LOAN AND SECURITY AGREEMENT
BY AND AMONG
CONGRESS FINANCIAL CORPORATION (NORTHWEST)
AS LENDER
AND
UNITED GROCERS, INC. AND UNITED RESOURCES, INC.
AS BORROWERS
DATED: AUGUST 25, 1998
TABLE OF CONTENTS
1. DEFINITIONS.................................................................1
2. CREDIT FACILITIES..........................................................15
2.1Revolving Loans.........................................................15
2.2Letter of Credit Accommodations.........................................17
2.3Term Loan...............................................................19
2.4Availability Reserves...................................................20
3. INTEREST AND FEES..........................................................20
3.1Interest................................................................20
3.2Closing Fee.............................................................22
3.3 [deleted]..............................................................22
3.4Servicing Fee...........................................................22
3.5 [deleted]..............................................................22
3.6Changes in Laws and Increased Costs of Loans............................22
4. CONDITIONS PRECEDENT.......................................................23
4.1Conditions Precedent to Initial Loans and
Letter of Credit Accommodations.........................................23
4.2Conditions Precedent to All Loans and Letter of Credit Accommodations...25
5. GRANT OF SECURITY INTEREST.................................................26
6. COLLECTION AND ADMINISTRATION..............................................27
6.1Borrowers' Loan Account(s).............................................27
6.2Statements..............................................................27
6.3Collection of Accounts..................................................28
6.4Payments................................................................29
6.5Authorization to Make Loans.............................................29
6.6Use of Proceeds.........................................................30
7. COLLATERAL REPORTING AND COVENANTS.........................................30
7.1Collateral Reporting....................................................30
7.2Accounts Covenants......................................................30
7.3Inventory Covenants.....................................................32
7.4Equipment Covenants.....................................................33
7.5Note Covenants..........................................................33
7.6Power of Attorney.......................................................33
7.7Right to Cure...........................................................34
7.8Access to Premises......................................................34
8. REPRESENTATIONS AND WARRANTIES.............................................35
8.1Corporate Existence, Power and Authority; Subsidiaries..................35
8.2Financial Statements; No Material Adverse Change........................35
8.3Chief Executive Office; Collateral Locations............................35
8.4Priority of Liens; Title to Properties..................................36
8.5Tax Returns.............................................................36
8.6Litigation..............................................................36
8.7Compliance with Other Agreements and Applicable Laws....................36
8.8Environmental Compliance................................................36
8.9Employee Benefits.......................................................37
8.10Bank Accounts..........................................................38
8.11Accuracy and Completeness of Information...............................38
8.12Eligible Notes.........................................................38
8.13Survival of Warranties; Cumulative.....................................39
9. AFFIRMATIVE AND NEGATIVE COVENANTS.........................................39
9.1Maintenance of Existence................................................39
9.2New Collateral Locations................................................39
9.3Compliance with Laws, Regulations, Etc..................................39
9.4Payment of Taxes and Claims.............................................41
9.5Insurance...............................................................42
9.6Financial Statements and Other Information..............................43
9.7Sale of Assets, Consolidation, Merger, Dissolution, Etc.................44
9.8Encumbrances............................................................45
9.9Indebtedness............................................................45
9.10Loans, Investments, Guarantees, Etc....................................46
9.11Dividends and Redemptions..............................................47
9.12Transactions with Affiliates...........................................47
9.13Additional Bank Accounts...............................................47
9.14Compliance with ERISA..................................................48
9.15 [deleted].............................................................48
9.16Adjusted Net Worth.....................................................48
9.17Costs and Expenses.....................................................48
9.18Further Assurances.....................................................49
9.19Year 2000 Compliance...................................................49
9.20Amendment of Bylaws....................................................50
9.21Accounts Receivable Turnover...........................................50
9.22Fill Rate Covenants....................................................50
9.23Management.............................................................52
9.24Agricultural Products..................................................52
10. EVENTS OF DEFAULT AND REMEDIES............................................52
10.1Events of Default......................................................52
10.2Remedies...............................................................54
11. JURY TRIAL WAIVER; OTHER WAIVERS..........................................56
11.1Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..56
11.2Waiver of Notices......................................................57
11.3Amendments and Waivers.................................................57
11.4Waiver of Counterclaims................................................58
11.5Indemnification........................................................58
12. TERM OF AGREEMENT; MISCELLANEOUS..........................................58
12.1Term...................................................................58
12.2Notices................................................................60
12.3Partial Invalidity.....................................................60
12.4Successors.............................................................60
12.5Participant's Security Interest........................................60
12.6Joint and Several Liability............................................60
12.7Entire Agreement.......................................................61
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificates
Exhibit 1.11 Notice of Assignment
Schedule 8.2 Exceptions to Section 8.2
Schedule 8.4 Existing Liens
Schedule 8.7 Exceptions to Section 8.7
Schedule 8.8 Environmental Disclosures
Schedule 8.10 Bank Accounts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement, dated August 25, 1998, is entered
into by and among Congress Financial Corporation (Northwest), an Oregon
corporation ("Lender"), United Grocers, Inc. ("UGI"), an Oregon corporation and
United Resources, Inc. ("URI"), an Oregon corporation and wholly-owned
subsidiary of UGI. UGI and URI are referred to herein collectively as
"Borrowers," and each individually as "Borrower".
W I T N E S S E T H:
--------------------
WHEREAS, Borrowers have requested that Lender enter into certain
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrowers and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meaning customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of each
Borrower to payment for goods sold or leased or for services rendered, which are
not evidenced by instruments or chattel paper, and whether or not earned by
performance.
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1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book value all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrowers under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as determined by Lender in good faith, do or may affect either
(i) the Collateral or any other property which is security for the Obligations
or its value, (ii) the assets, business or prospects of Borrowers, or either of
them, or any Obligor or (iii) the security interests and other rights of Lender
in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Lender's good faith belief that any collateral report
or financial information furnished by or on behalf of Borrowers, or either of
them, or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) to reflect
dilution in excess of three percent (3%) as provided in Section 2.4 hereof or
(e) to reflect any liquidated damages payable or alleged to be payable by any
Person under Section 18 of the Supply Agreement or under any other supply
agreement with any other customer or (f) in respect of any state of facts which
Lender determines in good faith constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default. Without
limiting the generality of the foregoing, Lender shall be entitled at all times
to establish Availability Reserves reducing the amount of the Revolving Loans
and Letter of Credit Accommodations which would otherwise be available to
Borrowers, and to increase and decrease such Availability Reserves from time to
time, in respect of any or all amounts owed or which may under any contingency
be owed by Borrowers to any Farm Products Sellers or other third party, which
amounts are or may be secured by any of the Collateral, or if Lender believes in
good faith such Availability Reserves are or may be necessary to protect it
against statutory or common law liens or trust fund
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claims or other liens in favor of any Farm Products Sellers or any lender to any
Farm Products Seller or any other person with a security interest in the assets
of such supplier or seller or any category of indebtedness or other obligation
or liability owed to a third party, the payment of which is or may be secured by
a statutory or common law lien or entitled to the benefit of a trust or other
lien upon any of the assets and properties of Borrowers, or either of them.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Oregon or the State of New York, and a day on which the
Reference Bank and Lender are open for the transaction of business, except that
if a determination of a Business Day shall relate to any Eurodollar Rate Loans,
the term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.9 "Eligible Accounts" shall mean Accounts created by UGI which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by UGI or rendition of services by UGI in the ordinary course
of its business, which transactions are completed in accordance with the terms
and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than twenty-nine (29) days
after the original due date for them or thirty-nine (39) days after the date of
the original invoice for them, whichever first occurs;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2 (c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to such
Accounts is located in the United States of America, or, at Lender's option, if
either: (i) the account debtor has delivered to UGI an irrevocable letter of
credit issued or confirmed by a bank satisfactory to Lender and payable only in
the United States of America and in U.S. dollars, sufficient to cover such
Accounts, in form and substance satisfactory to Lender and, if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent
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and the issuer thereof notified of the assignment of the proceeds of such letter
of credit to Lender, or (ii) such Accounts are subject to credit insurance
payable to Lender issued by an insurer and on terms and in an amount acceptable
to Lender, or (iii) such Accounts are otherwise acceptable in all respects to
Lender (subject to such lending formula with respect thereto as Lender may
determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and
hold invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts, except a setoff by UGI if authorized by Lender as provided in Section
7.2(c) hereof (but the portion of the Accounts of such account debtor in excess
of the amount at any time and from time to time owed by UGI to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) [deleted];
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended, or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which are
likely to result in any material adverse change in any such account debtor's
financial condition;
(m) [deleted];
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than twenty-nine (29) days after the original due date for
them or thirty-nine (39) days after the date of the original invoice for them,
whichever first occurs, which constitute more than fifty percent (50%) of the
total Accounts of such account debtor;
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(o) such Accounts are owed by account debtors whose total
indebtedness to Borrowers does not exceed the credit limits with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may be deemed Eligible
Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.10 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of UGI which are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) work-in-process; (b) components which are not
part of finished goods; (c) spare parts for equipment; (d) packaging and
shipping materials; (e) supplies used or consumed in UGI's business; (f)
Inventory at premises other than those owned and controlled by UGI, except if
Lender shall have received an agreement in writing from the person in possession
of such Inventory and/or the owner or operator of such premises in form and
substance satisfactory to Lender acknowledging Lender's first priority security
interest in the Inventory, waiving security interests and claims by such person
against the Inventory and permitting Lender access to, and the right to remain
on, the premises so as to exercise Lender's rights and remedies and otherwise
deal with the Collateral; (g) Inventory subject to a security interest or lien
in favor of any person other than Lender except those permitted in this
Agreement; (h) ▇▇▇▇ and hold goods; (i) unserviceable, obsolete or slow moving
Inventory; (j) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (k) returned, damaged and/or defective
Inventory; (l) Inventory purchased or sold on consignment; (m) dairy products;
and (n) fresh produce and meat. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.
1.11 "Eligible Notes Receivable" means promissory notes held by and
payable to URI which are and continue to be acceptable to Lender based on the
criteria set forth below. In general, promissory notes shall be Eligible Notes
Receivable if:
(a) at least one of the obligors on each such note is and
continues to be a Member or is another person acceptable to Lender in its sole
discretion;
(b) the notes are acceptable to Lender in form and substance;
(c) no payment due under such notes or any other note payable to
Borrowers, or either of them, or any note payable to National Consumer
Cooperative Bank that was assigned or in any way originated by Borrowers, or
either of them (after giving effect to any applicable grace periods) remains
unpaid, in whole or in part, more than thirty (30) days past the scheduled due
date;
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(d) the chief executive offices of the obligors on such notes are
located in the United States of America, and the note originated in the United
States;
(e) the obligors with respect to such notes have not asserted a
counterclaim, defense or dispute and do not have, and do not engage in
transactions which may give rise to, any right of setoff against such notes
except a set-off by UGI if authorized by Lender as provided in Section 7.2
hereof (but the portion of the notes in excess of the amount at any time and
from time to time owed by URI to such note obligors or claimed owed by such note
obligors may be deemed Eligible Notes Receivable);
(f) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such notes or reduce the
amount payable or delay payment thereunder, and each note, at the time it was
made complied and as of the date delivered to Lender, continued to comply, in
all material respects with applicable state and federal laws and regulations,
including usury, equal credit opportunity, disclosure and recording laws;
(g) such notes are subject to the first priority, valid and
perfected security interest of Lender and have been assigned, endorsed and
delivered to Lender;
(h) the are no proceedings or actions which are threatened or
pending against the note obligors which might result in any material adverse
change in such obligors' financial condition;
(i) such notes are not owed by obligors who have Accounts unpaid
more than twenty-nine (29) days after the original due date for them or
thirty-nine (39) days after the original due date for them, whichever first
occurs, which constitute more than fifty percent (50%) of the total Accounts of
such obligors to UGI;
(j) each Related Document that is a security or similar agreement
requires the maker and guarantor (if any) thereunder, at its own cost and
expense, to maintain the tangible collateral pledged to secure the note, in good
repair, condition and working order, and to the best of Borrowers' knowledge,
each maker and guarantor of that note is currently in compliance with this
requirement;
(k) such notes comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(l) such notes have not been amended, modified or supplemented
except as has been disclosed to and accepted by Lender;
(m) such notes are owed by obligors whose total indebtedness to
Borrowers does not exceed the credit limits with respect to such obligors as
determined by Lender from time to time (but the portion of the notes not in
excess of such credit limit may be deemed Eligible Notes Receivable);
(n) the executed original of each such note has been endorsed by
an authorized officer of the assigning Borrower as follows: "Holder hereby
endorses and assigns, with full recourse, all of its right, title and interest
in and to this Promissory Note to Congress Financial
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Corporation (Northwest), or its order, for security purposes," and such
endorsement, together with all prior and intervening endorsements, evidence a
complete chain of endorsement from the original payee to Lender;
(o) the executed original counterpart of the Related Documents,
together with executed originals of all modifications or amendments thereof have
been delivered to Lender;
(p) documents evidencing or related to any insurance policies have
been delivered to Lender;
(q) with respect to notes secured by mortgages or deeds of trust
on real property, Lender shall have received (A) either: (i) the original
mortgage or deed of trust, with evidence of recording thereon, (ii) a copy of
the mortgage certified as a true copy by an officer of the beneficiary where the
original has been transmitted for recording until such time as the original is
returned by the public recording officer or duly licensed title or escrow
officer or (iii) a copy of the mortgage or deed of trust certified by the public
recording office in those instances where the original recorded mortgage or deed
of trust has been lost; (B) either (i) an original assignment of mortgage or
deed of trust from the assigning Borrower to Lender in form an substance
satisfactory to Lender; or (ii) a copy of such assignment, certified as a true
copy by an officer of the assigning Borrower where the original has been
transmitted for recording; and (C) either (i) originals of all intervening
assignments, if any, showing a complete chain of title from the original
beneficiary to Lender, including warehousing assignments, with evidence of
recording thereon if such assignments were recorded; (ii) copies of any
assignments certified as true copies by an officer of the assigning Borrower
where the originals have been submitted for recording until such time as the
originals are returned by the public recording officer, or (iii) copies of any
assignments certified by the public recording office in any instances where the
original recorded assignments have been lost;
(r) Lender shall have received any UCC-1 financing statements,
UCC-3 assignments or other instruments that Lender determines is necessary to
perfect Lender's security interest in the notes and the other property
transferred to Lender in connection with the notes, and to deliver a
file-stamped copy of such financing statements or other evidence of such filing
to Lender;
(s) Lender shall have received a duly executed Notice of
Assignment in the form annexed hereto as Exhibit 1.11, addressed to the maker
and any other obligor of each note and no maker or guarantor of that note shall
have objected to the assignment of the note to Lender or to any provision of the
Notice of Assignment;
(t) the notes of a single Member, together with its affiliates, do
not constitute more than twenty-five percent (25%) of all notes held by
Borrowers (but the portion of the note not in excess of such percentage may be
deemed an Eligible Note);
(u) Lender shall have determined that each representation and
warranty of Borrowers set forth in Section 8.12 shall be true and correct in all
material respects, and a duly authorized officer of Borrowers shall have so
certified in writing;
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(v) the note and the Related Documents are dated prior to the date
of this Agreement;
(w) Lender shall have received a Note Schedule for each such note;
(x) there is no material default, breach, violation or event of
acceleration existing under any such note or Related Document and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, or both, would constitute a material default, breach, violation
or event of acceleration, and Borrowers, or either of them, have not waived any
such default, breach, violation or event of acceleration, and Borrowers have no
reason to believe that the makers and guarantors of the note will not perform
their respective obligations thereunder;
(y) the note and Related Documents to which any maker or guarantor
is a party bears the original signature of such maker and guarantor (and not a
copy), and the maker and/or any guarantor of each such note is personally liable
(i.e. the note is with full recourse) for the payment and performance of its
obligations under that note, and pursuant to the terms of the note and Related
Documents, each maker and guarantor thereof is absolutely required to make all
payments and perform all obligations due under the note and Related Documents,
without abatement, deferment or defense of any kind or for any reason (except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting creditors rights and by general
principles of equity);
(z) Uniform Commercial Code Financing Statements have been duly
filed in all places where filing is necessary, and all other additional acts
have been taken as are necessary to perfect Borrowers' security interests
arising pursuant to the Related Documents, and, except as provided in the Note
Schedule, such security interests constitute a first priority, valid and
perfected lien in and to all of the collateral identified in the Note Schedule,
and except as noted in the Note Schedule, will be enforceable against all third
parties in all jurisdictions as security for the obligations of the makers of
the note and the Related Documents; and
(aa) the maker of each note is generally paying its obligations as
they become due and to Borrowers' knowledge, has no present intent to seek
relief under the federal bankruptcy laws; and
(bb) such notes are owed by obligors otherwise deemed creditworthy
at all times by Lender, as determined by Lender.
1.12 "Environmental Laws" shall mean all applicable foreign, Federal,
State and local laws (including common law), legislation, rules, codes,
licenses, permits (including any conditions imposed therein), authorizations,
judicial or administrative decisions, injunctions or agreements between Borrower
and any governmental authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety (including under the Occupational Health and Safety
Act), (b) relating to the exposure to, or the use, storage, recycling,
treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened release, of
Hazardous Materials, or
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(c) relating to all laws with regard to record keeping, notification, disclosure
and reporting requirements respecting Hazardous Materials. The term
"Environmental Laws" includes (i) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
1.13 "Equipment" shall mean all equipment, machinery, computers and
computer hardware and software (whether owned or licensed), vehicles, tools,
furniture and fixtures now owned or hereafter acquired by Borrowers, or either
of them, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.
1.14 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.15 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrowers, or either of them, or any of their Subsidiaries under Sections
414(b), 414(c), 414(m) or 414(o) of the Code.
1.16 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrowers and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrowers.
1.17 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.18 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.19 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of
the Revolving Loans available to Borrowers as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and Eligible Notes Receivable and the Value of Eligible Inventory, as determined
by Lender, and subject to the sublimits and Availability Reserves from
9
time to time established by Lender hereunder, and (ii) the Maximum Credit (less
the then outstanding principal amount of the Term Loans), minus the sum of: (i)
the amount of all then outstanding and unpaid Obligations (but not including for
this purpose the then outstanding principal amount of the Term Loans), plus (ii)
the aggregate amount of all then outstanding and unpaid trade payables of
Borrowers which are more than thirty (30) days past due as of such time, plus
(iii) the amount of checks issued by Borrowers to pay trade payables, but not
yet sent and the book overdrafts of Borrowers.
1.20 "Farm Products Sellers" shall mean, individually and collectively,
sellers or suppliers to Borrowers, or either of them, of any farm product (as
such term is defined in both the Food Security Act and the UCC) and including
any perishable agricultural commodity (as defined in PACA) or livestock (as
defined in the PSA), meat, meat food products or livestock products derived
therefrom.
1.21 "Fill Rate" means, for any period, (a) the aggregate dollar amount
(based upon UGI's landed net cost as of the date of the corresponding orders) of
all goods shipped or made available for pick-up by UGI's customers pursuant to
orders submitted during the period, divided by (b) the aggregate dollar amount
(based upon UGI's landed net cost as of the date of the various orders) of all
goods included in orders submitted to UGI by its customers during the period,
expressed as a percentage. For purposes of calculating the Fill Rate, the
aggregate dollar amount attributable to goods that have been discontinued, that
were unauthorized or that were unavailable or out-of-stock (including vendor's
scratches, vendor out-of-stock and vendor out-of-pack) shall be deducted from
the aggregate dollar amount of goods included in orders submitted to UGI
described in part (b) above. For purposes of calculating the Fill Rate, UGI's
"landed net cost" shall mean the actual invoiced cost to UGI for such item of
merchandise, including cross-docking costs, the out-of-pocket cost of
transportation, handling and insurance in connection with the shipment and
warehousing of such item of merchandise to the UGI warehouse, less all
applicable discounts, rebates and allowances actually allowed (including those
allowed by or with respect to purchases of All Kitchen, Western Family and
tobacco products) to UGI in connection therewith, but excluding all applicable
state and federal excise taxes on cigarettes and tobacco products. In addition,
and notwithstanding the preceding, discounts and allowances granted by UGI's
vendors for a specific duration shall be reallowed to UGI's customers with
respect to orders submitted during that duration only, and in no event shall
UGI's landed net cost be reduced by, nor shall UGI be required to reallow or
pass through to any of its customers, any dividend or other distribution, or any
allocation (or similar benefit arising out of that customer's ownership interest
in Western Family) declared, paid, awarded or given to UGI from or by Western
Family. In calculating the landed net cost of any item, any fractional cent
shall be rounded up or down to the nearest cent.
1.22 "Food Security Act" shall mean the Food Security Act of 1984, 7
U.S.C. Section 1631, et seq., as the same now exists or may hereafter from time
to time be amended, modified, recodified or supplemented, together with all
rules and regulations thereunder.
1.23 "Food Security Act Notices" shall mean any notice received by a
Borrower from any person (i) that farm products purchased or to be purchased by
Borrower are or may be subject to a security interest created by a Farm Products
Seller or (ii) that purports to be given under the Food Security Act, including
in each case, any such notice received from any Farm Products Seller, any lender
or any central filing system established under the Food Security Act.
10
1.24 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrowers, or either or them, or by any Obligor in connection with this
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.25 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.16 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.
1.26 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become subject to regulation under
any Environmental Law (including any that are or become classified as hazardous
or toxic under any Environmental Law).
1.27 "Information Certificate" shall mean the Information Certificate
of each Borrower included in Exhibit A hereto containing material information
with respect to each Borrower, its business and assets, provided by or on behalf
of Borrowers to Lender in connection with the preparation of this Agreement and
the other Financing Agreements and the financing arrangements provided for
herein.
1.28 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrowers may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrowers may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.29 "Interest Rate" shall mean, as to Prime Rate Loans, the Prime Rate
and, as to Eurodollar Rate Loans, a rate of one and three-quarters (1.75%)
percent per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by Borrowers as in
effect three (3) Business Days after the date of receipt by Lender of the
request of Borrowers for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to
Borrowers); provided, that, the Interest Rate shall mean the rate of two percent
(2.0%) per annum in excess of the Prime Rate as to Prime Rate Loans and the rate
of three and three-quarters percent (3.75%) per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option, without notice,
(a) for the period (i) from and after the date of termination or non-renewal
hereof
11
until Lender has received full and final payment of all Obligations
(notwithstanding entry of a judgment against Borrowers, or either of them) and
(ii) from and after the date of the occurrence of an Event of Default for so
long as such Event of Default is continuing as determined by Lender, and (b) on
the Revolving Loans at any time outstanding in excess of the amounts available
to Borrowers under Section 2 (whether or not such excess(es), arise or are made
with or without Lender's knowledge or consent and whether made before or after
an Event of Default); provided, further, that Borrowers shall be eligible for a
reduction of the Interest Rate as to Eurodollar Rate Loans to a rate of one and
one-half percent (1.50%) per annum in excess of the Adjusted Eurodollar Rate
after the second anniversary of the date of this Agreement but only (x) if
Borrower submits to Lender profit projections that are satisfactory to Lender
and if, for fiscal years ending September, 1999 and September, 2000, Borrowers'
profits (before taxes, dividends and extraordinary gains) are no less than
eighty percent (80%) of those projections (before taxes, dividends and excluding
extraordinary gains), as evidenced by Borrower's audited financial statements
prepared by PricewaterhouseCoopers or other independent certified accountants
selected by Borrowers and reasonably acceptable to Lender, and (y) if Lender has
not declared an Event of Default between the date of this Agreement and
Borrowers' fiscal year ending September, 2000.
1.30 "Inventory" shall mean all raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature now owned or
hereafter existing or acquired by Borrowers, or either of them, wherever
located.
1.31 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of UGI or any Obligor or
(b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by UGI of its obligations to such
issuer.
1.32 "Loans" shall mean the Revolving Loans and the Term Loans.
1.33 "Maximum Credit" shall mean the amount of $135,000,000.
1.34 "Member" shall mean a Person who has applied for and has been
accepted as a member of UGI, has satisfied all requirements for such membership
including the purchase of UGI capital stock, remains a member of and shareholder
in UGI, and has not given notice of withdrawal or been given notice of expulsion
from membership in UGI.
1.35 "Mortgages" shall mean, individually and collectively, each of the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Trust Deed,
Assignment of Rents, Security Agreement and Fixture Filing, dated of even date
herewith, by UGI in favor of Lender with respect to the real property and
related assets of UGI located in Clackamas County, Oregon, and (b) the Trust
Deed, Assignment of Rents, Security Agreement and Fixture Filing, dated of even
date herewith, by UGI in favor of Lender with respect to the real property and
related assets of Borrower located in ▇▇▇▇▇▇▇ County, Oregon.
1.36 "NCCB" shall mean National Consumer Cooperative Bank.
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1.37 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, rebates, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
1.38 "Note Schedule" shall mean the schedule for each Eligible Notes
delivered by Borrowers to Lender from time to time. The Eligible Note Schedule
will identify each Eligible Note by the name and address of the maker of the
note (and if different from that address, the location of the grocery store to
which such Eligible Note relates) and setting forth as to each Eligible Note:
(i) the date the note was made and the original principal balance of the note;
(ii) the unpaid principal balance of the note as of the date the note is
delivered to Lender; (iii) the aggregate principal and interest payments
received by Borrowers with respect to the note through the date of the Note
Schedule; (iv) the original number of months to maturity and the original
amortization period, in months, of the note, together with the actual number of
months remaining to maturity as of the date the note is delivered to Lender; (v)
the date the first monthly payment under the note was due; (vi) the interest
rate payable by the maker under the note, including the minimum and maximum
rates payable, if applicable; (vii) the amortization method and period; and
(viii) the type and priority of the collateral securing the note.
1.39 "Obligations" shall mean any and all Revolving Loans, Term Loans,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrowers, or either
of them, to Lender and/or its affiliates, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Agreement
or otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrowers, or either of them, under the
United States Bankruptcy Code or any similar statute (including the payment of
interest and other amounts which would accrue and become due but for the
commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lender.
1.40 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than a Borrower.
1.41 "PACA" shall mean the Perishable Agricultural Commodities Act,
1930, as amended, 7 U.S.C, Section 499a, et seq., as the same now exists or may
from time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.42 "Participant" shall mean any person which at any time participates
with Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.
1.43 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
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1.44 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.45 "Prime Rate" shall mean the rate announced by the Reference Bank,
or its successors, from time to time as its prime rate, whether or not such
announced rate is the best rate available at such bank.
1.46 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
hereof.
1.47 "PSA" shall mean the Packers and Stockyard Act of 1921, 7 U.S.C.
Section 181, et seq., as the same now exists or may from time to time hereafter
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.48 "Real Property" shall mean the real property and related assets of
UGI which is located in Clackamas County, Oregon, and ▇▇▇▇▇▇▇ County, Oregon and
which is to be subject to the Mortgages.
1.49 "Records" shall mean all of each Borrower's present and future
books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrowers, or
either of them, with respect to the foregoing maintained with or by any other
person).
1.50 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate.
1.51 "Related Documents" shall mean with respect to each note that is
or may become an Eligible Note, a loan agreement, security agreement, mortgage
or deed of trust, assignment of lease, UCC financing statements and all other
documents, instruments or assignments (including amendments or modifications
thereof) executed by the maker of the Eligible Note or other person on that
maker's behalf, including any guaranties.
1.52 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrowers, or either of them, on a revolving
basis (involving advances, repayments and readvances) as set forth in Section
2.1 hereof.
1.53 "Supply Agreement" shall mean the Supply Agreement dated as of May
15, 1998 between UGI and Smart & Final, Inc.
1.54 "Term Loans" shall mean the term loans made by Lender to UGI as
provided for in Section 2.3 hereof, and "Term Loan" shall mean any such loan.
14
1.55 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.56 [deleted].
2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to UGI from time to time in amounts
requested by UGI up to the amount equal to the sum of:
(i) ninety percent (90%) of the Net Amount of Eligible Accounts,
plus
(ii) the lesser of: (A) seventy-five percent (75%) of the Value of
Eligible Inventory or (B) $70,000,000, less
(iii) any Availability Reserves.
(b) In addition to the amount described in subsection 2.1(a),
subject to and upon the terms and conditions contained herein, Lender agrees to
make Revolving Loans to UGI from time to time during the periods described below
in amounts requested by UGI up to the amount equal to the sum of:
(i) (x) during not more than two (2) separate periods of sixty
(60) consecutive days each year (a "year" for purposes of this subsection
(i) being the period from August 31 of each year through August 30 of the
following year) the lesser of (A) ninety percent (90%) of the Value of
Eligible Inventory designated by UGI and acceptable to Lender in its
discretion as "Special Purchase Inventory" or (B) $10,000,000, and (y)
during one additional and separate period of ninety (90) consecutive days
each year, the lesser of (A) ninety percent (90%) of the Value of Eligible
Inventory designated by UGI and acceptable to Lender in its discretion as
"Special Purchase Inventory," or (B) $15,000,000; less
(ii) (without duplication) any Availability Reserves.
(c) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to URI from time to time in amounts
requested by URI up to the amount equal to the sum of:
(i) the lesser of (A) sixty percent (60%) of the then outstanding
principal balance of Eligible Notes Receivable, or (B) $5,000,000, less
15
(ii) (without duplication) any Availability Reserves.
(d) The aggregate amount of Revolving Loans under subsections
2.1(a), (b) and (c) outstanding at any time shall not exceed $100,000,000.
(e) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrowers, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines
in good faith that: (A) the dilution with respect to Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of total sales)
has increased in any material respect or may be reasonably anticipated to
increase in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, or (C) the nature
and quality of the Inventory has deteriorated or (iii) reduce the lending
formula with respect to Eligible Notes Receivable to the extent that Lender
determines in good faith that the general creditworthiness of note obligors has
declined. In determining whether to reduce the lending formula(s), Lender may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory, Eligible Notes Receivable or
in establishing Availability Reserves.
(f) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(d) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrowers shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
(g) [deleted].
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein,
at the request of UGI, Lender agrees to provide or arrange for Letter of Credit
Accommodations for the account of UGI containing terms and conditions acceptable
to Lender and the issuer thereof. Any payments made by Lender to any issuer
thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to UGI pursuant to
this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, UGI shall
pay to Lender a letter of credit fee at a rate equal to one percent (1.0%) per
annum on the daily outstanding balance of the Letter of Credit Accommodations
for the immediately preceding month (or part thereof), payable
16
in arrears as of the first day of each succeeding month, except that UGI shall
pay to Lender such letter of credit fee, at Lender's option, without notice, at
a rate equal to two percent (2.0%) percent per annum on such daily outstanding
balance for: (i) the period from and after the date of termination or
non-renewal hereof until Lender has received full and final payment of all
Obligations (notwithstanding entry of a judgment against Borrowers, or either of
them) and (ii) the period from and after the date of the occurrence of an Event
of Default for so long as such Event of Default is continuing as determined by
Lender. Such letter of credit fee shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed, and the obligation of UGI
to pay such fee shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to UGI (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than an amount equal to one
hundred (100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, an Availability Reserve shall
be established in the amount described above in this Section 2.2(c).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time prior to
February 26, 1999 exceed the sum of $11,000,000 and will not at any time on or
after February 26, 1999 exceed the sum of $5,000,000. At any time an Event of
Default exists or has occurred and is continuing, upon Lender's request, UGI
will either furnish cash collateral to secure the reimbursement obligations to
the issuer in connection with any Letter of Credit Accommodations or furnish
cash collateral to Lender for the Letter of Credit Accommodations, and in either
case, the Revolving Loans otherwise available to UGI shall not be reduced as
provided in Section 2.2(c) to the extent of such cash collateral.
(e) UGI shall indemnify and hold Lender harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto (except
to the extent such losses are caused by Lender's gross negligence or willful
misconduct), including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by any issuer or correspondent with respect to
any Letter of Credit Accommodation. UGI assumes all risks with respect to the
acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
UGI's agent. UGI assumes all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods subject to any
Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. UGI hereby releases and holds Lender harmless from and against any
acts, waivers, errors, delays or omissions, whether caused by UGI, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation. The provisions of this Section 2.2(e) shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrowers, or either of them, any right or authority to pledge the credit of
Lender in any manner. Lender
17
shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
UGI shall be bound by any interpretation made in good faith by Lender, or any
other issuer or correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of UGI. Lender shall have the sole and exclusive right and
authority to, and UGI shall not: (i) at any time an Event of Default exists or
has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in UGI's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by UGI to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by UGI to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by UGI to Lender and to apply in all respects to
UGI.
2.3 Term Loan. Subject to and upon the terms and conditions contained
herein, Lender will make two Term Loans to UGI as follows:
(a) One Term Loan (the "Real Estate Term Loan") will be in an
amount equal to the lesser of (A) $25,000,000 or (B) sixty-five percent (65%) of
the fair market value of the Real Property, determined by appraisals which are
satisfactory to Lender. Such appraisals are to be conducted, at Borrower's
expense, by Moscato, Ofner & ▇▇▇▇▇▇▇▇▇▇, Inc. If Lender funds the Real Estate
Term Loan prior to receipt and approval of final appraisals on both the
Clackamas County and ▇▇▇▇▇▇▇ County Real Property, Lender will be authorized to
reserve $5,000,000 of the Real Estate Term Loan until such time, if any, as
Lender has received the appraisals and has determined that they are satisfactory
in all respects. If Lender is not fully satisfied with the appraisal, Lender may
decline to advance all or any part of the $5,000,000 reserved portion of the
Real Estate Term Loan. If Lender funds the Real Estate Term Loan prior to
receipt and approval of Phase II environmental assessment reports with respect
to the Real Property, Lender will be authorized to reserve an additional
$1,000,000 of the Real Estate Term Loan until Lender has received the Phase II
environmental assessment reports (including estimates of any remediation costs)
and has determined that they are satisfactory in all respects. Lender may have
such reports reviewed by an independent environmental consulting firm selected
by Lender, and Borrower shall reimburse Lender for the cost of said review. If
Lender is not fully satisfied with the Phase II environmental assessments,
Lender may decline to advance all or any part of the $1,000,000 reserved
portions of the Real Estate Term Loan. Borrowers acknowledge that they will
perform
18
all remediation required or recommended in the Phase II environmental report,
even if the cost of such remediation exceeds the amount reserved by Lender under
this subsection; provided that with respect to remediation that is recommended
(rather than required), Borrower shall be obligated to perform that remediation
only if Lender determines in its sole discretion, that failure to do so would
not (A) affect the marketability of that parcel of Real Property or (B) have a
material adverse effect on the value of that parcel of Real Property. If they
fail or refuse to do so, Lender is authorized, but not required, to perform such
remediation, at the expense of Borrowers. The Real Estate Term Loan will (i) be
evidenced by one or more Term Promissory Notes duly executed and delivered by
UGI; (ii) bear interest at the Interest Rate, with such interest payable
monthly; (iii) be repayable in equal monthly principal payments each in an
amount equal to one-one hundred twentieth (1/120th) of the initial principal
balance, the first principal payment to be due on the first day of February
1999; (iv) subject to Section 3.1(b)(vi), be repayable in full on the fifth
anniversary of the date of this Agreement or upon the earlier termination or
expiration of this Agreement; (v) be secured by all the Collateral; and (vi)
subject to Section 3.1(b)(vi), be repayable in advance at any time without
premium provided that no Event of Default has occurred and is then continuing.
Provided that no Event of Default has occurred and is then continuing, Lender
agrees to release or reconvey the Mortgages upon payment in full of the Real
Estate Term Loan, including interest thereon, notwithstanding the fact that
other Obligations may then be outstanding.
(b) The second term loan (the "Smart & Final Term Loan") will be
in an amount equal to the lesser of (A) $10,000,000 or (B) sixty percent (60%)
of the principal outstanding balance of the Promissory Note dated May 15, 1998
in the original principal sum of $17,500,000 made by Smart & Final, Inc. and
payable to UGI (the "Smart & Final Note") as of the date of initial funding of
the Smart & Final Term Loan. The Smart & Final Term Loan will: (i) be evidenced
by a Term Promissory Note duly executed and delivered by UGI; (ii) bear interest
at the Interest Rate, with such interest payable monthly; (iii) be repayable in
four equal annual principal payments of $2,500,000 each on May 15, 1999, May 15,
2000, May 15, 2001 and May 15, 2002; (iv) be repayable in full upon the
termination or expiration of this Agreement; (v) be secured by all the
Collateral; and (vi) be repayable in advance at any time without premium,
provided that no Event of Default has occurred and is then continuing. The Smart
& Final Note shall be assigned, endorsed and delivered to Lender to be held as
part of the Collateral. UGI shall not amend, compromise or make any settlement
or waiver with respect to, the Smart & Final Note without the prior written
consent of Lender. Provided that no Event of Default has occurred and is then
continuing, Lender agrees to assign, endorse (without recourse) and deliver the
Smart & Final Note to UGI upon payment in full of the Smart & Final Term Loan,
including all interest thereon, notwithstanding the fact that other Obligations
may then be outstanding.
2.4 Availability Reserves. All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves. In the event dilution with
respect to Accounts for any period (based on the ratio of (1) the aggregate
amounts of reductions in Accounts other than payments in cash to (2) the
aggregate amount of total sales) exceeds three percent (3%), an Availability
Reserve satisfactory to Lender shall be established with respect thereto.
19
3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrowers may from time to time request that Prime Rate Loans
be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrowers shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Lender of such a
request from Borrowers, such Prime Rate Loans shall be converted to Eurodollar
Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default, or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrowers shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrowers from time to time for requests by Borrowers for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in effect at any one time,
(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof,
(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrowers shall not exceed the amount equal to (A) the principal amount of the
Term Loans which it is anticipated will be outstanding as of the last day of the
applicable Interest Period plus (B) ninety (90%) percent of the lowest principal
amount of the Revolving Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Revolving Loans) and (vii) Lender shall
have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Lender through the Reference Bank and can be readily determined as
of the date of the request for such Eurodollar Rate Loan by Borrowers. Any
request by Borrowers to convert Prime Rate Loans to Eurodollar Rate Loans or to
continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loans at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrowers, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which, with notice or passage of time, or both, would
constitute an Event of Default, shall exist, (ii) this Agreement shall terminate
or not be renewed,
20
or (iii) the aggregate principal amount of the Prime Rate Loans which have
previously been converted to Eurodollar Rate Loans or existing Eurodollar Rate
Loans continued, as the case may be, at the beginning of an Interest Period
shall at any time during such Interest Period exceed either (A) the aggregate
principal amount of the Loans then outstanding, or (B) the sum of the then
outstanding principal amount of the Term Loans plus the Revolving Loans then
available to Borrowers under Section 2 hereof. Borrowers shall pay to Lender,
upon demand by Lender (or Lender may, at its option, charge any loan account(s)
of Borrowers) any amounts required to compensate Lender, the Reference Bank or
any participant with Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a result of the conversion
of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and if any such
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrowers shall pay to Lender as a closing fee the
amount of $675,000, which shall be fully earned as of and payable on the date
hereof.
3.3 [deleted].
3.4 Servicing Fee. Borrowers shall pay to Lender monthly a servicing
fee in an amount equal to $4,000 in respect of Lender's services for each month
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
3.5 [deleted].
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrowers shall
pay to Lender, upon
21
demand by Lender (or Lender may, at its option, charge any loan account(s) of
Borrowers) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such person
to make or maintain the Eurodollar Rate Loans or any portion thereof. A
certificate of Lender setting forth the basis for the determination of such
amount necessary to compensate Lender as aforesaid shall be delivered to
Borrowers and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account(s) of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory
to Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lender or
lenders to Borrowers of their respective financing arrangements with Borrowers
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of Borrowers and each Obligor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and Borrowers or any Obligor, as debtor and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by Borrowers or any
Obligor in favor of such existing lender or lenders, in form acceptable for
recording in the appropriate government office;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
22
(c) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the assets,
business or prospects of Borrowers, or either of them, since the date of
Lender's latest field examination and no change or event shall have occurred
which would impair the ability of Borrowers, or either of them, or any Obligor
to perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;
(e) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require, and
Lender shall have received current agings of receivables, current perpetual
inventory records and/or rollforwards of accounts and inventory through the date
of closing, and documentation with respect to inventory in transit, goods in
bonded warehouses or at other third-party locations, to determine the amount of
Revolving Loans available to Borrowers, the results of which shall be
satisfactory to Lender, not more than three (3) business days prior to the date
hereof;
(f) Lender shall have received, in form and substance satisfactory
to Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including acknowledgments by lessors, mortgagees and
warehousemen of Lender's security interests in the Collateral, waivers by such
persons of any security interests, liens or other claims by such persons to the
Collateral and agreements permitting Lender access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(g) Lender shall have received environmental assessments with
respect to the Real Property conducted by an independent environmental
consulting firm acceptable to Lender, and in form, scope and methodology
satisfactory to Lender, confirming (i) that such property and the owner and all
occupants thereof are in material compliance with all applicable Environmental
Laws and (ii) the absence of any material environmental problems; provided,
however, that if such assessments have not been delivered to Lender as of the
date of this Agreement and Lender nevertheless elects to fund the Loans, such
assessments shall be delivered to Lender no later than October 31, 1998;
(h) Lender shall have received, in form and substance satisfactory
to Lender, valid and effective title insurance policies (or commitments
therefor) issued by a company and agent acceptable to Lender (i) insuring the
priority, amount and sufficiency of the Mortgages, and (ii) containing any
legally available endorsements, assurances or affirmative coverages requested by
Lender for protection of its interests;
23
(i) Lender shall have received appraisals or opinions of value, in
form, scope and substance satisfactory to Lender, with respect to the Real
Property; provided, however, that if such appraisals have not been delivered to
Lender as of the date of this Agreement and Lender nevertheless elects to fund
the Loans, such appraisals shall be delivered to Lender no later than August 15,
1998 for the Real Property in Clackamas County and September 15, 1998 for the
Real Property in ▇▇▇▇▇▇▇ County;
(j) The Smart & Final Note shall have been assigned, endorsed,
negotiated, and delivered to Lender, Lender shall have received an
acknowledgment of such assignment from Smart & Final, Inc. in form and substance
satisfactory to Lender, and Lender shall have confirmed the creditworthiness of
Smart & Final, Inc. to its satisfaction;
(k) The Eligible Notes shall have been assigned, endorsed,
negotiated, and delivered to Lender, and Lender shall have received
acknowledgments of assignment from such of the makers of the Eligible Notes, in
form and substance satisfactory to Lender, as Lender shall have determined in
its sole discretion;
(l) Lender shall have entered into all such subordination and
intercreditor agreements with third parties as Lender requires in its
discretion, all in form and substance satisfactory to Lender;
(m) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(n) the Excess Availability as determined by Lender, as of the
date hereof, shall be satisfactory to Lender in its discretion after giving
effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial
transactions hereunder;
(o) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrowers with respect to the
Financing Agreements and such other matters as Lender may request; and
(p) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrowers, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of
24
each such Loan or providing each such Letter of Credit Accommodation and after
giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrowers, and
each of them, hereby grant to Lender a continuing security interest in, a lien
upon, and a right of setoff against, and hereby assign to Lender as security,
the following property and interests in property of Borrowers, and each of them,
whether now owned or hereafter acquired or existing, and wherever located
(collectively, the "Collateral"). All Obligations are fully
cross-collateralized; the Collateral owned by each Borrower shall secure not
only its own Obligations, but also the Obligations of the other Borrower:
5.1 Accounts;
5.2 all present and future contract rights, general intangibles
(including tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choses in action and other
claims and existing and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, securities and other
investment property, letters of credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrowers, and each of them,
now or hereafter held or received by or in transit to Lender or its affiliates
or at any other depository or other institution from or for the account of
Borrowers, and each of them, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Accounts and other Collateral, including (a) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (b) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Accounts or other Collateral, including returned, repossessed and
reclaimed goods, and (d) deposits by and property of account debtors or other
persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
25
5.6 Records;
5.7 Real Property; and
5.8 all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Account(s). Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers, or either of them, and (c) all other
appropriate debits and credits as provided in this Agreement, including fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrowers each month a
statement setting forth the balance in Borrowers' loan account(s) maintained by
Lender for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers and
conclusively binding upon Borrowers as an account stated except to the extent
that Lender receives a written notice from Borrowers of any specific exceptions
of Borrowers thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to
Borrowers a written statement as provided above, the balance in Borrowers' loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrowers.
26
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrowers shall promptly deposit and direct their account
debtors and note obligors to directly remit all payments on Accounts and on
notes and all payments constituting proceeds of Inventory or other Collateral in
the identical form in which such payments are made, whether by cash, check or
other manner. The banks at which the Blocked Accounts are established shall
enter into an agreement, in form and substance satisfactory to Lender, providing
that all items received or deposited in the Blocked Accounts are the property of
Lender, that the depository bank has no lien upon, or right to setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of Lender
as Lender may from time to time designate for such purpose ("Payment Account").
Borrowers agree that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or notes or as
proceeds of Inventory or other Collateral, or otherwise, shall be the property
of Lender.
(b) For purposes of calculating the amount of the Loans available
to Borrowers, such payments will be applied (conditional upon final collection)
to the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrowers' loan
account(s) on such day, and if not, then on the next business day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) business day following the date of receipt of immediately
available funds by Lender in the Payment Account provided such payments or other
funds and notice thereof are received in accordance with Lender's usual and
customary practices as in effect from time to time and within sufficient time to
credit Borrowers' loan account(s) on such day, and if not, then on the next
business day.
(c) Borrowers and all of their respective affiliates,
subsidiaries, shareholders, directors, employees or agents shall, acting as
trustee for Lender, receive, as the property of Lender, any monies, checks,
notes, drafts or any other payment relating to and/or proceeds of Accounts or
other Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with a
Borrower's own funds. Borrowers agree to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person. The obligation of Borrowers to reimburse Lender for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Prior to the occurrence of an Event of Default, Lender shall not apply
payments received or collected from
27
Borrowers under Section 6.3 to prepay the Term Loans, unless Borrowers direct
Lender to do so. Except as provided in the preceding sentence, Lender may apply
payments received or collected from Borrowers or for the account of Borrowers
(including the monetary proceeds of collections or of realization upon any
Collateral) to such of the Obligations, whether or not then due, in such order
and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of
Borrowers. Borrowers shall make all payments to Lender on the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, or any duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrowers shall be liable to pay to Lender, and
Borrowers, and each of them, do hereby indemnify and hold Lender harmless for,
the amount of any payments or proceeds surrendered or returned. This Section 6.4
shall remain effective notwithstanding any contrary action which may be taken by
Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of either Borrower
or other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. URI hereby appoints UGI and each officer
of UGI as its agent and attorney- in-fact for purposes of requesting Loans;
giving other instructions and directions of every nature to Lender in connection
with the financing arrangements provided for in this Agreement; executing and
delivering certificates, instruments and other documents; furnishing
information; and taking any and all actions of every nature in connection with
this Agreement, the other Financing Agreements and matters relating thereto.
Lender shall be authorized to rely upon such requests, instructions and
directions without confirmation by URI. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a business day) and the amount of the requested Loan. Requests received
after 11:00 a.m. Portland, Oregon time on any day shall be deemed to have been
made as of the opening of business on the immediately following business day.
All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, a Borrower when deposited to the credit of such Borrower or
otherwise disbursed or established in accordance with the instructions of such
Borrower or its agent or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the
Loans provided by Lender to Borrowers hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof
28
shall be used by Borrowers only for general operating, working capital and other
proper corporate purposes of Borrowers not otherwise prohibited by the terms
hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrowers shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis or more frequently as Lender may request, (i)
perpetual inventory reports, (ii) inventory reports by category and (iii) agings
of accounts payable, (c) upon Lender's request, (i) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (ii) copies of shipping and delivery
documents, and (iii) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrowers; (d) agings of accounts
receivable on a monthly basis or more frequently as Lender may request; and (e)
such other reports as to the Collateral as Lender shall request from time to
time. If any of Borrowers' records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent, each
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Each Borrower shall notify Lender promptly of: (i) any
material delay in such Borrower's performance of any of its obligations to any
account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor or note obligor, or any disputes with
account debtors or note obligors, or any settlement, adjustment or compromise
thereof, (ii) all material adverse information relating to the financial
condition of any account debtor or note obligor and (iii) any event or
circumstance which, to Borrower's knowledge, would cause Lender to consider any
then existing Accounts as no longer constituting Eligible Accounts or any then
existing notes as no longer constituting Eligible Notes Receivable. No credit,
discount, allowance, rebate or extension or agreement for any of the foregoing
shall be granted to any account debtor or note obligor without Lender's consent,
except in the ordinary course of a Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor or note obligor other than an obligor under an Eligible Note. In
no event shall Borrowers settle, adjust or compromise any claim, offset,
29
counterclaim or dispute with respect to any Eligible Note without Lender's prior
written consent which it may give or withhold in its sole discretion. At any
time that an Event of Default exists or has occurred and is continuing, Lender
shall, at its option, have the exclusive right to settle, adjust or compromise
any claim, offset, counterclaim or dispute with account debtors or note obligors
or grant any credits, discounts, allowances or rebates.
(b) Without limiting the obligation of Borrowers to deliver any
other information to Lender, Borrowers shall promptly report to Lender any
return of Inventory by any one account debtor if the inventory so returned in
such case has a value in excess of $25,000. At any time that Inventory is
returned, reclaimed or repossessed, the Account (or portion thereof) which arose
from the sale of such returned, reclaimed or repossessed Inventory shall not be
deemed an Eligible Account. In the event any account debtor returns Inventory
when an Event of Default exists or has occurred and is continuing, Borrowers
shall, upon Lender's request, (i) hold the returned Inventory in trust for
Lender, (ii) segregate all returned Inventory from all of its other property,
(iii) dispose of the returned Inventory solely according to Lender's
instructions, and (iv) not issue any credits, discounts or allowances with
respect thereto without Lender's prior written consent.
(c) With respect to each Account and each note receivable: (i) the
amounts shown on any invoice delivered to Lender or schedule thereof delivered
to Lender shall be true and complete, (ii) no payments shall be made thereon
except payments immediately delivered to Lender pursuant to the terms of this
Agreement, (iii) no credit, discount, allowance, rebate or extension or
agreement for any of the foregoing shall be granted except as reported to Lender
in accordance with this Agreement and except for credits, discounts, allowances,
rebates or extensions made or given in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed to
Lender, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable State or
Federal laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms. Neither Borrower shall make or
allow any offset or deduct from or against any Account or note receivable on
account of any obligation owing to such Borrower by the account debtor or note
obligor without the prior written approval of Lender. Lender agrees that
Borrower may discount Accounts to adjust for overstatements, damaged goods or
other overcharges, but only in the ordinary course of Borrowers' business
consistent with past practice and only in amounts of $10,000 or less with
respect to any invoice.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account, note receivable or other Collateral,
by mail, telephone, facsimile transmission or otherwise.
(e) Borrowers, and each of them, shall deliver or cause to be
delivered to Lender, with appropriate endorsement and assignment, with full
recourse to the assigning Borrower, all chattel paper, notes and other
instruments which either Borrower now owns or may at any time acquire
immediately upon such Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
or note obligors that the
30
Accounts and notes have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all account debtors and note
obligors to make payment of Accounts and notes directly to Lender, (ii) extend
the time of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all
Accounts, notes or other obligations included in the Collateral and thereby
discharge or release the account debtor, note obligor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts, notes or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor or note obligor shall state that the Accounts and such other
obligations have been assigned to Lender and are payable directly and only to
Lender, and Borrowers shall deliver to Lender such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrowers
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, the Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrowers shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrowers shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of a Borrower's
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) upon Lender's request, each
Borrower shall, at its expense, no more than once in any twelve (12) month
period, but at any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrowers shall produce, use,
store and maintain the Inventory with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto);
(f) each Borrower assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of its Inventory; (g)
Borrowers shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate either Borrower to
repurchase such Inventory; (h) Borrowers shall keep the Inventory in good and
marketable condition; and (i) Borrowers shall not, without prior written notice
to Lender, acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrowers shall, at their expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable
31
to Lender and by an appraiser acceptable to Lender; (b) Borrowers shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrowers shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws; (d) the Equipment is and shall be
used in a Borrower's business and not for personal, family, household or farming
use; (e) Borrowers shall not remove any Equipment from the locations set forth
or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of a Borrower or
to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of a Borrower in the ordinary course of business; (f) the
Equipment is now and shall remain personal property and Borrowers shall not
permit any of the Equipment to be or become a part of or affixed to real
property; and (g) each Borrower assumes all responsibility and liability arising
from the use of its Equipment.
7.5 Note Covenants. Borrowers shall (a) cause the representations and
warranties contained in Section 8.12 to continue to be true and correct at all
times; (b) use its best effort to collect and service all notes including the
Eligible Notes; (c) use its best efforts to preserve the holder's rights under
all notes, including all Eligible Notes, and under all Related Documents; (d)
use its best efforts to preserve all collateral securing the Eligible Notes and
all other notes, including the filing of all continuation statements for any
financing statements that relate to those notes; (e) immediately notify Lender
in the event any Eligible Note remains unpaid more than 30 days past any
scheduled payment date; and (f) promptly notify Lender in the event any other
criteria set forth in Section 1.11 fails at any time to remain true and correct
with respect to an Eligible Note.
7.6 Power of Attorney. Borrowers, and each of them, hereby irrevocably
designate and appoint Lender (and all persons designated by Lender) as each
Borrower's true and lawful attorney-in-fact, and authorize Lender, in Lender's
name or in the names of Borrowers, or either of them, to: (a) at any time an
Event of Default or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts, notes or other proceeds of Inventory or other
Collateral, (ii) enforce payment of Accounts or notes by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account, note or other Collateral, (iv) sell or assign any Account upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account or note, (vi)
discharge and release any Account or note, (vii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor or note obligor, (viii) notify the post office
authorities to change the address for delivery of each Borrower's mail to an
address designated by Lender, and open and dispose of all mail addressed to
either Borrower, and (ix) do all acts and things which are necessary, in
Lender's determination, to fulfill Borrowers' obligations under this Agreement
and the other Financing Agreements and (b) at any time to (i) take control in
any manner of any item of payment or proceeds thereof, (ii) have access to any
lockbox or postal box into which either Borrower's mail is deposited, (iii)
endorse Borrowers' names upon any items of payment or proceeds thereof and
deposit the same in the Lender's account for application to the Obligations,
(iv) endorse Borrowers' names upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account, note or any
goods pertaining thereto or any other Collateral, (v) sign Borrowers' names on
any verification of Accounts or notes receivable and notices thereof to account
debtors and note
32
obligors; (vi) execute in Borrowers' names and file any UCC financing statements
or amendments thereto; and (vii) execute, deliver, file, record or otherwise
deal with the collateral and Related Documents for each Eligible Note.
Borrowers, and each of them, hereby release Lender and its officers, employees
and designees from any liabilities arising from any act or acts under this power
of attorney and in furtherance thereof, whether of omission or commission,
except as a result of Lender's own gross negligence or willful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
7.7 Right to Cure. Lender may, at its option, (a) cure any default by
Borrowers, or either of them, under any agreement with a third party or pay or
bond on appeal any judgment entered against Borrowers, or either of them, (b)
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (c) pay any amount,
incur any expense or perform any act which, in Lender's judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended to
the Obligations and charge Borrowers' account(s) therefor, such amounts to be
repayable by Borrowers on demand. Lender shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of either Borrower. Any payment made or
other action taken by Lender under this Section shall be without prejudice to
any right to assert an Event of Default hereunder and to proceed accordingly.
7.8 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrowers, (a) Lender or its designee shall have
complete access to all of Borrowers' respective premises during normal business
hours upon at least twenty-four (24) hours' prior notice to the affected
Borrower, or at any time and without notice if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Borrowers' books and records, including the
Records, and (b) Borrowers shall promptly furnish to Lender such copies of such
books and records or extracts therefrom as Lender may request, and (c) use
during normal business hours such of Borrowers' personnel, equipment, supplies
and premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of Accounts
and notes and realization of other Collateral.
8. REPRESENTATIONS AND WARRANTIES
Borrowers, and each of them, hereby represent and warrant to Lender the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and providing Letter of Credit Accommodations by Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each
Borrower is a corporation duly organized and validly existing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the Borrower's financial
condition, results of
33
operation or business or the rights of Lender in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder are all
within each Borrower's corporate powers, have been duly authorized and are not
in contravention of law or the terms of each Borrower's respective articles of
incorporation, bylaws, or other organizational documentation, or any indenture,
agreement or undertaking to which either Borrower is a party or by which either
Borrower or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of Borrowers, and
each of them, enforceable in accordance with their respective terms. Neither
Borrower has any subsidiaries except as set forth on its Information
Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers, or either of them, which have been or may
hereafter be delivered by Borrowers, or either of them, to Lender have been
prepared in accordance with GAAP and fairly present the financial condition and
the results of operation of Borrowers as at the dates and for the periods set
forth therein. Except as disclosed in any interim financial statements furnished
by Borrowers, or either of them, or except as otherwise set forth in Schedule
8.2, to Lender prior to the date of this Agreement, there has been no material
adverse change in the assets, liabilities, properties and condition, financial
or otherwise, of Borrowers, or either of them, since the date of the most recent
audited financial statements furnished by Borrowers to Lender prior to the date
of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in the Information Certificates, subject to the right of each Borrower
to establish new locations in accordance with Section 9.2 below. The Information
Certificates correctly identify any of such locations which are not owned by a
Borrower and set forth the owners and/or operators thereof and to the best of
each Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for
34
the payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificates,
there is no present investigation by any governmental agency pending, or to the
best of either Borrower's knowledge threatened, against or affecting either
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of either Borrower's knowledge
threatened, against either Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against such Borrower would result in any material adverse change in
the assets, business or prospects of such Borrower or would impair the ability
of such Borrower to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Except as
set forth in Schedule 8.7, neither Borrower is in default in any material
respect under, or in violation in any material respect of any of the terms of,
any agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound and each Borrower is in
compliance in all material respects with all applicable provisions of laws,
rules, regulations, licenses, permits, approvals and orders of any foreign,
Federal, State or local governmental authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, neither Borrower
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrowers comply in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of each Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
a Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects either Borrower or
its business, operations or assets or any properties at which a Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Neither Borrower has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
35
(d) Each Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of such Borrower under any Environmental Law and
all of such licenses, permits, certificates, approvals or similar authorizations
are valid and in full force and effect.
8.9 Employee Benefits.
(a) To Borrowers' knowledge after due investigation, neither
Borrower has engaged in any material transaction in connection with which such
Borrower or any of its ERISA Affiliates could be subject to either a material
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any material accumulated funding deficiency
described in Section 8.9(c) hereof and any material deficiency with respect to
vested accrued benefits described in Section 8.9(d) hereof.
(b) To Borrowers' knowledge after due investigation, no material
liability to the Pension Benefit Guaranty Corporation has been or is expected by
either Borrower to be incurred with respect to any employee benefit plan of
either Borrower or any of its ERISA Affiliates. There has been no reportable
event (within the meaning of Section 4043(b) of ERISA) or any other event or
condition with respect to any employee pension benefit plan of either Borrower
or any of its ERISA Affiliates which presents a risk of termination of any such
plan by the Pension Benefit Guaranty Corporation.
(c) To Borrowers' knowledge after due investigation, full payment
has been made of all amounts which each Borrower or any of its ERISA Affiliates
is required under Section 302 of ERISA and Section 412 of the Code to have paid
under the terms of each employee benefit plan as contributions to such plan as
of the last day of the most recent fiscal year of such plan ended prior to the
date hereof, and no material accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any employee benefit plan, including any penalty or tax
described in Section 8.9(a) hereof and any material deficiency with respect to
vested accrued benefits described in Section 8.9(d) hereof.
(d) To Borrowers' knowledge after due investigation, the current
value of all vested accrued benefits under all employee benefit plans maintained
by either Borrower that are subject to Title IV of ERISA does not exceed the
current value of the assets of such plans allocable to such vested accrued
benefits, including any penalty or tax described in Section 8.9(a) hereof and
any material accumulated funding deficiency described in Section 8.9(c) hereof.
The terms "current value" and "accrued benefit" have the meanings specified in
ERISA.
(e) With respect to any multiemployer plan (as such term is
defined in Section 400(a)(3) of ERISA) in which either Borrower or any ERISA
Affiliate participates or has participated, (i) neither Borrower nor any ERISA
Affiliate has withdrawn, partially withdrawn, or received any notice of any
claim or demand for withdrawal liability or partial withdrawal liability, (ii)
neither Borrower nor any ERISA Affiliate has received any notice that any such
plan is in reorganization, that increased contributions may be required to avoid
a reduction in plan benefits or the imposition of any excise tax, or that any
such plan is or may become insolvent, (iii) neither Borrower nor any ERISA
Affiliate has failed to make any required
36
contributions, (iv) no such plan is a party to any pending merger or asset or
liability transfer, and (v) there are no PBGC proceedings against or affecting
any such plan.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrowers, or either of them,
maintained at any bank or other financial institution are set forth on Schedule
8.10 hereto, subject to the right of Borrowers to establish new accounts in
accordance with Section 9.13 below.
8.11 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrowers, or either of them, in writing to Lender
in connection with this Agreement or any of the other Financing Agreements or
any transaction contemplated hereby or thereby, including all information on the
Information Certificates, is true and correct in all material respects on the
date as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Borrowers, or either of them, which has not been fully and accurately disclosed
to Lender in writing.
8.12 Eligible Notes. With respect to each note that Borrower proposes
become an Eligible Note and with respect to each Related Document:
(a) The information in each Note Schedule, together with any
documentation supporting such information, is true and correct.
(b) There exists only one original of such note, and the original
and all of the other original or certified documents described in Section 1.11
have been delivered or will be delivered to Lender before Lender makes any
advances with respect to that note.
(c) Immediately prior to delivery of the note and the related
endorsement(s) to Lender, the assigning Borrower held good and indefeasible
title to, and was the sole owner of each such note, subject to no liens,
charges, mortgages, encumbrances or rights of others and immediately upon
delivery of the note to Lender, Lender will have a first priority security
interest in such note, subject to no other liens, charges, mortgages,
encumbrances or rights of others.
(d) The note and Related Documents delivered to Lender are true,
correct, and complete original counterparts of all instruments and documents
evidencing or in any way relating to that note and the related indebtedness
referred to therein.
(e) Borrowers have caused all copies of any note retained by
Borrowers to be identified with an appropriate legend clearly disclosing the
fact that Lender has possession of and a security interest in such note and
Related Documents.
8.13 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation
37
made or information possessed by Lender. The representations and warranties set
forth herein shall be cumulative and in addition to any other representations or
warranties which Borrowers shall now or hereafter give, or cause to be given, to
Lender.
9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times
preserve, renew and keep in full force and effect its corporate existence and
rights and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, trade names, approvals, authorizations,
leases and contracts necessary to carry on its business as presently or proposed
to be conducted. Each Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name, and Borrower shall deliver to Lender a copy of the amendment
to the Articles of Incorporation of Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower as soon as it is available.
9.2 New Collateral Locations. Either Borrower may open any new
location within the continental United States provided such Borrower (a) gives
Lender thirty (30) days prior written notice of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrowers shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to them and duly observe all requirements of any Federal, State or
local governmental authority, including the Employee Retirement Security Act of
1974, as amended, the Occupational Safety and Health Act of 1970, as amended,
PACA, the PSA, the Fair Labor Standards Act of 1938, as amended, and all
statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws; except that Borrowers' failure to file the reports described
on Schedule 8.7 shall not constitute a breach of this provision so long as (i)
the failure to file such reports does not violate any governmental order; and
(ii) all such reports have been filed, or the circumstances have changed such
that filing is no longer necessary, in either case by no later than January 31,
1999.
(b) Borrowers shall establish and maintain, at their expense, a
system to assure and monitor their continued compliance with all Environmental
Laws in all of their operations, which system shall include annual reviews of
such compliance by employees or agents of Borrowers who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrowers to Lender.
Borrowers shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
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(c) Borrowers shall give both oral and written notice to Lender
immediately upon a Borrower's receipt of any notice of, or a Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claim, citation
or notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by a Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material except in compliance with
applicable Environmental Laws; or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials except in compliance with applicable Environmental Laws; or (D) any
other environmental, health or safety matter, which affects a Borrower or its
business, operations or assets or any properties at which either Borrower
transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance with any Environmental
Law, or any condition which requires any action by or on behalf of Borrowers, or
either of them, in order to avoid any material non-compliance, with any
Environmental Law, Borrowers shall, at Lender's request and Borrowers' expense:
(i) cause an independent environmental consultant acceptable to Lender to
conduct such tests of the site where a Borrower's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Lender a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Lender a supplemental report of such
consultant whenever the scope of such non-compliance, or Borrowers' response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrowers shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrowers, or either of them, and the preparation and implementation of any
closure, remedial or other required plans. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims.
(a) Each Borrower shall duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books.
(b) Borrowers shall be liable for any taxes or penalties imposed on
Lender as a result of the financing arrangements provided for herein, and
Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the
39
amount thereof, and until paid by Borrowers such amount shall be added and
deemed part of the Revolving Loans, provided, that, nothing contained herein
shall be construed to require Borrowers to pay any income, franchise or other
similar taxes attributable to the net income of Lender from any amounts charged
or paid hereunder to Lender. The foregoing indemnity shall survive the payment
of the Obligations and the termination or non-renewal of this Agreement.
(c) In the event Lender shall assign all or any interest in the
Obligations to an assignee that is organized under the laws of a jurisdiction
outside the United States, such assignee shall provide Borrowers with an IRS
Form 4224 or Form 1001 or other applicable form, certificate or document
prescribed by the Internal Revenue Service certifying as to such assignee's
entitlement to full exemption from United States withholding tax with respect to
all payments to be made to such assignee under this Agreement and under any of
the other Financing Agreements (unless such assignee of Lender is unable to do
so by reason of a change in law (including, without limitation, any statute,
treaty, ruling, determination or regulation) occurring subsequent to the
effective date of such assignment). Unless Borrowers have received forms or
other documents reasonably satisfactory to them indicating that payments
hereunder or under any of the other Financing Agreements are not subject to
United States of America withholding tax, Borrowers shall, in the case of
payments to or for any assignee of Lender organized under the laws of a
jurisdiction outside the United States (i) withhold taxes from such payments at
the applicable statutory rate, or at a rate reduced by an applicable tax treaty
(provided that Borrowers have received forms or other documents satisfactory to
them indicating that such reduced rate applies) and (ii) pay such assignee such
payment net of any taxes withheld. Such assignee will be required to use
reasonable efforts (including reasonable efforts to change its lending office)
to avoid or to minimize any amounts which might otherwise be payable by Borrower
pursuant to this Section 9.4; provided, that, such efforts shall not cause the
imposition on such assignee of any additional costs or legal or regulatory
burdens deemed by such assignee in good faith to be material.
9.5 Insurance. Borrowers shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to form,
amount and insurer. Borrowers shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrowers fail to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrowers. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrowers, and
each of them, in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrowers shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrowers or any of their affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
40
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.
WARNING
UNLESS BORROWERS PROVIDE LENDER WITH EVIDENCE OF
THE INSURANCE COVERAGE AS REQUIRED BY THIS
AGREEMENT, LENDER MAY PURCHASE INSURANCE AT
BORROWERS' EXPENSE TO PROTECT LENDER'S INTEREST.
THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT
BORROWERS' INTEREST. IF THE COLLATERAL BECOMES
DAMAGED, THE COVERAGE LENDER PURCHASES MAY NOT PAY
ANY CLAIM BORROWERS MAKE OR ANY CLAIM MADE AGAINST
BORROWERS. BORROWERS MAY LATER CANCEL THIS COVERAGE
BY PROVIDING EVIDENCE THAT BORROWERS HAVE OBTAINED
THE REQUIRED COVERAGE ELSEWHERE.
BORROWERS ARE RESPONSIBLE FOR THE COST OF ANY
INSURANCE PURCHASED BY LENDER. THE COST OF THIS
INSURANCE MAY BE ADDED TO BORROWERS' LIABILITIES.
IF THE COST IS ADDED TO BORROWERS' LIABILITIES, THE
INTEREST RATE APPLICABLE TO THE REVOLVING LOANS
WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE
OF COVERAGE MAY BE THE DATE BORROWERS' PRIOR
COVERAGE LAPSED OR THE DATE BORROWERS FAILED TO
PROVIDE PROOF OF COVERAGE.
THE COVERAGE LENDER PURCHASES MAY BE CONSIDERABLY
MORE EXPENSIVE THAN INSURANCE BORROWERS CAN OBTAIN
ON THEIR OWN AND MAY NOT SATISFY ANY NEED FOR
PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY
INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.
9.6 Financial Statements and Other Information.
(a) Borrowers shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrowers and their subsidiaries
(if any) in accordance with GAAP, and Borrowers shall furnish or cause to be
furnished to Lender: (i) within thirty-five (35) days after the end of each
fiscal month, monthly unaudited consolidated financial statements (including in
each case balance sheets, statements of income and loss, and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of
41
Borrowers and their subsidiaries as of the end of and through such fiscal month;
(ii) within forty-five (45) days after the end of each of the first three fiscal
quarters, internally prepared quarterly unaudited consolidated financial
statements and unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail and certified by
Borrowers' chief financial officer as fairly presenting the financial position
and the results of the operations of Borrowers and their subsidiaries as of the
end of and through such fiscal quarter and; (iii) within one hundred twenty
(120) days after the end of each fiscal year, audited consolidated financial
statements and audited consolidating financial statements of Borrowers and their
subsidiaries (including in each case balance sheets, statements of income and
loss, statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrowers and their
subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrowers and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrowers and their subsidiaries as of the end of and
for the fiscal year then ended.
(b) Borrowers shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in either
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrowers
send to their stockholders generally and copies of all reports and registration
statements which either Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrowers shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrowers, and each of them, as Lender may, from
time to time, reasonably request. Lender is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrowers, and each of them, to any court or other government agency or to any
Participant or assignee or prospective Participant or assignee. Borrowers, and
each of them, hereby irrevocably authorize and direct all accountants or
auditors to deliver to Lender, at Borrowers' expense, copies of the financial
statements of Borrowers, and each of them, and any reports or management letters
prepared by such accountants or auditors on behalf of Borrowers, or each of
them, and to disclose to Lender such information as they may have regarding the
business of Borrowers. Any documents, schedules, invoices or other papers
delivered to Lender may be destroyed or otherwise disposed of by Lender one (1)
year after the same are delivered to Lender, except as otherwise designated by
Borrowers to Lender in writing.
(e) Borrowers shall furnish to Lender upon receipt a copy of
PricewaterhouseCoopers' Management Letter for the fiscal year ending September
1998 and all
42
other management letters prepared by Borrowers' independent certified
accountants for each fiscal year thereafter.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Neither
Borrower shall, directly or indirectly, (a) merge into or with or consolidate
with any other Person or permit any other Person to merge into or with or
consolidate with it, except as expressly provided in Section 9.10 below, or (b)
sell, assign, lease, transfer, abandon or otherwise dispose of any stock or
indebtedness to any other Person or any of its assets to any other Person
(except for (i) sales of Inventory in the ordinary course of business; (ii) the
disposition of worn-out or obsolete Equipment or Equipment no longer used in the
business of Borrower so long as, if an Event of Default exists or has occurred
and is continuing, any proceeds are paid to Lender), (iii) sales of notes to
NCCB on the terms set forth in various agreements with NCCB as in effect on the
date of this Agreement, consistent with past practice; and (iv) sale of UGI's
Real Property located in ▇▇▇▇▇▇▇ County, Oregon so long as the net proceeds are
paid to Lender), or (c) form or acquire any subsidiaries, or (d) wind up,
liquidate or dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. Neither Borrower shall create, incur, assume or
suffer to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower and with respect to which adequate
reserves have been set aside on its books; (c) non-consensual statutory liens
(other than liens securing the payment of taxes) arising in the ordinary course
of such Borrower's business to the extent: (i) such liens secure indebtedness
which is not overdue or (ii) such liens secure indebtedness relating to claims
or liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower, in
each case prior to the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of either Borrower as presently conducted thereon or materially impair the value
of the real property which may be subject thereto; (e) purchase money security
interests in Equipment (including capital leases) and purchase money mortgages
on real estate so long as such security interests and mortgages do not apply to
any property of a Borrower other than the Equipment or real estate so acquired,
and the indebtedness secured thereby does not exceed the cost of the Equipment
or real estate so acquired, as the case may be; (f) the security interests and
liens set forth on Schedule 8.4 hereto; and (g) security interests granted to
NCCB in connection with the sales of notes to NCCB on the terms set forth in
various agreements with NCCB as in effect on the date of this Agreement,
consistent with past practice;.
9.9 Indebtedness. Neither Borrower shall incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except: (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which a Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to such
Borrower, and with respect to which adequate reserves have been set aside on its
books; (c) purchase money indebtedness (including capital leases) to the extent
not incurred or secured by liens (including
43
capital leases) in violation of any other provision of this Agreement; (d)
indebtedness incurred in connection with the sales of notes to NCCB on the terms
set forth in various agreements with NCCB as in effect on the date of this
Agreement, consistent with past practice; and (e) the indebtedness set forth on
Schedule 9.9 hereto; provided, that, (i) Borrower may only make regularly
scheduled payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof, (ii) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
Notwithstanding the foregoing provisions of this Section 9.9, UGI may redeem,
retire or prepay all or any portion of its outstanding Subordinated Redeemable
Capital Investment Notes from time to time, provided that no Event of Default
has occurred and is then continuing, provided further that after giving effect
to such redemption, retirement or prepayment, Borrowers have no less than
$10,000,000 of Excess Availability.
9.10 Loans, Investments, Guarantees, Etc. Except as expressly set forth
below, neither Borrower shall, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the stock or indebtedness or all or a
substantial part of the assets or property of any person, or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
indebtedness, performance, obligations or dividends of any Person or agree to do
any of the foregoing, except: (a) the endorsement of instruments for collection
or deposit in the ordinary course of business; (b) investments in: (i)
short-term direct obligations of the United States Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender, payable to
the order of a Borrower or to bearer and delivered to Lender, and (iii)
commercial paper rated A1 or P1; provided that, as to any of the foregoing,
unless waived in writing by Lender, Borrowers shall take such actions as are
deemed necessary by Lender to perfect the security interest of Lender in such
investments; (c) a one-time investment of up to $10,000,000 in a joint venture
to be formed between UGI and Associated Grocers, provided that at the time of
such investment no Event of Default has occurred and is then continuing;
provided further that UGI's interest in such venture shall be assigned as
collateral to Lender by documents satisfactory in form and substance to Lender;
provided further that after giving effect to such investment, Borrowers have no
less than $10,000,000 of Excess Availability; (d) loans, advances and guaranties
issued to or on behalf of Members; provided that the aggregate amount of (i)all
sums advanced under those loans and advances, (ii) any increase in the amount of
any existing loans, advances or guaranties as a part of restructuring such
obligations, and (iii) the maximum amount being guarantied under any such
guaranty, shall not exceed the sum of $2,000,000 in any fiscal year (excluding
for purposes of this calculation, any guaranties made by UGI for the benefit of
NCCB); and (e) the loans, advances, investment and guarantees set forth on
Schedule 9.10 hereto; provided, that, as to loans, advances, investment and
guarantees related in any way to Eligible Notes, Borrowers shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such loans,
advances, investment or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise
44
deposit or invest any sums for such purpose, and provided further, that with
respect to any loans, advances, investments and guaranties, whether or not
related to the Eligible Notes or to the notes purchased by NCCB, Borrowers shall
furnish to Lender all notices or demands in connection with such loans,
advances, investment or guarantees or other indebtedness subject to such
guarantees either received by Borrowers, or either of them, or on their behalf,
promptly after the receipt thereof, or sent by Borrowers, or either of them, or
on their behalf, concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrowers shall not, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except that URI may declare and pay
dividends to UGI and UGI (a) may redeem shares of its capital stock from persons
who withdraw or are expelled as Members, (b) may redeem a pro rata share of its
capital stock from persons who remain Members but who close less than all of
their stores as set forth below; and (c) may redeem the number of shares in
excess of 4,000 held by any Member, provided in each case that no Event of
Default has occurred and is then continuing, such shares are redeemed at Book
Value as provided in UGI's current bylaws, and the redemption price is paid over
the maximum period allowed by such bylaws. The pro rata share of capital stock
that UGI may redeem under subsection (b) above shall be equal to the product of
the total number of shares of UGI stock held by the relevant Member multiplied
by a fraction, the numerator of which is the gross sales from the store(s) being
closed by that Member and the denominator of which is the gross sales from all
of that Member's stores, including the stores to be closed, in each case during
the full twelve (12) calendar months preceding the redemption. Notwithstanding
the foregoing provisions of this Section 9.11, UGI may pay patronage dividends
to its Members based upon the respective amounts of net income generated by
sales to such Members, provided that no Event of Default has occurred and is
then continuing, provided further that after giving effect to all such patronage
dividend payments, Borrowers have no less than $10,000,000 of Excess
Availability; and provided further that no patronage dividends will be paid in
or for the fiscal year ending September 1998.
9.12 Transactions with Affiliates. Neither Borrower shall, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with such Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than the Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person or
(b) make any payments of management, consulting or other fees for management or
similar services, or of any indebtedness owing to any officer, employee,
shareholder, director or other person affiliated with a Borrower except
reasonable compensation to officers, employees and directors for services
rendered to a Borrower in the ordinary course of business and regularly
scheduled payments to Members or former Members under notes currently
outstanding or hereafter made in accordance with the terms of this Agreement. No
payments shall be made on any such note if an Event of Default has occurred and
is then continuing.
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9.13 Additional Bank Accounts. Neither Borrower shall, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.10 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b) as to any accounts used by Borrowers to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.
9.14 Compliance with ERISA.
(a) Borrowers shall not with respect to any "employee benefit
plans" maintained by Borrowers, or either of them, or any of its ERISA
Affiliates: (i) terminate any of such employee benefit plans so as to incur any
liability to the Pension Benefit Guaranty Corporation established pursuant to
ERISA, (ii) allow or suffer to exist any prohibited transaction involving any of
such employee benefit plans or any trust created thereunder which would subject
either Borrower or any such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA, (iii) fail to pay to any such employee benefit plan any contribution
which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code
or the terms of such plan, (iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such employee benefit
plan, (v) allow or suffer to exist any occurrence of a reportable event or any
other event or condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such employee benefit plan that is a
single employer plan, which termination could result in any liability to the
Pension Benefit Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.14, the terms "employee benefit
plans", "accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.15 [deleted].
9.16 Adjusted Net Worth. Borrowers shall, at all times, maintain
Adjusted Net Worth of not less than $65,000,000 minus (a) amounts actually paid
by Borrowers to redeem subordinated debt during the forty-two (42) months
following the date of this Agreement, in an amount not exceeding $8,000,000;
minus (b) amounts actually paid by Borrowers in connection with scheduled
redemptions of UGI's capital investment notes during the forty-two (42) months
following the date of this Agreement, in an amount not exceeding $7,000,000;
minus (c) all amounts actually paid by Borrowers in connection with mandatory
redemptions of UGI's capital investment notes resulting from the death of a
holder of one or more of those notes; and minus (d) the amount actually written
off by Borrowers in connection with tax planning for fiscal year ending
September, 1998, in an amount not exceeding $5,000,000.
9.17 Costs and Expenses. Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense
46
of the Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees; (c) costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (g)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrowers' operations, plus a per diem charge at the rate of $650
per person per day for Lender's examiners in the field and office; and (h) the
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.18 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers, and each of them, shall, at their expense, duly execute
and deliver, or cause to be duly executed and delivered, such further
agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Lender may at any time and from time to time request
a certificate from an officer of each Borrower representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such request by Lender, Lender
may, at its option, cease to make any further Loans or provide any further
Letter of Credit Accommodations until Lender has received such certificate and,
in addition, Lender has determined that such conditions are satisfied. Where
permitted by law, Borrowers, and each of them, hereby authorize Lender to
execute and file one or more UCC financing statements signed only by Lender.
9.19 Year 2000 Compliance. Borrowers shall make inquiry of Borrowers'
key suppliers and customers with respect to the ability of their computer based
systems to effectively process data including dates on and after January 1,
2000. Borrowers shall take all actions necessary to assure that their computer
based systems are able to effectively process data including dates on and after
January 1, 2000, and shall take all such actions as are reasonably within
Borrowers' control to prevent any inadequacies in the systems of any key
suppliers or customers from having a material adverse effect upon Borrowers, or
either of them. At the request of Lender, Borrowers shall provide Lender with
assurance reasonably acceptable
47
to Lender of Borrowers' Year 2000 capability and of Borrowers' review with
respect to key suppliers and customers.
9.20 Amendment of Bylaws. On or before January 31, 1999, UGI shall
submit to its Members for approval amendments to its bylaws in form and
substance approved by Lender. The amendments shall include, among other things,
a prohibition of offset or deduction by any Member against any account, note or
other obligation payable by the Member to UGI or any of its subsidiaries or
affiliates and shall not impair Lender's rights or the Collateral. UGI shall not
otherwise amend its bylaws or articles of incorporation without the prior
written consent of Lender.
9.21 Accounts Receivable Turnover. The average time between the date of
Borrowers' invoices and the date those invoices are fully and finally paid,
(weighted on the basis of dollars) shall not exceed twenty-five (25) days. The
preceding shall be calculated by multiplying Borrowers' trade accounts
receivable at the beginning of each month, by 30, and dividing the product
thereof by Borrowers' gross cash derived from collection of their trade accounts
receivable during that month. Compliance with this Section 9.21 shall be
calculated monthly. Lender agrees to eliminate by written amendment to this
Agreement, this Section 9.21 when UGI shall have amended its bylaws in a manner
satisfactory to Lender and such amendment(s) have been approved by UGI's Members
as provided in Section 9.20.
9.22 Fill Rate Covenants.
(a) UGI shall provide to Lender a report on Tuesday of each week
for the preceding week (the "Weekly Reports") for all customers (including Smart
& Final under the Supply Agreement), which Weekly Reports shall conform in all
respects to the fill ratio reports that UGI customarily produces, copies of
which have been previously furnished to Lender. The parties acknowledge that the
Weekly Report shall be calculated on a "per unit" basis and shall show the
relationship, expressed as a percentage, between the goods actually shipped or
made available for pick-up by UGI's customers for that week, to the goods
ordered for shipment or availability during the same week. The parties
acknowledge that the resulting percentage will differ from the Fill Rate as
defined and applied herein. In addition, no later than five (5) Business Days
following the end of each month, UGI shall furnish to Lender a Fill Rate report
for the previously month (the "Monthly Report"), which Monthly Report shall
separately show the Fill Rate (as defined in Section 1.21, and subject to the
adjustments called for in Section 9.22(b) below) (a) for all customers of UGI
(including Smart & Final), and (b) for Smart & Final under the Supply Agreement.
In addition, UGI shall also provide to Lender copies of (A) any and all reports
or communications that UGI regularly provides to Smart & Final Inc., or that
Smart & Final Inc. provides to UGI, including, but not limited to, Service Level
Reconciliation Reports and notices of Service Level Breaches (as such terms are
defined in the Supply Agreement)communication, or (B) similar reports and
communications that UGI provides to or receives from any other customer under
any supply agreement, in each case within one Business Day of receipt.
Compliance with the covenants in subsections (b) and (c) below shall be
determined monthly, notwithstanding any different period of determination under
the Supply Agreement or any other agreement.
(b) UGI shall at all times maintain an aggregate Fill Rate of no
less than ninety-five percent (95%) with respect to all of its customers,
including with respect to Smart &
48
Final, Inc. under the Supply Agreement. UGI's failure to comply with the Fill
Rate covenant in this subsection (b) for any month will constitute an Event of
Default unless either (i) Borrowers' Excess Availability as of the end of such
month, or determined by lender, is at least $15,000,000, or (ii) within sixty
(60) days thereafter, either (A) Borrower's Excess Availability is at least
$15,000,000 or (B) UGI's Fill Rate is no less than ninety-five percent (95%).
Lender agrees to eliminate by written amendment to this Agreement, the Fill Rate
covenant in this subsection (b) with respect to all UGI customers other than
Smart & Final, Inc. when UGI shall have amended its bylaws in a manner
satisfactory to Lender and such amendment(s) have been approved by UGI's Members
as provided in Section 9.20. Notwithstanding that this Agreement is amended to
eliminate the application of this Section 9.22(b) with respect to those other
customers, this Section 9.22(b) shall at all times remain in full force and
effect with respect to Smart & Final, Inc. and the Supply Agreement.
(c) UGI shall at all times maintain an aggregate Fill Rate of no
less than ninety percent (90%) with respect to all of its customers, including
with respect to Smart & Final, Inc. under the Supply Agreement. UGI's failure to
comply with the covenant in this subsection (c) for any month shall be an Event
of Default without respect to Borrowers' Excess Availability. The provisions of
this Section 9.22(c) shall continue to apply to all of UGI's customers,
notwithstanding the amendment of UGI's bylaws as described under Subsection
9.22(b) above.
(d) The calculation of Fill Rate will not be adversely affected by
any error by a UGI customer in booking advertising and feature items, including
sales levels of feature items in excess of projections made by that customer. In
addition, the calculation of Fill Rate will not be adversely affected if UGI
fails to maintain the required Fill Rate as the result of (A) a material default
by a UGI customer under any supply agreement it has with UGI; (B) picketing or
other labor disputes at any UGI facility or any customer facility; (C) a force
majeure event such as a strike or other labor disturbance, riot or other civil
disturbance, fire, accident, flood, interference by civil or military
authorities, shortages of labor, raw material, power fuel, water, means of
containers or transportation facilities or common lack of other necessities,
plant or traffic disturbances, delays in transportation, failure of suppliers,
compliance with any law, rule, regulation or governmental order that (x) becomes
effective after the date of this Agreement and (y) is binding on the party whose
performance is affected thereby, and compliance therewith by such party is not
voluntary or optional, (D) the establishment by producers or manufacturers of
goods of allocation or restriction on quantities of goods available to a party
(in which case performance will be excused only to the extent of amounts in
excess of the other party's fair allocable share); and/or any other
circumstances beyond its reasonable control; or (E) failure by a customer to
provide UGI on a timely basis, any ad/display requirements or new product
projections as required by any written contract between them.
(e) The covenants in this Agreement are independent of the
covenants in the Supply Agreement, and UGI's failure to comply with the
covenants in this Section 9.22 will be an Event of Default hereunder even though
UGI may not have committed a Service Level Breach or Major Service Level Breach
under the Supply Agreement and notwithstanding any cure periods provided in the
Supply Agreement.
9.23 Management. Borrowers will not make any changes in or additions to
their executive management team (including chief executive officer, chief
operating officer, and chief
49
financial officer) without the prior approval of Lender. All new members of the
executive management team will be required to have significant experience in
wholesale grocery distribution.
9.24 Agricultural Products.
(a) Borrowers have complied with and shall, in all material
respects, continue to comply with, all existing and future Food Security Act
Notices during their periods of effectiveness under the Food Security Act,
including, without limitation, directions to make payments to the Farm Products
Seller by issuing payment instruments directly to the secured party with respect
to any assets of the Farm Products Seller or jointly payable to the Farm
Products Seller and any secured party with respect to the assets of such Farm
Products Seller, as specified in the Food Security Act Notice, so as to
terminate or release the security interest in any farm products maintained by
such Farm Products Seller or any secured party with respect to the assets of
such Farm Products Seller under the Food Security Act.
(b) Borrowers shall take all other actions as may be reasonably
required, if any, to ensure that any perishable agricultural commodity, poultry,
livestock (in whatever form) or other farm products are purchased free and clear
of any security interest, lien or other claim by any Farm Products Seller or any
secured party with respect to the assets of any Farm Products Seller. In
connection therewith, Borrowers shall register, and shall maintain their
registration, as purchasers of farm products in each state that has a central
filing system if a Farm Products Seller is located in that state.
(c) Borrowers shall notify Lender in writing within twenty-four
(24) hours after receipt by a Borrower of any Food Security Act Notice or
amendment to a previous Food Security Act Notice and including any notice from
any Farm Products Seller of the intention of such Farm Products Seller to
preserve the benefits of any trust applicable to any assets of Borrowers, or
either of them, established in favor of such Farm Products Seller or other
person under the provisions of PACA, the PSA or any local law and within such
twenty-four (24) hours Borrowers shall provide Lender with a true, correct and
complete copy of such Food Security Act Notice or amendment or other notice, as
the case may be, and including any master lists of effective financing
statements delivered to Borrowers, or either of them, pursuant to the Food
Security Act. Borrowers shall, upon Lender's reasonable request, at any time and
from time to time, furnish Lender with a true, correct and complete list of
persons from whom Borrowers purchase any livestock or livestock products or
by-products, perishable agricultural commodities or other farm products and the
outstanding amounts owed by Borrowers to such persons.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default." All Obligations are subject
to cross-default; an Event of Default with respect to either Borrower shall
constitute an Event of Default with respect to both Borrowers.
50
(a) Borrowers, or either or them, fail to pay when due any of the
Obligations or fail to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
Borrowers, or either or them, to Lender in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrowers, or either of them, or any Obligor in excess of $250,000 in any one
case or in excess of $250,000 in the aggregate and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively bonded against and stayed, or any judgment other than
for the payment of money, or injunction, attachment, garnishment or execution is
rendered against Borrowers, or either of them, or any Obligor or any of their
assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or either Borrower or any Obligor which is
a partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) Borrowers, or either of them, or any Obligor becomes insolvent
(however defined or evidenced), makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrowers, or either of them, or any Obligor or all
or any part of its properties and such petition or application is not dismissed
within thirty (30) days after the date of its filing or Borrowers, or either of
them, or any Obligor shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or approval
of, any such action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrowers, or either of them, or any Obligor or for all
or any part of its property; or
(i) any default by Borrowers, or either of them, or any Obligor
under any agreement, document or instrument relating to any indebtedness for
borrowed money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in
51
connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lender, in any case in an amount in
excess of $250,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrowers, or either of
them, or any Obligor, is declared by any other party to any material contract,
lease, license or other obligation or as a result of any default by Borrowers,
or either of them, or any Obligor, the other party to any material contract,
lease, license or other obligation to any person other than Lender, terminates
or ceases to perform its obligations thereunder;
(j) any change in the controlling ownership of Borrower;
(k) the indictment or threatened indictment of Borrowers, or
either of them, or any Obligor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against Borrowers, or
either of them, or any Obligor, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of any of the
property of Borrowers, or either of them, or such Obligor;
(l) More than $1,000,000 of any notes purchased by National
Consumer Cooperative Bank from Borrowers, or either of them, shall constitute
"Defaulted Loans" (as that term is defined under the relevant agreement with
National Consumer Cooperative Bank) within any calendar month. The amount
attributable to the notes for each Defaulted Loan under this subsection 10.1(l),
shall equal the sum of the unpaid principal balance of such notes, together with
all accrued and unpaid interest and other costs under the notes.
(m) Borrowers, or either of them shall have received notice of a
default under the Vehicle Lease Services Agreement between Bay Area Foods, Inc.
(which interest has been assigned to UGI) and Penske Truck Leasing Co., L.P.
dated April 14, 1995, as it may be modified, amended, supplemented, restated or
replaced.
(n) An event of default shall have occurred under the Supply
Agreement.
(o) there shall be a material adverse change in the business,
assets or prospects of Borrowers, or either of them, or any Obligor after the
date hereof; or
(p) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrowers or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrowers of this
Agreement
52
or any of the other Financing Agreements. Lender may, at any time or times,
proceed directly against Borrowers, or either of them, or any Obligor to collect
the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrowers, which right or equity of redemption is hereby expressly waived and
released by Borrowers, and each of them, and/or (vii) terminate this Agreement.
If any of the Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Lender to Borrowers
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrowers waive any other notice. In
the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrowers waive the
posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrowers and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit Accommodations
to be made by Lender to Borrowers.
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11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Oregon
(without giving effect to principles of conflicts of law).
(b) Borrowers, and each of them, and Lender irrevocably consent
and submit to the non-exclusive jurisdiction of the Circuit Court of the State
of Oregon for Multnomah County and the United States District Court for the
District of Oregon and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrowers, or either of them, or their property in the courts
of any other jurisdiction which Lender deems necessary or appropriate in order
to realize on the Collateral or to otherwise enforce its rights against
Borrowers, or either of them, or their property).
(c) Borrowers, and each of them, hereby waive personal service of
any and all process and consent that all such service of process may be made by
certified mail (return receipt requested) directed to Borrowers' address(es) set
forth on the signature pages hereof, and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Lender's option, by service upon Borrowers in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Borrowers shall appear in answer to such process, failing which
Borrowers shall be deemed in default and judgment may be entered by Lender
against Borrowers for the amount of the claim and other relief requested.
(d) BORROWERS, AND EACH OF THEM, AND LENDER EACH HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWERS, AND EACH OF THEM, AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT BORROWERS OR LENDER MAY FILE AN ORIGINAL
54
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrowers, or either of
them (whether in tort, contract, equity or otherwise), for losses suffered by
Borrower, or either of them, in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender, that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable presumption that it acted in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement.
11.2 Waiver of Notices. Borrowers, and each of them, hereby expressly
waive demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and commercial paper included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrowers, or either of them,
which Lender may elect to give shall entitle Borrowers, or either of them, to
any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of each
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrowers, and each of them, waive all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 Indemnification. Borrowers, and each of them, shall indemnify and
hold Lender, and its directors, agents, employees and counsel, harmless from and
against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them (except to the extent
caused by Lender's gross negligence or willful misconduct) in connection with
any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs,
55
and the fees and expenses of counsel. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers shall pay the maximum
portion which they are permitted to pay under applicable law to Lender in
satisfaction of indemnified matters under this Section. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date forty-two (42) months
after the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrowers may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrowers shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender as Lender may, in its discretion, designate in writing to
Borrowers for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrowers to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Portland,
Oregon time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrowers of their respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
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Amount Period
--------- --------------------- ------------------------------------------------
(i) 2% of Maximum Credit From the date hereof to and including the first
anniversary of such date
(ii) 1% of Maximum Credit After the first anniversary of the date hereof
to and including the second anniversary of such
date
(iii) .5% of Maximum Credit Any time after the second anniversary of the
date hereof
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrowers, or either of them, or permit the
use of cash collateral under the United States Bankruptcy Code. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations. Notwithstanding the foregoing provisions of this Section 12.1,
no early termination fee shall be payable to Lender: (a) with respect to any
prepayment of the Term Loans, except upon occurrence of an Event of Default; (b)
with respect to or reduction in the limit on Revolving Loans provided in Section
2.1 as a consequence of the formation of a joint venture between UGI and
Associated Grocers; or (c) on termination of this Agreement in connection with a
sale or merger transaction, provided that Lender is given the opportunity to
submit a proposal to provide financing to the successor entity; or (d) upon
termination of this Agreement in connection with full payment of the Obligations
by Borrowers within the last sixty (60) days of the initial term or any renewal
term of this Agreement.
(d) At such time as this Agreement shall have terminated and
Borrowers shall have paid and discharged all the Obligations, Borrowers, and
each of them, shall execute and deliver to Lender a release in form and
substance satisfactory to Lender, of all obligations and liabilities of Lender
and its officers, directors, employees, agents, parents, subsidiaries and
affiliates to Borrowers, and each of them, and Lender shall, upon Borrowers'
request, execute and deliver to Borrowers a release in form and substance
satisfactory to them, of all obligations and liabilities of Borrower to Lender.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
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12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that neither Borrower may assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Participant's Security Interest. If a Participant shall at any
time participate with Lender in the Loans, Letter of Credit Accommodations or
other Obligations, Borrower hereby grants to such Participant and such
Participant shall have and is hereby given, a continuing lien on and security
interest in any money, securities and other property of Borrower in the custody
or possession of the Participant, including the right of setoff, to the extent
of the Participant's participation in the Obligations, and such Participant
shall be deemed to have the same right of setoff to the extent of its
participation in the Obligations, as it would have if it were a direct lender.
12.6 Joint and Several Liability. Except as otherwise provided in this
Agreement, all Obligations of Borrowers shall be joint and several.
12.7 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represent the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
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IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWER:
------ --------
CONGRESS FINANCIAL CORPORATION UNITED GROCERS, INC.
(NORTHWEST)
By: /s/ [illegible] By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: S.V.P Title: Pres. & C.E.O.
Address: Chief Executive Office:
▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
UNITED RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
59
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificates
Exhibit 1.11 Notice of Assignment
Schedule 8.2 Exceptions to Section 8.2
Schedule 8.4 Existing Liens
Schedule 8.7 Exceptions to Section 8.7
Schedule 8.8 Environmental Disclosures
Schedule 8.10 Bank Accounts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees