Exhibit 10(f)
LOAN AND SECURITY AGREEMENT
Dated as of August 15, 1997
Among
EMONS TRANSPORTATION GROUP, INC.,
EMONS INDUSTRIES, INC.
EMONS FINANCE CORP.
MARYLAND AND PENNSYLVANIA RAILROAD COMPANY,
EMONS LOGISTICS SERVICES, INC.,
MAINE INTERMODAL TRANSPORTATION, INC.,
EMONS RAILROAD GROUP, INC.,
YORKRAIL, INC. and
ST. ▇▇▇▇▇▇▇▇ & ATLANTIC RAILROAD COMPANY
as the Borrowers
and
LASALLE NATIONAL BANK
as the Lender
This LOAN AND SECURITY AGREEMENT (the "Agreement") is dated as of August
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15, 1997 among LASALLE NATIONAL BANK (the "Lender") and EMONS TRANSPORTATION
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GROUP, INC. ("Emons"), EMONS FINANCE CORP. ("Finance") EMONS INDUSTRIES, INC.
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("Industries"), MARYLAND AND PENNSYLVANIA RAILROAD COMPANY ("MPA"), EMONS
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LOGISTICS SERVICES, INC. ("Logistics"), MAINE INTERMODAL TRANSPORTATION, INC.
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("MIT"), EMONS RAILROAD GROUP, INC. ("Railroad Group"), YORKRAIL, INC. ("YKR"),
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and ST. ▇▇▇▇▇▇▇▇ & ATLANTIC RAILROAD COMPANY ("SLR"), (collectively referred to
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herein as the "Borrowers"). In consideration of the mutual conditions and
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agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Borrowers and the Lender hereby
agree as follows.
I.
INTERPRETATION OF THIS AGREEMENT
I.1 Definitions. As used herein:
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"AAR" shall mean the Association of American Railroads.
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"Account Debtor" means each Person obligated in any way on or in
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connection with an Account.
"Accounts" means, with respect to each Borrower, all of such Borrower's
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now owned or hereafter acquired or arising accounts, contract rights, and
any other rights to payment for the sale or lease of goods or rendition of
services, whether billed or accrued, whether or not they have been earned
by performance.
"Affiliate" means with respect to any Person: (i) any Person which,
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directly or indirectly, controls, is controlled by or is under common
control with such first Person; (ii) any Person which beneficially owns or
holds, directly or indirectly, ten percent (10.0%) or more of any class of
Voting Stock of such first Person; or (iii) any Person, ten percent (10.0%)
or more of any class of the Voting Stock (or if such Person is not a
corporation, ten percent (10.0%) or more of the equity interest) of which
is beneficially owned or held, directly or indirectly, by such first
Person. Control (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used herein, means the
possession, directly or indirectly, of the power in any form to direct or
cause the direction of the management and policies of the Person in
question.
"Applicable Margin" shall mean, at any time of determination, with
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respect to the interest rate payable on the Loans, L/C Fees and the amount
of Non-Use Fee payable hereunder, the percentage set forth below for such
Loan or fee, as the case may be, opposite the applicable Debt to Cash Flow
Ratio as at the most recently ended quarter:
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Debt to Cash Flow Ratio Eurodollar Rate Base Rate Non-Use Fee L/C Fee
----------------------- --------------- --------- ----------- --------
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(less than)2.0 1.75% 0% .25% 1.75%
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2.0 - 3.0 2.25% 0% .375% 2.25%
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3.01 - 3.5 2.50% 0% .50% 2.50%
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3.51 - 4.0 2.75% .25% .50% 2.75%
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(greater than)4.0 3.00% .50% .50% 3.00%
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The Applicable Margin shall be initially determined by Lender based upon
Borrowers unaudited financial statements furnished to Lender pursuant to
Section 6.6 for the twelve months ended March 31, 1997 and shall be
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determined by Lender from time to time thereafter based upon the
information set forth in subsequent audited annual financial statements
delivered pursuant to Section 5.2(a) and unaudited financial statements
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delivered pursuant to Section 5.2(b) for each fiscal quarter ended
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March 31, September 30 and December 31 (each a "Determining Financial
Statement"), in each case, together with a certificate of the chief
financial officer of the Borrowers setting forth the calculation of the
Debt to Cash Flow Ratio as at the end of such quarter or year, as the case
may be. Except as
1
hereinafter provided, any change in the Applicable Margin shall take effect
on the Business Day following the Business Day of delivery to Agent of the
applicable Determining Financial Statement, and the Applicable Margin, as
so determined, shall remain in effect until the earlier of (i) the Business
Day next following the Business Day of delivery to the Lender of a
subsequent Determining Financial Statement evidencing a Debt to Cash Flow
Ratio requiring either a higher or lower Applicable Margin from that then
in effect or (ii) the day on which Borrowers fail to deliver to the Lender
the applicable Determining Financial Statement within the time provided by
Section 5.2(a) or Section 5.2(b), as the case may be, the Applicable Margin
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shall be deemed to be based upon an assumed Debt to Cash Flow Ratio of
greater than 4.0 and such Applicable Margin shall be effective on the date
such Determining Financial Statement was required to have been delivered
and shall remain in effect until the Business Day following the Business
Day of delivery to the Lender of a Determining Financial Statement
reflecting a Debt to Cash Flow Ratio for which a lower Applicable Margin
would be applicable. Notwithstanding any other provision of this Agreement,
no reduction to the Applicable Margin shall be effective during any period
that an Event of Default exists.
"Available Term Loan Amount" means $7,775,000 as reduced from time to
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time as provided in Section 2.4(b) hereof.
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"Bankruptcy Code" shall mean Title 11 of the United States Code (11
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U.S.C. (S) 101 et seq.), as amended from time to time and any successor
statute.
"Base Rate" means the rate announced from time to time by the Lender
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at its principal office in Chicago, Illinois as its prime rate. The "prime
rate" is one of several base rates that serve as a basis upon which
effective rates of interest are calculated for loans making reference
thereto and may not be the lowest of the Lender's rates. Each interest
rate based on the Base Rate shall be adjusted simultaneously with any
change in the Base Rate.
"Base Rate Loan" means a Loan which bears interest as provided in
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Section 2.5(a).
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"Benefit Plan" shall mean a defined benefit plan as defined in Section
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3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower or any ERISA Affiliate is or within the immediately preceding six
(6) years was an "employer" as defined in Section 3(5) of ERISA.
"Borrowing" means a borrowing consisting of Loans of the same type
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made on the same day by the Lender.
"Borrowing Base" shall mean, at any time of determination, an amount
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equal to eighty percent (80%) of the actual amount (after deduction of such
Eligibility Reserves as the Lender deems proper and necessary) of Eligible
Receivables of the Borrowers.
"Borrowing Base Certificate" means, with respect to any date, a
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certificate of the chief financial officer or treasurer of each Borrower
substantially in the form of Exhibit A attached hereto and made a part
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hereof setting forth a schedule of the net realizable value of all accounts
receivable of the Borrowers, as at the close of business on the last day of
the preceding month, all in such detail as shall be reasonably satisfactory
to the Lender.
"Business Day" shall mean any day, excluding Saturday, Sunday and any
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day that is a legal holiday under the laws of each of the States of
Pennsylvania and Illinois, or is a day on which banking institutions in any
of such states are required or authorized by law or other governmental
action to close.
"Canadian National Note" means that certain Subordinated Non-
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Negotiable Promissory Note dated as of May 19, 1989 in the original
principal amount of $1,500,000 executed by SLR and payable to and for the
benefit of Canadian National to be amended and restated by Third Amended
Promissory Note in accordance that certain letter agreement from Canadian
National to SLR to be dated August 19, 1997.
--
2
"Capital Expenditures" shall mean with respect to any Person, for any
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period, the aggregate of all expenditures, whether paid in cash or accrued
as liabilities during that period and including that portion of Capital
Leases that is capitalized on the balance sheet of such Person during such
period that, in conformity with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset
accounts reflected in the combined and consolidated balance sheet of such
Person (including equipment which is purchased simultaneously with the
trade-in of existing equipment owned by such Person to the extent of the
gross amount of such purchase price less the book value of the equipment
being traded in at such time), but excluding expenditures made in
connection with the replacement or restoration of assets, to the extent
reimbursed or financed from insurance proceeds paid on account of the loss
of or damage to the assets being replaced or restored, or from awards of
compensation arising from the taking by condemnation of eminent domain of
such assets being replaced.
"Capital Lease" shall mean, as applied to any Person, any lease of any
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property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of such Person.
"Cash Flow Period" shall mean each full Fiscal Year of the Borrowers
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commencing after the Closing Date, and, as a separate period, the period
from September 1, 1997 through June 30, 1998.
"Cash Interest Expense" means, with respect to any Person, for any
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period, total interest expense, whether paid or accrued (including the
interest component of Capital Leases), of such Person, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and net costs under Interest Rate Contracts,
but excluding, however, interest expense not payable in cash (including
amortization of discount), all as determined in conformity with GAAP.
"Closing Date" shall mean the date all of the conditions precedent set
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forth in Article VIII hereof are fulfilled with respect to the Term Loan
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and any Working Capital Loan or Letters of Credit initially requested by
Borrowers.
"Closing Fee" has the meaning specified in Section 2.11.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Collateral" shall have the meaning ascribed to it in Section 4.1.
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"Collection Account" shall mean each depository account maintained by
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any Borrower for the collection of Accounts and other proceeds of
Collateral and Third Party Collateral.
"Collection Account Agreements" shall have the meaning ascribed to it
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in Section 4.8.
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"Concentration Account" shall mean the account maintained at the
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Lender's office in Chicago, into which collections of Accounts of the
Borrowers and other cash proceeds of Collateral and Third Party Collateral
may be deposited or transferred on a daily basis pursuant to the terms of
the applicable Collection Account Agreements or otherwise as described in
Section 4.8.
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"Contaminant" shall mean any waste, pollutant, hazardous substance,
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toxic substance, hazardous waste, special waste, petroleum or petroleum-
derived substance or waste, or any constituent of any such substance or
waste.
"Contract Rights" means, with respect to each Borrower, all of such
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Borrower's right, title and interest in, to and under any and all contracts
and all other agreements relating to such Borrower's business or its
Property, whether such contracts or agreements are currently in effect or
executed by such Borrower after the date hereof, together with any and all
extensions, modifications, amendments and renewals thereof, any and all
payments or rents
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to be paid to such Borrower under any such contracts and agreements, and
all benefits and advantages to be derived therefrom. Contract Rights shall,
include, without limitation, any and all rights of such Borrower under any
leases or subleases (whether as a lessor/sublessor or lessee/sublessee) to
which such Borrower is a party and all rents payable by any
lessees/sublessees under such leases or subleases and all claims for money
due or to become due to such Borrower under agreements and bills pursuant
to which such Borrower purchased any Property and all rights and claims of
such Borrower now or hereafter existing: (i) under any insurance,
indemnities, warranties, and guarantees provided for or arising out of or
in connection with any of the foregoing agreements; (ii) for any damages
arising out of or for breach or default under or in connection with any of
the foregoing agreements; (iii) to all other amounts from time to time paid
or payable under or in connection with any of the foregoing agreements; or
(iv) to exercise or enforce any and all covenants, remedies, powers and
privileges thereunder.
"Conversion Date" shall have the meaning ascribed to it in Section
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2.11(a).
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"Credit Facility" means either the Term Loan Facility or the Working
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Capital Facility.
"Debt" means, with respect to any Borrower, all liabilities,
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obligations and indebtedness of such Borrower and its Subsidiaries on a
consolidated basis to any Person, of any kind or nature, now or hereafter
owing, arising, due or payable, howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed or
otherwise, without duplication and without regard to intercompany accounts,
and including, without in any way limiting the generality of the foregoing:
(i) such Borrower's or any Subsidiary's liabilities and obligations to
trade creditors; (ii) all of the Obligations; (iii) all of such Borrower's
obligations for borrowed money; (iv) all obligations and liabilities of any
Person (other than obligations to repay grant funding which are not due and
payable and obligations under operating leases) secured by any Lien on such
Borrower's or any Subsidiary's Property, even though such Borrower or such
Subsidiary shall not have assumed or become liable for the payment thereof;
provided, however, that all such obligations and liabilities which are
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limited in recourse to such Property shall be included in Debt only to the
extent of the value of such Property as shown on a consolidated balance
sheet of such Borrower and its Subsidiaries prepared in accordance with
GAAP; (v) all obligations or liabilities created or arising under any
Capital Lease or conditional sale or other title retention agreement with
respect to Property used or acquired by such Borrower or any Subsidiary,
even if the rights and remedies of the lessor, seller or lender thereunder
are limited to repossession of such Property; provided, however, that all
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such obligations and liabilities which are limited in recourse to such
Property shall be included in Debt only to the extent of the value of such
Property as shown on a consolidated balance sheet of such Borrower and its
Subsidiaries prepared in accordance with GAAP; (vi) all accrued Plan
liabilities; (vii) all obligations and liabilities under Guaranties; and
(viii) deferred taxes. Notwithstanding the foregoing, for purposes of
calculating or determining Debt, if one or more of any Borrower or any
Subsidiary are jointly and severally liable for the entire amount of any
liability, obligation or indebtedness or any Borrower or any Subsidiary is
a guarantor of any liability, obligation or indebtedness of any other
Borrower or Subsidiary, such liability, obligation or indebtedness shall
only be included in determining Debt for the Borrowers on a consolidated
basis as the Debt of the Borrower or Subsidiary, as the case may be, that
is primarily liable therefor.
"Debt to Cash Flow Ratio" means with respect to the Borrowers at any
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time of determination, the ratio of (a) Funded Indebtedness of the
Borrowers at such time on a consolidated basis to (b) EBITDA of the
Borrowers on a consolidated basis for the 12 consecutive month period ended
at such time.
"Default" means any event or condition which, with notice, the passage
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of time or both, would constitute an Event of Default.
"Default Rate" means a per annum interest rate equal to the sum of (a)
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the Base Rate in effect from time to time plus (b) two percent (2.00%).
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Each Default Rate shall be adjusted simultaneously with any change in the
applicable interest rate.
"Demand Deposit Account" shall have the meaning ascribed to it in
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Section 2.3(e).
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4
"DOL" shall mean the United States Department of Labor and any
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successor department or agency.
"Dollars" and "$" shall mean the lawful money of the United States of
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America.
"EBITDA" shall mean with respect to any Person, for any period, the
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sum of the amounts for such period, of (i) Net Income, plus (ii)
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depreciation and amortization expense, plus (iii) Cash Interest Expense,
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plus (iv) federal and state income taxes, plus (v) extraordinary losses as
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determined in accordance with GAAP which have been included in the
determination of Net Income, minus (vi) extraordinary gains as determined
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in accordance with GAAP which have been included in the determination of
Net Income.
"Eligibility Reserves" shall mean, as of any date of determination,
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such amounts as the Lender, in its reasonable credit judgment, may from
time to time establish against the gross amounts of Eligible Receivables of
any of the Borrowers to reflect contingencies or risks which may affect the
Collateral or Third Party Collateral, the business or financial condition
of any of the Borrowers, or the security of the Loans made hereunder.
"Eligible Receivables" shall mean, with respect to each Borrower,
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those Accounts that when scheduled to the Lender, and at all times
thereafter, do not violate the negative covenants and other provisions of
this Agreement and do satisfy the affirmative covenants and other
provisions of this Agreement and that the Lender, in its reasonable credit
judgment, deems to be Eligible Receivables. No Account shall be an
Eligible Receivable if:
(i) it is due or unpaid, more than ninety (90) days, after the
date that the original invoice was issued or such account otherwise
became due with respect to the sale or services giving rise thereto;
or
(ii) it arises out of a transaction not in the ordinary course
of such Borrower's business or to a Person which is an Affiliate of
such Borrower or controlled by an Affiliate of such Borrower; or
(iii) any warranty contained in this Agreement with respect to
such Eligible Receivable or any warranty contained in this Agreement
with respect to such Account has been breached; or
(iv) the Account Debtor is also a supplier or creditor of such
Borrower and the Account is or may become subject to any right of
setoff by the Account Debtor, and that Account Debtor has not entered
into an agreement with the Lender with respect to the waiver of rights
of setoff which is acceptable to the Lender; or the Account Debtor has
disputed liability with respect to it, or made any claim with respect
to any other Account due from such Account Debtor to any of the
Borrowers, in each case, the Account shall be ineligible to the extent
of such dispute, claim, and/or setoff as and when it arises; or
(v) the Account Debtor has filed a petition for bankruptcy or
any other petition for relief under the Bankruptcy Code, made an
assignment for the benefit of creditors, or if any petition or other
application for relief under the Bankruptcy Code has been filed
against the Account Debtor, or if the Account Debtor has failed,
suspended its business operations, become insolvent, or suffered a
receiver or a trustee to be appointed for any of its assets or
affairs; or
(vi) the Account is owed by an Account Debtor outside the
continental United States or Canada, unless the payment of the Account
is secured by a letter of credit or an acceptance on terms acceptable
to the Lender; or
(vii) the Lender believes, in its reasonable credit judgment
exercised in Good Faith, that collection of such Account is insecure
or that such Account may not be paid by reason of the Account Debtor's
financial inability to pay; or
5
(viii) the Account Debtor is the United States of America or any
other Governmental Authority, unless such Borrower assigns its right
to payment of such Account to the Lender, pursuant to the Assignment
of Claims Act of 1940, as amended (31 U.S.C. (S) 3727) or similar
procedure if required in the applicable jurisdiction; or
(ix) the services, the performance of which has given rise to
such Account, have not been performed by such Borrower and accepted by
the Account Debtor; or
(x) the Account is owing from an Account Debtor where 25% or
more of all Accounts owing from such Account Debtor are ineligible as
a result of the criteria in clause (i) above.
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"Emons Pledge Agreement" shall mean that certain Pledge Agreement of
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even date herewith executed by Emons in favor of the Lender pursuant to
which Emons has pledged the shares of the capital stock of Industries, MPA,
Finance, Logistics, MIT and Railroad Group.
"Environmental Laws" means all federal, state and local laws, rules,
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regulations, ordinances, programs, permits, guidance, orders and consent
decrees relating to health, safety, hazardous substances, and environmental
matters applicable to the Borrowers and/or their business and Property
(whether or not owned by it). Such laws and regulations include but are
not limited to the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901 et seq., as amended; the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 6901 et seq., as amended; the
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., as amended; the
Clean Water Act, 42 U.S.C. (S) 466 et seq., as amended; the Clean Air Act,
46 U.S.C. (S) 7401 et seq., as amended; state and federal lien and
environmental cleanup programs; and U.S. Department of Transportation
regulations.
"Environmental Lien" shall mean a Lien in favor of any Governmental
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Authority for (i) any liability under federal or state environmental laws
or regulations, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Equipment" means, with respect to each Borrower, all of such
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Borrower's now owned and hereafter acquired machinery, equipment,
furniture, furnishings, fixtures, and other tangible personal property
(except Inventory), including, without limitation, Rolling Stock, motor
vehicles, aircraft, railroad ties, rail track, ballast, bridges, tools,
switches, main switches, branch switches, spur switches, industrial
switches, terminals, superstructures, road beds, trestles, culverts,
viaducts, depots, stations, stockyards, warehouses, elevators, car houses,
engine houses, freight houses, machine shops, other shops, turntables, fuel
stations, water stations, signals, communication test instruments and other
communication equipment, interlocking plants, telegraph lines, telephone
lines, cable wires, wireless facilities, fences, docks and trade fixtures,
and office equipment, as well as all of such types of property leased by
such Borrower and all of such Borrower's rights and interests with respect
thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies
used or to be used in connection therewith, and all substitutes for any of
the foregoing, and all manuals, drawings, instructions, warranties and
rights with respect thereto; wherever any of the foregoing is located.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean any (i) corporation which is a member of
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the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Borrowers, or (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with the Borrowers, or (iii) member
of the same affiliated service group (within the meaning of Section 414(m)
of the Code) as the Borrowers, any corporation described in clause (i)
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above or any partnership or trade or business described in clause (ii)
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above.
6
"Eurocurrency Liabilities" has the meaning assigned to that term in
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Regulation D.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
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Rate Loan, an interest rate per annum equal to the rate per annum obtained
by dividing (i) the average (rounded upward to the nearest whole multiple
of 1/16 of 1% per annum, if such average is not such a multiple) of the
rates per annum at which deposits in Dollars are offered by the principal
office of ABN Amro Holdings, Inc. in London, England to prime banks in the
London interbank market at 11:00 a.m. (London time) three Business Days
before the first day of such Interest Period in an amount substantially
equal to Lender's Eurodollar Rate Loan comprising part of such Borrowing
and for a period equal to such Interest Period by (ii) a percentage equal
to 100% minus the Eurodollar Rate Reserve Percentage for such Interest
Period. The Eurodollar Rate for the Interest Period for each Eurodollar
Rate Loan comprising part of the same Borrowing shall be determined by the
Lender two Business Days before the first day of such Interest Period.
"Eurodollar Rate Loan" means a Loan or portion thereof which bears
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interest as provided in Section 2.5(b).
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"Eurodollar Rate Reserve Percentage" for the Interest Period for any
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Eurodollar Rate Loan means the reserve percentage applicable during such
Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for the
Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.
"Excess Cash Flow" shall mean, for any Cash Flow Period, an amount
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equal to (i) Net Income of the Borrowers on a continued and consolidated
basis for such period, plus (ii) depreciation, amortization of intangibles,
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non-cash interest, non-cash amortization of discount and other non-cash
charges (including deferred taxes) included in the determination of Net
Income of the Borrowers on a combined and consolidated basis for such
period, minus (iii) non-cash credits to Net Income of the Borrowers on a
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combined and consolidated basis for such period, minus (iv) Capital
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Expenditures of the Borrowers on a combined and consolidated basis net of
purchase money and Capital Lease obligations with respect thereto, to the
extent permitted hereunder and made during such period, minus (v) all
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mandatory reductions of the Available Term Loan Amount under the Term Loan
Facility made during such period pursuant to Section 2.4 hereof, minus (vi)
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all payments permitted hereunder and made during such period in respect of
other Debt, minus (vii) gains included in the determination of Net Income
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of the Borrowers on a combined and consolidated basis for such period,
representing transactions in which any of the Borrowers received Net Cash
Proceeds of Sale.
"Event of Default" shall mean any of the events listed in Section 9.1.
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"Federal Reserve Board" shall mean the Board of Governors of the
---------------------
Federal Reserve System and any successor thereto.
"Fiscal Year" shall mean the fiscal year of the Borrowers, which shall
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be the twelve-month period ending on the last day of June, or such other
period as the Borrowers may designate and the Lender shall approve in
writing.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
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(i) EBITDA minus federal and state income taxes actually payable during
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such period, minus Capital Expenditures of the Borrowers on a combined and
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consolidated basis net of purchase money obligations including, without
limitation, low interest rate or no interest rate loans from Governmental
Authorities, grant funding and Capital Lease obligations with respect
thereto, to the extent permitted hereunder and made during the period for
which the Fixed Charge Coverage Ratio is to be calculated, to (ii) Fixed
Charges during the period for which the Fixed Charge Coverage Ratio is to
be calculated.
7
"Fixed Charges" shall mean with respect to any Person, for any period,
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the amounts for such period of (i) Cash Interest Expense, plus (ii)
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permanent reductions of the Available Term Loan Amount (other than
mandatory reductions attributable to Excess Cash Flow) and other Funded
Indebtedness other than the Canadian National Note (including the principal
component of Capital Lease obligations).
"FRA" shall mean the United States Department of Transportation, the
---
Federal Railroad Administration and every other state, federal or
provincial agency having jurisdiction over the condition, maintenance,
repair or safety of the Equipment or of any item of Equipment.
"Funded Indebtedness" shall mean, at any time of determination,
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without duplication, all Debt and Guaranties of Debt by the Borrowers at
such time except for Debt described in clauses (i), (ii), (vi) and (viii)
of the Definition of Debt.
"Funding Date" means the date the Term Loan or any Working Capital
------------
Loan is to be made hereunder.
"GAAP" shall mean generally accepted accounting principles set forth
----
in the rules, regulations, statements, opinions and pronouncements of the
American Institute of Certified Public Accountants and of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), which,
subject to Section 5.1, are applicable to the circumstances as of the date
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of determination.
"General Intangibles" shall, with respect to each Borrower, mean and
-------------------
include all of such Borrower's now owned and hereafter acquired choses in
action, causes of action and all other intangible personal property of
every kind and nature (other than Accounts), including, without limitation,
corporate and other business records, inventions, designs, patents, patent
applications, service marks, trademarks, trademark applications, trade
names, trade secrets, goodwill, registrations, copyrights, licenses,
franchises, customer lists, reversions from any Benefit Plan, tax refunds,
tax refund claims, rights and claims against carriers, shippers,
franchisees, lessors and lessees, and rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any
similar type of insurance and any proceeds thereof, proceeds of insurance
covering the lives of key employees on which such Borrower is beneficiary,
and any letter of credit, guarantee, claim, security interest or other
security held by or granted to such Borrower to secure payment by an
Account Debtor of any of the Accounts.
"Good Faith" shall mean honesty in fact in the conduct or transaction
----------
concerned, without regard to whether standards which might be deemed
commercially reasonable have been observed.
"Government Acts" shall have the meaning ascribed to it in Section
--------------- -------
3.8(a).
------
"Governmental Authority" shall mean any nation or government, any
----------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, local or other political
subdivision thereof or thereto and any department, commission, board,
bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" means, with respect to any Person, all obligations of such
--------
Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person (the
"guaranteed obligations"), or to assure or in effect assure the holder of
the guaranteed obligations against loss in respect thereof, including,
without limitation, any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed obligations or any
property constituting security thereof; (b) to advance or supply funds for
the purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition; (c) to lease property or
to purchase any debt or equity securities or other property or services.
8
"Indemnitees" shall have the meaning ascribed to it in Section 12.9.
----------- ------------
"Interest Period" means, for each Eurodollar Rate Loan, the period
---------------
commencing on the date of such Loan or the conversion thereof and ending on
the last day of the period selected by the Borrowers pursuant to the
provisions below. The duration of each such Interest Period shall be one,
two, three or six months as the Borrowers may select, upon notice received
by the Lender in accordance with Section 2.3(b) or Section 2.11, as the
-------------- ------------
case may be; provided, however, that:
-------- -------
(i) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day; provided, however, that if such extension would cause
-------- -------
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(ii) the Borrowers shall not select an Interest Period for any
Loan that ends after the applicable Termination Date for the Credit
Facility under which such Loan is made.
"Interest Rate Contracts" shall mean interest rate insurance product
-----------------------
agreements providing interest rate protection.
"Inventory" shall mean and include with respect to each Borrower, such
---------
Person's now owned and hereafter acquired goods, materials, supplies,
merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, rail,
ties, fuel, oil, grease, wheels, brake shoes and other locomotive and
railcar replacement parts and all raw materials, work in process, finished
goods and materials, parts and supplies of any kind, nature or description
which are used or consumed in such Borrower's business or are or might be
used in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and other personal
property, or are used in connection with the provision of services in such
Borrower's business, all returned or repossessed goods now, or at any time
or times hereafter, in the possession or under the control of such Borrower
or Lender, and all documents of title or documents representing the same.
"IRS" shall mean the Internal Revenue Service, or any successor
---
thereto.
"L/C Fees" shall have the meaning set forth in Section 3.7.
-------- -----------
"Letter of Credit" shall mean a letter of credit issued by the Lender
----------------
for the account of any Borrower pursuant to Article III.
-----------
"Letter of Credit Obligations" shall mean, at any particular time, the
----------------------------
sum of (i) the Reimbursement Obligations at such time, plus (ii) the
----
aggregate maximum amount available for drawing under the Letters of Credit
at such time, plus (iii) the aggregate maximum amount available for drawing
----
under Letters of Credit which have been requested but not yet been issued,
in each case, as determined by the Lender.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, security interest, encumbrance for the
payment of money, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other
title retention agreement, the interest of a lessor under a capital lease,
any financial lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement (other than a
financing statement filed by a "true" lessor pursuant to (S) 9-408 of the
Code or other comparable law of any jurisdiction) naming the owner of the
asset to which such Lien relates as debtor under the Code or other
comparable law of any jurisdiction.
9
"Loan" shall mean a Term Loan or a Working Capital Loan.
----
"Loan Account" shall have the meaning ascribed to it in Section
------------ -------
2.3(e).
------
"Loan Documents" shall mean this Agreement and all other agreements,
--------------
instruments and documents, including, without limitation, any other
security agreements, notes, warrants, guaranties, mortgages, deeds of
trust, subordination agreements, pledges, powers of attorney, consents,
assignments, collateral assignments, letter agreements, contracts, notices,
leases, amendments, financing statements, letter of credit applications and
reimbursement agreements, and all other writings heretofore, now, or
hereafter executed by or on behalf of any of the Borrowers or any of their
Affiliates and delivered to the Lender in connection with or relating to
this Agreement (including, without limitation, any Interest Rate Contract
entered into by any Borrower with Lender or any Affiliate of Lender),
together with all agreements, instruments and documents referred to therein
or contemplated thereby, in each case, as amended from time to time.
"Mandatory Prepayment" shall have the meaning ascribed to it in
--------------------
Section 2.4(b).
--------------
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA which is, or within the immediately preceding
six (6) years was, contributed to by either Borrower or an ERISA Affiliate.
"Net Cash Proceeds of Sale" shall mean Net Proceeds of Sale received
-------------------------
by any Borrower or any of its Subsidiaries in cash or equivalents readily
convertible into cash.
"Net Income" shall mean with respect to any Person, for any period,
----------
the net earnings (or loss) after taxes of such Person for such period taken
as a single accounting period determined in conformity with GAAP.
"Net Proceeds of Sale" shall mean proceeds (including insurance
--------------------
proceeds and any notes received as consideration and any other non cash
consideration) received by any Borrower or its Subsidiaries from the sale,
lease, assignment, casualty, condemnation or other disposition outside of
the ordinary course of business of any Property of such Person net of the
costs of sale, lease, assignment or other disposition, taxes paid or
payable as a result thereof, amounts applied to the repayment of other Debt
secured by a Lien on the asset disposed of and amounts permitted to be used
under this Agreement, and in fact used, in the case of casualty or
condemnation, within 180 days of receipt, to purchase or lease a
replacement asset.
"Net Worth" shall mean with respect to any Person, as at any date of
---------
determination, the amount by which total assets of such Person exceed total
liabilities of such Person.
"Notes" shall mean each and every Term Note and Working Capital Note
-----
and any other note or notes executed by a Borrower pursuant to this
Agreement.
"Notice of Borrowing" shall mean a notice substantially in the form of
-------------------
Exhibit B attached hereto and made a part hereof.
---------
"Non-Use Fee" shall have the meaning set forth in Section 2.12.
----------- -------------
"Notice of Conversion" shall have the meaning provided in Section
-------------------- -------
2.11(a).
-------
"Obligations" shall mean and include all loans, advances, debts,
-----------
liabilities, obligations, covenants and duties owing to the Lender, any
Affiliate of the Lender, any Indemnitee or any of their respective
successors and assigns, from or assumed by any Borrower of any kind or
nature, present or future, whether or not evidenced by any note, guaranty
or other instrument, whether arising under this Agreement, any Interest
Rate Contract entered into with the Lender or any Affiliate of Lender, or
under any other Loan Document, whether or not for the payment of money,
10
whether arising by reason of an extension of credit, opening or amendment
of a letter of credit (or payment of any draft drawn thereunder), loan,
guaranty, indemnification, foreign exchange or interest rate swap
transactions or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become
due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees,
attorneys' fees and disbursements and paralegals' fees, any other sums
chargeable to Borrowers under this Agreement or any other Loan Document.
"Other Taxes" shall have the meaning ascribed to it in Section 2.9(b).
----------- --------------
"Participating Lender" means any Person who shall have been granted
--------------------
the right by Lender to participate in the financing provided pursuant to
this Agreement and who shall have entered into a participation agreement
with Lender.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
----
Person succeeding to the functions thereof.
"Pending Loans" shall mean, at any time, the aggregate principal
-------------
amount of all Working Capital Loans requested in any Notice(s) of Borrowing
previously received by the Lender but not yet advanced at such time.
"Permitted Liens" means the Liens reflected on Schedule 1.1 attached
--------------- ------------
hereto and incorporated herein by this reference and any of the following
Liens created after the date hereof:
(i) Liens for taxes not yet payable;
(ii) statutory Liens for taxes in an amount not to exceed
$100,000 provided that the payment of such taxes which are due and
payable is being contested in Good Faith and by proper proceedings
diligently pursued, and that reserves or other appropriate provision,
if any, as shall be required by GAAP shall have been made therefor and
that a stay of enforcement of any such Lien is in effect;
(iii) Liens in favor of the Lender;
(iv) Liens upon Equipment granted or assumed in connection with
the acquisition of such Equipment by a Borrower after the date hereof
(including, without limitation, pursuant to Capital Leases), provided,
--------
that (a) the cost of each such acquisition constitutes a Capital
Expenditure permitted by Section 7.21 (including Capital Expenditures
------------
made with grant funding and Debt permitted by Section 7.13(d), (b) the
Debt incurred to finance each such acquisition is permitted by Section
-------
7.13, and (c) each such Lien attaches only to the Equipment acquired
----
with the Debt secured thereby;
(v) deposits under workmen's compensation, unemployment
insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance or
other similar bonds for the performance of bids, tenders or contracts
(other than for the repayment of borrowed money) or to secure
statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course
of business;
(vi) Liens which arise by operation of law under Article 2 of
the UCC in favor of unpaid sellers of goods or prepaying buyers of
goods, or liens in items of any accompanying documents or proceeds of
either arising by operation of law under Article 4 of the UCC in favor
of a collecting bank; and
11
(vii) Liens arising by operation of law securing the claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons, provided that the payment thereof is not at
--------
the time required by Section 7.1.
-----------
"Person" shall mean and include any person, employee, individual, sole
------
proprietorship, partnership, joint venture, trust, limited liability
company, unincorporated organization, association, corporation,
institution, entity, party or Governmental Authority.
"Plan" shall mean an employee benefit plan defined in Section 3(3) of
----
ERISA in respect of which any Borrower or an ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Property" shall mean, with respect to any Borrower or any Subsidiary,
--------
any real or personal property, plant, building, facility, structure,
equipment or unit, or other asset owned, leased or operated by such Person
and any of its Subsidiaries, including, without limitation, such Person's
Equipment and Inventory.
"Proprietary Rights" means, with respect to each Borrower, all of such
------------------
Borrower's now owned and hereafter arising or acquired: licenses,
franchises, permits, patents, patent rights, copyrights, works which are
the subject matter of copyrights, trademarks, service marks, trade secrets,
trade names, trade styles, patent, trademark and service ▇▇▇▇ applications,
and all licenses and rights related to any of the foregoing, including,
without limitation, those patents, trademarks, service marks and copyrights
set forth on Schedule 6.10 attached hereto and incorporated herein by this
-------------
reference, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of
any of the foregoing, and all rights to ▇▇▇ for past, present and future
infringement of any of the foregoing.
"Railroad Pledge Agreement" shall mean that certain Pledge Agreement
-------------------------
of even date herewith executed by Railroad Group in favor of Lender
pursuant to which Railroad Group has pledged the shares of the capital
stock of YKR and SLR.
"Real Property" shall have the meaning provided in Section 4.2.
------------- -----------
"Real Property Security Documents" shall have the meaning provided in
--------------------------------
Section 4.2.
-----------
"Regulation D" shall mean Regulation D of the Federal Reserve Board as
------------
in effect from time to time.
"Regulation G" shall mean Regulation G of the Federal Reserve Board as
------------
in effect from time to time.
"Regulation T" shall mean Regulation T of the Federal Reserve Board as
------------
in effect from time to time.
"Regulation U" shall mean Regulation U of the Federal Reserve Board as
------------
in effect from time to time.
"Regulation X" shall mean Regulation X of the Federal Reserve Board as
------------
in effect from time to time.
"Reimbursement Obligations" shall mean the reimbursement or repayment
-------------------------
obligations of the Borrowers to the Lender pursuant to Section 3.5 or
-----------
pursuant to Letter of Credit Reimbursement Agreements with respect to
Letters of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment or into or out of any Property,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater or Property.
12
"Remedial Action" shall mean actions required to (i) clean up, remove,
---------------
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; or (iii) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Reportable Event" shall mean any of the events described in Section
----------------
4043 of ERISA.
"Restricted Investment" means, with respect to any Borrower, any
---------------------
acquisition of property by such Borrower or any of its Subsidiaries in
exchange for cash or other property, whether in the form of an acquisition
of stock, debt security, or other indebtedness or obligation, or the
purchase or acquisition of any other property, or by loan, advance, capital
contribution, or subscription, except acquisitions of the following: (i)
fixed assets to be used in the business of such Borrower or a Subsidiary,
so long as the acquisition costs thereof constitute Capital Expenditures
permitted hereunder; (ii) goods held for use in the provision of services
by such Borrower or a Subsidiary in the ordinary course of business; (iii)
current assets arising from the rendition of services in the ordinary
course of business of such Borrower or a Subsidiary; (iv) direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
--------
obligations mature within one year from the date of acquisition thereof;
(v) certificates of deposit maturing within one year from the date of
acquisition, bankers' acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued by, created by, or with a bank or trust
company organized under the laws of the United States or any state thereof
having capital and surplus aggregating at least $100,000,000; and (vi)
commercial paper given the highest rating by a national credit rating
agency and maturing not more than 90 days from the date of creation
thereof.
"Restricted Junior Payment" shall mean (i) any dividend or other
-------------------------
distribution, direct or indirect, on account of any shares of any class of
capital stock of the Borrowers now or hereafter outstanding, except a
dividend payable solely in shares of the issuer, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of capital stock
of the Borrowers now or hereafter outstanding, and (iii) any payment made
to redeem, purchase, repurchase or retire, or to obtain the surrender of or
any outstanding warrants, options or other rights to acquire shares of any
class of capital stock of the Borrowers now or hereafter outstanding (other
than the issuance of common stock) upon the exercise of any such warrants,
options or rights to acquire such stock.
"Rolling Stock" shall mean any gondola, boxcar, tanker, locomotive or
-------------
railcar of any type.
"SEC" shall mean the Securities and Exchange Commission and any
---
successor agency.
"Securities" shall mean any stock, shares, voting trust certificates,
----------
partnership interests (whether general or limited), bonds, debentures,
notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities", whether certificated or uncertificated, or
any certificates of interest, shares, or participation in temporary or
interim certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include the Notes or any other evidence of the Obligations.
"Solvent" means when used with respect to any Borrower that (i) the
-------
fair saleable value of all its Property as a going concern, is in excess of
the total amount of its debts (including contingent liabilities); (ii) it
is able to pay its debts as they mature; (iii) it does not have
unreasonably small capital for the business in which it is engaged or for
any business or transaction in which it is about to engage; and (iv) it is
not "insolvent" as such term is defined in Section 101(31) of the
Bankruptcy Code.
"Subordinated Indebtedness" shall mean (i) the indebtedness due under
-------------------------
the Canadian National Note, and (ii) with respect to any Borrower that
portion of any unsecured Funded Indebtedness of such Borrower that is
incurred
13
on terms and conditions approved in writing by the Lender and is
subordinated, in a manner approved in writing by the Lender, as to right
and time of payment of principal and interest thereon to any and all of the
Obligations.
"Subsidiary" means any corporation or other entity of which more than
----------
fifty percent (50.0%) of the voting power of the outstanding securities or
interests of any class or classes, is at the time, directly or indirectly
through one or more intermediaries, owned by one or more of the Borrowers
and/or one or more of their Subsidiaries.
"Taxes" shall have the meaning ascribed to it in Section 2.9(a).
----- --------------
"Term Loan" means the Loan described in Section 2.1(a).
--------- --------------
"Termination Date" shall mean June 30, 2004.
----------------
"Term Loan Facility" shall mean the credit facility provided under
------------------
Section 2.1.
-----------
"Term Note" shall have the meaning ascribed to it in Section 2.1(b).
--------- --------------
"Termination Event" shall mean (i) a Reportable Event with respect to
-----------------
any Benefit Plan; (ii) the withdrawal of any Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which such Borrower or
such ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the imposition of an obligation on such Borrower
or any ERISA Affiliate under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by
the PBGC of proceedings to terminate a Benefit Plan; (v) any event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of such Borrower
or any ERISA Affiliate from a Multiemployer Plan.
"Third Party Collateral" shall mean any property of any Person, other
----------------------
than a Borrower, which, pursuant to the terms of any of the Loan Documents,
secures the payment and performance of any portion of the Obligations.
"UCC" means the Uniform Commercial Code (or any successor statute) of
---
the State of Pennsylvania or Illinois or of any other state the laws of
which are required by Section 9-103 thereof to be applied in connection
with the issue of perfection of security interests.
"Voting Stock" means securities of any class or classes of a
------------
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Working Capital Amount" shall mean at any time of determination an
----------------------
amount equal to the lesser of (i) the Working Capital Commitment at such
time or (ii) the amount of the Borrowing Base at such time.
"Working Capital Commitment" shall mean $2,000,000, as such amount may
--------------------------
be reduced from time to time pursuant to Section 2.4 or Section 9.2 of this
----------- -----------
Agreement.
"Working Capital Facility" shall mean the credit facility provided
------------------------
under Section 2.2.
-----------
"Working Capital Loans" shall have the meaning ascribed to it in
---------------------
Section 2.2(a).
--------------
"Working Capital Note" shall have the meaning ascribed to it in
--------------------
Section 2.2(b).
--------------
"Working Capital Termination Date" shall mean August 15, 1999.
--------------------------------
14
I.2 Accounting Terms. Any accounting terms used in this Agreement
----------------
which are not specifically defined shall have the meanings customarily given
them in accordance with GAAP.
I.3 Other Terms. All other terms contained in this Agreement shall,
-----------
unless the context indicates otherwise, have the meanings provided for by the
UCC to the extent the same are defined therein.
I.4 Computation of Time Periods. For purposes of this Agreement,
---------------------------
in the computation of periods of time from a specified date to a later specified
date, unless otherwise specified, the word "from" means "from and including" and
the words "to" and "until" each means "to and including."
II.
LOANS AND OTHER FINANCIAL ACCOMMODATIONS
II.1 The Term Loan Facility.
----------------------
(a) Amount of Term Loan. Subject to the terms and conditions
-------------------
of this Agreement and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Lender hereby agrees
to make to Borrowers on the Closing Date a term loan (the "Term Loan")
---------
in an amount equal to $7,775,000. Upon satisfaction of the applicable
conditions set forth in Article VIII hereof, the Lender shall make the
------------
proceeds of the Term Loan available to the Borrowers by transferring
same day funds equal to the Term Loan to an account designated in
writing by Emons, on behalf of the Borrowers. Initially, the Term Loan
shall be made as a Base Rate Loan. The amount of any voluntary
reductions of the outstanding Term Loan as described in Section 2.4(a)
--------------
may be reborrowed, subject to the satisfaction of the other terms and
conditions hereof, provided that at no time will the Lender be obligated
to make any Term Loan if after giving effect to such Loan, the aggregate
outstanding amount of the Term Loan shall exceed the Available Term Loan
Amount at such time; and provided, further, that at any time the Term
Loan has been repaid in full, no further amounts may be reborrowed under
the Term Loan Facility.
(b) Term Note. Borrowers shall execute and deliver to Lender
---------
a promissory note, substantially in the form of Exhibit D attached
---------
hereto and made a part hereof (the "Term Note"), to evidence the Term
-----------
Loan.
II.2 Working Capital Loans.
---------------------
(a) Availability.
------------
(i) Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties
of the Borrowers herein set forth, the Lender hereby agrees to
make revolving credit loans ("Working Capital Loans") to the
---------------------
Borrowers from time to time during the period from the Closing
Date to the Working Capital Termination Date, in an amount which
shall not exceed, in the aggregate at any time outstanding, the
amount, if any, by which the Working Capital Amount at such time
exceeds the sum of (A) the aggregate Letter of Credit Obligations
at such time plus (B) the aggregate amount of the Pending Loans
----
at such time.
(ii) From the Closing Date to the Working Capital
Termination Date and subject to all of the terms and conditions
of this Agreement, Working Capital Loans may be voluntarily
prepaid pursuant to Section 2.4(a), and any amounts so prepaid,
--------------
together with the amount of mandatory prepayments made pursuant
to Section 2.4(c), may be reborrowed, up to the amount available
--------------
under this Section 2.2(a) at the time of such Borrowing.
--------------
15
(iii) Working Capital Loans made on any Funding Date
which constitute Eurodollar Rate Loans shall be in the aggregate
minimum amount of $100,000.00 and integral multiples of $10,000
in excess of that amount. Working Capital Loans made on any
Funding Date which constitute Base Rate Loans shall be in the
aggregate minimum amount of $25,000.00 and integral multiples of
$5,000 in excess of that amount.
(b) Working Capital Note. The Borrowers shall execute and
--------------------
deliver to the Lender a promissory note (a "Working Capital Note")
--------------------
substantially in the form of Exhibit E attached hereto and made a part
---------
hereof to evidence the aggregate amount of the Working Capital Loans
from time to time outstanding in the original principal amount of
$2,000,000 and with other appropriate insertions. The Working Capital
Note shall be dated as of the Funding Date for the Term Loan and shall
mature on the Working Capital Termination Date.
II.3 Notice of Borrowing; Making the Loans; Loan Accounts.
----------------------------------------------------
(a) Each Loan shall be made on notice, given by Emons on behalf
of the Borrowers to the Lender in writing, including, by telecopy, not
later than 11:00 a.m. (Chicago time) on (A) the third Business Day prior
to the date of the proposed Borrowing, in the case of a request for a
Eurodollar Rate Loan, and (B) the Business Day of the proposed
Borrowing, in the case of a request for a Base Rate Loan. Each such
notice of a borrowing (a "Notice of Borrowing") shall be substantially
-------------------
in the form of Exhibit B attached hereto. Any Notice of Borrowing must
---------
specify the requested (i) date of such Loan, (ii) type of Loan, (iii)
aggregate amount of such Loan, (iv) applicable Interest Period for each
such Loan if such Loan is a Eurodollar Rate Loan, and (v) the account or
accounts to which the proceeds of such Loan are to be disbursed. The
original of each Notice of Borrowing given by telecopy shall be sent to
the Lender by mail for receipt within five (5) days after the applicable
Funding Date. Upon fulfillment of the applicable conditions set forth in
Article VIII, the Lender will make such funds available to the Borrowers
------------
in such deposit account maintained with the Lender as Emons, on behalf
of the Borrowers, shall designate.
(b) Anything in paragraph (a) above to the contrary
-------------
notwithstanding,
(i) if the Lender shall, at least one Business Day
before the date of any requested Borrowing, notify the Borrowers
that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or
that any central bank or other Governmental Authority makes it
unlawful, for the Lender to perform its obligations hereunder to
make Eurodollar Rate Loans; or
(ii) if the Lender is unable, after reasonable efforts,
due to prevailing market conditions, to provide timely
information for the determination of the Eurodollar Rate, or is
otherwise unable to determine the Eurodollar Rate at any time, or
(iii) if the Lender has reasonably determined that the
Eurodollar Rate is inadequate to compensate the Lender,
then, in either such event, the right of the Borrowers to select
Eurodollar Rate Loans shall be suspended until the Lender shall notify
the Borrowers that the circumstances causing such suspension no longer
exist, and each Loan shall be a Base Rate Loan.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Borrowers. In the case of any requested Eurodollar Rate Loans,
the Borrowers shall indemnify the Lender against any loss, reasonable
cost or expense incurred by the Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing for
such Loan the applicable conditions set forth in Article VIII,
------------
including, without limitation, any loss (including loss of anticipated
profits of which the Lender shall supply to Borrowers
16
reasonable calculations), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the
Lender to fund the requested Loan, as a result of such failure, is not
made on such date.
(d) The Borrowers shall notify the Lender in writing of the
names of the officers and employees authorized to request any Loans on
behalf of Borrowers, and shall provide the Lender with a specimen
signature of each such officer or employee. The Lender shall be entitled
to rely conclusively on such officer's or employee's authority to
request a Loan on behalf of the Borrowers, until the Lender receives
written notice to the contrary. The Lender shall have no duty to verify
the authenticity of the signature appearing on any written Notice of
Borrowing.
(e) The Lender shall establish or cause to be established on
its books in the Borrowers' name an account (each, a "Loan Account") to
------------
evidence Loans made to Borrowers. The Lender will credit or cause to be
credited to a commercial account ("Demand Deposit Account") maintained
----------------------
by Emons at Lender's Chicago, Illinois office, the amount of any sums
advanced as Loans hereunder. Any amounts credited to such Demand Deposit
Account and advanced to Borrowers as a Loan pursuant to this Agreement,
will be debited to the Borrowers' Loan Account and result in an increase
in the principal balance outstanding in the Loan Account in the amount
thereof. The Lender is hereby authorized, at its option, either (i) to
endorse the date and amount of each Loan made by it and each repayment
or prepayment of principal of Loans made with respect to the applicable
Note on the schedule annexed to and constituting a part of the Note or
(ii) to record such Loans, repayments and prepayments in its books and
records, such schedule or such books and records, as the case may be,
constituting prima facie evidence, absent manifest error, of the
accuracy of the information contained therein.
II.4 Prepayments; Reserves.
---------------------
(a) Voluntary Prepayments. The Borrowers may (i) at any time
---------------------
prepay the Working Capital Loans in whole or in part, subject to Section
-------
2.6, and (ii) upon not less than two (2) Business Days' prior written or
---
telephonic notice confirmed promptly in writing to the Lender, at any
time and from time to time, prepay the Term Loan in whole or in part,
without premium or penalty (except as provided in Section 2.6), in an
-----------
aggregate minimum amount of $50,000 and integral multiples of $10,000 in
excess of that amount; provided, however, that the Borrowers may prepay
-------- -------
the Term Loan in full without regard to such minimum amount. Any notice
of prepayment given to the Lender under this Section 2.4(a) shall
--------------
specify the date of prepayment, the aggregate principal amount of the
prepayment and which Loans such prepayment is to be applied against. To
the extent that any voluntary prepayment is made against the Term Note,
such voluntary prepayments shall be applied to the installments due
under the Term Note in the order of maturity until paid in full and,
subject to the other terms and conditions of this Agreement may be
reborrowed pursuant to Section 2.3 hereof. Notice of prepayment having
-----------
been delivered as provided herein, the principal amount of the Loans
specified in such notice shall become due and payable on the prepayment
date.
(b) Reductions of the Available Term Loan Amount and
------------------------------------------------
Prepayments of Loans. The Available Term Loan Amount shall be reduced
--------------------
on each of the dates set forth below by the dollar amount set forth
opposite such date and to the extent that the outstanding principal
amount of the Term Loan on such date shall exceed the Available Term
Loan Amount on such date, the Borrowers shall immediately pay the amount
of such excess:
===================================================================
Date Amount of Reduction
---- -------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
9/30/97, 12/31/97, 3/31/98, 6/30/98 $ 62,500
-------------------------------------------------------------------
9/30/98, 12/31/98, 3/31/99, 6/30/99 $ 150,000
-------------------------------------------------------------------
9/30/99, 12/31/99, 3/31/00, 6/30/00 $ 200,000
17
===================================================================
Date Amount of Reduction
---- -------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
9/30/00, 12/31/00, 3/31/01, 6/30/01 $ 200,000
-------------------------------------------------------------------
9/30/01, 12/31/01, 3/31/02, 6/30/02 $ 262,500
-------------------------------------------------------------------
9/30/02, 12/31/02, 3/31/03, 6/30/03 $ 300,000
-------------------------------------------------------------------
9/30/03, 12/31/03, 3/31/04 $ 325,000
-------------------------------------------------------------------
6/30/04 $2,100,000
===================================================================
18
In addition to the reductions described above, within two (2)
Business Days after the receipt by any Borrower or any of its
Subsidiaries of any Net Cash Proceeds of Sale, such Borrower shall make
a mandatory prepayment of the Term Loan, without premium or penalty
except as provided in Section 2.6, in an amount equal to the amount by
-----------
which such Net Cash Proceeds of Sale and all other amounts, Net Cash
Proceeds of Sale received by the Borrowers and their Subsidiaries during
the applicable Fiscal Year exceeds $100,000, such to be set forth in an
officers' certificate delivered by the Borrowers to the Lender
concurrently with such payment and to be made as of the date of such
officers' certificate (each such payment, a "Net Proceeds Prepayment").
-----------------------
In addition, within one hundred and twenty (120) days after the end of
each Cash Flow Period, the Borrowers shall make a mandatory prepayment,
without premium or penalty except as provided in Section 2.6, of the
-----------
Term Loan in an amount equal to 50% of any Excess Cash Flow for such
Cash Flow Period (each such payment, an "Excess Cash Prepayment," which
----------------------
together with all other Excess Cash Prepayments and Net Proceeds
Prepayments shall be referred to collectively as "Mandatory
---------
Prepayments"). The Borrower shall give the Lender not less than two (2)
-----------
Business Days' prior written notice of the date on which each such
Mandatory Prepayment will be made (which date shall be no later than the
date on which such Mandatory Prepayment becomes due and payable pursuant
to this Section 2.4(b)) and, with respect to Excess Cash Prepayments,
--------------
such notice shall be accompanied by the audited or preliminary audited
annual financial statements of the Borrowers for such Cash Flow Period
(except for the Cash Flow Period commencing September 1, 1997 which
shall be accompanied by internally prepared financial statements),
together with a computation of Excess Cash Flow for such Cash Flow
Period. Each Mandatory Prepayment shall be applied first to the
installments on the Term Loan in the inverse order of maturity until
paid in full and next, to the Working Capital Loans outstanding. The
Available Term Loan Amount shall be immediately reduced by the amount of
each Mandatory Prepayment. In addition, at the Lender's option the
Working Capital Commitment shall be permanently reduced on a dollar for
dollar basis by the amount of such Mandatory Prepayments in excess of
those applied to the Term Loan.
(c) Mandatory Prepayment of Working Capital Loans. The
---------------------------------------------
Borrower shall make prepayments of Working Capital Loans to the extent
necessary such that the sum of (i) the aggregate principal amount of the
Working Capital Loans outstanding at any time, plus (ii) the aggregate
Letter of Credit Obligations at such time, plus (iii) the aggregate
----
Pending Loans at such time, does not exceed the Working Capital Amount
at such time.
(d) Modification of Advance Rates and Eligibility Reserves.
------------------------------------------------------
Borrowers agree that the Lender shall have the right, at any time and
from time to time, at the discretion of the Lender, exercised in its
reasonable credit judgment and in Good Faith, (i) to reduce or otherwise
modify the advance rates applied to Eligible Receivables as specified in
the definitions of "Borrowing Base," (ii) to add additional restrictions
which exclude particular types of Accounts from Eligible Receivables,
and (iii) to establish Eligibility Reserves, increase the amount thereof
and add additional types of Eligibility Reserves. The Borrowers
expressly acknowledge that the above referenced reductions, restrictions
and additions may have the effect of reducing the credit available under
this Agreement.
II.5 Interest. The Borrowers shall pay interest on the unpaid
--------
principal amount of each Loan from the date of such Loan until such principal
amount shall be paid in full, at the following intervals and at the following
rates per annum:
(a) Base Rate Loans. If such Loan is a Base Rate Loan, a rate
---------------
per annum equal to the Applicable Margin at the time of determination
plus the Base Rate in effect from time to time, payable, in arrears, on
----
the last day of each calendar quarter and on the date such Base Rate
Loan shall be paid in full; and
19
(b) Eurodollar Rate Loans. If such Loan is a Eurodollar Rate
Loan, a rate per annum equal at all times during the Interest Period for
such Loan to the Eurodollar Rate for such Interest Period plus the
Applicable Margin at the time of determination, payable, in either such
event, in arrears, on the last day of each Interest Period (provided that
if such Interest Period exceeds three months, on the last day of the third
month and on the last day of such Interest Period), or, if earlier, on the
date such Eurodollar Rate Loan shall be paid in full;
provided, however, that, from and after the occurrence of an Event of Default
-------- -------
and unless and until such Event of Default is cured or waived, (i) the Borrowers
shall not be entitled to elect that any portion of any Loan be a Eurodollar Rate
Loan; and (ii) the Borrowers shall pay interest on the unpaid principal amount
of all Loans at the Default Rate, such interest being payable on demand.
II.6 Prepayment Provisions; Breakage Costs. The Borrowers shall have no
-------------------------------------
right to voluntarily prepay any principal amount of any Loans other than Base
Rate Loans. If the Borrowers repay any Eurodollar Rate Loan prior to the last
day of the applicable Interest Period for any reason, the Borrowers shall pay to
the Lender the amount of any cost, loss (including loss of anticipated profits)
or expense incurred by the Lender as a result of the repayment of a Eurodollar
Rate Loan prior to the last day of the Interest Period applicable to such Loan
including, without limitation, any cost or expense incurred by Lender by reason
of the liquidation and reemployment of deposits or other funds acquired by the
Lender to fund the Eurodollar Rate Loan being prepaid.
II.7 Increased Costs; Increased Capital. In the event that the Lender
----------------------------------
determines that compliance with any United States (including any state,
political subdivision, territory or possession thereof) or foreign law,
regulation, treaty, directive or guideline, currently or hereafter in effect, or
the interpretation or application thereof, or the compliance with any request,
guideline or directive (whether or not having the force of law) from any United
States or foreign central bank or any other Governmental Authority:
(a) imposes, modifies or holds applicable any reserve, special
deposit, compulsory loan or similar requirement against, or imposes any
other conditions with respect to assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other credit
or commitment therefor extended by, or any other acquisition of funds by,
any office of the Lender which is not otherwise included or accounted for
in any determination of the Eurodollar Rate or any interest payable
hereunder; or
(b) affects or would affect the amount of capital required or
expected to be maintained by the Lender or any corporation controlling the
Lender and the Lender determines that the amount of such capital is
increased by or based upon the existence of the Lender's obligations to
make, maintain or fund the Eurodollar Loans;
and the result is to increase (as reasonably determined by the Lender) the cost
to the Lender of (i) agreeing to make, making, funding, renewing or maintaining
the Eurodollar Loans hereunder, or (ii) agreeing to maintain, or its maintenance
of, the Working Capital Commitment hereunder, or to reduce any amount receivable
in respect of any of the foregoing, or to reduce (as determined by the Lender)
the rate of return on the Lender's or such controlling corporation's capital
(taking into account the policies of the Lender or corporation with regard to
capital), then, in any such case, the Borrowers agree to pay to the Lender upon
the Lender's demand any additional amount as may be necessary to compensate
fully the Lender for such additional cost, reduced amount receivable, or reduced
rate of return as reasonably determined by the Lender to place the Lender in the
same economic position as if such compliance had not occurred. The Lender will
promptly notify the Borrowers, in writing, of the occurrence of any of the
events described in this Section 2.7.
-----------
II.8 Payments and Computations.
-------------------------
20
(a) All payments of principal, interest, Reimbursement Obligations and fees
hereunder and under the Notes payable to the Lender shall be made without
condition or reservation of right and in same day funds and delivered to the
Lender not later than 1:00 p.m. (Chicago time) on the date due to such account
of the Lender as the Lender may designate; and funds received by the Lender
after that time shall be deemed to have been paid on the next succeeding
Business Day.
(b) The Borrowers hereby authorize the Lender and, unless the Borrowers
have arranged for another means of payment satisfactory to the Lender, the
Lender shall, if and to the extent any payment is due hereunder, to charge from
time to time against any or all of the Borrowers' accounts with the Lender any
amount so due. The Lender shall notify the Borrowers of any such charge;
provided, however, that the failure to give such notice shall not limit or
-------- -------
otherwise affect the obligation of the Borrowers to make any payment when due
hereunder.
(c) All computations of interest calculated on the basis of the Base Rate
shall be made by the Lender on the basis of a year of 365 or 366 days as
applicable, and all calculations of all other interest and fees shall be
calculated on the basis of a year of 360 days, in each case, for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest or fees are payable. Each determination by
the Lender of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest or the Non-Use Fee, as the case may be;
provided, however, if such extension would cause payment of interest on or
-------- -------
principal of Eurodollar Rate Loans to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
21
(e) Prior to the occurrence of an Event of Default, except as otherwise
directed by the Borrowers (and notwithstanding any other application thereof by
the Lender on its books, which application may be made in the Lender's
discretion), any payments received by the Lender from the Borrowers shall be
applied as follows: first, to pay interest due in respect of Working Capital
-----
Loans; second, to pay interest due in respect of the Term Loan; third, to pay
------ -----
the outstanding principal of the Working Capital Loans which constitute Base
Rate Loans; fourth, to pay the outstanding principal of the Working Capital
------
Loans which constitute Eurodollar Rate Loans (in the order of their maturity);
fifth, to pay the outstanding principal of any portion of the Term Loan which
-----
constitutes Base Rate Loans; sixth, to pay the outstanding principal of any
-----
portion of the Term Loan which constitutes Eurodollar Rate Loans (in the order
of their maturity); seventh, to provide cash collateral in respect of Letter of
-------
Credit Obligations; and eighth, to the payment of any other Obligation due to
------
the Lender. During the existence of an Event of Default, the Lender may apply
any payments received by the Borrowers to the Obligations in any manner
determined by the Lender in its discretion. No checks, drafts or other
instruments received by the Lender shall constitute final payment to the Lender
for the accounts of the Lender unless and until such item or payment has
actually been collected. All items or amounts which are delivered to the Lender
by or on behalf of any Borrower or any Account Debtor on account of partial or
full payment or otherwise as proceeds of any of the Collateral or Third Party
Collateral (including any items or amounts which may have been deposited to the
Concentration Account) may, during the existence of an Event of Default, from
time to time in the Lender's discretion, be released to the Borrowers or may be
applied by the Lender towards payment of the Obligations, whether or not then
due as provided in the foregoing terms of this subsection. Notwithstanding
anything to the contrary herein, (i) solely for purposes of determining the
occurrence of an Event of Default, all cash, checks, instruments and other items
of payment shall be deemed received upon actual receipt by the Lender, unless
the same is subsequently dishonored for any reason whatsoever, (ii) for purposes
of determining whether, under Sections 2.2 and 3.2, there is availability for
------------ ---
Working Capital Loans or Letters of Credit and for purposes of interest
calculation hereunder, (A) all cash and collected funds shall be deemed to have
been applied against the Obligations on the Business Day which Lender shall have
received, prior to 1:00 p.m. (Chicago time), such funds, and (B) all checks,
instruments and other items of payment shall be deemed to have been applied
against the Obligations on the second (2nd) Business Day after the Business Day
on which the Lender shall have received, prior to 1:00 p.m. (Chicago time), such
items of payment. The foregoing apportionment of payments is solely for the
purpose of determining the obligations of the Borrowers hereunder and,
notwithstanding such apportionment, Lender may on its books and records allocate
payments received by it in a manner different from that contemplated hereby. No
such different allocation shall alter the rights and obligations of the
Borrowers under this Agreement determined in accordance with the apportionments
contemplated by this subsection (e). To the extent that the Borrowers make a
--------------
payment or payments to the Lender, including, without limitation, proceeds of
the Accounts, other Collateral or Third Party Collateral for the Borrowers'
benefit, which payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause then, to the
extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the Lender.
(f) Each Borrower hereby authorizes the Lender, and the Lender may, in its
discretion, charge to each Borrower at any time when due all or any portion of
any of the Obligations (and interest, if any, thereon), including but not
limited to any costs and expenses of the Lender for which the Borrowers are
liable pursuant to the terms of this Agreement or any other Loan Document, by
charging Emon's Demand Deposit Account or any other bank account of any Borrower
maintained with the Lender; provided, however, that the provisions of this
-------- -------
subsection (f) shall not affect the Borrowers' obligation to pay when due all
--------------
amounts payable by Borrowers under this Agreement, or any other Loan Document,
whether or not there are sufficient funds therefor in the Demand Deposit Account
or any such other bank account of a Borrower.
22
II.9 Taxes.
-----
(a) Any and all payments by the Borrowers hereunder shall be made, in
accordance with Section 2.8, free and clear of and without deduction for any and
-----------
all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
---------
on the Lender's income, and franchise taxes imposed on the Lender, by the
jurisdiction under the laws of which the Lender is organized or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
-----
If the Borrowers shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to the Lender, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
-------
2.9) the Lender receives an amount equal to the sum it would have received had
---
no such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall pay the full amount deducted to the relevant taxing
authority or other appropriate authority in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (but specifically excluding, any taxes due as a result of
any assignment or participation made by the Lender as permitted by the terms of
Section 11.2 hereof) (hereinafter referred to as "Other Taxes").
------------ -----------
(c) The Borrowers agree to indemnify the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.9) paid by
-----------
the Lender and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. Any amounts due from the Borrowers in
accordance with the foregoing indemnification shall be paid to the Lender within
thirty (30) days from the date the Lender makes written demand therefor.
Notwithstanding the foregoing, however, the Lender agrees that it shall not pay
any Taxes or Other Taxes if it has received written notice from the Borrowers
that the Borrowers are contesting the same and for so long as the Borrowers
continue to contest the same in accordance with the terms of Section 7.1
-----------
provided that such failure to pay does not adversely affect the Lender's ability
--------
to obtain or maintain a perfected security interest in any of the Borrowers'
Property or any of the Lender's rights and remedies hereunder.
(d) Within 30 days after the date of any payment of Taxes, the Borrowers
will furnish to the Lender, at its address referred to on the signature page
hereto, the original or a certified copy of a receipt evidencing payment
thereof. In respect of any payment hereunder or under the Notes, the Borrowers
will furnish to the Lender, upon the Lender's request therefor, and as to such
Taxes and taxing authorities specifically designated in such request and
respecting which no receipt is delivered by the Borrowers, a certificate from
each appropriate taxing authority or an opinion of counsel acceptable to the
Lender, in either case, stating that such payment is exempt from or not subject
to such Taxes.
(e) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrower contained in
this Section 2.9 shall survive the payment in full of principal and interest
-----------
hereunder and under the Notes.
23
II.10 Borrowing Base. The Borrowing Base shall be calculated by the
--------------
Borrowers, giving effect to reserves historically provided by the Borrowers, and
such calculations shall be set forth in a Borrowing Base Certificate delivered
to the Lender by the Borrowers in accordance with Section 5.2(i) and Article
-------------- -------
VIII. The Lender shall have the right to review, confirm and adjust, from time
----
to time, in its reasonable credit judgment, the values ascribed by the Borrowers
to Eligible Receivables, and the reserves therefor, in any Borrowing Base
Certificate, such adjustments to include, without limitation, reductions for
such reserves as the Lender deems proper and reasonable.
II.11 Conversions.
-----------
(a) On the terms and subject to the conditions of this Agreement
and provided that no Event of Default shall have occurred and be
continuing, upon written notice, including by telecopy, given by Emons on
behalf of the Borrowers to the Lender in substantially the form of Exhibit
-------
F attached hereto and made a part hereof (the "Notice of Conversion"), the
- --------------------
Borrowers may (i) convert all or any portion of the Term Loan or any
Working Capital Loan which is a Eurodollar Rate Loan to a Base Rate Loan
upon expiration of the applicable Interest Period, (ii) continue any
Eurodollar Rate Loan as a Eurodollar Rate Loan upon the expiration of the
applicable Interest Period, or (iii) convert any Base Rate Loan to a
Eurodollar Rate Loan at any time (any such date on which any Loan is to be
converted being referred to herein as a "Conversion Date"). The original of
---------------
each Notice of Conversion given to the Lender, by telecopy, shall be sent
to the Lender by regular mail within five (5) days of the applicable
Conversion Date. Such Notice of Conversion shall be delivered to the Lender
prior to 1:00 p.m. (Chicago time) three (3) Business Days prior to the
proposed Conversion Date if conversion to, or continuation of, a Eurodollar
Rate Loan is requested, and prior to 11:00 a.m. (Chicago time) on the
proposed Conversion Date if conversion to a Base Rate Loan is requested.
Each proposed Conversion Date shall be a Business Day.
(b) If the Borrowers shall fail to give notice of the duration of
the proposed Interest Period with respect to a proposed conversion of an
outstanding Base Rate Loan or a continuation of a Eurodollar Rate Loan, the
Borrowers shall be deemed not to have elected to convert the Base Rate Loan
or continue the Eurodollar Rate Loan. If the Borrowers shall fail to give a
timely and complete Notice of Conversion with respect to an outstanding
Eurodollar Rate Loan in accordance with this Section 2.11, the Borrowers
------------
shall be deemed to have elected to convert such outstanding Eurodollar Rate
Loan to a Base Rate Loan on the last day of the applicable Interest Period.
(c) Any Notice of Conversion given or deemed to have been given
pursuant to this Section 2.11 shall be irrevocable.
------------
(d) Each Eurodollar Rate Loan shall be converted to a Base Rate
Loan at the end of the then applicable Interest Period if (i) an Event of
Default has occurred and is continuing, or (ii) the Lender shall be unable
to determine the Eurodollar Rate or shall have deemed the Eurodollar Rate
to be inadequate or unfair (as provided in Section 2.3(b)). If the making
--------------
or maintaining of Eurodollar Rate Loans shall be unlawful, impossible,
inadequate or unfair (as provided in Section 2.3(b)), all Eurodollar Rate
--------------
Loans then outstanding shall be converted into Base Rate Loans on either
(i) the last day of the Interest Period or Interest Periods applicable to
such Loans if the Lender may lawfully continue to maintain and fund such
Loans until such day, or (ii) immediately, if the Lender may not lawfully
continue to fund and maintain such Loans.
(e) Notwithstanding any provision in this Agreement to the
contrary, Borrowers shall have no more than five (5) different Interest
Periods outstanding for Eurodollar Rate Loans at any time.
II.12 Fees.
----
24
(a) The Borrowers shall pay to the Lender a closing fee in the
amount of Sixty-One Thousand Ninety-Four Dollars ($61,094) (the "Closing
-------
Fee") which shall be fully earned and non-refundable and payable on the
---
Closing Date.
(b) As additional compensation for Lender's costs and risks in
making the Working Capital Loans available to Borrowers, Borrowers agree
to pay to Lender in arrears, on the first Business Day of each calendar
quarter prior to the Working Capital Termination Date and on the Working
Capital Termination Date, a fee for Borrowers' non-use of available
funds under the Working Capital Facility (the "Non-Use Fee") in an
-----------
amount equal to the per anum rate shown in the definition of Applicable
Margin (calculated on the basis of a 360 day year for actual days
elapsed) on the difference between (i) $2,000,000 and (ii) the
respective daily averages of the amount of the Working Capital Loans
outstanding during the period for which the Non-Use Fee is due.
III.
THE LETTER OF CREDIT SUBFACILITY
III.1 Obligation to Issue. Subject to the terms and conditions of this
-------------------
Agreement, and in reliance upon the representations and warranties of the
Borrowers herein set forth, the Lender hereby agrees to issue for the account of
any Borrower through such of the Lender's branches as it and the Borrowers may
jointly agree, one or more Letters of Credit in accordance with this Article
-------
III, from time to time during the period commencing on the Closing Date and
---
ending at least thirty (30) days prior to the Working Capital Termination Date.
III.2 Types and Amounts. The Lender shall not have any obligation to
-----------------
issue any Letter of Credit at any time:
(a) if the aggregate maximum amount then available for drawing
under Letters of Credit, after giving effect to the issuance of the
requested Letter of Credit, shall exceed any limit imposed by law or
regulation upon the Lender;
(b) if, after giving effect to the issuance of the requested
Letter of Credit, the sum of the aggregate Letter of Credit Obligations,
plus the aggregate principal amount of the Working Capital Loans
----
outstanding, plus the aggregate Pending Loans, would exceed the Working
----
Capital Amount at such time; or
(c) which has an expiration date (A) more than one year after
the date of issuance or (B) after the thirtieth (30th) day preceding the
date specified in the definition of "Working Capital Termination Date."
III.3 Conditions. In addition to being subject to the satisfaction of
----------
the conditions contained in Article VIII, the obligation of the Lender to issue
------------
any Letter of Credit is subject to the satisfaction in full of the following
conditions:
(a) the Borrowers shall have delivered to the Lender at such
times and in such manner as the Lender may prescribe a Letter of Credit
application and such other documents and materials as may be required
pursuant to the terms thereof and the terms of the proposed Letter of
Credit shall be satisfactory to the Lender; and
(b) as of the date of issuance no order, judgment or decree of
any court, arbitrator or Governmental Authority shall purport by its
terms to enjoin or restrain the Lender from issuing the Letter of Credit
and no law, rule or regulation applicable to the Lender and no request
or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Lender shall prohibit
or request that the Lender refrain from the issuance of letters of
credit generally or the issuance of the requested Letter of Credit.
25
III.4 Issuance of Letters of Credit.
-----------------------------
(a) Request for Issuance. The Borrowers shall give the Lender
--------------------
at least five (5) Business Days' prior written notice of any requested
issuance of a Letter of Credit under this Agreement; such notice shall
be irrevocable and shall specify the stated amount of the Letter of
Credit requested, the effective date (which day shall be a Business Day)
of issuance of such requested Letter of Credit, the date on which such
requested Letter of Credit is to expire (which date shall be a Business
Day), the purpose for which such Letter of Credit is to be issued, and
the Person for whose benefit the requested Letter of Credit is to be
issued.
(b) Issuance. Subject to the terms and conditions of this
--------
Article III, and provided that the applicable conditions set forth in
-----------
Article VIII hereof have been satisfied, the Lender shall, on the
------------
requested date, issue a Letter of Credit on behalf of any Borrower in
accordance with the Lender's usual and customary business practices.
(c) No Extension or Amendment. The Lender shall not extend or
-------------------------
amend any Letter of Credit unless the requirements of Section 3.3 and
-----------
this Section 3.4 are met as though a new Letter of Credit was being
-----------
requested and issued and any amounts due under Section 3.7 are paid.
-----------
III.5 Reimbursement Obligations; Duties of the Lender.
-----------------------------------------------
(a) Reimbursement. Notwithstanding any provisions to the
-------------
contrary in any Letter of Credit Reimbursement Agreement:
(i) the Borrowers shall reimburse the Lender for any
drawings under a Letter of Credit issued by it no later than 1:00
p.m. (Chicago time) on the date of such drawing; and
(ii) any Reimbursement Obligation with respect to any
Letter of Credit shall bear interest from the date of the
relevant drawing under the pertinent Letter of Credit until the
date paid in full at the interest rate applicable to Base Rate
Loans at the time an Event of Default exists.
(b) Duties of the Lender. Any action taken or omitted to be
--------------------
taken by the Lender under or in connection with any Letter of Credit, if
taken or omitted in the absence of willful misconduct or recklessness,
shall not put the Lender under any resulting liability to any Borrower.
In determining whether to pay under any Letter of Credit, the Lender
shall have no obligation relative to the Borrowers other than to confirm
that any documents required to have been delivered under such Letter of
Credit appear to comply on their face, with the requirements of such
Letter of Credit. The Lender shall notify the Borrower upon the
occurrence of a draw under any Letter of Credit.
III.6 Payment of Reimbursement Obligations. The Borrowers agree to pay
------------------------------------
to the Lender the amount of all Reimbursement Obligations, interest and other
amounts payable to the Lender under or in connection with any Letter of Credit
immediately when due, irrespective of any claim, set-off, defense or other right
which the Borrowers or any of their Subsidiaries may have at any time against
the Lender or any other Person.
III.7 Compensation for Letters of Credit.
----------------------------------
26
(a) Letter of Credit Fees. As a condition precedent to
---------------------
issuing or extending any Letter of Credit, the Borrowers shall pay to
the Lender a fee (the "L/C Fee") in an amount equal to the Applicable
-------
Margin for Letters of Credit multiplied by the face amount of the Letter
of Credit to be issued or extended and then multiplied by a fraction,
the numerator of which is the number of days from the issue date (or
extension date) of such Letter of Credit through but not including the
expiry date (or new expiry date) of such Letter of Credit and the
denominator of which shall be 365. In addition, if any Letter of Credit
has a period longer than one (1) year or if any Letter of Credit is
renewed so that it does not expire until after the first anniversary of
its issuance, the Borrowers shall pay to the Lender on each anniversary
of the date such Letter of Credit is issued until such Letter of Credit
expires or is terminated, an amount equal to (i) the Applicable Margin
for Letters of Credit multiplied by (ii) the face amount of such Letter
---------- --
of Credit then outstanding, multiplied by (ii) a fraction, the numerator
---------- --
of which shall be the number of days in the succeeding twelve (12) month
period prior to the stated expiration date of such Letter of Credit, and
the denominator of which shall be 365.
(b) Increased Capital. If either (i) the introduction of or
-----------------
any change in or in the interpretation of any law or regulation or (ii)
compliance by the Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected
to be maintained by it or any corporation controlling it and the Lender
determines, on the basis of reasonable allocations, that the amount of
such capital is increased by or is based upon its issuance or
maintenance of, or commitment to issue, the Letters of Credit then, upon
demand by the Lender, the Borrowers shall immediately pay to Lender,
from time to time as specified by the Lender, additional amounts
sufficient to compensate the Lender therefor. A certificate as to such
amounts submitted to the Borrowers by the Lender shall, in the absence
of manifest error, be conclusive and binding for all purposes.
III.8 Indemnification; Exoneration.
----------------------------
(a) Indemnification. In addition to amounts payable as
---------------
elsewhere provided in this Article III, the Borrowers hereby agree to
-----------
protect, indemnify, pay and save the Lender harmless from and against
any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) which the
Lender may incur or be subject to as a consequence, direct or indirect,
of (i) the issuance of any Letter of Credit other than as a result of
the Lender's recklessness or willful misconduct, as determined by a
court of competent jurisdiction or (ii) the failure of the Lender to
honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure
or de facto Governmental Authority (all such acts or omissions herein
called "Government Acts").
---------------
27
(b) Assumption of Risk by Borrowers. As between the Borrowers
-------------------------------
and the Lender, the Borrowers assume all risks of the acts and omissions
of, or misuse of the Letters of Credit by, the respective beneficiaries
of the Letters of Credit. In furtherance and not in limitation of the
foregoing, subject to the provisions of the Letter of Credit
applications, the Lender shall not be responsible absent gross
negligence or willful misconduct of the Lender: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for
and issuance of the Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign
a Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (iii) for failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to
draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms; (vi) for
any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or of the
proceeds thereof; (vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter of
Credit; and (viii) for any consequences arising from causes beyond the
control of the Lender including, without limitation, any Government
Acts. None of the above shall affect, impair, or prevent the vesting of
any of the Lender's rights or powers under this Section 3.8.
-----------
(c) Exoneration. In furtherance and extension and not in
-----------
limitation of the specific provisions hereinabove set forth, any action
taken or omitted by the Lender under or in connection with the Letters
of Credit or any related certificates, if taken or omitted in Good
Faith, shall not put the Lender under any resulting liability to the
Borrowers or relieve the Borrowers of any of their obligations hereunder
to any such Person.
IV.
COLLATERAL
IV.1 Grant of Security Interest.
--------------------------
(a) To secure the prompt, complete, payment and performance of
all Obligations, each Borrower hereby grants to the Lender a continuing
security interest in, lien on, assignment of, and right of set off
against all of such Borrower's right, title and interest in any of the
following property, whether now owned or existing or hereafter acquired
or arising and regardless of where located:
(i) all Accounts, Contract Rights, letters of credit,
chattel paper, instruments, notes, documents, and documents of
title;
(ii) General Intangibles;
(iii) Inventory;
(iv) Equipment;
(v) all moneys, investment property, Securities and
other property of any kind of such Borrower (including, without
limitation, any sums at any time on deposit in any Collection
Account or the Concentration Account);
28
(vi) all of such Borrower's deposit accounts, credits,
and balances with and other claims against the Lender or any of
its affiliates or any other financial institution with which such
Borrower maintains deposits (including, without limitation, the
Concentration Account and the Collection Accounts);
(vii) all books, records and other property relating to
or referring to any of the foregoing, including, without
limitation, all books, records, ledger cards, data processing
records, computer software and other property and general
intangibles at any time evidencing or relating to any of the
foregoing; and
(viii) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing,
including, but not limited to, proceeds of any insurance
policies, claims against third parties, and condemnation or
requisition payments with respect to all or any of the foregoing.
All of the foregoing, together with all other property in which the
Lender may at any time be granted a Lien to secure the Obligations, is
herein collectively referred to as the "Collateral."
----------
(b) All of the Obligations shall be secured by all of the
Collateral.
IV.2 Real Property Matters. As additional security for the
---------------------
Obligations, each Borrower agrees from time to time hereafter to execute,
deliver and/or cause to be recorded such mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust and other security documents reasonably
requested by the Lender (collectively, the "Real Property Security Documents")
--------------------------------
relating to all of such Borrower's right, title and interest in all of those
easements, rights-of-way, plots, pieces or parcels of land now or hereafter
owned, leased or otherwise acquired by such Borrower, the improvements situated
thereon and other rights relating thereto (collectively, the "Real Property").
-------------
The Real Property Security Documents shall be in form and substance reasonably
satisfactory to the Lender and grant valid and perfected Liens on the Real
Property to the Lender.
IV.3 Perfection and Protection of Security Interest.
----------------------------------------------
(a) The Borrowers shall, at their expense, perform all steps
reasonably requested by the Lender at any time to perfect, maintain,
protect, and enforce its Liens in the Collateral including, without
limitation: (i) executing and filing financing or continuation
statements, and amendments thereof, in form and substance satisfactory
to the Lender; (ii) delivering to the Lender the original certificates
of title for all motor vehicles of the Borrowers with the Lender's
security interest properly endorsed thereon; (iii) delivering to the
Lender the originals of all instruments, documents, and chattel paper,
and all other Collateral of which the Lender determines it should have
physical possession in order to perfect and protect the Lender's
security interest therein, duly endorsed or assigned to the Lender
without restriction; (iv) delivering to the Lender warehouse receipts
covering any portion of the Collateral located in warehouses and for
which warehouse receipts are issued; (v) delivering to the Lender all
letters of credit on which any Borrower is named beneficiary; (vi) the
filing and recordation with the U.S. Surface Transportation Board of
this Agreement and any other agreement under which any Person other than
the Borrowers shall use any Equipment; and (vii) taking such other steps
as are deemed necessary by the Lender to maintain and protect its Liens.
To the extent permitted by applicable law, the Lender may file, without
any Borrower's signature, one or more financing statements disclosing
its Liens. The Borrower agrees that a carbon, photographic, photostatic,
or other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
29
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any agent of any of the
Borrowers, then such Borrower shall notify the Lender thereof and shall
notify such Person of the Lender's security interest in such Collateral
and, upon the Lender's request, instruct such Person to hold all such
Collateral for the Lender's account subject to the Lender's
instructions. If at any time significant operations of the Borrowers'
business are operated on or any significant Collateral is located on any
premises that are not owned by a Borrower, then the Borrowers shall use
Good Faith efforts to obtain, at the request of the Lender, attornment
agreements in form and substance satisfactory to the Lender with the
owner or lessor of such premises.
(c) From time to time, each Borrower shall, upon the Lender's
request, execute and deliver confirmatory written instruments pledging
to the Lender the Collateral, but any Borrower's failure to do so shall
not affect or limit the Lender's security interest or the Lender's other
rights in and to the Collateral. So long as the Working Capital
Commitment is in effect or any of the Obligations remain outstanding,
the Lender's Liens shall continue in full force and effect in all
Collateral.
IV.4 Location of Collateral. Each Borrower represents and warrants to
----------------------
Lender that as of the date hereof: (a) Schedule 4.4 attached hereto and
------------
incorporated herein by this reference is a correct and complete list of such
Borrower's chief executive office, the location of its books and records, the
locations of its Collateral, and the locations of all of its other places of
business; and (b) Schedule 4.4 attached hereto correctly identifies any of such
------------
facilities and locations that are not owned by such Borrower and to the best of
such Borrower's knowledge, sets forth the names of the owners and lessors or
sublessors of such facilities and locations. Such Borrower covenants and agrees
that it will not maintain any Collateral at any location other than those listed
for it on Schedule 4.4 attached hereto, and it will not otherwise change or add
------------
to any of such locations, unless it gives the Lender at least five (5) days'
prior written notice thereof and executes any and all financing statements and
other documents that the Lender requests in connection therewith.
IV.5 Title to, Liens on, and Sale and Use of Collateral. Each
--------------------------------------------------
Borrower represents and warrants to the Lender and agrees with the Lender that:
(a) all Collateral of such Borrower is and will continue to be owned by such
Borrower (whether by fee, leasehold, easement, right-of-way or otherwise) free
and clear of all Liens whatsoever, except for Permitted Liens; (b) the Lender's
Liens in the Collateral will not be subject to any Lien which is prior in right
of prepayment, other than the obligations to pay taxes with respect to real
property (which taxes shall be paid when due); (c) the Borrower will use, store,
and maintain the Collateral with all reasonable care and will use the Collateral
for lawful purposes only; (d) upon the Lender's request, Accounts for any
material amounts (as determined by the Lender) due from any Governmental
Authority shall be duly assigned to the Lender in full compliance with the
Federal Assignment of Claims Act (31 U.S.C.A. (S) 3727 et seq.) or similar
statute, if applicable, and (e) such Borrower will not, without the Lender's
prior written approval, sell, or dispose of or permit the sale or disposition of
any Collateral, except for sales of Inventory in the ordinary course of
business, and Equipment as permitted by Section 4.9; provided, however, that
-----------
Lender's approval of the sale of non-essential real estate Collateral shall not
be unreasonably withheld or delayed, and provided that the Net Cash Proceeds
thereof are prepaid, if required under Section 2.4(b). The inclusion of proceeds
in the Collateral shall not be deemed to constitute the Lender's consent to any
sale or other disposition of the Collateral except as expressly permitted
herein.
IV.6 Access and Examination; Appraisals. The Lender may at all
----------------------------------
reasonable times (and at any time when a Default or Event of Default exists)
have access to, examine, audit, make extracts from, copy and inspect each
Borrower's records, files, and books of account and the Collateral, and discuss
such Borrower's affairs with such Borrower's officers and management. Each
Borrower will deliver to the Lender any instrument necessary for the Lender to
obtain records from any service bureau maintaining records for such Borrower.
Whenever a Default or Event of Default exists, the Borrower shall, at its
expense and upon the Lender's request, provide the Lender with appraisals or
updates thereof of any or all of the Collateral from an appraiser, and prepared
on a basis satisfactory to the Lender.
30
IV.7 Intentionally Omitted.
---------------------
IV.8 Collections and Concentration Account Arrangements. All
--------------------------------------------------
collections of Accounts of the Borrowers and other proceeds of Collateral of the
Borrowers shall be deposited directly into or maintained in one of the
Collection Accounts described on Schedule 4.8 under arrangements established by
------------
the Borrowers and acceptable to the Lender. The Collection Accounts shall be
maintained on terms acceptable to the Lender, subject to agreements in
substantially the form attached hereto and made a part hereof as Exhibit G
---------
("Collection Account Agreements") among the applicable Borrower, the Lender and
-----------------------------
the applicable financial institution at which such account is maintained, to the
effect that such financial institution shall remit all amounts deposited in the
applicable Collection Account on a daily basis to the Concentration Account with
the Lender or as the Lender may direct. At all times during the term of this
Agreement and notwithstanding the termination of this Agreement, until all of
the Obligations shall have been fully paid and satisfied, each Borrower shall
continue to deposit, or cause to be deposited, directly into a Collection
Account or the Concentration Account all collections of Accounts and other
proceeds of Collateral; provided, however that Finance may maintain an operating
-------- -------
account with Corestates Bank in Wilmington, Delaware provided that the amount on
--------
deposit in such account at no time exceeds $15,000.
IV.9 Equipment. Each Borrower represents and warrants to the Lender and
---------
agrees with the Lender that all of the Equipment owned or leased by such
Borrower is and will be used or held for use in such Borrower's business (which
includes the lease of such equipment to third parties from time to time), and is
and will be fit for such purposes. Each Borrower will use the Equipment in a
careful and proper manner and will comply with and conform to all governmental
laws, rules and regulations relating thereto. Without limitation to the
foregoing, the Borrowers will (i) cause all Equipment to be used in compliance
with all rules of AAR and FRA and (ii) will not permit any items of Equipment to
be used outside the continental United States or Canada. Each Borrower shall
keep and maintain its Equipment in good operating condition and repair (ordinary
wear and tear excepted) and shall make all necessary replacements thereof so
that the condition and operating efficiency thereof will at all times be
maintained and preserved, reasonable wear and tear excepted. Each Borrower will
cause such item of Equipment which constitutes Rolling Stock to be maintained in
conformance with all rules and regulations of AAR and FRA, to the extent
applicable and, if mandated, modified so that it will qualify for unrestricted
interchange in the United States and remain suitable for its intended use. Each
Borrower shall promptly inform the Lender of any material additions to or
deletions from the Equipment. No Borrower shall permit any Equipment to become a
fixture to real property or an accession to other personal property, unless the
Lender has a valid and perfected Lien in such real or personal property. Each
Borrower will cause each item of Rolling Stock owned by such Borrower to be kept
marked and numbered with the identifying ▇▇▇▇ and number set forth in Schedule
--------
4.9 hereto. Such Borrower will not place or permit any such item of Rolling
---
Stock to be placed in operation or exercise any control or dominion over the
same until such number shall have been so marked on both sides thereof and will
replace or cause to be replaced promptly any such name and words which may be
removed, defaced, obliterated or destroyed. Such Borrower will not change or
permit to be changed the identifying ▇▇▇▇ or number of any item of Rolling Stock
unless and until a statement of new ▇▇▇▇ and/or number or numbers to be
substituted therefor shall have been filed, recorded and deposited by such
Borrower in all public offices where this Agreement shall have been filed,
recorded and deposited. Except for occasional sales of Equipment, the proceeds
of which represent the fair market value therefor and do not exceed in the
aggregate for any Fiscal Year $100,000, no Borrower shall, without the Lender's
prior written consent, sell, lease as a lessor, or otherwise dispose of any of
the Equipment.
31
IV.10 Contract Rights. Each Borrower shall fully perform all of its
---------------
material obligations under each material contract to which it is a party and
shall enforce all of its rights and remedies thereunder as it deems appropriate
in its business judgment; provided, however, that such Borrower shall not take
-------- -------
any action or fail to take any action with respect to the Contract Rights which,
in such Borrower's business judgment, exercised in Good Faith, would result in a
waiver or other loss of any material right or remedy of such Borrower
thereunder. Without limiting the generality of the foregoing, such Borrower
shall take all action necessary or appropriate to permit, and shall not take any
action which would have any material adverse effect upon, the full enforcement
of all indemnification rights under the Contract Rights. Except in the ordinary
course of business and consistent with past practices, the Borrowers shall not,
without the Lender's prior written consent, modify, amend, supplement,
compromise, satisfy, release, or discharge any of the Contract Rights, any
collateral securing the same, any Person liable directly or indirectly with
respect thereto, or any agreement relating to any of the Contract Rights or the
collateral therefor. Each Borrower shall notify the Lender in writing, promptly
after such Borrower becomes aware thereof, of any event or fact which could give
rise to a claim by it for indemnification under any of the Contract Rights, and
shall diligently pursue such right and report to the Lender on all further
developments with respect thereto. If an Event of Default exists and the
Borrower has not cured or is unable to cure such Event of Default, then the
Lender may directly enforce any material right in the Contract Rights in its own
or such Borrower's name and may enter into such settlements or other agreements
with respect thereto as the Lender determines. In any suit, proceeding or action
brought by the Lender under any Contract Rights for any sum owing thereunder or
to enforce any provision thereof, each Borrower shall indemnify and hold the
Lender harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaims, recoupment, or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by any Borrower of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing from any Borrower to or in favor of such obligor or
its successors. All such obligations of any Borrower shall be and remain
enforceable only against such Borrower and shall not be enforceable against the
Lender. Notwithstanding any provision hereof to the contrary, any Borrower shall
at all times remain liable to observe and perform all of its duties and
obligations under the Contract Rights, and the Lender's exercise of any of its
rights with respect to the Collateral shall not release any Borrower from any of
such duties and obligations. The Lender shall not be obligated to perform or
fulfill any of a Borrower's duties or obligations under the Contract Rights or
to make any payment thereunder, or to make any inquiry as to the nature or
sufficiency of any payment or property received by it thereunder or the
sufficiency of performance by any party thereunder, or to present or file any
claim, or to take any action to collect or enforce any performance, any payment
of any amounts, or any delivery of any property. Notwithstanding any provision
in this Section 4.10 to the contrary, provided no Event of Default has occurred
------------
and is continuing, the Lender shall not be permitted to waive or release on
behalf of any Borrower any rights that any Borrower may have (whether at law or
in equity) against any other party to the Contract Rights.
IV.11 Right to Cure. The Lender may, in its discretion and at any time
-------------
after at least ten (10) days prior written notice, for any Borrower's account
and at such Borrower's expense, pay any amount not being disputed by such
Borrower in Good Faith or do any act required of such Borrower hereunder or
reasonably requested by the Lender to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Lender's Liens therein, and which such
Borrower fails to pay or do, including, without limitation, payment of any
judgment against such Borrower, any insurance premium, any warehouse charge, any
landlord's claim, and any other Lien upon or with respect to the Collateral.
All payments that the Lender makes under this Section 4.11 and all out-of-pocket
------------
costs and expenses that the Lender pays or incurs in connection with any action
taken by it hereunder shall be payable on demand. Any payment made or other
action taken by the Lender under this Section 4.11 shall be without prejudice to
------------
any right to assert an Event of Default hereunder and to proceed thereafter as
herein provided.
32
IV.12 Power of Attorney. Each Borrower hereby appoints the Lender and
-----------------
the Lender's designees as such Borrower's attorney, with power to send requests
for verification of accounts to customers or account debtors and after an Event
of Default has occurred and as long as such Event of Default is continuing: (a)
to endorse such Borrower's name on any checks, notes, acceptances, money orders,
or other forms of payment or security that come into the Lender's possession;
(b) to sign such Borrower's name on any invoice, ▇▇▇▇ of lading, or other
document of title relating to any Collateral, on drafts against customers, on
assignments of Accounts, on notices of assignment, financing statements and
other public records; (c) to notify the post office authorities to change the
address for delivery of such Borrower's mail to an address designated by the
Lender and to receive, open and dispose of all mail addressed to such Borrower;
and (d) to do all things necessary to carry out this Agreement. Each Borrower
ratifies and approves all acts of such attorney. Neither the Lender nor the
attorney will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law except to the extent of the Lender's gross negligence
or willful misconduct. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
IV.13 The Lender's Rights, Duties and Liabilities. Each Borrower assumes
-------------------------------------------
all responsibility and liability arising from or relating to the use, sale or
other disposition of the Collateral except for liability resulting from the
Lender's or any of its respective attorney's gross negligence or willful
misconduct. The Lender and its officers, directors, employees, and agents shall
not be liable or responsible in any way for the safekeeping of any of the
Collateral except to the extent of the Lender's gross negligence or willful
misconduct with respect thereto, or for any loss or damage thereto, or for any
diminution in the value thereof, or for any act of default of any warehouseman,
carrier, forwarding agency or other person whomsoever, all of which shall be at
the Borrowers' sole risk. The Obligations shall not be affected by any failure
of the Lender to take any steps to perfect its Liens or to collect or realize
upon the Collateral, nor shall loss of or damage to the Collateral release any
Borrower from any of the Obligations. After the occurrence of and during the
continuance of a Default or Event of Default, the Lender may (but shall not be
required to), without notice to or consent from the Borrowers, ▇▇▇ upon or
otherwise collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take any other action with respect to the Collateral, any security therefor,
any agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of any Borrower for the
Obligations or under this Agreement or any other agreement now or hereafter
existing between the Lender and each Borrower.
V.
BOOKS AND RECORDS;
FINANCIAL INFORMATION; NOTICES
V.1 Books and Records. Each Borrower shall maintain, at all times,
-----------------
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in a manner necessary to insure that
the audited financial statements required to be delivered pursuant to Section
-------
5.2(a) shall be prepared in accordance with GAAP, consistently applied and in
------
accordance with the accounting rules of the AAR as they relate to the settlement
of interline accounts. Each Borrower shall, by means of appropriate entries,
reflect in such accounts and in all financial statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
its Property and bad debts, all in accordance with GAAP. Each Borrower shall
maintain at all times books and records pertaining to the Collateral in such
detail, form and scope as the Lender shall reasonably require, including, but
not limited to, records of (a) all payments received and all credits and
extensions granted with respect to the Accounts; and (b) all other dealings
affecting the Collateral.
33
V.2 Financial Information. Each Borrower shall promptly furnish to the
---------------------
Lender all such financial information as the Lender shall reasonably request,
and notify its auditors and accountants that the Lender is authorized to obtain
such information directly from them. Without limiting the foregoing, the
Borrowers will furnish to the Lender, in such detail as the Lender shall
request, the following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, a copy of the unaudited
consolidating and the audited consolidated balance sheets, related
statements of income and operations, shareholders' equity (only for
consolidated statements) and cash flows for Emons and its consolidated
Subsidiaries for such Fiscal Year, and the accompanying notes thereto,
setting forth in each case in comparative form figures for the previous
Fiscal Year and the budgeted figures for the current Fiscal Year, all in
reasonable detail, fairly presenting the financial position and the results
of operations of Emons and its consolidated Subsidiaries as at the date
thereof and for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be examined in accordance with generally
accepted auditing standards by and accompanied by a report thereon
unqualified as to scope of independent certified public accountants
selected by Emons and reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than forty-
five (45) days after the close of each fiscal quarter other than the fourth
quarter of a Fiscal Year, a copy of the unaudited consolidating and
consolidated balance sheets of Emons and its consolidated Subsidiaries as
at the end of such quarter, and the related consolidating and consolidated
statements of income and operations, and cash flows for Emons and its
consolidated Subsidiaries for the last month of such quarter and for the
period from the beginning of the Fiscal Year to the end of such quarter,
together with the accompanying notes thereto, all in reasonable detail,
setting forth in each case in comparative form the budgeted figures for the
current Fiscal Year, fairly presenting the financial position and results
of operation of Emons and its consolidated Subsidiaries as at the date
thereof and for such periods, prepared in accordance with GAAP. Such
statements shall be certified to be correct by the chief financial or
accounting officer of each Borrower, subject to normal year-end
adjustments.
(c) As soon as available, but in any event not later than thirty
(30) days after the end of each month except the last month of each fiscal
quarter, consolidated and consolidating unaudited balance sheets of Emons
and its consolidated Subsidiaries as at the end of such month, and
consolidated and consolidating unaudited statements of income and expenses
for Emons and its consolidated Subsidiaries for such month and for the
period from the beginning of the Fiscal Year to the end of such month, all
in reasonable detail, setting forth in each case in comparative form
figures the budgeted figures for the current Fiscal Year, fairly presenting
the financial position and results of operation of Emons and its
consolidated Subsidiaries as at the date thereof and for such periods, and
prepared in accordance with GAAP. Such statements shall be certified to be
correct by the chief financial or accounting officer of each Borrower,
subject to normal year-end adjustments.
(d) With each of the audited financial statements delivered
pursuant to Section 5.2(a), a certificate of the independent certified
--------------
public accountants that examined such statement to the effect that they
have reviewed and are familiar with this Agreement and that, in examining
such financial statements, they did not become aware of any fact or
condition which then constituted a Default or Event of Default, except for
those, if any, described in reasonable detail in such certificate.
34
(e) With each of the audited financial statements delivered
pursuant to 5.2(a) and the unaudited financial statements delivered
pursuant to Section 5.2(b), a certificate of the chief executive or chief
--------------
financial officer of each Borrower (i) setting forth in reasonable detail
the calculations required to establish that such Borrower was in compliance
with its covenants set forth in Sections 7.21, Section 7.23, Section 7.24,
------------- ------------ ------------
Section 7.25 and Section 7.28 during the period covered in such financial
------------ ------------
statements and as at the end thereof, and (ii) stating that, except as
explained in reasonable detail in such certificate, (A) all of the
representations and warranties of such Borrower contained in this Agreement
and the other Loan Documents are correct and complete as at the date of
such certificate as if made at such time, (B) such Borrower is, at the date
of such certificate, in compliance with all of its covenants and agreements
in this Agreement and the other Loan Documents, and (C) no Default or Event
of Default then exists or existed during the period covered by such
financial statements. If such certificate discloses that a representation
or warranty is not correct or complete, or that a covenant has not been
complied with, or that a Default or Event of Default existed or exists,
such certificate shall set forth what action such Borrower has taken or
proposes to take with respect thereto.
(f) No sooner than sixty (60) days prior to the beginning of each
Fiscal Year and no later than thirty (30) days after the commencement of
such Fiscal Year, consolidated and consolidating projected balance sheets,
statements of income and expense, and statements of cash flow for each
Borrower as at the end of and for each month of such Fiscal Year.
(g) Within forty-five (45) days after the end of each fiscal
quarter, a report of the Capital Expenditures of each Borrower for the
Fiscal Year to date ending with such quarter.
(h) Promptly after the filing thereof, copies of any all proxy
statements, financial statements, materials or reports (including, without
limitation, Forms 10K, 10Q and 8K) which any Borrower files with the SEC or
makes available to its stockholders.
(i) Within thirty (30) days after the end of each month, a
Borrowing Base Certificate and an accounts receivable aging report as of
the end of such month.
(j) Such additional information as the Lender may from time to
time reasonably request regarding the financial and business affairs of any
Borrower or any Subsidiary, including, without limitation, projections of
future operations on both a consolidated and consolidating basis.
V.3 Notices to the Lender. The Borrowers shall notify the Lender in
---------------------
writing of the following matters at the following times:
(a) Immediately after becoming aware thereof, any Default or Event
of Default.
(b) Immediately after becoming aware thereof, the assertion by a
holder or holders of Debt in an outstanding principal amount in excess of
$100,000 in the aggregate at any one time that a default exists with
respect thereto or that any Borrower is not in compliance with the terms
thereof, or the threat or commencement by such holder of any enforcement
action because of such asserted default or non-compliance.
(c) Immediately after becoming aware thereof, any material adverse
change in any Borrower's Property, business, operations, or condition
(financial or otherwise) or any material and continuing decrease in the
Borrowers' Accounts.
35
(d) Immediately after becoming aware thereof, any pending or
threatened action, suit, proceeding, or counterclaim by any Person, or any
pending or threatened investigation by a Governmental Authority, which may
materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or any
Borrower's Property, business, operations, or condition (financial or
otherwise); provided, however, the Borrowers shall not be required to
-------- -------
notify the Lender of actions or proceedings filed against Industries
involving damages from the ingestion of diethylstilbestrol ("DES"), but
will deliver a status report with each statement delivered pursuant to
Section 5.2(a) and Section 5.2(b) setting forth the number of pending DES
claims at such time and the availability of insurance coverage for such
claims.
(e) Immediately after becoming aware thereof, any pending or
threatened strike, work stoppage, material unfair labor practice claim, or
other material labor dispute affecting any Borrower or any Subsidiary.
(f) Immediately after becoming aware thereof, any violation of any
law, statute, regulation, or ordinance of Governmental Authority applicable
to any Borrower, any Subsidiary, or their respective properties which may
materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or any
Borrower's Property, business, operations, or condition (financial or
otherwise).
(g) Immediately after becoming aware thereof, any violation by any
Borrower or any Subsidiary of any Environmental Law or, immediately upon
its receipt thereof, any notice that any Borrower or any Subsidiary
receives asserting that such Borrower or any Subsidiary is or may be (i)
liable to any Person as a result of the Release or threatened Release of
any Contaminant into the environment; (ii) subject to investigation by a
Governmental Authority evaluating whether any Remedial Action is needed to
respond to the Release or threatened Release of any Contaminant into the
environment; (iii) subject to any judicial or administrative proceeding
alleging a violation of any Environmental Law; (iv) subject to any new or
proposed changes to any health or safety law or any Environmental Law that
could have a material adverse effect on the operations of such Borrower;
(v) in violation of any Environmental Law or health and safety law; or (vi)
that its compliance with any health or safety law or Environmental Law is
being investigated.
(h) Any change in any Borrower's name, state of incorporation, or
form of organization, at least ten (10) days prior thereto.
36
(i) Any Termination Event with respect to a Plan within fifteen (15)
days after any Borrower knows or has reason to know thereof, and any other
Reportable Event, within forty (40) days after any Borrower knows or has
reason to know thereof, in each case accompanied by any materials required
to be filed with the PBGC with respect thereto; immediately after the
receipt by any Borrower or any ERISA Affiliate of any notice concerning the
imposition of any withdrawal liability under Title IV of ERISA with respect
to a Benefit Plan or a Multiemployer Plan; within ten (10) days after any
Borrower or any ERISA Affiliate fails to make a required installment or any
other required payment under Section 412 of the Code on or before the due
date for such installment or payment, a notification of such failure; the
establishment of any Plan not existing at the Closing Date, or any increase
in the benefits of any existing Plan or the commencement of contributions
by any Borrower to any Plan to which such Borrower was not contributing at
the Closing Date, within fifty-five (55) days after the end of the fiscal
quarter in which such event occurs; within fifteen (15) days after any
Borrower or an ERISA Affiliate knows or has reason to know (i) a
Multiemployer Plan has been terminated, (ii) the administration or plan
sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan
or (iii) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multiemployer Plan; within forty-five
(45) days after any Borrower or an ERISA Affiliate knows or has reason to
know that a prohibited transaction (defined in Section 406 of ERISA and
Section 4975 of the Code) has occurred; immediately after filing with the
IRS a funding waiver request for any Plan, in each case accompanied by a
copy of such request and, subsequent thereto, copies of all communications
received by any Borrower or an ERISA Affiliate with respect to such
request; or immediately after becoming aware thereof, any other event or
condition regarding a Plan or any Borrower's or an ERISA Affiliate's
compliance with ERISA which may materially and adversely affect any
Borrower's Property, business, operation, or condition (financial or
otherwise).
(j) Any derailment or accident involving any of the Borrowers'
Property resulting in property damage or liability in excess of $100,000.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the
Borrowers have taken or propose to take with respect thereto.
VI.
GENERAL WARRANTIES AND REPRESENTATIONS
Each Borrower warrants and represents to Lender that all of such Borrower's
representations and warranties contained in this Agreement and the other Loan
Documents are true at the time of the Borrowers' execution of this Agreement,
and shall survive the execution, delivery and acceptance hereof by the parties
hereto and the closing of the transactions described herein or related hereto.
Each request for a Loan or a Letter of Credit hereunder shall constitute a
representation and warranty by each Borrower, with the same effect as a
certificate delivered by such Borrower in writing, that all of the
representations and warranties made herein (other than representations and
warranties which expressly speak as of a certain date), are true and correct in
all respects. Each Borrower warrants and represents to Lender that:
37
VI.1 Authorization, Validity, and Enforceability of this Agreement and the
---------------------------------------------------------------------
Loan Documents. Such Borrower has the corporate power and authority to execute,
--------------
deliver and perform this Agreement and the other Loan Documents, to incur the
Obligations, and to grant to the Lender, Liens upon, and security interests in,
the Collateral. Such Borrower has taken all necessary corporate action
(including, without limitation, obtaining approval of its stockholders, if
necessary) to authorize its execution, delivery, and performance of this
Agreement and the other Loan Documents. No consent, approval, or authorization
of, or declaration or filing with, any Governmental Authority, and no consent of
any other Person, is required in connection with such Borrower's execution,
delivery, and performance of this Agreement and the other Loan Documents, except
for those already duly obtained. Each of this Agreement and the other Loan
Documents has been duly executed and delivered by such Borrower, and constitutes
the legal, valid and binding obligation of such Borrower, enforceable against it
in accordance with its terms. Such Borrower's execution, delivery, and
performance of this Agreement and the other Loan Documents do not and will not
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the Property of
such Borrower or any of its Subsidiaries by reason of the terms of (a) any
contract, mortgage, Lien, lease, agreement, indenture, or instrument to which
such Borrower or any of its Subsidiaries is a party or which is binding upon it
or its Property, (b) any judgment, law, statute, rule or governmental regulation
applicable to such Borrower or any of its Subsidiaries, or (c) the Certificate
of Incorporation or By-laws of such Borrower or any of its Subsidiaries.
VI.2 Validity and Priority of Security Interest. To the best of such
------------------------------------------
Borrower's knowledge, the provisions of this Agreement and the other Loan
Documents create legal and valid Liens on all the Collateral in the Lender's
favor, and upon filing of the financing statements referenced on the closing
list with the appropriate filing offices and the delivery of the "Pledged
Shares" to the Lender as contemplated by the Pledge Agreements, such Liens
constitute perfected and continuing Liens on all the Collateral, having priority
over all other Liens on the Collateral except for Permitted Liens, and
enforceable against such Borrower and all third parties.
VI.3 Organization and Qualification. As of the date hereof, except as set
------------------------------
forth on Schedule 6.5, such Borrower (a) is duly incorporated and organized and
validly existing in good standing under the laws of the State of its
incorporation, (b) is qualified to do business as a foreign corporation and is
in good standing in all states where the failure of such Borrower to qualify to
do business would have a material adverse effect on such Borrower's ability to
collect its Accounts or otherwise conduct its business or own or lease Property
in such state, and (c) has all requisite power and authority to conduct its
business and to own its Property.
VI.4 Corporate Name; Prior Transactions. None of the Borrowers have,
----------------------------------
during the past five (5) years prior to the Closing Date, been known by or used
any other corporate or fictitious name, or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property outside of the ordinary course of business,
except as set forth on Schedule 6.4 attached hereto and incorporated herein by
------------
this reference.
VI.5 Subsidiaries and Affiliates. Schedule 6.5 attached hereto and
--------------------------- ------------
incorporated herein by this reference is as of the date hereof, a correct and
complete list of the name and relationship to such Borrower of each and all of
such Borrower's Subsidiaries and other Affiliates.
VI.6 Financial Statements. The Borrowers have delivered to the Lender
--------------------
audited balance sheets and the related statements of income and operations,
shareholders equity and cash flow for the Fiscal Year ended June 30, 1996 and
the unaudited balance sheets and the related statements of income and
operations, shareholders equity and cash flow for the Fiscal Year to date period
ended March 31, 1997 for Emons and its consolidated Subsidiaries. All such
financial statements have been prepared in accordance with GAAP and present
accurately and fairly in all material respects each of such entities' financial
position as at the dates thereof and its results of operations for the periods
then ended. Since June 30, 1996, there has been no event or circumstance which
is likely to have a material adverse affect on the financial condition or
operations of the businesses of such entities.
38
VI.7 Capitalization. As of the date hereof, to the best of such
--------------
Borrower's knowledge, based solely on a review of copies of reports on Schedule
13D which have been delivered to Emons, no shareholder of Emons owns more than
five percent (5%) of the issued and outstanding shares of stock in Emons except
as set forth on Schedule 6.7 attached hereto and incorporated herein by this
------------
reference. As of the date hereof, each of the Borrower's authorized capital
stock and the number of shares validly issued and outstanding are set forth on
Schedule 6.7 attached hereto and such issued shares are all fully paid and non-
------------
assessable, and all of the outstanding stock of Industries, MPA, Finance,
Logistics, MIT and Railroad Group are owned beneficially and of record by Emons
and all of the outstanding capital stock of YKR and SLR is owned beneficially
and of record by Railroad Group.
VI.8 Debt. After giving effect to the making of the Term Loan and the
----
Working Capital Loans to be made on the Closing Date, the Borrowers have no
Debt, except (a) the Obligations, (b) Debt set forth on Schedule 6.8 attached
------------
hereto, (c) trade payables and other contractual obligations arising in the
ordinary course of business and (d) Debt permitted under Section 7.13.
VI.9 Real Property; Leases. As of the date hereof, Schedule 6.9 attached
--------------------- ------------
hereto and incorporated herein by this reference sets forth a correct and
complete list of all real property owned by such Borrower (whether by fee,
leasehold easement, right-of-way or otherwise), all leases and subleases of real
or personal property by such Borrower as lessee or sublessee, and all leases and
subleases of real or personal property by such Borrower as lessor or sublessor,
in each case where such property is necessary or useful in any material respect
in the conduct of such Borrower's business. To the best of Borrower's
knowledge, each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect, and no default by any
party to any such lease or sublease which is material to the business or
operations of such Borrower exists.
VI.10 Proprietary Rights. As of the date hereof, Schedule 6.10 attached
------------------ -------------
hereto and incorporated herein by this reference sets forth a correct and
complete list of all of the Proprietary Rights. None of such Proprietary Rights
is subject to any licensing agreement or similar arrangement except as set forth
on Schedule 6.10 attached hereto. To the best of such Borrower's knowledge,
-------------
none of the Proprietary Rights infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with the
Proprietary Rights.
VI.11 Trade Names and Terms of Sale. As of the date hereof, all trade
-----------------------------
names or styles under which the Borrowers will create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
--------
6.11 attached hereto and incorporated herein by this reference.
----
VI.12 Litigation. Except as set forth on Schedule 6.12 attached hereto and
---------- -------------
incorporated herein by this reference, there is no pending or (to the best of
such Borrower's knowledge) threatened, action, suit, proceeding, or counterclaim
by any Person, or investigation by any Governmental Authority, or any basis for
any of the foregoing, which may materially and adversely affect any material
portion of the Collateral, the repayment of the Obligations, the Lender's rights
under the Loan Documents, or the Borrowers' Property, business, operations, or
condition (financial or otherwise), taken as a whole.
VI.13 Restrictive Agreements. Such Borrower is not a party to any contract
----------------------
or agreement, and is not subject to any charter or other corporate restriction,
which affects its ability to execute, deliver, and perform its obligations under
the Loan Documents and repay the Obligations or which materially and adversely
affects or, insofar as such Borrower can reasonably foresee, could materially
and adversely affect, such Borrower's Property, business, operations, or
condition (financial or otherwise), or would in any respect materially and
adversely affect the Collateral, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or such Borrower's Property, business,
operations, or condition (financial or otherwise), taken as a whole.
39
VI.14 Labor Disputes. As of the date hereof, except as set forth on
--------------
Schedule 6.14, there is no collective bargaining agreement or other labor
contract covering employees of such Borrower or any of its Subsidiaries; no such
collective bargaining agreement or other labor contract is scheduled to expire
during the term of this Agreement and, to the best of such Borrower's knowledge,
no union or other labor organization is seeking to organize, or to be recognized
as, a collective bargaining unit of employees of such Borrower or any of its
Subsidiaries or for any similar purpose. There is no pending or (to the best of
such Borrower's knowledge) threatened, strike, work stoppage, material unfair
labor practice claim, or other material labor dispute against or affecting such
Borrower, or any of its Subsidiaries or their respective employees.
VI.15 Environmental, Health and Safety Laws. Except as disclosed on
-------------------------------------
Schedule 6.15 attached hereto and incorporated herein by this reference, (a) the
-------------
operations of such Borrower comply in all material respects with all applicable
Environmental Laws and health and safety requirements of law; (b) such Borrower
has obtained all environmental, health and safety permits necessary for its
operation, and all such permits are in good standing and such Borrower is in
compliance with all terms and conditions of such permits; (c) neither such
Borrower nor any of its present Property or operations, or to the best of such
Borrower's knowledge, its past Property or operations, are subject to any order
from or agreement with any Governmental Authority or private party respecting
(i) any Environmental Laws or any health or safety requirements of law, (ii) any
Remedial Action or (iii) liabilities and costs arising from the Release or
threatened Release of a Contaminant into the environment; (d) none of the
operations of such Borrower is subject to any judicial or administrative
proceeding alleging a violation of any Environmental Laws or any health or
safety requirement of law; (e) none of the present or, to the best of the
Borrower's knowledge, past operations of such Borrower's predecessor in interest
is the subject of any investigation by any Governmental Authority evaluating
whether any Remedial Action is needed to respond to a Release or threatened
Release of a Contaminant into the environment; (f) such Borrower has not filed
any notice under any requirement of law indicating past or present treatment,
storage or disposal of a hazardous waste, as that term is defined under 40 CFR
Part 261 or any state equivalent; (g) such Borrower has not filed any notice
under any applicable requirement of law reporting a Release of a Contaminant
into the environment; (h) to the best of such Borrower's knowledge, there is not
now, nor has there ever been on or in such Borrower's Property (i) any
generation, treatment, recycling, storage or disposal of any hazardous waste, as
that term is defined under 40 CFR Part 281 or any State equivalent, (ii) any
underground storage tanks or surface impoundments, (iii) any asbestos-containing
material, (iv) any polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment; (i) such Borrower has not entered
into any negotiations or agreements with any Person (including, without
limitation, the prior owner of such Borrower's Property) relating to any
Remedial Action or environmentally related claim; (j) such Borrower has not
received any notice or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release of a Contaminant into
the environment; (k) such Borrower has no material contingent liability in
connection with any Release or threatened Release of any Contaminants into the
environment; (l) to the best of such Borrower's knowledge, no Environmental Lien
has attached to any Property of such Borrower; (m) to the best of such
Borrower's knowledge, such Property does not contain any asbestos-containing
material; and (n) none of the products that such Borrower manufactures,
distributes or sells, or, to the best of its knowledge, has ever had
manufactured, distributed or sold, contains asbestos-containing material.
VI.16 No Violation of Law. Such Borrower is not in violation of any law,
-------------------
statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, the Lender's rights under the Loan
Documents, or such Borrower's Property, business, operations, or condition
(financial or otherwise), taken as a whole.
VI.17 No Default. No Borrower is in default with respect to any note,
----------
indenture, loan agreement, mortgage, lease, deed, or other agreement to which
such Borrower is a party or by which it is bound, which default would materially
and adversely affect the Collateral, the repayment of the Obligations, any
Lender's rights under the Loan Documents, or such Borrower's Property, business,
operations, or condition (financial or otherwise), taken as a whole.
40
VI.18 ERISA.
-----
(a) Neither any Borrower nor any ERISA Affiliate has or contributes
to any Plan other than those listed on Schedule 6.18 attached hereto and
-------------
incorporated herein by this reference.
(b) Except as provided on Schedule 6.18 attached hereto, no Benefit
-------------
Plan has been terminated or partially terminated or is insolvent or in
reorganization, nor have any proceedings been instituted to terminate or
reorganize any Plan.
(c) Neither any Borrower nor any ERISA Affiliate has withdrawn from
any Multiemployer Plan in a complete or partial withdrawal, nor has a
condition occurred which if continued would result in a complete or partial
withdrawal.
(d) Neither any Borrower nor any ERISA Affiliate has incurred any
withdrawal liability, including contingent withdrawal liability, to any
Benefit Plan pursuant to Title IV of ERISA as of December 31, 1995.
(e) Neither any Borrower nor any ERISA Affiliate has any liability
to the PBGC other than for required insurance premiums which have been paid
when due.
(f) No Reportable Event has occurred with respect to a Benefit Plan.
(g) No Benefit Plan has an "accumulated funding deficiency" (whether
or not waived) as defined in Section 302 of ERISA or in Section 412 of the
Code.
(h) Except as provided on Schedule 6.18 attached hereto, to the best
-------------
of Borrower's knowledge each Plan is in substantial compliance with ERISA,
and neither any Borrower nor any ERISA Affiliate has received any notice
asserting that a Plan is not in compliance with ERISA.
(i) Except as provided on Schedule 6.18 attached hereto, each Plan
-------------
which is intended to be a qualified Plan has been determined by the IRS to
be qualified under Section 401(a) of the Code as currently in effect and
neither any Borrower nor any ERISA Affiliate knows or has reason to know
why each such plan should not continue to be so qualified, and each trust
related to such Plan has been determined to be exempt from federal income
tax under Section 501(a) of the Code.
(j) Except as provided on Schedule 6.18 attached hereto, neither any
-------------
Borrower nor any ERISA Affiliate maintains or contributes to any employer
welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides lifetime benefits to retirees.
(k) Neither any Borrower nor any ERISA Affiliate has failed to make
a required installment under subsection (m) of Section 412 of the Code or
any other payment required under Section 412 of the Code on or before the
due date for such installment or other payment.
(l) Neither any Borrower nor any ERISA Affiliate is required to
provide security to a Benefit Plan under Section 401(a)(29) of the Code due
to a Plan amendment that results in an increase in current liability for
the plan year.
41
(m) To the best of Borrower's knowledge, neither any Borrower, nor
any ERISA Affiliate, nor any other "party-in-interest" or "disqualified
person" has engaged in a "prohibited transaction," as such terms are
defined in Section 4975 of the Code and Section 406 of ERISA, in connection
with any Plan or any other employee benefit plan to which the Borrower or
any ERISA Affiliate is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA or has taken or
failed to take any action which would constitute or result in a Termination
Event.
(n) To the best of Borrower's knowledge, neither any Borrower nor
any ERISA Affiliate has failed to comply with the health care continuation
coverage requirements of Section 4980B of the Code in respect of employees
and former employees of such Borrower or such ERISA Affiliate and their
dependant and beneficiaries which alone or in the aggregate would subject
such Borrower or such ERISA Affiliate to any material liability.
(o) To the best knowledge of such Borrower or any ERISA Affiliate
after due inquiry, the consummation of the transactions contemplated by the
Acquisition shall not result in any liability to any Borrower or any ERISA
Affiliate under any employment-related agreement, contract or arrangement,
whether written or oral, including without limitation, any severance pay
agreement. The liability of any Borrower or any ERISA Affiliate to make
payments to any employee on account of termination of employment under
individual employment or severance agreements does not in the aggregate
give rise to any material liability to the Borrower or such ERISA
Affiliate.
VI.19 Taxes. Except as set forth on Schedule 6.19, such Borrower has filed
-----
all tax returns and other reports which it was required by law to file on or
prior to the date hereof and has paid all taxes assessments, fees, and other
governmental charges, and penalties and interest, if any, against it or its
Property, income, or franchise, that are due and payable except where the
failure to do so could not, individually or in the aggregate, have a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) of such Borrower.
VI.20 Investment Act. Such Borrower is not an "investment company" nor an
--------------
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. (S) 80(a)(l), et seq.). The making of the Working
Capital Loans, the Term Loan, and other financial accommodations hereunder by
the Lender, the application of the proceeds and repayment thereof by the
Borrowers and the consummation of the other transactions contemplated by this
Agreement and the Loan Documents do not violate any provisions of such Act or
any rule, regulation or order issued by the Securities and Exchange Commission
thereunder.
VI.21 Margin Securities. Such Borrower does not own any "margin security"
-----------------
(as that term is defined in Regulations G and U) and the proceeds of the Working
Capital Loans, the Term Loan, and the other financial accommodations made
pursuant to this Agreement will be used only for the purposes contemplated
hereunder. None of the transactions contemplated by this Agreement, or the Loan
Documents will violate Regulations G, T, U or X. None of the Working Capital
Loans, the Term Loan, or the other financial accommodations hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any Debt or other
Person's indebtedness which was originally incurred to purchase or carry any
margin security, or for any other purpose which might cause any such loan or
other financial accommodation to be considered a "purpose credit" within the
meaning of Regulation G, U or X. Such Borrower will neither take nor permit any
agent acting on its behalf to take any action which might cause any transaction,
obligation or right created by this Agreement, or any document or instrument
delivered pursuant hereto, to violate any regulation of the Federal Reserve
Board.
VI.22 Benefit. Each of the Borrowers will benefit, directly or indirectly,
-------
from the Credit Facilities as a result of the synergistic operations of their
respective businesses.
42
VI.23 Industries Corporate Separateness. Since August 1, 1992, and to the
---------------------------------
best knowledge of the Borrowers prior to that date, there have been no transfers
of property or property rights (including money) by Industries to, or to
Industries by, any of the other Borrowers without adequate consideration and the
observance of "corporate formalities" other than the distribution by Industries
of dividends to Emons in accordance with applicable corporate law and, after
giving effect thereto, Industries retained sufficient capital for its operations
and to pay known liabilities. "Corporate formalities" as used herein, with
respect to any transaction, includes the adoption of appropriate authorizing
resolutions, evidencing such transaction by customary documentation, executed
and delivered by duly authorized officers, and compliance with the terms and
conditions set forth in such documentation. Industries has not and does not
commingle its assets, liabilities or business functions with those of the other
Borrowers. Industries has at all times maintained separate accounting and
corporate records and has had regular board of director meetings and shareholder
meetings as contemplated by its Articles of Incorporation and By-laws.
Industries now holds (and has held at all times) itself out as a separate
corporation and not as a division of any other Borrower, nor has Industries
represented or conducted its affairs at any time in a manner which would cause
other Persons to believe that any other Borrower is part of or a division of
Industries. Industries maintains bank accounts separate and apart from the
other Borrowers and is billed for and pays its own expenses or pays its pro rata
share of common expenses on a fair and equitable allocation basis. To the
extent Industries is included in the consolidated financial statements of Emons
and the other Borrowers, the existence and ownership of Industries has been
adequately disclosed in footnotes.
VI.24 Disclosure. Neither this Agreement nor any document or statement
----------
furnished to the Lender by or on behalf of any Borrower or in contemplation of
this Agreement or in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not materially misleading.
VII.
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower covenants that, so long as any of the Obligations remain
outstanding or the Working Capital Commitment is in effect unless the Lender
shall otherwise consent in writing:
VII.1 Taxes and Other Obligations. Such Borrower shall, and shall cause
---------------------------
each of its Subsidiaries to (a) file when due all tax returns and other reports
which it is required to file (taking into account any allowed extensions), (b)
pay, or provide for the payment, when due, of all taxes, fees, assessments and
other governmental charges against it or upon its Property, income and
franchises, make all required withholding and other tax deposits, and establish
adequate reserves for the payment of all such items, and provide to the Lender,
upon request, satisfactory evidence of its timely compliance with the foregoing
and (c) pay when due all claims of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, and all other indebtedness owed
by it and perform and discharge in a timely manner all other obligations
undertaken by it; provided, however, that such Borrower and its Subsidiaries
-------- -------
need not pay any tax, fee, assessment, governmental charge, or Debt, or
discharge any other obligation, that any of them is contesting in Good Faith by
appropriate proceedings diligently pursued, and for which adequate reserves are
maintained, so long as no Lien, other than a Permitted Lien, results from such
non-payment.
VII.2 Corporate Existence and Good Standing. Such Borrower shall, and
-------------------------------------
shall cause each of its Subsidiaries to, maintain its corporate existence and
its qualification and good standing in all states necessary to conduct its
business and own its Property, and shall obtain and maintain all licenses,
permits, franchises and governmental authorizations necessary to conduct its
business and own its Property.
43
VII.3 Compliance with Law and Agreements. Such Borrower shall, and shall
----------------------------------
cause each of its Subsidiaries to, comply with the terms and provisions of each
judgment, law, statute, rule, and governmental regulation applicable to it and
each contract, mortgage, lien, lease, indenture, order, instrument, agreement,
or document to which it is a party or by which it is bound, the failure to
comply with which, whether considered individually or when aggregated with all
other failures, is likely to have a material adverse effect on the ability of
such Borrower to perform its obligations under this Agreement, or on the
business, operations, properties or condition (financial or otherwise) of such
Borrower, taken as a whole; provided, however, that such Borrower shall have the
-------- -------
right to contest the imposition of such laws, rules, regulations, court orders,
decrees and governmental agency orders if such contest is made in Good Faith and
diligently pursued by proper proceedings, adequate reserves with respect thereto
have been established in accordance with GAAP, and such contest could not
reasonably be expected to have a material adverse affect on the ability of such
Borrower to perform its obligations under this Agreement, or the business,
operations, properties or condition (financial or otherwise) of such Borrower,
taken as a whole.
VII.4 Maintenance of Property. Such Borrower shall, and shall cause each
-----------------------
of its Subsidiaries to, maintain all of its Property necessary and useful in its
business in good operating condition and repair, ordinary wear and tear
excepted.
VII.5 Insurance.
---------
(a) Such Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance against loss or damage by fire with extended coverage; public
liability and third party property damage; and such other hazards or of
such other types as is customary for Persons engaged in the same or similar
business, as the Lender shall reasonably specify, in amounts, and under
policies reasonably acceptable to the Lender.
(b) Such Borrower shall cause the Lender to be named in each such
policy as secured party or mortgagee and lender's loss payee or additional
insured, as appropriate, in a manner acceptable to the Lender. Each policy
of insurance shall contain a clause or endorsement requiring the insurer to
give not less than thirty (30) days' prior written notice to the Lender in
the event of cancellation of the policy for any reason whatsoever and a
clause or endorsement stating that the interest of the Lender shall not be
impaired or invalidated by any act or neglect of such Borrower, any of its
Subsidiaries, or the owner of any premises for purposes more hazardous than
are permitted by such policy. All premiums for such insurance shall be paid
by the Borrowers or their Subsidiaries when due, and certificates of
insurance and, if requested, photocopies of the policies shall be delivered
to the Lender. If such Borrower fails to procure (or cause to be procured)
such insurance or to pay (or cause to be paid) the premiums therefor when
due, the Lender may (but shall not be required to) do so and such amounts
shall be due and payable on demand.
(c) Such Borrower shall promptly notify the Lender of any material
loss, damage, or destruction to the Collateral or arising from its use,
whether or not covered by insurance. In the absence of any Default or
Events of Default, such Borrower shall have the right to determine, whether
and to what extent such proceeds shall be used for repair or replacement.
If, however, any Default or Event of Default shall be continuing, the
Lender may determine, in its sole discretion, whether the proceeds shall be
used for repair or replacement. If neither an Event of Default nor a
Default exists, such Borrower or its Subsidiary, as the case may be, may
negotiate a settlement regarding such proceeds with the applicable
insurance company and the Lender shall forward such proceeds to the
applicable Borrower. If, however, an Event of Default or a Default exists,
the Lender shall collect the insurance proceeds directly and neither such
Borrower nor its Subsidiary, as the case may be, shall enter into any
settlement agreement with the applicable insurance company without the
prior written consent of Lender, which consent shall not be unreasonably
withheld. Any insurance proceeds paid to any Borrower not used to replace
the property which suffered the casualty giving rise to the payment of such
insurance proceeds within 180 days of receipt of such proceeds by such
Borrower, shall be required to be paid to the Lender as a Mandatory
Prepayment in accordance with Section 2.4(b).
--------------
44
(d) If an Event of Default shall exist, Lender may, and if a
decision to not rebuild or replace is made, the Lender shall, apply the
proceeds of insurance to the payment of the Obligations as set forth in
Section 2.8(e).
--------------
VII.6 Condemnation. Such Borrower shall, immediately upon learning of the
------------
institution of any proceeding for the condemnation or other taking of any of its
Property or the Property of any of its Subsidiaries, which has a material and
adverse effect on the operations of such Borrower, notify the Lender of the
pendency of such proceeding. Any condemnation proceeds paid to any Borrower
which have not been used to replace the property which was condemned within 180
days of receipt of such proceeds by such Borrower, shall be paid to the Lender
and treated as a Mandatory Prepayment in accordance with Section 2.4(b). If an
--------------
Event of Default shall exist at the time such Borrower receives any condemnation
proceeds, Lender may require that all such condemnation proceeds be applied to
the payment of the Obligations as set forth in Section 2.8(e).
VII.7 Environmental, Health and Safety Laws. Such Borrower shall, and
-------------------------------------
shall cause each of its Subsidiaries to, conduct its business in compliance in
all material respects with all health and safety laws and Environmental Laws
applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of hazardous and toxic wastes
and substances. Such Borrower shall, and shall cause each of its Subsidiaries
to, take prompt and appropriate action to respond to any non-compliance with
health and safety laws and Environmental Laws and shall regularly report to the
Lenders on such response. Without limiting the generality of the foregoing,
whenever such Borrower gives notice to the Lender pursuant to Section 5.3(g),
--------------
such Borrower shall, at the Lender's request and such Borrower's expense (a)
cause an independent environmental engineer acceptable to the Lender to conduct
such tests of the site where the noncompliance or alleged non-compliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
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 (b) provide to the Lender a supplemental report of such engineer whenever
the scope of the environmental problems, or the response thereto or the
estimated costs thereof, shall change.
VII.8 ERISA.
-----
(a) For each Plan adopted by such Borrower or any ERISA Affiliate,
such Borrower or such ERISA Affiliate shall (i) use its best efforts to
seek and receive a determination letter from the IRS that such Plan is
qualified under Section 401(a) of the Code (unless such Plan is a master or
prototype plan), and (ii) from and after the adoption of any such Plan, use
its best efforts to cause such Plan to be qualified under Section 401(a) of
the Code and to be administered in all material respects in accordance with
the requirements of ERISA and Section 401(a) of the Code, and (iii) not
take any action which would cause such Plan not to be qualified under
Section 401(a) of the Code or not to be administered in all material
respects in accordance with the requirements of ERISA and Section 401(a) of
the Code.
(b) Such Borrower shall not, and shall not permit any ERISA
Affiliate, to:
(i) Engage in any transaction for which an exemption is not
available or has not been previously obtained from the DOL in
connection with which such Borrower or any ERISA Affiliate could be
subject to either a civil penalty assessed pursuant to Section 502(i)
of ERISA or tax imposed by Section 4975 of the Code;
(ii) Permit to exist any accumulated funding deficiency
(whether or not waived), as defined in Section 302 of ERISA and
Section 412 of the Code;
(iii) Fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
45
(iv) Fail to make any payments to any Multiemployer Plan which
such Borrower or any ERISA Affiliate may be required to make under
any agreement relating to such Multiemployer Plan, or any law
pertaining thereto;
(v) Terminate or permit an ERISA Affiliate to terminate a
Benefit Plan or withdraw or partially withdraw from, or permit an
ERISA Affiliate to withdraw or partially withdraw from, any
Multiemployer Plan and fail to pay any liability of such Borrower or
an ERISA Affiliate under Title IV of ERISA;
(vi) Fail to pay any required installment under subsection (m)
of Section 412 of the Code or any other payment required under
Section 412 of the Code on or before the due date for such
installment or other payment; or
(vii) Amend a Benefit Plan resulting in an increase in current
liability for the plan year such that such Borrower or an ERISA
Affiliate is required to provide security to such Benefit Plan under
Section 401(a)(29) of the Code.
VII.9 Mergers, Consolidations or Sales. None of the Borrowers or any of
--------------------------------
their Subsidiaries shall enter into any transaction of merger, reorganization,
or consolidation, or transfer, sell, assign, lease, or otherwise dispose of all
or any material part of its Property, or wind up, liquidate or dissolve, or
agree to do any of the foregoing, except for sales of Equipment as otherwise
permitted hereunder.
VII.10 Restricted Junior Payments; Capital Change. None of the Borrowers
------------------------------------------
nor any of their Subsidiaries shall (a) directly or indirectly declare or make,
or incur any liability to make, any Restricted Junior Payment, except dividends
to a Borrower by a Subsidiary wholly owned by such Borrower or by one or more
other Subsidiaries that are wholly owned by the Borrowers or (b) make any change
in its capital structure which could adversely affect the repayment of the
Obligations.
VII.11 Transactions Affecting Collateral or Obligations. Neither such
------------------------------------------------
Borrower nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or such Borrower's ability to
repay the Obligations.
VII.12 Guaranties. Neither such Borrower nor any of its Subsidiaries shall
----------
make, issue, or become liable on any Guaranty, except (a) Guaranties in favor of
the Lender, (b) Guaranties by one Borrower of the obligations of another
Borrower provided the incurrence of such obligations are otherwise permitted
under this Agreement, and (c) a guaranty of the Canadian National Note given by
Emons.
VII.13 Debt. Neither such Borrower nor any Subsidiary shall incur or
----
maintain any Debt, other than: (a) the Obligations; (b) trade payables and
contractual obligations to suppliers, customers and others incurred in the
ordinary course of business; (c) Debt incurred to finance the purchase of
Equipment constituting Capital Expenditures permitted by Section 7.21, so long
------------
as (i) the aggregate principal amount of such Debt incurred in any Fiscal Year
(regardless of when the same becomes due and payable) shall be included in the
determination of Capital Expenditures for such Fiscal Year for purposes of
Section 7.21, (ii) the rate at which interest accrues on such Debt does not
------------
exceed the market rate of interest for similar transactions at such time, and
(iii) such Debt would not, after giving effect to such Debt on a pro forma
basis, cause any Default or Event of Default; (d) with the Lender's prior
written consent, not to be unreasonably withheld, no interest or low interest
Debt incurred to any Governmental Authority to rehabilitate or construct
railroad structures and related facilities and (e) other Debt existing on the
Closing Date and reflected on Schedule 6.8 hereof.
------------
46
VII.14 Prepayment. None of the Borrowers shall voluntarily prepay any
----------
Funded Indebtedness, except the Obligations in accordance with the terms hereof.
VII.15 Transactions with Affiliates. Except as set forth below, neither
----------------------------
such Borrower nor any of its Subsidiaries shall sell, transfer, distribute, or
pay any money or its Property, including, but not limited to, any fees or
expenses of any nature (including, but not limited to, any fees or expenses for
management services), to any Affiliate of any Borrower, or lend or advance money
or its Property to any Affiliate of any Borrower, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or indebtedness,
or any of its Property, of any Affiliate of any Borrower, or become liable on
any Guaranty of the indebtedness, dividends, or other obligations of any
Affiliate of any Borrower except (a) actual expenses incurred and approved in
advance in writing by the Lender; (b) reimbursement of actual and reasonable
out-of-pocket expenses incurred by employees or directors of the Borrowers in
the ordinary course of the Borrowers' business; (c) Guaranties in favor of the
Lender; (d) Guaranties with respect to any wholly owned Subsidiary of any
Borrower or its Subsidiaries; (e) any transactions, consistent with past
practices and intercompany indebtedness, among Emons, Finance, MPA, Logistics,
MIT, Railroad Group, SLR, YKR or any other entity which becomes a subsidiary of
a Borrower, provided that the capital stock of such entity is pledged to the
Lender as collateral security for the performance of the Obligations and such
subsidiary becomes a borrower under this Agreement, and (f) any payments due
from any Borrower to another Borrower in accordance with the terms of any tax
sharing agreement by and among the Borrowers as in effect on the date hereof.
VII.16 Business Conducted. Such Borrower and its Subsidiaries shall not
------------------
engage, directly or indirectly, in any line of business other than the
businesses in which such Borrower is engaged on the Closing Date.
VII.17 Liens. Neither such Borrower nor any of its Subsidiaries shall
-----
create, incur, assume, or permit to exist any Lien on any Property now owned or
hereafter acquired by any of them, except Permitted Liens.
VII.18 Sale and Leaseback Transactions. Neither such Borrower nor any
-------------------------------
of its Subsidiaries shall directly or indirectly, enter into any arrangement
with any Person providing for such Borrower or a Subsidiary to lease or rent
Property that such Borrower or a Subsidiary has or will sell or otherwise
transfer to such Person.
VII.19 New Subsidiaries. Such Borrower shall not, directly or
----------------
indirectly, organize or acquire any Subsidiary unless such Subsidiary becomes a
Borrower under this Agreement and such Borrower shall have pledged the stock of
such Subsidiary as collateral to secure the Obligations.
VII.20 Restricted Investments. Neither the Borrower nor any of its
----------------------
Subsidiaries shall make any Restricted Investment other than (a) acquisitions of
assets and operations of similar businesses provided the aggregate purchase
price for such acquisitions does not exceed $2,500,000 in the aggregate during
the term of this Agreement, provided that after giving effect to such
acquisitions no Default or Event of Default exists, (b) intercompany
transactions permitted under Section 7.15(e) and (c) capital contributions by
Emons to Finance from time to time.
VII.21 Capital Expenditures. Neither such Borrower nor any of its
--------------------
Subsidiaries shall make or incur any Capital Expenditure if, after giving effect
thereto, the aggregate amount of all Capital Expenditures by all Borrowers and
their Subsidiaries on a consolidated basis would exceed $1,600,000 during each
Fiscal Year through June 30, 2001, $1,700,000 for the Fiscal Year ending June
30, 2002, $1,800,000 for the Fiscal Year ending June 30, 2003, and $1,900,000
for the Fiscal Year ending June 30, 2004; in each case, net of any Capital
Expenditures funded with grants provided by a Governmental Authority or Debt
permitted under Section 7.13(d).
47
VII.22 Change of Deposit Accounts. Such Borrower shall not establish
--------------------------
any deposit account, other than those deposit accounts described on Schedule 4.8
------------
attached hereto and incorporated herein by this reference, with any bank or
other financial institution, unless such Borrower shall have (i) notified the
Lender thereof in writing at least ten (10) days prior thereto and (ii)
delivered a Collection Account Agreement or similar agreement to the Lender
covering such account; provided, however, that Finance may maintain an operating
-------- -------
account with Corestates Bank in Wilmington, Delaware provided that the amount on
deposit at any time does not exceed $15,000.
VII.23 Minimum Fixed Charge Coverage Ratio. The Borrowers and their
-----------------------------------
consolidated Subsidiaries on a combined and consolidated basis shall at all
times maintain a Fixed Charge Coverage Ratio, as determined as of the last day
of each fiscal quarter during the applicable Fiscal Year set forth below for the
twelve month period ending on such day, of at least the ratio set forth opposite
the applicable period below:
Fiscal Year Minimum Ratio
----------- -------------
1998 1.00 to 1.00
1999 1.05 to 1.00
2000 1.20 to 1.00
2001 and thereafter 1.25 to 1.00
VII.24 Maximum Debt to Cash Flow Ratio. The Borrowers and their
-------------------------------
Subsidiaries on a combined and consolidated basis shall at all times maintain a
Debt to Cash Flow Ratio of at least the ratio set out below opposite the Fiscal
Year in which the applicable determination date falls:
Determination Date
Occurring in the Fiscal Year Maximum Ratio
---------------------------- -------------
1998 4.25 to 1.00
1999 3.50 to 1.00
2000 3.00 to 1.00
2001 2.25 to 1.00
Thereafter 2.00 to 1.00
VII.25 Minimum Tangible Net Worth. The Borrowers and their
--------------------------
Subsidiaries on a combined and consolidating basis shall at all times maintain
Tangible Net Worth as determined as of the last day of each calendar quarter, of
at least $5,113,033 plus 50% of positive net income of the Borrowers accrued
after the Closing Date until such date of determination.
VII.26 Interest Expense Hedging Arrangements. Not later than
-------------------------------------
September 30, 1997, the Borrowers shall enter into and cause to be maintained
an Interest Rate Contract, including an interest rate cap or similar interest
expense hedging arrangement with a financial institution having assets of at
least One Hundred Million Dollars ($100,000,000) and otherwise acceptable to
the Lender with respect to a notional principal amount of at least one half
of the Available Term Loan Amount at such time which effectively caps the
Eurodollar Rate applicable to the Term Loan at a rate not greater than 8% per
annum, and promptly provide the Lender with written notification that such
arrangement is in place, including the details of such arrangement and the
name of the counter-parties. Upon Lender's request, Borrower shall promptly
provide Lender with a true copy of such Interest Rate Contract. Nothing in
this Section 7.26 shall require the Borrowers to purchase an Interest Rate
------------
Contract from the Lender or one of its Affiliates or require the Lender or
any of its Affiliates to provide such an Interest Rate Contract.
VII.27 Corporate Governance. Each of Industries and Finance shall:
--------------------
48
(a) Maintain its own corporate books, records and accounts
separate and apart from the corporate books, records and accounts of any
other Borrower;
(b) Act solely in its corporate name and solely through its
board of directors and its duly authorized officers and agents;
(c) Refrain from holding out to creditors that it is a division
of any other Borrower;
(d) Refrain from using the letterhead of any other Borrower in
the conduct of its business;
(e) Prepare its own budgets and financial statements, separate
and apart from any other Borrower provided, however, that if any such
-------- -------
financial statements are prepared on a consolidated basis, such financial
statements shall clearly disclose that none of the assets of a Borrower
will be available to satisfy or pay the obligations of any other Borrower
except as expressly provided by contract;
(f) Maintain its own bank accounts, separate and distinct from
the bank accounts of any other Borrower or any Affiliate, and refrain from
commingling its funds and/or other property with the funds and/or other
property of any other Borrower or any Affiliate;
(g) Cause all corporate formalities to be observed, including,
without limitation, (i) the preparation of appropriate corporate
resolutions authorizing each material transaction in which it engages, if
such resolutions are appropriate, (ii) the holding of separate and distinct
Board of Directors meetings from meetings of the Board of Directors of any
other Borrower and the meetings of the board of directors of any Affiliate,
and (iii) the holding of separate and distinct annual shareholders'
meetings from the annual shareholders' meetings of any other Borrower and
the annual shareholders' meetings of any Affiliate;
(h) Be at all times adequately capitalized so as to be able to
conduct its business; and
(i) Refrain from paying its expenses using funds or other
property of any other Borrower or any Affiliate other than its pro rata
share of common expenses allocated on a fair and equitable basis.
VII.28 Operating Leases. Neither such Borrower nor any Subsidiary shall
----------------
incur or continue obligations for operating leases which, when aggregated with
the obligations for operating leases of all of the Borrowers and their
Subsidiaries, exceeds at any time outstanding $10,000,000 calculated as at the
end of each Fiscal Year on a present value basis for the term of such
obligations remaining in excess of one year from the date of determination,
discounted at a rate of 8.5%. The calculation of operating lease obligations
shall be net of obligations under operating leases which are subject to
subleases where the applicable sublessee has a credit profile satisfactory to
Lender and assumes all obligations of the applicable Borrower under such
operating leases.
VIII.
CONDITIONS OF LENDING AND ISSUING LETTERS OF CREDIT
VIII.1 Conditions Precedent to Making of Loans and the Issuance of
-----------------------------------------------------------
Letters of Credit. The obligation of the Lender to make the initial Loans and
-----------------
issue the initial Letters of Credit is subject to the following conditions
precedent having been satisfied in a manner satisfactory to the Lender:
(a) The Borrowers shall have performed and complied with all
covenants, agreements and conditions contained herein which are required to
be performed or complied with by the Borrowers before or on the Funding
Date for the Term Loan and any Working Capital Loans initially requested by
Borrowers or the issuance of any Letters of Credit initially requested by
Borrowers (including, without limitation, the execution and deliver of the
Term Note and the Working Capital Note).
49
(b) The Lender shall have received a certificate dated the
Closing Date and signed by the president or a vice president and the chief
financial officer or treasurer of each Borrower certifying that the
conditions specified in this Section 8.1 have been fulfilled.
-----------
(c) The Borrower shall have caused all items on the List of
Closing Documents attached hereto and made a part hereof as Exhibit H which
---------
are not elsewhere identified in this Article VIII, to be delivered to the
------------
Lender, all such items to be in form and substance satisfactory to the
Lender, and to be executed by all parties thereto when the nature of such
items so requires.
(d) All proceedings taken in connection with the execution of
this Agreement, the Notes, all other Loan Documents and all documents and
papers relating thereto shall be satisfactory to the Lender. The Lender
shall have received copies of such documents and papers as the Lender may
reasonably request in connection therewith, all in form and substance
satisfactory to the Lender.
(e) The Borrowers shall have paid to the Lender the Closing Fee
as well as all costs and expenses incurred as of the Closing Date which the
Borrowers are obligated to pay pursuant to the terms of Section 12.7
------------
hereof.
The acceptance by any Borrower of any Loan made on the Closing Date shall be
deemed to be a representation and warranty made by such Borrower to the effect
that all of the conditions to the making of such Loan set forth in this Section
-------
8.1 have been satisfied, with the same effect as delivery to the Lender of a
---
certificate signed by the president and chief financial officer of such
Borrower, dated the Closing Date, to such effect.
VIII.2 Conditions Precedent to Each Loan and the Issuance of Each
----------------------------------------------------------
Letter of Credit. The obligation of the Lender to make each Loan including the
----------------
initial Loans on the Closing Date or issue any Letter of Credit, shall be
subject to the satisfaction of further conditions precedent that on the date of
any such extension of credit:
(a) With respect to a request for Working Capital Loans, the
Borrower shall be in compliance with Section 5.2(i) (and for the initial
funding, Lender shall have received a Borrowing Base Certificate as of July
31, 1997) and a duly executed Notice of Borrowing, or telecopy or telex
notice in lieu thereof, as and when required pursuant to Section 2.3(a);
--------------
and
(b) the following statements shall be true, and the acceptance
by any Borrower of any extension of credit shall be deemed to be a
statement to the effect set forth in clauses (i) and (ii), with the same
----------- ----
effect as the delivery to the Lender of a certificate signed by the
president and chief financial officer of each Borrower, dated the date of
such extension of credit, stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all
material respects on and as of the date of such extension of
credit as though made on and as of such date, subject only to
such exceptions as are not material and adverse to Lender, except
to the extent that the Lender has been notified by a Borrower
that any representation or warranty is not current or correct and
has explicitly waived such representation or warranty; and
(ii) No event has occurred and is continuing, or would
result from such extension of credit, which constitutes a Default
or an Event of Default; and
(c) the Lender shall have received such other approvals,
opinions or documents as it may reasonably request in Good Faith.
50
IX.
DEFAULT; REMEDIES
IX.1 Events of Default. It shall constitute an event of default
-----------------
("Event of Default") if any one or more of the following shall occur for any
----------------
reason:
(a) any failure to pay the principal of or interest or premium
on any of the Obligations (including, without limitation, the Reimbursement
Obligations) when due, whether upon demand or otherwise;
(b) any representation or warranty made by any Borrower in this
Agreement, any of the other Loan Documents, any financial statement, or any
certificate furnished by such Borrower or any Subsidiary at any time to the
Lender shall prove to be untrue in any material respect as of the date on
which made;
(c) any failure by any of the Borrowers to comply with any of
the covenants set forth in Article VII of this Agreement except for the
-----------
covenants set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.8;
------------ --- --- --- --- ---
(d) any failure by any Borrower to comply with any of the other
covenants and agreements contained in this Agreement (including, without
limitation, Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.8), the other Loan
------------ --- --- --- --- ---
Documents, or any other agreement entered into at any time to which any
Borrower or any Subsidiary and the Lender are party, for more than twenty
(20) days after notice of such failure by the Lender to such Borrower;
provided, however, that no such grace period shall apply, and an Event
-------- -------
of Default shall exist promptly upon such failure to comply, if such
failure to comply may not, in the Lender's reasonable determination, be
cured by such Borrower during such grace period; or if any such agreement,
instrument or document shall terminate (other than in accordance with its
terms or the terms hereof or with the written consent of the Lender) or
become void or unenforceable without the written consent of the Lender;
(e) default shall occur with respect to any Debt for borrowed
money or any indebtedness for borrowed money of any Subsidiary (other than
the Obligations) in an outstanding principal amount in excess of $100,000
or under any agreement or instrument under or pursuant to which any such
Debt or indebtedness may have been issued, created, assumed, or guaranteed
by any Borrower or any Subsidiary, and such default shall continue for more
than the period of grace, if any, therein specified, if the effect thereof
(with or without the giving of notice or further lapse of time or both) is
to accelerate, or to permit the holders of any such Debt or indebtedness to
accelerate, the maturity of any such Debt; or any such Debt or indebtedness
shall be declared due and payable or be required to be prepaid (other than
by a regularly scheduled required prepayment) prior to the stated maturity
thereof;
(f) any Borrower or any Subsidiary shall (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization,
arrangement or readjustment of its debts or for any other relief under the
federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing, or
consent to, approve of, or acquiesce in, any such petition, action or
proceeding; (ii) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, trustee or similar officer
for it or for all or any part of its Property; (iii) make an assignment for
the benefit of creditors; (iv) take any corporate action in furtherance of
any of the foregoing or (v) be unable generally to pay its debts as they
become due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of any Borrower's or any Subsidiary's debts or for any other
relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing and such petition, action or proceeding is not dismissed within
sixty (60) days thereafter;
51
(h) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for any Borrower or any Subsidiary or for all or
any part of their Property shall be appointed; or a warrant of attachment,
execution or similar process shall be issued against any part of the
Property of any Borrower or any Subsidiary;
(i) any Borrower or any Subsidiary shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or
proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(j) all or any material part of the Property of any Borrower or
any Subsidiary shall be nationalized, expropriated or condemned, seized or
otherwise appropriated, or custody or control of such Property or of any
Borrower or any Subsidiary shall be assumed by any Governmental Authority
or any court of competent jurisdiction at the instance of any Governmental
Authority, except where contested in Good Faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;
(k) any guaranty of, subordination to, or security for, the
Obligations shall be terminated, revoked or declared void or invalid;
(l) one or more final judgments for the payment of money
aggregating in excess of $100,000 shall be rendered against any Borrower
which is not discharged in full or stayed within thirty (30) days from the
date of entry thereof unless such judgments are (i) covered by such
Borrower's liability insurance as confirmed in writing by the insurance
company carrying such insurance, or (ii) the subject of an obligation of
any Person (other than a Borrower or any Affiliate of any Borrower) to
indemnify such Borrower against whom such judgment is rendered provided the
--------
terms of such indemnification and the creditworthiness of the indemnitor
are satisfactory to the Lender in its sole discretion;
(m) any event occurs which materially and adversely affects the
operations and financial condition of the Borrowers taken as a whole; or
(n) any Environmental Lien shall attach to any Property of any
Borrower or any Borrower or any Subsidiary becomes subject to any
liabilities, costs, expenses, damages, fines or penalties, which is likely
to have a material adverse effect on the financial condition of the
Borrowers taken as a whole, arising out of or relating to (i) the release
at any location of any Contaminant into the environment, or the incurrence
of remediation costs in response thereto, or (ii) any violation of any
Environmental Laws.
IX.2 Remedies.
--------
(a) If an Event of Default exists, the Lender may without notice
to or demand on any Borrower, do one or more of the following at any time
or times and in any order: (i) reduce the amount of the Working Capital
Commitment, and (ii) restrict the amount of or refuse to make Working
Capital Loans. If an Event of Default exists, the Lender may, without
notice to or demand on any Borrower, do one or more of the following, in
addition to the actions described in the preceding sentence, at any time or
times and in any order: (i) terminate the Working Capital Commitment and
(ii) declare any or all Obligations to be immediately due and payable
(provided, however that upon the occurrence of any Event of Default
-------- -------
described in Sections 9.1(f), 9.1(g), 9.1(h), or 9.1(i), all Obligations
--------------- ------ ------ ------
shall automatically become immediately due and payable without notice or
demand of any kind); and (iii) pursue its other rights and remedies under
the Loan Documents and applicable law.
52
(b) If an Event of Default exists: (i) the Lender shall have, in
addition to all other rights, the rights and remedies of a secured party
under the UCC; (ii) the Lender may, at any time, take possession of the
Collateral and keep it on one of the Borrowers' premises, at no cost to the
Lender, or remove any part of it to such other place or places as the
Lender may desire, or each Borrower shall, upon the Lender's demand, at the
Borrowers' cost, assemble the Collateral and make it available to the
Lender at a place reasonably convenient to the Lender; and (iii) the Lender
may sell and deliver any Collateral at public or private sales, for cash,
upon credit or otherwise, at such prices and upon such terms as the Lender
deems advisable, in its sole discretion, and may, if the Lender deems it
reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or
adjourned sale without giving a new notice of sale. Without in any way
requiring notice to be given in the following manner, each Borrower agrees
that any notice by the Lender of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to each Borrower if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least five
(5) days prior to such action to each Borrower's address specified in or
pursuant to Section 12.8. If any Collateral is sold on terms other than
------------
payment in full at the time of sale, no credit shall be given against the
Obligations until the Lender receives payment, and if the buyer defaults in
payment, the Lender may resell the Collateral without further notice to any
Borrower. In the event the Lender seeks to take possession of all or any
portion of the Collateral by judicial process, each Borrower irrevocably
waives: (i) the posting of any bond, surety or security with respect
thereto which might otherwise be required; (ii) any demand for possession
prior to the commencement of any suit or action to recover the Collateral;
and (iii) any requirement that the Lender retain possession and not dispose
of any Collateral until after trial or final judgment. Each Borrower
agrees that the Lender has no obligation to preserve rights to the
Collateral or ▇▇▇▇▇▇▇▇ any Collateral for the benefit of any Person. The
Lender is hereby granted a license or other right to use, without charge,
each Borrower's labels, patents, copyrights, name, trade secrets, trade
names, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and each
Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender's benefit. The proceeds of sale shall be applied by
Lender against the principal and/or interest of any Loans and/or any other
Obligations, whether or not then due, in such order of application as the
Lender may determine. The Lender will return any excess to the Borrowers
or such other Person as shall be legally entitled thereto and the Borrowers
shall remain liable for any deficiency.
(c) After the occurrence and during the continuance of an Event
of Default, the Borrowers hereby waive all rights to notice and hearing
prior to the exercise by the Lender of the Lender's rights to repossess the
Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing.
X.
TERMINATION
This Agreement shall terminate at such time as all of the Obligations have
been indefeasibly paid and satisfied in full and the Working Capital Commitment
shall have been terminated, unless earlier terminated as provided herein.
XI.
AMENDMENTS; ASSIGNMENTS; SUCCESSORS
53
XI.1 Amendments and Waivers. No amendment or modification of any
----------------------
provision of this Agreement shall be effective without the written agreement of
the Lender and the Borrowers, and no termination or waiver of any provision of
this Agreement, or consent to any departure by any Borrower therefrom, shall in
any event be effective without the written concurrence of the Lender, which the
Lender shall have the right to grant or withhold at its sole discretion. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on any Borrower
in any case shall entitle such Borrower to any other or further notice or demand
in similar or other circumstances.
XI.2 Assignments; Participations.
---------------------------
(a) With the consent of the Borrowers which will not be
unreasonably withheld or delayed, the Lender shall have the right at any
time to assign to one or more commercial banks or other financial
institutions all or a portion of its Working Capital Commitment, the Loans
owing to it and Term Note held by it. The Lender may also grant
participations in all or any part of its rights and obligations under this
Agreement (including, without limitation, all or any part of the Working
Capital Commitment and the Loans, as applicable) to one or more other
Persons; provided, however, that (i) any such disposition shall not,
-------- -------
without the consent of the Borrower, require the Borrower to file a
registration statement with the Securities and Exchange Commission or apply
to qualify the Loans under the blue sky law of any state; and (ii) Lender
shall make and receive all payments for the account of its participant and
shall retain exclusively, and shall continue to exercise exclusively, all
rights of approval and administration available hereunder with respect to
the Working Capital Commitment and the Loans even after giving effect to
the sale of any such participation, and Lender shall make such arrangements
with its participants as may be necessary to accomplish the foregoing. No
holder of a participation in all or any part of the Loans shall be a
"lender" for any purpose under this Agreement; provided, however, that each
-------- -------
holder of a participation shall have the rights of increased capital as the
Lender (including any right to receive payment) under Sections 2.7, 3.7 and
-------- --- ---
12.7; provided, further, that all requests for any such payments shall be
---- -------- -------
made by a participant through the Lender. The right of each holder of a
participation to receive payment under Sections 2.7, 3.7 and 12.7 and shall
------------ --- ----
be limited to the lesser of (i) the amounts actually incurred by such
holder for which payment is provided under such Sections and (ii) the
amounts that would have been payable under such Sections by the Borrowers
to the Lender granting the participation to such holder had such
participation not been granted.
(b) It is expressly agreed that, in connection with prospective
offers for the sale and transfer of any assignment or any participation
pursuant to this Section 11.2, Lender may provide to such prospective
------------
assignees and participants such information pertaining to any Borrower as
Lender may deem appropriate provided that, prior to any such disclosure of
--------
non-public information, such proposed assignee or participant shall agree
in writing (under the same terms and conditions outlined in Section 12.15
-------------
hereof) to preserve the confidentiality of any confidential information
relating to the Borrowers received by it from the Lender.
(c) Notwithstanding the foregoing provisions of this
Section 11.2, Lender may at any time sell, assign, transfer, or negotiate
------------
all or any part of its rights and obligations under this Agreement to any
Affiliate of Lender.
(d) This Agreement and the other Loan Documents shall be binding
upon the parties hereto and their respective successors and assigns
(including, without limitation, a receiver, trustee or debtor-in-possession
of any Borrower) and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lender. In the event of any
such transfer or assignment, the rights and privileges conferred upon the
Lender shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. Neither the
Borrowers' rights nor any interest therein hereunder may be assigned
without the written consent of the Lender.
54
XII.
MISCELLANEOUS
XII.1 Cumulative Remedies; No Prior Recourse to Collateral. The
----------------------------------------------------
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender may,
without limitation, proceed directly against any Borrower to collect the
Obligations without any prior recourse to the Collateral.
XII.2 No Implied Waivers. No act, failure or delay by the Lender shall
------------------
constitute a waiver of any of its rights and remedies. No single or partial
waiver by the Lender of any provision of this Agreement or any other Loan
Document, or of breach or default hereunder or thereunder, or of any right or
remedy which the Lender may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provisions, breach,
default, right or remedy on a future occasion. No waiver by the Lender shall
affect its rights to require strict performance of this Agreement.
XII.3 Severability. If any provision of this Agreement shall be
------------
prohibited or invalid, under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
XII.4 Governing Law; Choice of Forum; Service of Process; Jury Trial
--------------------------------------------------------------
Waiver.
------
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF ILLINOIS.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE, EACH
BORROWER AND THE LENDER HEREBY AGREE TO THE EXCLUSIVE JURISDICTION OF THE
FEDERAL COURT OF THE NORTHERN DISTRICT OF ILLINOIS AND WAIVE ANY OBJECTION
BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
INSTITUTED THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING THE RELATIONSHIP
BETWEEN THE LENDER AND ANY BORROWER OR THE CONDUCT OF ANY PARTY IN
CONNECTION WITH THIS AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE
COURTS DESCRIBED ABOVE. NOTWITHSTANDING THE FOREGOING THE LENDER SHALL HAVE
THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE LENDER DEEMS NECESSARY
OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR
THE OBLIGATIONS.
(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT
ITS ADDRESS SET FORTH IN SECTION 12.8 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. EACH BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.
55
(d) EACH OF THE BORROWERS AND THE LENDER HEREBY WAIVE ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY
OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED, IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE LENDER AND EACH
BORROWER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY MAY FILE AN ORIGINAL 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) NOTHING IN THIS SECTION 12.4 SHALL AFFECT THE RIGHT OF THE
------------
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST
ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
XII.5 Survival of Representations and Warranties. All of the
------------------------------------------
Borrowers' representations, and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or any of its respective agents.
XII.6 Other Security and Guaranties. The Lender, may, without notice
-----------------------------
or demand and without affecting any Borrower's obligations hereunder, from time
to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any Borrower or any such endorser or guarantor, or any
Person who has given any Lien in any other collateral as security for the
payment of all or any part of the Obligations, or any other Person in any way
obligated to pay all or any part of the Obligations.
56
XII.7 Fees and Expenses. The Borrowers shall pay to the Lender on demand
-----------------
all costs and expenses that Lender pays or incurs in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Loan Documents, including, without
limitation: (a) reasonable attorneys' and paralegals' fees and disbursements of
counsel to the Lender and any Participating Lender; (b) reasonable costs and
expenses (including reasonable attorneys' and paralegals' fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien and title searches; (d) taxes, fees and
other charges for recording any mortgages, filing financing statements and
continuations, and other actions to perfect, protect, and continue the Lender's
Liens; (e) sums paid or incurred to pay any amount or take any action required
of any Borrower under the Loan Documents that any Borrower fails to pay or take;
(f) reasonable costs of inspections, and verifications of the Collateral,
including, without limitation, due diligence appraisals, travel, lodging, and
meals for inspections of the Collateral and any Borrower's operations by the
Lender's agents up to one (1) time during any Fiscal Year and whenever an Event
of Default exists; (g) costs and expenses (which shall not exceed the Lender's
costs and expenses customarily charged to other customers) of forwarding loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Concentration Account; (h) costs and expenses of preserving and
protecting the Collateral; and (i) costs and expenses (including attorneys' and
paralegals' fees and disbursements) paid or incurred to obtain payment of the
Obligations, enforce the Lender's Liens, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Lender arising out of the
transactions contemplated hereby (including without limitation, preparations for
and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrowers. All of the foregoing costs and
expenses may be paid as described in Section 2.8(b).
--------------
XII.8 Notices. Except as otherwise provided herein, all notices, demands
-------
and requests that any party is required or elects to give to any other party
shall be in writing, or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, (b) on the Business Day following the Business Day on which it
was delivered to an overnight mail or courier service with charges prepaid, (c)
five (5) days after it shall have been mailed by United States mail, first
class, certified or registered, with postage prepaid, or (d) in the case of
notice by such a telecommunications device upon acknowledgement of receipt when
properly transmitted, in each case addressed with respect to each party as set
forth below:
If to the Lender: LaSalle National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: 312-876-7934
If to any Borrower: c/o Emons Transportation Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
57
with a copy to: ▇▇▇▇▇▇▇▇ Kill & Olick
1251 Avenue of the Americas
New York, N.Y. 10020-1182
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: 212-278-1733
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication. Any
notices, demands or consents required or permitted to be given to or by the
Borrowers will be valid and binding on all Borrowers if given to or by, as the
case may be, Emons.
XII.9 Indemnity. The Borrowers agree to (a) reimburse the Lender for any
---------
costs and expenses (including, without limitation, reasonable attorneys' and
paralegals' fees and expenses) incurred by the Lender in defending any suit
brought against it by any Borrower or any other Person in connection with the
transactions contemplated by this Agreement or the Loan Documents, and (b)
indemnify and hold the Lender, and its officers, directors, employees, attorneys
and agents (collectively, the "Indemnitees") harmless from and against any and
-----------
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
incurred by the Indemnitees, whether direct, indirect or consequential, as a
result of or arising from or relating to any proceeding by any Person, whether
threatened or initiated, asserting any claim for legal or equitable remedy
against any Person under any statute or regulation (including, without
limitation, any federal or state securities or commercial laws or under any
common law or equitable cause or otherwise, including any liability and costs
under Environmental Laws or common law principles arising from or in connection
with the past, present or future operations of the Borrowers or their
predecessors in interest, or the past, present or future environmental condition
of the Borrowers' Property, the presence of asbestos-containing materials at or
on such Property, or the release or threatened release of any contaminant into
the environment from such Property), in any way arising from or in connection
with the negotiation, preparation, execution, delivery, enforcement, performance
and administration of this Agreement or any other document executed in
connection herewith, provided that the Borrowers shall have no obligation
--------
hereunder with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of any Indemnitee seeking such indemnification.
To the extent that the indemnity set forth in this Section 12.9 may be
------------
unenforceable because it is violative of any law or public policy, Borrowers
shall pay the maximum portion which it is permitted to pay under applicable law.
Any Indemnitee will promptly notify the Borrowers of the commencement of any
legal proceeding which may give rise to any indemnified liability under the
foregoing indemnity and shall permit the Borrowers to participate in the defense
of such Indemnitee in any such proceeding. The foregoing indemnity shall
survive the payment of the Obligations and the termination of this Agreement.
All of the foregoing fees, costs and expenses shall be part of the Obligations,
payable upon demand, and secured by the Collateral.
XII.10 Waiver of Notices. Unless otherwise expressly provided herein,
-----------------
each Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on any Borrower which the
Lender may elect to give shall entitle such Borrower to any or further notice or
demand in the same, similar or other circumstances.
XII.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by the Lender and each of the Borrowers in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
XII.12 Captions. The captions contained in this Agreement are for
--------
convenience only, are without substantive meaning and should not be construed to
modify, enlarge, or restrict any provision.
58
XII.13 Contribution. To the extent that any Borrower shall, under the
------------
terms of this Agreement or any Note or any other Loan Document, make a payment
of a portion of the Obligations which, taking into account all other concurrent
payments of the Obligations by the Borrowers collectively, shall exceed the
amount which such Borrower has actually received under the Credit Facilities or
would have otherwise paid if each Borrower had paid the aggregate Obligations
satisfied by such payments in the same proportion as such Borrower's Net Worth
immediately prior to such payments bore to the aggregate amount of all the
Borrowers' Net Worth immediately prior to such payment; then such Borrower shall
be entitled to contribution from, and be reimbursed by, the other Borrowers for
the amount of such excess, prorata based on their respective Net Worth
immediately prior to such payment. This agreement regarding contribution is
intended to define the relative rights of the Borrowers, and nothing set forth
in this Section 12.13 is intended to or shall impair the obligations of the
-------------
Borrowers, jointly and severally, to pay the Obligations as and when the same
shall become due and payable in accordance with this Agreement and the Notes.
XII.14 Joint and Several Liability. All obligations of the Borrowers under
---------------------------
this Agreement and under the Notes shall be joint and several obligations of the
Borrowers. Each Borrower shall be liable for the full amount of the Obligations
with the rights of contribution and reimbursement against the other Borrowers
under Section 12.13.
-------------
XII.15 Confidentiality. The Lender hereby agrees that it will use
---------------
reasonable efforts to keep confidential any information from time to time
supplied to it by any Borrower under this Agreement unless such information was
already known to the Lender on a nonconfidential basis at the time it was
received or was obtained from a third party on a nonconfidential basis, or was,
is or becomes publicly available; provided, however, that nothing herein shall
-------- -------
affect the disclosure of any such information to: (a) the extent required by
statute, rule, regulation or judicial process; (b) provided that all such
persons agree to keep such information confidential in accordance with this
Section 12.15 (i) counsel for the Lender or to its accountants; (ii) bank
examiners and auditors; and (iii) any transferee or prospective transferee of
any Note; or (c) any other Person in connection with any litigation to which the
Lender is a party; provided, further, that the Lender hereby agrees that it will
-------- -------
notify the Borrowers in writing of any request for information under clauses (a)
and (c) above or with respect to any other request for information not
enumerated in this Section 12.15 at least five (5) Business Days before
-------------
complying with any such request, unless such notice is specifically prohibited
by applicable law, court order or governmental authority. If the terms of any
request for information subject to the last proviso of the preceding sentence do
not provide a reasonably sufficient time to give the Borrowers five (5) Business
Days' notice, the Lender will use its best efforts to seek additional time for
compliance in order to permit such notice and in any event will notify the
Borrowers of such request as soon as practicable.
59
IN WITNESS WHEREOF, the parties have entered into this Agreement on the date
first above written.
EMONS TRANSPORTATION GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
EMONS INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
MARYLAND AND PENNSYLVANIA RAILROAD COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
EMONS LOGISTICS SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
MAINE INTERMODAL TRANSPORTATION, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
EMONS RAILROAD GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
YORKRAIL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
▇▇
▇▇. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Title: VP - Finance, Controller & Secretary
------------------------------------
EMONS FINANCE CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Title: President
------------------------------------
LASALLE NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Title: Vice President
------------------------------------
61
EXHIBITS
--------
EXHIBIT A - Form of Borrowing Base Certificate
EXHIBIT B - Form of Notice of Borrowing
EXHIBIT C - INTENTIONALLY OMITTED
EXHIBIT D - Form of Term Note
EXHIBIT E - Form of Working Capital Note
EXHIBIT F - Form of Notice of Conversion
EXHIBIT G - Form of Collection Account Agreement
EXHIBIT H - List of Closing Documents
SCHEDULES
---------
1.1 - Permitted Liens
4.4 - List of Collateral Locations
4.8 - List of Collection Accounts
4.9 - List of Rolling Stock
6.4 - List of Prior Names
6.5 - Subsidiaries and Affiliates
6.7 - Capitalization
6.8 - Debt
6.9 - Leases; Real Property
6.10 - Proprietary Rights
6.11 - List of Trade Names
6.12 - Litigation
6.14 - Labor Matters
6.15 - Environmental Matters
6.18 - Employee Benefit Plans
6.19 - Tax Matters
62