SERVICES OF AMERICA, INC.
By: /s/
----------------------------------
Name:
----------------------------
Title:
---------------------------
MAC-GRAY ACQUISITION CORP. (AND
ITS SUCCESSOR-IN-INTEREST,
▇. ▇▇▇▇▇▇ COIN-OP LAUNDRY, INC.)
By: /s/
----------------------------------
Name:
----------------------------
Title:
--------------------------
MAC-GRAY CO., INC.
By: /s/
----------------------------------
Name:
----------------------------
Title:
--------------------------
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THE BANKS:
STATE STREET BANK AND TRUST
COMPANY, FOR ITSELF AND AS AGENT FOR
CORESTATES BANK, N.A.
By: /s/
------------------------------------
Name:
-----------------------------
Title:
----------------------------
CORESTATES BANK, N.A.
By: /s/
------------------------------------
Name:
-----------------------------
Title:
----------------------------
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