CREDIT AGREEMENT
dated as of June 27, 1997
among
PUMPKIN LTD.,
PUMPKIN MASTERS HOLDINGS, INC.,
THE LENDERS referred to herein
and
NATIONSCREDIT COMMERCIAL CORPORATION,
as Agent
TABLE OF CONTENTS
PAGE
------
ARTICLE 1
DEFINITIONS
SECTION 1.01. Certain Defined Terms................................... 1
SECTION 1.02. Accounting Terms and Determinations..................... 20
SECTION 1.03. Other Definitional Provisions........................... 21
ARTICLE 2
TRANCHE A LOANS
SECTION 2.01. Tranche A Loans......................................... 21
SECTION 2.02. Tranche A Notes......................................... 22
SECTION 2.03. Interest on the Tranche A Loans......................... 22
SECTION 2.04. Repayments and Prepayments of Tranche A Notes........... 22
ARTICLE 3
TRANCHE B LOANS AND WARRANTS
SECTION 3.01. Tranche B Loans......................................... 25
SECTION 3.02. Tranche B Notes......................................... 25
SECTION 3.03. Interest on the Tranche B Loans......................... 25
SECTION 3.04. Repayments and Prepayments of Tranche B Notes........... 25
SECTION 3.05. Warrants................................................ 28
ARTICLE 4
WORKING CAPITAL LOANS
SECTION 4.01. Working Capital Loans and Commitments................... 28
SECTION 4.02. Working Capital Notes................................... 28
SECTION 4.03. Interest on the Working Capital Loans................... 29
SECTION 4.04. Advance Working Capital Loans........................... 29
SECTION 4.05. Mandatory Repayments and Prepayments.................... 29
SECTION 4.06. Optional Prepayments.................................... 30
SECTION 4.07. Application of Payments................................. 30
SECTION 4.08. Letters of Credit....................................... 30
SECTION 4.09. Obligation to Make Working Capital Loans................ 34
ARTICLE 5
CONDITIONS
SECTION 5.01. Conditions to Closing................................... 34
SECTION 5.02. Conditions to Each Loan................................. 38
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Corporate Existence and Power........................... 39
SECTION 6.02. Corporate and Governmental Authorization; No
Contravention....................................................... 39
SECTION 6.03. Binding Effect; Liens of Security Documents............. 40
SECTION 6.04. Financial Information................................... 40
SECTION 6.05. Litigation.............................................. 42
SECTION 6.06. Ownership of Property; Liens............................ 42
SECTION 6.07. No Default.............................................. 42
SECTION 6.08. No Burdensome Restrictions.............................. 43
SECTION 6.09. Labor Matters........................................... 43
SECTION 6.10. Subsidiaries; Other Equity Investments.................. 43
SECTION 6.11. Investment Company Act.................................. 43
SECTION 6.12. Margin Regulations...................................... 44
SECTION 6.13. Taxes................................................... 44
SECTION 6.14. Compliance with ERISA................................... 44
SECTION 6.15. Brokers................................................. 45
SECTION 6.16. Related Transactions.................................... 45
SECTION 6.17. Employment, Shareholders and Subscription Agreements.... 45
SECTION 6.18. Full Disclosure......................................... 45
SECTION 6.19. Representations and Warranties Incorporated from Other
Operative Documents................................................. 45
SECTION 6.20. Private Offering........................................ 46
SECTION 6.21. Compliance with Environmental Requirements; No Hazardous
Materials........................................................... 46
SECTION 6.22. Initial Capitalization.................................. 48
SECTION 6.23. Real Property Interests................................. 48
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ARTICLE 7
AFFIRMATIVE COVENANTS
SECTION 7.01. Financial Statements and Other Reports.................. 48
SECTION 7.02. Payment of Obligations.................................. 53
SECTION 7.03. Conduct of Business and Maintenance of Existence........ 53
SECTION 7.04. Maintenance of Property; Insurance...................... 53
SECTION 7.05. Compliance with Laws.................................... 55
SECTION 7.06. Inspection of Property, Books and Records............... 55
SECTION 7.07. Use of Proceeds......................................... 55
SECTION 7.08. Further Assurances...................................... 55
SECTION 7.09. Board Meetings.......................................... 56
SECTION 7.10. Lenders' Meetings....................................... 56
SECTION 7.11. Consummation of the Acquisition......................... 56
SECTION 7.12. Hazardous Materials; Remediation........................ 56
SECTION 7.13. Collateral Reports...................................... 57
SECTION 7.14. Collections; Right to Notify Account Debtors............ 57
SECTION 7.15. Enforcement of Covenant Not to Compete.................. 57
SECTION 7.16. Landlord and Warehouseman Waivers....................... 58
ARTICLE 8
NEGATIVE COVENANTS
SECTION 8.01. Debt.................................................... 58
SECTION 8.02. Negative Pledge......................................... 59
SECTION 8.03. Capital Stock........................................... 60
SECTION 8.04. Restricted Payments..................................... 60
SECTION 8.05. ERISA................................................... 62
SECTION 8.06. Consolidations, Mergers and Sales of Assets............. 62
SECTION 8.07. Purchase of Assets; Investments......................... 63
SECTION 8.08. Transactions with Affiliates............................ 63
SECTION 8.09. Amendments or Waivers................................... 63
SECTION 8.10. Fiscal Year............................................. 64
SECTION 8.11. Limitations on Activities by Holdings; Payments by
Holdings and the Company under the Tax Sharing Agreement............ 64
SECTION 8.12. Investor Fees........................................... 65
SECTION 8.13. Management Compensation................................. 65
SECTION 8.14. Lease Payments.......................................... 66
SECTION 8.15. Capital Expenditures.................................... 66
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SECTION 8.16. Total Debt Coverage Ratio............................... 66
SECTION 8.17. Minimum EBITDA.......................................... 66
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. Events of Default....................................... 67
SECTION 9.02. Cash Collateral......................................... 70
ARTICLE 10
FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING
TO PAYMENTS
SECTION 10.01. Fees................................................... 71
SECTION 10.02. Computation of Interest and Fees....................... 71
SECTION 10.03. General Provisions Regarding Payments.................. 71
SECTION 10.04. Expenses............................................... 72
SECTION 10.05. Indemnity.............................................. 72
SECTION 10.06. Taxes.................................................. 73
SECTION 10.07. Funding Losses......................................... 74
SECTION 10.08. Maximum Interest....................................... 74
ARTICLE 11
THE AGENT
SECTION 11.01. Appointment and Authorization.......................... 75
SECTION 11.02. Agents and Affiliates.................................. 75
SECTION 11.03. Action by Agent........................................ 75
SECTION 11.04. Consultation with Experts.............................. 75
SECTION 11.05. Liability of Agent..................................... 76
SECTION 11.06. Indemnification........................................ 76
SECTION 11.07. Credit Decision........................................ 76
SECTION 11.08. Successor Agent........................................ 76
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Survival............................................... 77
SECTION 12.02. No Waivers............................................. 77
SECTION 12.03. Notices................................................ 77
iv
SECTION 12.04. Severability........................................... 78
SECTION 12.05. Amendments and Waivers................................. 78
SECTION 12.06. Successors and Assigns; Registration................... 78
SECTION 12.07. Collateral............................................. 80
SECTION 12.08. Headings............................................... 80
SECTION 12.09. Governing Law; Submission to Jurisdiction.............. 81
SECTION 12.10. Notice of Breach by Agent or Lender.................... 81
SECTION 12.11. Waiver of Jury Trial................................... 82
SECTION 12.12. Counterparts; Integration.............................. 82
SECTION 12.13. Knowledge of Any Person................................ 82
SCHEDULE 6.06 -- Patent, Trademark and Copyright Infringements
SCHEDULE 6.10 -- Joint Ventures
SCHEDULE 6.17 -- Employment, Shareholders' and Subscription Agreements
SCHEDULE 6.21 -- Environmental Matters
SCHEDULE 6.22 -- Initial Capitalization
SCHEDULE 6.23 -- Real Property Interests
SCHEDULE 7.04 -- Required Insurance
SCHEDULE 8.01 -- Outstanding Debt
EXHIBIT A -- Tranche A Note
EXHIBIT B -- Tranche B Note
EXHIBIT C -- Working Capital Note
EXHIBIT D -- Warrant
EXHIBIT E -- Company Security Agreement
EXHIBIT F -- Holdings Pledge Agreement
EXHIBIT G -- Security Capital Pledge and Guaranty Agreement
EXHIBIT H -- Borrowing Base Certificate
EXHIBIT I -- Opinion of counsel to the Company
EXHIBIT J -- Opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, Special Counsel to the Agent
EXHIBIT K -- Warrantholders Rights Agreement
EXHIBIT L -- Security Capital Note
EXHIBIT M -- Security Capital Subordination Agreement
EXHIBIT N -- Investors Subordination Agreement
EXHIBIT O -- Seller Earnout Subordination Agreement
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EXHIBIT P -- Opinion of Moye, Giles, ▇'▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
Colorado Counsel to the Company
vi
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of June 27, 1997 among PUMPKIN LTD., PUMPKIN
MASTERS HOLDINGS, INC., the LENDERS listed on the signature pages hereof and
NATIONSCREDIT COMMERCIAL CORPORATION, as Agent.
The parties hereto agree as follows:
ARTICLE 1
Definitions
SECTION 1.01. Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means the transactions contemplated by the Acquisition
Documents to be consummated on or before the Closing Date.
"Acquisition Corp." means Pumpkin Ltd., a Delaware corporation.
"Acquisition Documents" means the Asset Purchase Agreement, including the
exhibits and schedules thereto, and all agreements, documents and instruments
executed and delivered pursuant thereto or in connection therewith.
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Company (a "Controlling Person") or
(ii) any Person (other than the Company or any of its Subsidiaries) which is
controlled by or is under common control with a Controlling Person or (iii)
the Seller. As used herein, the term "control" of a Person means the
possession, directly or indirectly, of the power to vote 10% or more of any
class of voting securities of such Person or to direct or cause the direction
of the management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Agent" means NationsCredit in its capacity as agent for the Lenders
hereunder, and its successors in such capacity.
"Applicable Premium Amount" has the meaning set forth in Section 2.04(c).
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as
of June 27, 1997 among the Seller, Security Capital, Holdings and Acquisition
Corp.
"Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) by the Company
or any of its Subsidiaries of any asset, but excluding (i) dispositions of
inventory in the ordinary course of business, (ii) dispositions of obsolete,
worn-out or surplus equipment and (iii) dispositions of Temporary Cash
Investments and cash payments otherwise permitted under this Agreement;
provided that a disposition of assets not excluded by clauses (i), (ii) or
(iii) above during any Fiscal Year shall not constitute an Asset Sale unless
and until (and only to the extent that) the aggregate Net Cash Proceeds from
such disposition, when combined with the Net Cash Proceeds all other such
dispositions previously made during such Fiscal Year, exceeds $50,000.
"▇▇▇▇▇▇▇ Leases" means the Lease Agreement dated June 27, 1997, between
▇▇▇▇▇▇▇ Investment Properties, L.L.C., as lessor, and the Company, as lessee,
and the Equipment Lease Agreement dated June 27, 1997 between ▇▇▇▇▇▇▇
Educational Trust, as lessor, and the Company, as lessee.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by the Company or
any of its Subsidiaries.
"Borrowing Base" means, on any date, a dollar amount equal to the sum of
(i) 85% of Eligible Receivables and (ii) during the months of June and July,
60% of Eligible Inventory and, during each other month, 50% of Eligible
Inventory, each determined as of such date.
"Borrowing Base Certificate" means a certificate, duly executed by the
chief financial officer or treasurer of the Company, appropriately completed
and substantially in the form of Exhibit H.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Chicago or New York City are authorized by law to
close.
"Capital Lease" of any Person means any lease of any property (whether
real, personal or mixed) by such Person as lessee which would, in accordance
2
with GAAP, be required to be accounted for as a capital lease on the balance
sheet of such Person.
"Capital Partners" means Capital Partners, Inc., a Connecticut
corporation, and its successors.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from
time to time, and regulations promulgated thereunder.
"Class" refers, with respect to Loans, to whether such Loans are Tranche
A Loans, Tranche B Loans or Working Capital Loans and, with respect to
Commitments, to whether such Commitments are Tranche A Commitments, Tranche B
Commitments or Working Capital Commitments.
"Closing Date" means June 27, 1997, or such other date as the parties
hereto agree to in writing, but in any event not later than July 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all property mortgaged, pledged or otherwise
purported to be subjected to a Lien pursuant to the Security Documents.
"Commitment" means a Tranche A Commitment, Tranche B Commitment or
Working Capital Commitment, or any combination of the foregoing, as the
context may require.
"Company" means Acquisition Corp.; provided that, when used with
reference to periods prior to the Closing Date, "Company" means Pumpkin Ltd.
d/b/a Pumpkin Masters Inc., a Colorado corporation.
"Company Account" means the account specified on the signature pages
hereof into which all Loans to the Company shall be made available, or such
other account as the Company shall from time to time specify by notice to the
Lenders.
"Company Common Stock" means the Company Voting Common Stock or the
Company Non-Voting Common Stock, or both, as the context may require.
"Company Non-Voting Common Stock" means the Class B common stock of the
Company, $.01 par value per share.
3
"Company Security Agreement" means the Company Security Agreement dated
as of the date hereof between the Company and the Agent, substantially in the
form of Exhibit E.
"Company Voting Common Stock" means the Class A common stock of the
Company, $.01 par value per share.
"Consolidated Capital Expenditures" means, for any period, the aggregate
amount of expenditures by the Company and its Consolidated Subsidiaries for
plant, property and equipment during such period (including any such
expenditure by way of acquisition of a Person or by way of assumption of
indebtedness or other obligations of a Person, to the extent reflected as
plant, property and equipment), but excluding any such expenditures made for
the replacement or restoration of assets to the extent financed by
condemnation awards or proceeds of insurance received with respect to the
loss or taking of or damage to the asset or assets being replaced or restored.
"Consolidated Free Cash Flow" means, for any period, EBITDA for such
period minus the following amounts:
(a) (i) all cash payments of income taxes by the Company and its
Consolidated Subsidiaries during such period and (ii) to the extent not
included in clause (i), the aggregate amount of Tax Sharing Payments
(excluding, to the extent included therein, the aggregate amount applied
pursuant to Section 8.11(b)(y)(A) or (B)) during such period;
(b) Consolidated Capital Expenditures for such period, to the
extent that such Consolidated Capital Expenditures are permitted by
Section 8.15 and are not financed during such period (and will not be
financed in any future period) with the proceeds of Debt of the Company
permitted by Section 8.01(c); and
(c) any net gain in respect of Asset Sales during such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company
in its consolidated financial statements if such statements were prepared as
of such date.
"Consolidated Total Debt" means at any date the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis at such date
4
and without giving effect to any amount attributable to original issue discount
in connection with the issuance of the Warrants.
"Debt" of a Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all Capital Leases of such Person, (v) all
obligations of such Person to purchase securities (or other property) which
arise out of or in connection with the sale of the same or substantially
similar securities (or property) (other than the Warrants), (vi) all
non-contingent obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vii) all equity securities of such Person (other than the
Warrants and the Management Options) subject to repurchase or redemption
otherwise than at the sole option of such Person, (viii) all Debt secured by
a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (ix) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"EBITDA" means, for any period, the consolidated net income of the
Company and its Consolidated Subsidiaries for such period, after all expenses
and other proper charges except depreciation, interest, amortization,
Additional Payments (as defined in the Asset Purchase Agreement), income
taxes and, to the extent not included in income taxes, Tax Sharing Payments
for such period, determined in accordance with GAAP plus or minus (i) all
intercompany items, (ii) all earnings attributable to equity interests in
Persons that are not Subsidiaries unless actually received by the Company or
a Consolidated Subsidiary, (iii) all income arising from the forgiveness,
adjustment, or negotiated settlement of any indebtedness, (iv) any
extraordinary items of income or expense, (v) any increase or decrease in
income arising from any change in the Company's method of accounting, subject
to Section 1.02, (vi) any fees paid pursuant to the Management Agreement and
(vii) any interest income, in each case for such period.
"Eligible Inventory" means, at any date of determination thereof, the
aggregate value (determined at the lower of cost or market on a basis
consistent with that used in the preparation of the financial statements
referred to in Section 6.04(a)) at such date of all Inventory owned by the
Company and located in any
5
jurisdiction in the United States of America as to which appropriate UCC
financing statements have been filed naming the Company as "debtor" and the
Agent as "secured party", all net of any amounts payable by the Company in
respect of commissions, processing fees or other charges, excluding, however,
without duplication (i) any such Inventory which has been shipped to a
customer, even if on a consignment or "sale or return" basis and whether or
not such Inventory has been subsequently returned by such customer (other
than any such Inventory which has been returned by a customer and is in
saleable condition); (ii) any Inventory subject to a Lien (other than Liens
created pursuant to the Company Security Agreement), including a landlord's
or warehouseman's Lien, other than Liens created by operation of law in favor
of any supplier or processor of Inventory securing amounts owed in respect of
processing such Inventory by such supplier or processor, as the case may be;
(iii) any Inventory against which the Company has taken a reserve; (iv) any
Inventory not subject to a valid and perfected first-priority Lien in favor
of the Agent under the Company Security Agreement, subject to no prior or
equal Lien; (v) any Inventory which is in transit; (vi) any domestically
produced Inventory not produced in compliance with the applicable requirements
of the Fair Labor Standards Act; and (vii) any supply, scrap or obsolete
Inventory and any Inventory that is not reasonably marketable; provided that
Inventory that is otherwise excluded from the definition of "Eligible Inventory"
solely by virtue of clauses (ii), (iv) or (v) or because it is not at such time
located in any jurisdiction in the United States of America as to which
appropriate UCC financing statements have been filed and as to which the Agent
shall have a perfected security interest (including without limitation pursuant
to arrangements between the Agent and any relevant letter of credit bank in form
and substance satisfactory to the Agent in its sole discretion), shall be
included in any determination of Eligible Inventory, but only to the extent that
such Inventory consists of finished goods in transit or Inventory held by others
and the aggregate value thereof (determined as aforesaid) does not at any time
exceed $250,000.
"Eligible Receivables" means, at any date of determination thereof, the
aggregate amount of all Receivables at such date due to the Company other than
the following (determined without duplication):
(a) (i) any Receivable due from a Foreign Account Debtor at any time,
other than (I) any Receivable that is backed by a letter of credit issued by
a bank organized under the laws of the United States of America or a State
thereof having combined capital and surplus in excess of $250,000,000 and
having outstanding senior unsecured long-term debt securities rated A or
higher by Standard & Poor's Rating Group or A2 or higher by ▇▇▇▇▇'▇ Investor
Service, Inc. (so long as such letter of credit has been delivered to the
Security Agent as additional collateral under the
6
Security Documents) or (II) with respect to Receivables due from TESCO
(U.K.), Receivables in an aggregate amount not to exceed $60,000, and
(ii) any Receivable that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal
requirements, including, without limitation, all laws, rules, regulations
and orders of any governmental or judicial authority (including any
Receivable due from an account debtor located in the States of New Jersey
or Minnesota, unless the Company (at the time the Receivable was created
and at all times thereafter) (i) had filed and has maintained effective a
current notice of business activities report with the appropriate office or
agency of the State of New Jersey or Minnesota (but only if such notice of
business activities report is required to be filed or maintained under
applicable law in the States of New Jersey or Minnesota) or (ii) was and has
continued to be exempt from filing such report and has provided Agent with
satisfactory evidence thereof);
(c) any Receivable in respect of which there is any unresolved
dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable more than 210 days after the date of the
issuance of the original invoice therefor;
(e) any Receivable that remains unpaid for more than 60 days from the
original due date specified at the time of the original issuance of the
invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of goods
not yet shipped;
(g) any Receivable arising outside the ordinary course of business of
the Company;
(h) any Receivable in respect of which there has been established a
contra account, or which is due from an account debtor to whom the Company
owes a trade payable, but only to the extent of such account or trade
payable;
(i) any Receivable that is not subject to a first priority
perfected Lien under the Company Security Agreement and any Receivable
evidenced by an "instrument" (as defined in the UCC) not in the possession
of the Agent;
7
(j) any Receivable due from an account debtor (I) as to which
on such date Receivables representing more than 25% (or, in the case of a
Special Account Debtor, 50%) of aggregate amount of all Receivables of such
account debtor have remained unpaid for more than 60 days (or, in the case
of a Special Account Debtor, 180 days) from the original due date specified
at the time of the original issuance of the invoice therefor, (II) in respect
of which a credit loss has been recognized or reserved by the Company or any
of its Subsidiaries, (III) in respect of which the Agent shall have notified
the Company that such account debtor does not have a satisfactory credit
standing as determined in good faith by the Agent, (IV) that is a Subsidiary
or Affiliate of the Company, (V) that is the United States of America or any
department, agency or instrumentality thereof, unless the Company has
complied in all respects with the Federal Assignment of Claims Act of 1940,
or (VI) that is the subject of a case or proceeding of the type described in
clauses (g) and (h) of Section 9.01;
(k) any Receivable due at any time (i) from an account debtor that
the Company has not instructed such account debtor in the invoice therefor to
make payments in respect of such Receivable to the Lockbox Account (as
defined in the Company Security Agreement) if at such time such payments are
required to be made to the Lockbox Account pursuant to Section 5(B) of the
Company Security Agreement or (ii) from any account debtor that makes
payments in a form that cannot be accepted in the Lockbox Account if at such
time such payments are required to be made to the Lockbox Account pursuant
to Section 5(B) of the Company Security Agreement; and
(l) any Receivables due from an account debtor at any time, to the
extent that the aggregate outstanding amount of Receivables due from such
account debtor and its affiliates at such time exceeds 20% (or, in the case
of a Special Account Debtor during the months of November, December and
January, 49.9%) of the aggregate amount of all Receivables due to the Company
at such time, but only to the extent of such excess.
"Employment Contracts" means the employment contracts delivered by the
Company to NationsCredit on the Closing Date pursuant to Section 5.01(o).
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions,
whether now or hereafter in
8
effect, relating to human health, the environment or to emissions, discharges
or releases of pollutants, contaminants, Hazardous Materials or wastes into
the environment, including ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Materials or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 (b) or (c) of the
Code.
"Event of Default" has the meaning set forth in Section 9.01.
"Excess Amount" has the meaning set forth in Section 8.11(b)(y)(A).
"Excess Cash Flow" means, for any period, an amount equal to:
(a) EBITDA for such period, it being understood that any fees paid
pursuant to the Management Agreement with respect to such period have been
deducted from the determination of EBITDA for such period in accordance with
the definition of EBITDA set forth herein;
(b) minus the following amounts:
(i) (x) all cash payments of taxes by the Company and its
Consolidated Subsidiaries during such period and (y) to the extent
not included in clause (x), the aggregate amount of Tax Sharing
Payments during such period;
(ii) Consolidated Capital Expenditures for such period, to
the extent that such Consolidated Capital Expenditures are permitted
by Section 8.15 and are not financed during such period (and will not
be financed in any future period) with the proceeds of Debt of the
Company permitted by Section 8.01(c);
(iii) any net gain in respect of Asset Sales during such
period; and
9
(iv) the sum for such period of (x) Total Debt Service
(exclusive of amortization of debt discount or premium) for such
period, (y) all optional payments of the Tranche A Notes and Tranche
B Notes during such period pursuant to Sections 2.04(c) and 3.04(c),
and (z) the aggregate amount of Restricted Payments made during such
period in accordance with clauses (i), (ii) or (iii) of the proviso
to Section 8.04(a); and
(c) plus (or minus) the following amounts:
(i) any net cash extraordinary gains (or extraordinary cash
losses) for such period of the Company and its Consolidated
Subsidiaries (except any such gains or losses in respect of Asset
Sales);
(ii) any decrease (or increase) in the Net Working Investment
at the last day of such period when compared with the Net Working
Investment at the day immediately preceding the first day of such
period (or, in the case of the period beginning on the Closing Date
and ending on December 31, 1997, when compared with the Net Working
Investment at December 31, 1996); and
(iii) any interest income of the Company and its Consolidated
Subsidiaries for such period.
"Financing Documents" means this Agreement, the Notes and the Security
Documents.
"Fiscal Year" means a fiscal year of the Company.
"Foreign Account Debtor" means an account debtor that is not both
domiciled in the United States of America or British Columbia, Canada and (if
not a natural person) organized under the laws of the United States of
America or any political subdivision thereof or British Columbia, Canada.
"GAAP" has the meaning set forth in Section 1.02.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such
10
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" means (i) any "hazardous substance" as defined in
CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its
derivatives, by-products and other hydrocarbons; and (v) any other toxic,
radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.
"Hazardous Materials Contamination" means contamination (whether now
existing or hereafter occurring) (i) of the improvements, buildings,
facilities, personalty, soil, groundwater, air or other elements on or of any
property now or previously owned, leased or operated by the Company or any of
its Subsidiaries by Hazardous Materials, or any derivatives thereof, or (ii)
on or of any other property as a result of Hazardous Materials, or any
derivatives thereof, generated on, emanating from or disposed of in
connection with any property now or previously owned, leased or operated by
the Company or any of its Subsidiaries.
"Holdings" means Pumpkin Masters Holdings, Inc., a Delaware corporation,
and its successors.
"Holdings Common Stock" means the common stock, par value $.01 per
share, of Holdings.
"Holdings Documents" has the meaning set forth in Section 8.11.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement dated as
of the date hereof between Holdings and the Agent, substantially in the form
of Exhibit F.
"Indemnitees" has the meaning set forth in Section 10.05.
"Insurance Account" has the meaning set forth in the Company Security
Agreement.
11
"Inventory" means inventory (as defined in Article 9 of the UCC) to the
extent comprised of readily marketable materials of a type manufactured,
consumed or held for resale (including raw materials and work-in-process) by
the Company in the ordinary course of its business as presently conducted, or
as modified from time to time in a manner not prohibited by this Agreement.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"Investors" means Capital Partners and Security Capital.
"Investors Subordination Agreement" means the Subordination Agreement
dated as of the date hereof among the Company, Security Capital and the
Agent, substantially in the form of Exhibit N.
"Investors Subscription Agreement" means the Subscription Agreement
dated June 27, 1997 between Security Capital and Holdings.
"IPO" means the initial sale of shares of Common Stock by and for the
account of the Holdings pursuant to an underwritten public offering
registered under the Securities Act.
"LC Issuer" means a bank or trust company, as issuer of all Letters of
Credit outstanding hereunder at any time, who shall be mutually acceptable to
the Company and the Agent and whose identity shall have been notified to each
of the Lenders (i) in the case of the initial LC Issuer, prior to the
issuance of the first Letter of Credit after the date hereof or (ii) in the
case of any substitute for the initial LC Issuer, prior to the issuance of
the first Letter of Credit issued by such substitute LC Issuer and after the
date on which all Letters of Credit issued by the initial LC Issuer shall
have expired (or shall have been made subject to arrangements satisfactory to
the Required Lenders for the release of the Reimbursement Obligation of the
Lenders with respect thereto), it being understood that the LC Issuer shall
not be an affiliate of any Lender without the consent of such Lender. For
purposes of this definition, Norwest Bank Colorado, National Association
shall be deemed to be an "LC Issuer" acceptable to the Company and the Agent
and with respect to which notice has been duly given to each of the Lenders.
"Lender" means NationsCredit and each other Person that becomes a holder
of a Note pursuant to Section 12.06, and their respective successors, and
"Lenders" means all of the foregoing.
12
"Letter of Credit" means a letter of credit issued pursuant to Section
4.08(a) for the account of the Company by the LC Issuer.
"Letter of Credit Liabilities" means, at any time the sum, without
duplication, of (i) the aggregate amount available for drawing under all
Letters of Credit (without regard to whether any conditions to drawing
thereunder can then be met) plus (ii) the aggregate unpaid amount of all
Reimbursement Obligations in respect of previous drawings made under all
Letters of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement and
the other Financing Documents, the Company or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loans" means the Tranche A Loans, the Tranche B Loans and the Working
Capital Loans, or any combination of the foregoing, as the context may
require.
"Lockbox Account" has the meaning set forth in the Company Security
Agreement.
"Lockbox Agreement" has the meaning set forth in the Company Security
Agreement.
"Lockbox Bank" has the meaning set forth in the Company Security
Agreement.
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Company or any
of its Subsidiaries under any Property Insurance Policy or (ii) any award or
other compensation with respect to any condemnation of property (or any
transfer or disposition of property in lieu of condemnation) received by the
Company or any of its Subsidiaries, if the amount of such aggregate insurance
proceeds or award or other compensation exceeds $1,000,000.
"Management Agreement" means the Management Advisory Services Agreement
dated as of the date hereof between Capital Partners, Inc. and the Company.
13
"Management Options" means the options to purchase shares of the Class B
common stock of the Company representing in the aggregate not more than 5% of
the aggregate number of shares of Company Non-Voting Common Stock outstanding
(determined assuming the exercise of all options or warrants to purchase
Company Common Stock held by such Person and adjusted for stock splits,
combinations and similar events) granted pursuant to the terms of the Option
Agreement and any other agreement that may from time to time be entered into
between the Company and other senior members of management of the Company
with the prior written consent of the Required Lenders.
"Management Stockholders" means the Seller and its Permitted Transferees
(as defined in the Asset Purchase Agreement).
"Margin Stock" has the meaning assigned thereto in Regulation G, U or X
of the Federal Reserve Board, as the same may be amended, supplemented or
modified from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, financial position, results of operations or condition (financial
or otherwise) of the Company and its Subsidiaries or (ii) a material adverse
effect on the rights and remedies of the Agent and the Lenders under this
Agreement and the Notes and the other Financing Documents.
"Material Plan" means at any time a Plan having Unfunded Liabilities.
"Measuring Period" means, with respect to the last day of any fiscal
quarter of the Company (i) if such last day falls on September 30, 1997, the
period from and including July 1, 1997 to and including September 30, 1997,
(ii) if such last day falls on December 31, 1997, the period from and
including July 1, 1997 to and including December 31, 1997, (iii) if such last
day falls on March 31, 1998, the period from and including July 1, 1997 to
and including March 31, 1998, and (iv) if such last day fall any time
thereafter, the period of four consecutive fiscal quarters of the Company
ended on such day.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group
during such five year period.
14
"NationsCredit" means NationsCredit Commercial Corporation, a Delaware
corporation, and its successors.
"Net Cash Proceeds" means, with respect to any transaction, an amount
equal to the cash proceeds received by Holdings or any of its Subsidiaries
from or in respect of such transaction (including any cash proceeds received
as income or other proceeds of any non-cash proceeds of such transaction),
less (x) any expenses (including commissions) reasonably incurred by such
Person in respect of such transaction and (y) in the case of an Asset Sale,
the amount of any Debt secured by a Lien on the related asset and discharged
from the proceeds of such Asset Sale and any taxes paid or payable by such
Person (as estimated by the chief financial officer of the Company) in
respect of such Asset Sale.
"Net Working Investment" means, at any date, (i) the consolidated
current assets (excluding cash and cash equivalents) of the Company and its
Consolidated Subsidiaries minus (ii) the sum of (x) consolidated current
liabilities (excluding Debt) of the Company and its Consolidated Subsidiaries
plus (y) the current liabilities of any Person (other than the Company or a
Consolidated Subsidiary) which are Guaranteed by the Company or a
Consolidated Subsidiary, all determined as of such date.
"Notes" means the Tranche A Notes, the Tranche B Notes and the Working
Capital Notes, or any combination of the foregoing, as the context may
require.
"Notice of Borrowing" has the meaning set forth in Section 4.04.
"Officers' Certificate" means a certificate executed on behalf of a
Person by its chairman of the board (if an officer), chief executive officer
or president or one of its vice presidents and by its chief financial officer
or treasurer.
"Operative Documents" means the Financing Documents, the Acquisition
Documents, the Warrants, the Common Stockholders Agreement, the Investors
Subscription Agreement, the Management Agreement, the Security Capital Note,
the Security Capital Subordination Agreement, the Investors Subordination
Agreement, the Seller Earnout Subordination Agreement, the Employment
Contracts, the Warrantholders Rights Agreement, the Option Agreement, the
▇▇▇▇▇▇▇ Leases and the Tax Sharing Agreement.
"Option Agreement" means the Option Agreement dated June 27, 1997
between the Company, as optionor, and Gay ▇▇▇▇▇, as optionee.
15
"Option Shares" means the shares of Company Common Stock issuable upon
the exercise of the Management Options.
"Payment Account" means, with respect to each Lender, the account
specified on the signature pages hereof into which all payments by or on
behalf of the Company to such Lender under the Financing Documents shall be
made, or such other account as such Lender shall from time to time specify by
notice to the Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Contest" means a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed or permitted to be deferred during such challenge.
"Permitted Liens" means Liens permitted pursuant to Section 8.02.
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal entity, and any
government agency or political subdivision thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees
of any member of the ERISA Group or (ii) has at any time within the preceding
five years been maintained, or contributed to, by any Person which was at
such time a member of the ERISA Group for employees of any Person which was
at such time a member of the ERISA Group.
"Property Insurance Policy" means any insurance policy maintained by the
Company or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements or losses from business
interruption.
"Quarterly Date" means the first Business Day of each July, October,
January and April occurring after the Closing Date.
16
"Receivable" means, as at any date of determination thereof, the unpaid
portion of the obligation, as stated in the respective invoice, of a customer
of the Company in respect of Inventory or services rendered in the ordinary
course of business, which amount has been earned by performance under the
terms of the related contract and recognized as revenue on the books of the
Company, net of any credits, rebates or offsets owed to the customer and also
net of any commissions payable to Persons other than employees of the Company
or its Subsidiaries.
"Reimbursement Obligations" means at any date the obligations of the
Company then outstanding to reimburse the LC Issuer and/or the Lenders for
payments made by the LC Issuer under all Letters of Credit and/or the Lenders
under Section 4.08(b).
"Required Lenders" means at any time Lenders holding Notes evidencing at
least 51% of the aggregate unpaid principal amount of the Loans or, if no
Loans are outstanding, having at least 51% of the aggregate amount of the
Commitments or, if the Commitments shall have been terminated and the Notes
shall have been repaid in full, holding at least 51% of the Letter of Credit
Liabilities.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock of the same class) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of
the Company's capital stock or (b) any option, warrant or other right to
acquire shares of the Company's capital stock, it being understood that any
payment made directly by the Company to Security Capital under the Tax
Sharing Agreement does not constitute a "Restricted Payment".
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and the rules and regulations promulgated thereunder.
"Security Capital" means Security Capital Corporation, a Delaware
corporation, and its successors.
"Security Capital Note" means any Note issued by the Company to Security
Capital permitted pursuant to Section 8.01(e) in substantially the form of
Exhibit L.
17
"Security Capital Pledge Agreement" means the Pledge and Guaranty
Agreement dated as of the date hereof between the Company and Security
Capital, substantially in the form of Exhibit G.
"Security Capital Subordination Agreement" means the Subordination
Agreement dated as of the date hereof among the Company, Security Capital and
the Agent, substantially in the form of Exhibit M.
"Security Documents" means the Company Security Agreement, the Security
Capital Pledge Agreement, the Holdings Pledge Agreement and any other
agreement pursuant to which Holdings, the Company or any of its or their
Subsidiaries or Affiliates provides a Lien on its assets in favor of the
Agent for the benefit of the Lenders, and all supplementary assignments,
security agreements, pledge agreements, acknowledgments or other documents
delivered or to be delivered pursuant to the terms hereof or of any other
Security Document.
"Seller" means Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a Colorado
company.
"Seller Earnout Subordination Agreement" means the Subordination
Agreement dated as of the date hereof among the Company and the Seller,
substantially in the form of Exhibit O.
"Special Account Debtor" means each of Wal-Mart Stores, Inc, K-Mart
Corporation and Target Northern.
"Subsidiary" means with respect to any Person any corporation or other
entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person; provided that unless the context otherwise requires,
"Subsidiary" means a Subsidiary of the Company.
"Tax Sharing Agreement" means the Consolidated Income Tax Sharing
Agreement dated as of the Closing Date among Security Capital, the Company
and Holdings.
"Tax Sharing Payments" means, for any period, the aggregate amount of
cash payments made by Holdings and the Company to Security Capital pursuant
to the Tax Sharing Agreement for tax liabilities for such period.
18
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Ratings Service and P-1 by ▇▇▇▇▇'▇
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or
trust company which is organized under the laws of the United States or any
State thereof and has capital, surplus and undivided profits aggregating at
least $500,000,000 and which issues (or the parent of which issues)
certificates of deposit or commercial paper with a rating described in clause
(ii) above, or (iv) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iii) above, provided in
each case that such Investment matures within one year from the date of
acquisition thereof by the Company or any of its Subsidiaries.
"Total Debt Service" means, for any period, the sum of (i) the aggregate
interest charges incurred by the Company and its Consolidated Subsidiaries
for such period, whether expensed or capitalized, including the portion of
any obligation under Capital Leases allocable to interest expense in
accordance with GAAP and the portion of any debt discount or premium (but not
expenses of issuance) that shall be amortized in such period and (ii) the
aggregate amount during such period of mandatory principal payments pursuant
to Sections 2.04(a) and 3.04(a) and all other scheduled principal payments on
all other Debt, including the portion of any payments under Capital Leases
that is allocable to principal.
"Tranche A Commitment" means, for NationsCredit as Lender, an amount
equal to $3,000,000.
"Tranche A Loan" has the meaning set forth in Section 2.01.
"Tranche A Note" has the meaning set forth in Section 2.02.
"Tranche B Commitment" means, for NationsCredit as Lender, an amount
equal to $2,000,000.
"Tranche B Loan" has the meaning set forth in Section 3.01.
"Tranche B Note" has the meaning set forth in Section 3.02.
"UCC" has the meaning set forth in the Company Security Agreement.
19
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Warrantholders Rights Agreement" means the Warrantholders Rights
Agreement dated as of the date hereof among Holdings, the Company and the
warrantholders and stockholders referred to therein, substantially in the
form of Exhibit K.
"Warrant Shares" means the shares of Company Non-Voting Common Stock
issuable upon exercise of the Warrants.
"Warrants" has the meaning set forth in Section 3.05.
"Working Capital Borrowing" means the aggregation of Working Capital
Loans of the Lenders to be made to the Company pursuant to Section 4.01 on a
single date.
"Working Capital Commitment" means, (i) for NationsCredit as Lender,
initially $3,500,000, less any amount assigned to another Person that becomes
a Lender after the date hereof (a "Subsequent Lender") and (ii) for any
Subsequent Lender, the amount of Working Capital Commitment assigned to such
Lender.
"Working Capital Loans" has the meaning set forth in Section 4.01.
"Working Capital Note" has the meaning set forth in Section 4.02.
"Working Capital Outstandings" means at any time, as to any Lender, the
sum of the aggregate outstanding principal amount of such Lender's Working
Capital Loans and its pro rata share of the Letter of Credit Liabilities.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with generally accepted accounting principles as in effect from time to time
("GAAP"), applied
20
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries
delivered to the Lenders; provided that, if the Company notifies the Lenders
that the Company wishes to amend any covenant in Article 8 or the definition
of "Excess Cash Flow" or any related definition to eliminate the effect of
any change in GAAP on the operation of such covenant or the determination of
"Excess Cash Flow" (or if the Agent notifies the Company that the Required
Lenders wish to amend Article 8 or the definition of "Excess Cash Flow" or
any related definition for such purpose), then the Company's compliance with
such covenant or "Excess Cash Flow", as the case may be, shall be determined
on the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Company and the Required Lenders.
SECTION 1.03. Other Definitional Provisions. References in this Agreement
to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles,
Sections, Schedules or Exhibits of or to this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1.01 may, unless
the context otherwise requires, be used in the singular or plural depending
on the reference. "Include", "includes" and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import. "Writing", "written" and comparable terms
refer to printing, typing and other means of reproducing words in a visible
form. References to any agreement or contract are to such agreement or
contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof. References to any Person include the
successors and assigns of such Person. References "from" or "through" any
date mean, unless otherwise specified, "from and including" or "through and
including", respectively.
ARTICLE 2
Tranche A Loans
SECTION 2.01. Tranche A LoansUpon the terms and subject to the
conditions set forth herein, NationsCredit agrees to make one senior floating
rate loan to the Company on the Closing Date pursuant to this Section 2.01 in
a principal amount equal to its Tranche A Commitment (such loan, or any
portion thereof assigned to any other Lender in accordance with Section
12.06, a "Tranche A Loan"). Tranche A Loans are not revolving in nature and
amounts of
21
such Loans repaid or prepaid may not be reborrowed. The Tranche A
Commitment shall terminate at the close of business on the Closing Date.
SECTION 2.02. Tranche A Notes. Each Tranche A Loan shall be evidenced by a
Tranche A Note of the Company substantially in the form of Exhibit A (each
such note, a "Tranche A Note"), dated the Closing Date in a principal amount
equal to the initial principal amount of such Tranche A Loan, duly executed
and delivered by the Company and payable to the Lender of such Tranche A
Loan.
SECTION 2.03. Interest on the Tranche A Loans. Each Tranche A Loan shall
bear interest on its principal amount outstanding from the Closing Date at
the rate determined as set forth in the Tranche A Note in respect thereof.
Interest shall be payable monthly in arrears as set forth therein.
SECTION 2.04. Repayments and Prepayments of Tranche A Notes. (a)
Mandatory Scheduled Repayments. There shall become due and payable and the
Company shall repay an aggregate principal amount of the Tranche A Notes on
each Quarterly Date, commencing with the second Quarterly Date following the
Closing Date, equal to the applicable installment amount set forth below (or,
if less, the aggregate outstanding principal amount of the Tranche A Notes),
in each case together with accrued and unpaid interest on the principal
amount being repaid to and but excluding the date of payment:
Installment Principal Amount
----------- ----------------
Nos. 1-4 $150,000
Nos. 5-8 $175,000
Nos. 9-12 $200,000
Nos. 13-16 $225,000
(b) Mandatory Incremental Prepayments.
(i) There shall become due and payable, and the Company shall prepay,
on the 90th day following the last day of each Fiscal Year beginning with
the Fiscal Year ending December 31, 1997, an aggregate principal amount of
the Tranche A Notes equal to 35%, in the case of the Fiscal Year ending
December 31, 1997, and 75%, in the case of any Fiscal Year thereafter, of
Excess Cash Flow (or, if less, the aggregate outstanding principal amount
of the Tranche A Notes) for such Fiscal Year (or, in the case of the
payment for the first such period, for the period beginning on the Closing
Date and ending on the last day of such Fiscal Year).
22
(ii) On the date on which the Company or any of its Subsidiaries
receives any payment which constitutes Major Casualty Proceeds, the amount
of such payment shall be applied to prepay outstanding Tranche A Loans in
an aggregate principal amount equal to the amount of such payment (or, if
less, the aggregate outstanding principal amount of the Tranche A Notes),
unless the Required Lenders shall otherwise direct (in which case the
amount of such payment shall be deposited into the Insurance Account to
be held and applied in accordance with Section 5 of the Company Security
Agreement).
(iii) Promptly upon receipt thereof by the Company or any Subsidiary,
100% of the Net Cash Proceeds received in respect of any Asset Sale shall
be applied to prepay outstanding Tranche A Loans in an aggregate principal
amount equal to the amount of such Net Cash Proceeds (or, if less, the
aggregate outstanding principal amount of the Tranche A Loans).
(iv) Promptly upon receipt thereof by Holdings or any of its
Subsidiaries, 100% of the Net Cash Proceeds from the issuance and sale of
common stock or other equity securities of Holdings or any of its
Subsidiaries after the Closing Date shall be applied to prepay outstanding
Tranche A Loans in an aggregate principal amount equal to the amount of
such Net Cash Proceeds (or, if less, the aggregate outstanding principal
amount of the Tranche A Loans).
(v) Any prepayment of the Tranche A Notes in whole under this
Section 2.04(b) shall be made together with accrued and unpaid interest on
the principal amount being prepaid to but excluding the date of payment.
(c) Optional Prepayments.
(i) From and after the first anniversary date of the Closing Date,
the Company may prepay the Tranche A Notes in whole or in part (in
principal amounts of $100,000 or in any integral multiple of $10,000 in
excess thereof) upon prior revocable written notice to the Lenders, by
paying an amount equal to the sum of the aggregate principal amount being
prepaid plus the Applicable Premium Amount on the date of payment together,
in the case of any prepayment of the remaining Tranche A Notes in whole,
with accrued and unpaid interest on the principal amount being prepaid to
but excluding the date of payment.
23
"Applicable Premium Amount" means, at any date, (x) if such
prepayment is made with proceeds from the sale of 100% of the capital
stock of the Company, with proceeds from an IPO consisting of the sale
of substantially all of the outstanding capital stock of Holdings or
any of its Subsidiaries (after giving effect to such IPO) or with loan
proceeds received pursuant to any Security Capital Note, zero, and (y)
in the case of any other prepayment (a) an amount equal to 2% of the
aggregate principal amount being prepaid if such date is the first
anniversary of the Closing Date, (b) an amount equal to 2% of the
aggregate principal amount being prepaid minus the Reduction
Percentage at such date if such date occurs after the first
anniversary of the Closing Date but prior to the third anniversary of
the Closing Date and (c) zero if such date occurs on or after the
third anniversary of the Closing Date.
"Reduction Percentage" means, at any date, a percentage equal to
0.0833% multiplied by the number of times the 27th day of a month has
occurred during the period from and excluding the first anniversary of
the Closing Date to and including such date.
(ii) Notwithstanding the foregoing, the Company may not
prepay the Tranche A Notes in whole pursuant to this subsection (c)
with the proceeds of other Debt except Debt evidenced by the
Security Capital Notes unless simultaneously with such prepayment
(x) the Company (A) prepays any outstanding balance of the Tranche
B Notes, together with accrued interest thereon, in accordance with
Section 3.04(c) and (B) repays all Working Capital Loans and
terminates the Working Capital Commitments, (y) all Letters of
Credit are terminated with the consent of the respective
beneficiaries thereunder or cash collateral is deposited to cover
the undrawn balance of each Letter of Credit pursuant to
arrangements satisfactory to the Required Lenders and (z) the
Company redeems in cash, as provided in Section 5.2 of the
Warrants, the number of Warrants which any Lender holding such
Warrants requests the Company in writing to redeem.
(d) Application of Payments. Each repayment or prepayment of less than
all the outstanding aggregate principal amount of the Tranche A Notes shall
be applied pro rata to all the Tranche A Notes according to their respective
outstanding principal amounts. The principal amount of each payment pursuant
to Section 2.04(b) or 2.04(c) shall be applied to reduce ratably the
remaining payments required by Section 2.04(a). No payment pursuant to
Section 2.04(a)
24
or 2.04(c) shall (except as reflected in any determination of Excess Cash
Flow) reduce the amount of any payment required by Section 2.04(b).
ARTICLE 3
TRANCHE B LOANS AND WARRANTS
Section 3.01. Tranche B Loans. Upon the terms and subject to the
conditions set forth herein, NationsCredit agrees to make one floating rate
loan to the Company on the Closing Date pursuant to this Section 3.01 in a
principal amount equal to its Tranche B Commitment (such loan, or any portion
thereof assigned to any other Lender in accordance with Section 12.06, a
"Tranche B Loan"). Tranche B Loans are not revolving in nature and amounts of
such Loans repaid or prepaid may not be reborrowed. The Tranche B Commitment
shall terminate at the close of business on the Closing Date.
Section 3.02. Tranche B Notes. Each Tranche B Loan shall be evidenced
by a Tranche B Note of the Company substantially in the form of Exhibit B
(each such note, a "Tranche B Note"), dated the Closing Date in a principal
amount equal to the initial principal amount of such Tranche B Loan, duly
executed and delivered by the Company and payable to the Lender of such
Tranche B Loan.
Section 3.03. Interest on the Tranche B Loans. Each Tranche B Loan
shall bear interest on its principal amount outstanding from the Closing Date
at the rate determined as set forth in the Tranche B Note in respect thereof.
Interest shall be payable monthly in arrears as set forth therein.
Section 3.04. Repayments and Prepayments of Tranche B Notes. (a)
Mandatory Scheduled Payments. There shall become due and payable and the
Company shall repay an aggregate principal amount of the Tranche B Notes on
each Quarterly Date, commencing with the earlier of (i) the second Quarterly
Date following the fourth anniversary date of the Closing Date and (ii) the
first Quarterly Date following the date on which the Tranche A Notes shall
have been repaid in their entirety, an aggregate principal amount of the
Tranche B Notes equal to the applicable installment amount set forth below
(or, if less, the aggregate outstanding principal amount of the Tranche B
Notes), in each case together with accrued and unpaid interest on the
principal amount being repaid to and but excluding the date of payment:
25
Installment Principal Amount
------------ -----------------
Nos. 1-8 $250,000
(b) Mandatory Incremental Prepayments.
(i) There shall become due and payable, and the Company shall
prepay, on the 90th day following the last day of each Fiscal Year
beginning with the Fiscal Year ending December 31, 1997, an
aggregate principal amount of the Tranche B Notes equal to the
amount (if any) by which (x) 35%, in the case of the Fiscal Year
ending December 31, 1997, and 75%, in the case of any Fiscal Year
thereafter, of Excess Cash Flow for such Fiscal Year (or, in the
case of the payment for the first such period, for the period
beginning on the Closing Date and ending on the last day of such
Fiscal Year) exceeds (y) the amount (if any) applied to the
repayment of Tranche A Notes on such date in accordance with
Section 3.04(b)(i) (or, if less, the aggregate outstanding
principal amount of the Tranche B Notes).
(ii) On the date on which the Company or any of its
Subsidiaries receives any payment which constitutes Major Casualty
Proceeds, the amount of such payment shall be applied to prepay
outstanding Tranche B Loans in an aggregate principal amount equal
to the amount (if any) by which the amount of such payment exceeds
the amount (if any) of such payment applied to the repayment of
Tranche A Notes on such date in accordance with Section 3.04(b)(ii)
(or, if less, the aggregate outstanding principal amount of the
Tranche B Notes), unless the Required Lenders shall otherwise
direct (in which case the amount of such payment shall be deposited
into the Insurance Account to be held and applied in accordance
with Section 5 of the Company Security Agreement).
(iii) Promptly upon receipt thereof by the Company or any
Subsidiary, 100% of the Net Cash Proceeds received in respect of
any Asset Sale shall be applied to prepay outstanding Tranche B
Loans in an aggregate principal amount equal to the amount (if any)
by which the amount of such Net Cash Proceeds exceeds the amount
(if any) of such Net Cash Proceeds applied to prepay Tranche A
Loans in accordance with Section 3.04(b)(iii) (or, if less, the
aggregate outstanding principal amount of the Tranche B Loans).
(iv) Promptly upon receipt thereof by Holdings or any of its
Subsidiaries, 100% of the Net Cash Proceeds from the issuance and sale of
26
common stock or other equity securities of Holdings or any of its
Subsidiaries after the Closing Date shall be applied to prepay
outstanding Tranche B Loans in an aggregate principal amount equal
to the amount (if any) by which the amount of such proceeds exceeds
the amount (if any) of such Net Cash Proceeds applied to prepay
Tranche A Loans in accordance with Section 3.04(b)(iv) (or, if
less, the aggregate outstanding principal amount of the Tranche B
Loans).
(v) Any prepayment of the Tranche B Notes in whole under this
Section 3.04(b) shall be made together with accrued and unpaid
interest on the principal amount being prepaid to but excluding the
date of payment.
(c) Optional Prepayments.
(i) From and after the date on which the Company has paid the
Tranche A Notes in full, the Company may prepay the Tranche B Notes
in whole or in part (in principal amounts of $100,000 or in any
integral multiple of $10,000 in excess thereof) upon prior
revocable written notice to the Lenders, by paying an amount equal
to the Applicable Premium Amount of the aggregate principal amount
being prepaid together, in the case of any prepayment of the
Tranche B Notes in whole, with accrued and unpaid interest on the
principal amount being prepaid to but excluding the date of payment.
(ii) Notwithstanding the foregoing, the Company may not prepay the
Tranche B Notes in whole pursuant to this Section 3.04(c) with the
proceeds of other Debt unless simultaneously with such prepayment
(x) the Company (A) prepays any outstanding balance of the Tranche
A Notes in accordance with Section 2.04(c) and (B) repays all
Working Capital Loans and terminates the Working Capital
Commitments, (y) all Letters of Credit are terminated with the
consent of the respective beneficiaries thereunder or cash
collateral is deposited to cover the undrawn balance of each Letter
of Credit pursuant to arrangements satisfactory to the Required
Lenders and (z) the Company redeems in cash, as provided in Section
5.2 of the Warrants, the number of Warrants which any Lender
holding such Warrants requests the Company, in writing, to redeem.
(d) Application of Payments. Each payment or prepayment of less than
all the outstanding aggregate principal amount of the Tranche B Notes shall
be applied pro rata to all the Tranche B Notes according to their respective
outstanding principal amounts. The principal amount of each payment pursuant
to Section 3.04(b) or 3.04(c) shall be applied to reduce ratably the remaining
27
payments required by Section 3.04(a). No payment pursuant to Section 3.04(a)
or 3.04(c) shall (except as reflected in any determination of Excess Cash
Flow) reduce the amount of any payment required by Section 3.04(b).
Section 3.05. Warrants. On the Closing Date, the Company shall issue
to NationsCredit, in consideration for making the initial Tranche B Loan,
warrants exercisable for shares of Company Non-Voting Common Stock equivalent
to 10% of the Company Common Stock on a fully diluted basis (the "Warrants").
The Warrants shall be substantially in the form of Exhibit D hereto, and
shall be duly executed and registered in such name or names and in such
denominations as NationsCredit shall have notified the Company not less than
one Business Day before the Closing Date. The Company and NationsCredit agree
that, for Federal income tax purposes, (i) the initial Tranche B Loans and
the Warrants constitute an investment unit and (ii) the aggregate issue price
of the Tranche B Loans is $1,850,000 and the aggregate purchase price for the
Warrants is $150,000. None of the Company, Holdings nor any Lender shall
voluntarily take any action inconsistent with the agreement set forth in the
immediately preceding sentence.
ARTICLE 4
WORKING CAPITAL LOANS
Section 4.01. Working Capital Loans and Commitments. Upon the terms and
subject to the conditions set forth herein, each Lender severally and not
jointly agrees to make working capital loans ("Working Capital Loans") from
time to time to the Company in an aggregate principal amount at any time
outstanding not to exceed such Lender's Working Capital Commitment. Each
Working Capital Borrowing shall be in an aggregate amount of $50,000 or an
integral multiple of $10,000 in excess thereof. No more than three Working
Capital Borrowings shall be made within any week beginning on Monday of such
week and ending on the last Business Day of such week. Within the foregoing
limits, the Company may borrow under this Section 4.01, prepay or repay
Working Capital Loans as required under Section 4.05(b) or to the extent
permitted by Section 4.06, and reborrow pursuant to this Section 4.01.
Section 4.02. Working Capital Notes. The Working Capital Loans of each
Lender shall be evidenced by a single Working Capital Note, substantially in
the form of Exhibit C (each such note, a "Working Capital Note"), dated the
Closing Date in an aggregate principal amount equal to the amount of such
Lender's Working Capital Commitment, duly executed and delivered and payable
to such Lender. Each Lender shall record the date and amount of each Working
28
Capital Loan made by it and the date and amount of each payment of principal
made by the Company with respect thereto, and prior to any transfer of its
Working Capital Note shall endorse on Schedule A thereto (or any continuation
thereof) forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Working Capital Loan then
outstanding; provided that the failure of any Lender to make any such
recordation or endorsement shall not affect the obligations of the Company
hereunder or under the Working Capital Notes. Each Lender is hereby
irrevocably authorized by the Company so to endorse its Working Capital Note
and to attach to and make a part of its Working Capital Note a continuation
of any such schedule as and when required.
Section 4.03. Interest on the Working Capital Loans. Interest on the
Working Capital Loans shall accrue on the aggregate unpaid principal amount
thereof at the rate determined as set forth in the Working Capital Note with
respect thereto. Interest shall be payable monthly in arrears as set forth
therein.
Section 4.04. Advance Working Capital Loans. (a) Except with respect
to any Working Capital Borrowing made on the Closing Date, the Company shall
give each Lender notice (a "Notice of Borrowing") not later than 2:00 P.M.
(New York City time) on the Business Day immediately preceding each Working
Capital Borrowing, signed by the chief financial officer or treasurer of the
Company, specifying the date (which shall be a Business Day) and aggregate
principal amount of such Working Capital Borrowing, and certifying as to the
satisfaction of the conditions set forth in Sections 5.02(b), 5.02(c) and
5.02(d).
(b) Not later than 1:00 P.M. (New York City time) on the date of each
borrowing specified in a Notice of Borrowing, each Lender shall make
available its ratable share of such Working Capital Borrowing, in Federal or
other immediately available funds, to the Company Account.
Section 4.05. Mandatory Repayments and Prepayments. (a) The Working
Capital Commitment of each Lender shall terminate at the opening of business
on the earlier of (i) July 1, 2003 and (ii) the date on which both the
Tranche A Notes and the Tranche B Notes shall have been paid in full (the
"Termination Date"), and there shall become due and the Company shall pay on
the Termination Date, the entire outstanding principal amount of each Working
Capital Loan, together with accrued and unpaid interest thereon to but
excluding the Termination Date.
(b) (i)If at any time the aggregate Working Capital Outstandings exceed
the Borrowing Base, then, on the next succeeding Business Day, the Company
29
shall prepay Working Capital Loans or cash collateralize Letter of Credit
Liabilities, or both, in an aggregate amount equal to such excess.
(ii) In addition, the Company shall from time to time repay
or prepay Working Capital Loans so that for a period of 30
consecutive calendar days during the first quarter of each Fiscal
Year ended after December 31, 1997 no Working Capital Loans shall
be outstanding on each day during such period.
Section 4.06. Optional Prepayments. The Company may prepay the Working
Capital Loans in whole or in part (in minimum principal amounts of $100,000
or in any larger integral multiple of $10,000) upon at least one Business
Day's prior revocable written notice to the Lenders, in an amount equal to
100% of the principal amount being prepaid.
Section 4.07. Application of Payments. Each payment or prepayment of
less than all the outstanding aggregate principal amount of the Working
Capital Loans shall be applied pro rata to all the Working Capital Loans
according to their respective outstanding principal amounts.
Section 4.08. Letters of Credit. (a) Issuance of Letters of Credit;
Lender Reimbursement Agreement.
(i) Subject to the terms and conditions hereof and such additional
terms and conditions as the LC Issuer shall require, the LC Issuer
agrees to issue from time to time prior to the 30th day prior to
the Termination Date, letters of credit for the account of the
Company. No Letter of Credit issued hereunder shall have a term (i)
in excess of one year from the date of issuance thereof or (ii)
extending beyond the 10th day prior to the Termination Date.
(ii) Each Lender agrees for the benefit of the LC Issuer that
in the event that the Company fails to reimburse the LC Issuer on
the date of any drawing under any Letter of Credit for the full
amount of such drawing, each Lender shall be obligated to pay to
the LC Issuer, for value on the second Business Day following such
drawing to the relevant account notified by the LC Issuer to the
Lenders in the notice referred to in the following sentence, an
amount equal to its pro rata share (determined by reference to the
Working Capital Commitments of each of the Lenders) of such
unreimbursed amount. The LC Issuer shall notify each Lender of any
such unreimbursed amount (together with the account to which such
Lender's share in respect thereof is to be paid) not later than
11:00 A.M.
30
(New York City time) on the Business Day immediately preceding the
date that payment by such Lender is due.
(iii) In consideration of the foregoing, the parties hereto
agree (and the LC Issuer by accepting the benefits conferred on it
hereby shall be deemed to have agreed) that upon the issuance of
any Letter of Credit, the LC Issuer shall be deemed, without
further action on the part of the LC Issuer or of any party hereto,
to have sold to each Lender and each Lender shall be deemed,
without further action by the LC Issuer or any party hereto, to
have purchased from the LC Issuer, a participation in such Letter
of Credit and the related Letter of Credit Liabilities, in the
amount required so that the participations of the Lenders therein
shall be in proportion to their respective Working Capital
Commitments.
(iv) The several obligations of the Lenders to the LC Issuer
under this Section 4.08(a) shall be absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall
not be affected by any circumstance, including, without limitation,
(1) any set-off, counterclaim, recoupment, defense or other right
which any such Lender or any other Person may have against the LC
Issuer or any other Person for any reason whatsoever; (2) the
occurrence or continuance of a Default or the termination of the
Working Capital Commitments; (3) any adverse change in the
condition (financial or otherwise) of the Company or any other
Person; (4) any breach of any Financing Document by any party
thereto; (5) the fact that any condition precedent to the issuance
of, or the making of any payment under, any Letter of Credit was
not in fact met; (6) any violation or asserted violation of law by
any Lender or any affiliate thereof; or (7) to the extent permitted
under applicable law, any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. Each
payment by each Lender to the LC Issuer for its own account shall
be made without any offset, abatement, withholding or reduction
whatsoever.
(v) Each Lender acknowledges and agrees that the LC Issuer
will rely upon the provisions of this Section 4.08(a) in issuing
any Letter of Credit for the account of the Company.
(b) Reimbursement Obligations of the Company. The Company agrees, as a
separate obligation, independent from any obligation it may have to reimburse
the LC Issuer, that if at any time any Lender shall make a payment to the LC
Issuer pursuant to Section 4.08(a)(ii), the Company shall be irrevocably and
unconditionally obligated to reimburse such Lender within two Business
31
Days after such payment is made by such for the amount of such payment in
like currency, without presentment, demand, protest or other formalities of
any kind. Each Lender shall give the Company prompt notice of any such
payment made by such Lender; provided that failure by any Lender to give any
such notice shall not affect the obligations of the Company pursuant to this
Section 4.08(b). All such amounts paid by such Lender shall bear interest,
payable on demand, (i) for each day from the day such payment is made to and
including the second Business Day thereafter, at the rate applicable to
Working Capital Loans for such day and (ii) thereafter, until the Company
reimburses such Lender therefor, at a rate per annum equal to the sum of 2%
plus the rate applicable to Working Capital Loans for such day.
(c) Reimbursement and Other Payments by the Company. The obligations of
the Company to reimburse each Lender pursuant to Section 4.08(b) shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under all circumstances
whatsoever, including, without limitation, the following circumstances:
(A) any lack of validity or enforceability of any Letter of
Credit or any related document;
(B) any amendment or waiver of or any consent to departure
from any Letter of Credit or any related document;
(C) the existence of any claim, set-off, defense or other
right which the Company may have at any time against the
beneficiary of any Letter of Credit (or any Person or entity for
whom such beneficiary may be acting), the Agent, the LC Issuer or
any Lender or any other Person or entity, whether in connection
with this Agreement, any other Financing Document or any unrelated
transaction;
(D) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect whatsoever;
(E) payment by the LC Issuer under any Letter of Credit
against presentation of a draft or document which does not comply
with the terms of such Letter of Credit;
32
(F) any affiliation between the LC Issuer and any Lender; or
(G) to the extent permitted under applicable law, any other
circumstance or happening whatsoever, whether or not similar to any
of the foregoing.
(d) Notice of Issuance. The Company shall give the Agent notice (the
"Notice of Issuance") at least two Business Days before the proposed date of
issuance of any Letter of Credit specifying the stated amount of such Letter
of Credit, the transactions to be supported thereby and any other terms
thereof, all consistent with and subject to this Section 4.08.
(e) Conditions to Issuance of Letters of Credit. The Company shall not
request or permit any Letter of Credit to be issued for its account unless
each of the following conditions shall have been satisfied, in addition to
the conditions set forth in Sections 5.01 and 5.02:
(i) each Lender shall have received the Notice of Issuance
with respect to such Letter of Credit in accordance with Section
4.08(d) and a Borrowing Base Certificate in accordance with Section
7.01(l);
(ii) immediately after giving effect to the issuance of such
Letter of Credit, (x) the Letter of Credit Liabilities shall not
exceed $250,000 and (y) the aggregate amount of the Working Capital
Outstandings for all Lenders does not exceed the lesser of (1) the
Borrowing Base and (2) the aggregate amount of the Working Capital
Commitments;
(iii) the fact that, immediately before and immediately after
the issuance of such Letter of Credit, no Default shall have
occurred and be continuing; and
(iv) the fact that the representations and warranties of the
Company or Holdings contained in the Financing Documents (other
than (x) the representations and warranties set forth in Section
6.19 with respect to any Letter of Credit issued after the Closing
Date and (y) any representation and warranty made as of a specific
date, which date has occurred prior to the date of issuance of such
Letter of Credit) shall be true in all material respects on and as
of the date of issuance of such Letter of Credit (or the fact that
the Required Lenders shall have waived such condition with respect
to all or any of such representations and warranties in accordance
with Section 12.05).
33
The issuance of each Letter of Credit shall be deemed to be a
representation and warranty by the Company to the Lenders and the Agent as of
the date of such issuance as to the facts specified in clauses (ii), (iii)
and (iv) above.
Section 4.09. Obligation to Make Working Capital Loans. If any Lender
shall fail to perform its obligation to make a Working Capital Loan
hereunder, the amount of the Working Capital Commitment of such Lender shall
be assumed by the other Lenders ratably in proportion to their Working
Capital Commitments so that the aggregate amount of the Working Capital
Commitments to make any Working Capital Loans provided for herein shall not
be reduced and the Working Capital Commitment of each other Lender shall be
appropriately adjusted. No such assumption and adjustment shall relieve any
Lender from its Working Capital Commitment, and each such defaulting Lender
agrees to repay on demand the other Lenders that have assumed such Working
Capital Commitment any Working Capital Loans made by such other Lenders in
respect thereof, together with interest thereon from the date of such Loan to
but excluding the date of repayment at the rate applicable to such Working
Capital Loans plus 1%.
ARTICLE 5
CONDITIONS
Section 5.01. Conditions to Closing. The obligation of each Lender to
make Loans on the Closing Date shall be subject to the satisfaction of the
following conditions precedent:
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by NationsCredit of a duly executed Tranche A Note, Tranche
B Note and Working Capital Note for its account, each in the form provided
for herein, and of certificates representing the Warrants, all duly executed
and registered in such name or names and in such denominations as
NationsCredit shall have requested;
(c) receipt by the Agent of duly executed counterparts of each Security
Document required to be effective on the Closing Date, together with evidence
34
satisfactory to it in its sole good faith discretion of the effectiveness of
the security contemplated thereby;
(d) receipt by NationsCredit of evidence satisfactory to it in its sole
good faith discretion of the satisfaction (without waiver) of all other
conditions to the closing of the Acquisition on the Closing Date, and that
all transactions contemplated by the Operative Documents to be consummated on
the closing date of the Acquisition will take place prior to or
simultaneously with the transactions hereunder contemplated to take place on
the Closing Date, and satisfaction of NationsCredit in its sole good faith
discretion with the terms and conditions of the Acquisition Documents;
(e) receipt by NationsCredit of (i) evidence satisfactory to it in its
sole good faith discretion of the effectiveness of all other Operative
Documents, each of which shall be in form and substance satisfactory to
NationsCredit in its sole good faith discretion, and (ii) each opinion
required to be delivered pursuant to the Acquisition Documents in connection
with the Acquisition, with a letter from each Person delivering any such
opinion authorizing reliance thereon by the Agent and the Lenders, all in
form and substance reasonably satisfactory to NationsCredit;
(f) receipt by NationsCredit of evidence satisfactory to it that
Holdings shall have issued shares of Holdings Common Stock to Security
Capital for aggregate cash proceeds of not less than $1,500,000 and
contributed all of such cash proceeds to the capital of the Company;
(g) receipt by the Agent of opinions of (i) ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
counsel for the Company and Holdings, substantially in the form of Exhibit I
and (ii) Moye, Giles, ▇'▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the Company
and Holdings with respect to Colorado law, substantially in the form of
Exhibit P (by its execution and delivery of this Agreement, each of the
Company and Holdings authorizes and directs such counsel to deliver such
opinions to the Agent);
(h) receipt by the Agent of an opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, special
counsel for the Agent, substantially in the form of Exhibit J, and covering
such additional matters relating to the transactions contemplated hereby as
NationsCredit may reasonably request;
(i) receipt by NationsCredit, including in its capacity as Agent, of all
fees and any other amounts due and payable hereunder (including fees and
35
expenses payable pursuant to Section 10.04) of which the Company has received
notice;
(j) receipt by NationsCredit of the option agreement between the Company
and Gay ▇▇▇▇▇ that is in form and substance satisfactory to NationsCredit;
(k) receipt by NationsCredit of any reasonable information it may
request concerning the financial condition, results of operations,
liabilities, (contingent and otherwise, including with respect to
environmental liabilities and employee and retiree benefits) and prospects
of, and the financial reporting and accounting systems and the management
information systems of, the Company and confirmation satisfactory to
NationsCredit, after consultation with management of the Company, Deloitte &
Touche, as independent public accountants for the Company and any independent
environmental consultant or independent account retained by NationsCredit, of
all such information; and satisfaction of NationsCredit in its sole good
faith discretion with all such information;
(l) satisfaction of NationsCredit in its sole good faith discretion as
to the absence of any material adverse change in any aspect of the business,
operations, properties, prospects or condition (financial or otherwise) of
the Company and its Subsidiaries, or any event or condition which is
reasonably likely to result in such a material adverse change;
(m) receipt by NationsCredit of a certificate signed by the chief
financial officer or treasurer of the Company to the effect that, both before
and immediately after the making of the Loans, the issuance of the Warrants
and the consummation of the Acquisition and the other transactions
contemplated hereunder to take place on the Closing Date, (i) no Default
shall have occurred and be continuing and (ii) the representations and
warranties of Acquisition Corp. made in the Operative Documents to which
Acquisition Corp. is a party are true in all material respects;
(n) receipt by NationsCredit of the certificate referred to in Section
7.04(b);
(o) receipt by NationsCredit of employment contracts between the Company
and each Management Stockholder that are in form and substance satisfactory
to NationsCredit in its sole good faith discretion, to include provisions
relating to cash and non-cash compensation, stock repurchase and non-compete;
36
(p) receipt by NationsCredit of (i) the financial statements and pro
forma balance sheet referred to in Sections 6.04(a), 6.04(b) and 6.04(c),
(ii) a statement of sources and uses of funds covering all payments
reasonably expected to be made by the Company in connection with the
transactions contemplated by the Operative Documents to be consummated on the
Closing Date, including an itemized estimate of all fees, expenses and other
closing costs in an aggregate amount not to exceed the aggregate amount
provided for such fees, expenses and closing costs in the commitment letter
dated June 10, 1997 from NationsCredit to the Investors and (iii) payment
instructions with respect to each wire transfer to be made by the Agent,
Holdings or the Company on the Closing Date setting forth the amount of such
transfer, the purpose of such transfer, the name and number of the account to
which such transfer is to be made, the name and ABA number of the bank or
other financial institution where such account is located and the name and
telephone number of an individual that can be contacted to confirm receipt of
such transfer;
(q) receipt by the Agent of the written consent of the Seller to the
assignment by Acquisition Corp. of its rights and claims under the
Acquisition Documents to the Agent as collateral under the Security Documents;
(r) receipt by the Agent of evidence satisfactory to it that the
certificate of incorporation of the Company and Holdings shall each include
provisions substantially in the form of Exhibit P;
(s) receipt by the Agent of evidence satisfactory to it in its sole good
faith discretion that (i) all outstanding obligations of the Company under
the Revolving Credit Agreement dated as of April 19, 1996 by and among
Norwest Bank Colorado, National Association and the Seller and all
agreements, documents and instruments executed in writing in connection
therewith have been paid in full, all commitments thereunder have been
terminated and all Liens securing such obligations and all guarantees thereof
have been released and (ii) all outstanding obligations of the Company
pursuant to the promissory note payable to ▇▇▇▇▇▇▇ Investment Funds, LLC
dated May 29, 1997 in the principal amount of $500,000 have been paid in full
and all Liens securing such obligations have been released; and
(t) receipt by the Agent, for each of Holdings, the Company and Security
Capital, of (i) a certified copy of the certificate of incorporation as in
effect on the Closing Date, (ii) a short-form good standing certificate,
(iii) a bring-down telegram, (iv) a certified copy of the by-laws as in
effect on the Closing Date, (v) a certified copy of the resolutions of the
board of directors authorizing the execution, delivery and performance of the
Financing Documents and the
37
other Operative Documents and (vi) an incumbency certificate, all in form and
substance satisfactory to the Agent in its sole good faith discretion.
The documents referred to in this Section shall be delivered to the Agent no
later than the Closing Date. The certificates and opinions referred to in
this Section shall be dated the Closing Date.
Section 5.02. Conditions to Each Loan. The obligation of any Lender to
make a Loan on the occasion of any borrowing thereof (including on the
Closing Date) is subject to the satisfaction of the following additional
conditions:
(a) in the case of a Working Capital Borrowing, receipt by each Lender
of a Notice of Borrowing in accordance with Section 4.04 and a Borrowing Base
Certificate as of the close of business on the Business Day immediately
preceding the date of such borrowing and, in the case of the Borrowing Base
Certificate delivered in connection with the initial borrowing, on a pro
forma basis after giving effect to the Acquisition;
(b) the fact that, immediately after such borrowing, the aggregate
Working Capital Outstandings will not exceed the lesser of (i) the Borrowing
Base and (ii) the aggregate amount of the Working Capital Commitments (or, if
such borrowing is on the Closing Date, an amount not to exceed $500,000);
(c) the fact that, immediately before and after such borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company,
Holdings and Security Capital contained in the Financing Documents to which
each is a party (other than (x) the representations and warranties set forth
in Section 6.19, with respect to any Working Capital Borrowing made after the
Closing Date and (y) any representation and warranty made as of a specific
date, which date has occurred prior to the date of such Borrowing) shall be
true in all material respects on and as of the date of such borrowing (or the
fact that the Required Lenders shall have waived such condition with respect
to all or any of such representations and warranties in accordance with
Section 12.05).
Each borrowing hereunder shall be deemed to be a representation and
warranty by the Company on the date of such borrowing as to the facts
specified in Sections 5.02(b), 5.02(c) and 5.02(d).
38
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
The Company and Holdings, jointly and severally, represent and warrant
(including, in the case of any such representation and warranty made or
deemed made before the consummation of the Acquisition, at the time such
representation and warranty is made or deemed made and immediately after
giving effect to the consummation of the Acquisition) that:
Section 6.01. Corporate Existence and Power. Each of the Company and
Holdings is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and as will be
conducted immediately after the Acquisition. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the Company
is required to be so qualified, except in those jurisdictions in which the
failure to so qualify would not reasonably be expected to have a Material
Adverse Effect and except for any qualification to do business as a foreign
corporation in Colorado, which qualification will be in full force and effect
at all times on and after the 30th day after the Closing Date.
Section 6.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each of the Company
and Holdings of the Operative Documents to which it is a party are within the
Company's or Holdings' (as the case may be) corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (other
than the filing of UCC-1 financing statements, all of which will be made on
or within three Business Days after the Closing Date and will be in full
force and effect at all times thereafter) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or
of the certificate of incorporation or by-laws of the Company or any of its
Subsidiaries or Holdings or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its
Subsidiaries or Holdings (except for such contraventions and defaults under
agreements, judgments, injunctions, orders, decrees or other instruments
binding upon the Company or any of its Subsidiaries or Holdings that in the
aggregate would not reasonably be expected to have a Material Adverse Effect)
or result in the creation or imposition of any Lien (other than the Liens
created by the Security Documents) on any asset of the Company or any of its
Subsidiaries or Holdings.
39
Section 6.03. Binding Effect; Liens of Security Documents. (a) Each of
the Operative Documents to which the Company is a party (other than the
Warrants and the Notes) constitutes a valid and binding agreement of the
Company, and each of the Warrants and the Notes, when executed and delivered
in accordance with this Agreement, will constitute a valid and binding
obligation of the Company, in each case enforceable in accordance with its
respective terms subject, however, to general principles of equity and to
applicable bankruptcy, fraudulent transfer, insolvency, reorganization,
moratorium and other similar laws from time to time in effect and affecting
the enforcement of creditors' rights generally (regardless of whether such
enforcement is considered in a proceeding in equity or at law). The Company
has reserved and will keep available for issuance upon exercise of the
Warrants the total number of Warrant Shares deliverable upon exercise of all
Warrants from time to time outstanding. The issuance of the Warrant Shares
has been duly and validly authorized and, when issued and sold in accordance
with the Warrants, the Warrant Shares will be duly and validly issued, fully
paid and nonassessable and free of preemptive rights.
(b) Each of the Operative Documents to which Holdings is a party
constitutes a valid and binding agreement of Holdings, in each case
enforceable in accordance with its respective terms subject, however, to
general principles of equity and to applicable bankruptcy, fraudulent
transfer, insolvency, reorganization, moratorium and other similar laws from
time to time in effect and affecting the enforcement of creditors' rights
generally (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(c) The Security Documents create valid security interests in the
Collateral purported to be covered thereby, which security interests are and
will remain perfected security interests (subject to the filing of UCC
continuation statements), prior to all other Liens other than Permitted
Liens. Each of the representations and warranties made by the Company or
Holdings in the Security Documents to which each is a party is true and
correct in all material respects; provided that any representation and
warranty made as of a specific date shall be made by the Company pursuant to
this Section 6.03(c) only on such specific date.
Section 6.04. Financial Information. (a) The consolidated balance sheet
of the Seller and its Consolidated Subsidiaries as of January 31, 1997 and
the related consolidated statements of operations, stockholders' equity and
cash flows for the Fiscal Year then ended, reported on by Ehrardt, Keef,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., copies of which have been delivered to each of the
Lenders, fairly present in all material respects, in conformity with GAAP,
the consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and
40
their consolidated results of operations, changes in stockholders' equity and
cash flows for such period.
(b) The unaudited consolidated balance sheet of the Seller and its
Consolidated Subsidiaries as of April 30, 1997 and the related unaudited
consolidated statements of operations and cash flows for the three months
then ended, copies of which have been delivered to each of the Lenders,
fairly present in all material respects, in conformity with GAAP applied on a
basis consistent with the financial statements referred to in Section
6.04(a), the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for the three months then ended (subject to normal
year-end adjustments and the absence of footnotes).
(c) The pro forma balance sheet of the Company as of April 30, 1997,
copies of which have been delivered to each of the Lenders, fairly presents,
in conformity with GAAP applied on a basis consistent with the financial
statements referred to in Section 6.04(a), the consolidated financial
position of the Company as of such date, adjusted to give effect (as if such
events had occurred on such date) to (i) the transactions contemplated by the
Acquisition Documents and the Investors Subscription Agreement,(ii) the
making of the Loans, the issuance by the Company of the Warrants and the
Management Options, and the issuance and sale by Holdings of shares of common
stock as described in Section 5.01(f),(iii) the application of the proceeds
therefrom as contemplated by the Acquisition Documents and the Financing
Documents and (iv)the payment of all legal, accounting and other fees related
thereto to the extent known at the time of the preparation of such balance
sheet. As of the date of such balance sheet and the date hereof, the Company
had and has no material liabilities, contingent or otherwise, including
liabilities for taxes, long-term leases or forward or long-term commitments,
which are not properly reflected on such balance sheet.
(d) The information contained in the most recently delivered Borrowing
Base Certificate is complete and correct and the amounts shown therein as
"Eligible Receivables" and "Eligible Inventory" have been determined as
provided in the Financing Documents.
(e) Since January 31, 1997, there has been no material adverse change in
the business, operations, properties, prospects or condition (financial or
otherwise) of the Company and its Consolidated Subsidiaries, taken as a whole.
41
(f) Each of Acquisition Corp. and Holdings was organized to effect the
Acquisition, and except in connection therewith (and as contemplated by this
Agreement) has no significant assets or liabilities.
Section 6.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Company or Holdings threatened against or
affecting, the Company or any of its Subsidiaries or Holdings before any
court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which would
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Company and its Consolidated
Subsidiaries or which in any manner draws into question the validity of any
of the Operative Documents. To the knowledge of the Company, there is no
action, suit or proceeding pending against, or to the knowledge of the
Company or Holdings threatened against or affecting, any party to any of the
Operative Documents (other than the Company and Holdings) before any court or
arbitrator or any governmental body, agency or official which in any manner
draws into question the validity of any of the Operative Documents.
Section 6.06. Ownership of Property; Liens. On and as of the Closing
Date, after giving effect to the Acquisition, the Company is the lawful owner
of, has good and marketable title to and is in lawful possession of, or has
valid leasehold interests in, all properties and other assets (real or
personal, tangible, intangible or mixed) purported to be owned or leased (as
the case may be) by the Company on the balance sheet referred to in Section
6.04(c), and none of its properties and assets is subject to any Liens,
except Permitted Liens. The Company and its Subsidiaries conduct their
business without infringement or claim of infringement of any material
license, patent, trademark, trade name, service ▇▇▇▇, copyright, trade secret
or other intellectual property right of others (except for such infringements
or claims of infringement that in the aggregate would not reasonably be
expected to have a Material Adverse Effect) and to the knowledge of the
Company, except as set forth on Schedule 6.06, there is no infringement or
claim of infringement by others of any material license, patent, trademark,
trade name, service ▇▇▇▇, copyright, trade secret or other intellectual
property right of the Company or any of its Subsidiaries.
Section 6.07. No Default. No Default or Event of Default has occurred
and is continuing and neither the Company nor any of its Subsidiaries is in
default under or with respect to any material contract, agreement, lease or
other instrument to which it is a party or by which its property is bound or
affected (except for such defaults that in the aggregate would not reasonably
be expected to have a Material Adverse Effect).
42
Section 6.08. No Burdensome Restrictions. No contract, lease, agreement
or other instrument to which the Company or any of its Subsidiaries is a
party or by which any of its property is bound or affected, no charge,
corporate restriction, judgment, decree or order and no provision of
applicable law or governmental regulation is reasonably likely to have a
Material Adverse Effect.
Section 6.09. Labor Matters. There are no strikes or other labor
disputes pending or, to the best knowledge of the Company, threatened,
against the Company or any of its Subsidiaries. Hours worked and payments
made to the employees of the Company and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or, in any material respect, any
other applicable law dealing with such matters. All payments due from the
Company or any of its Subsidiaries, or for which any claim known to the
Company which is reasonably expected to be made against any of them, on
account of wages and employee and retiree health and welfare insurance and
other benefits have been paid or accrued as a liability as required under
GAAP on their books, as the case may be. The consummation of the transactions
contemplated by the Financing Documents and the other Operative Documents
will not give rise to a right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which it is a
party or by which it is bound.
Section 6.10. Subsidiaries; Other Equity Investments. The Company has no
Subsidiaries on the date hereof and on the Closing Date. With respect to any
corporate or partnership Subsidiary formed after the Closing Date, each of
such additional corporate or partnership Subsidiaries will be at each time
that this representation is made or deemed to be made after the Closing Date,
a wholly-owned Subsidiary that is a corporation or partnership (as the case
may be) duly organized or formed, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, and shall have
all corporate or partnership powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as
then conducted. None of Holdings, the Company or any of its Subsidiaries is
engaged in any joint venture or partnership with any other Person except as
listed on Schedule 6.10.
Section 6.11. Investment Company Act. Neither Holdings nor the Company
is an "investment company" as defined in the Investment Company Act of 1940,
as amended. The consummation of the transactions contemplated by the
Financing Documents do not and will not violate any provision of such Act or
any rule, regulation or order issued by the Securities and Exchange
Commission thereunder.
43
Section 6.12. Investment Company Act. Neither Holdings nor the Company
is an "investment company" as defined in the Investment Company Act of 1940,
as amended. The consummation of the transactions contemplated by the
Financing Documents do not and will not violate any provision of such Act or
any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. Margin RegulationsNone of the proceeds from the Loans
have been or will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning
of Regulation G, U or X of the Board of Governors of the Federal Reserve
Board.
Section 6.13. Taxes. Holdings' federal tax identification number is
▇▇-▇▇▇▇▇▇▇ and the Company's federal tax identification number is ▇▇-▇▇▇▇▇▇▇.
All Federal, state and local tax returns, reports and statements required to
be filed by or on behalf of the Company and its Subsidiaries have been filed
with the appropriate governmental agencies in all jurisdictions in which such
returns, reports and statements are required to be filed, and all taxes
(including real property taxes) and other charges shown to be due and payable
have been timely paid prior to the date on which any fine, penalty, interest,
late charge or loss may be added thereto for nonpayment thereof. All state
and local sales and use taxes required to be paid by the Company or any of
its Subsidiaries have been paid. All Federal and state returns have been
filed by the Company and its Subsidiaries for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or adequate provisions therefor have been made.
Section 6.14. Compliance with ERISA. To the knowledge of the Company,
each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan.
Each Plan and Benefit Arrangement is in compliance in all material respects
with the presently applicable provisions of ERISA and each Plan and Benefit
Arrangement meet in all material respects any applicable requirements for
favorable tax treatment under the Code in both form and operation. To the
knowledge of the Company, the Company has not (i) sought a waiver of the
minimum funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code or (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
44
Section 6.15. Brokers. Acquisition Corp. has and will have no obligation
to any Person in respect of any finder's or brokerage fees in connection
herewith or with the Acquisition.
Section 6.16. Related Transactions. The closing of the Acquisition will
occur simultaneously with the making of the initial Loans and purchase of the
Warrants hereunder and no party has waived, without the consent of the
Required Lenders, any condition precedent to their obligations to close as
set forth in the Acquisition Documents. True and complete copies of all of
the Acquisition Documents have been delivered or made available to the Agent,
together with a true and complete copy of each document to be delivered at
the closing of the Acquisition.
Section 6.17. Employment, Shareholders and Subscription Agreements.
Except for the Operative Documents and the other agreements described in
Schedule 6.17, true and complete copies of which have been delivered to the
Lenders, there are no (i) employment agreements covering the management of
the Company and its Subsidiaries, (ii) collective bargaining agreements or
other labor agreements covering any employees of the Company, (iii)
agreements for managerial, consulting or similar services to which the
Company is a party or by which it is bound or (iv) agreements regarding the
Company or Holdings, its assets or operations or any investment therein to
which any stockholder is a party or by which it is bound.
Section 6.18. Full Disclosure. None of the information (financial or
otherwise) furnished by or on behalf of Holdings or the Company to the Agent
or any Lender in connection with the consummation of the transactions
contemplated by any of the Operative Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements were made. All financial
projections delivered to the Lenders have been prepared on the basis of the
assumptions stated therein. Such projections represent the Company's good
faith best estimate of the Company's future financial performance as of the
date of delivery of such financial projections and such assumptions are
believed in good faith by the Company to be reasonable in light of current
business conditions.
Section 6.19. Representations and Warranties Incorporated from Other
Operative Documents. As of the Closing Date, each of the representations and
warranties made by the Company in the Operative Documents to which it is a
party are true and correct in all material respects, and such representations
and
45
warranties are hereby incorporated herein by reference with the same effect
as though set forth in their entirety herein, as qualified therein.
Section 6.20. Private Offering. Neither Holdings, the Company nor any
Person acting on its or their behalf has offered the Notes or Warrants or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Lenders and not more than five other institutional
investors. Neither Holdings, the Company nor any Person acting on its or
their behalf has taken, or will take, any action which would subject the
issuance or sale of the Notes or the Warrants or Warrant Shares to Section 5
of the Securities Act, other than as provided in the Warrants and the
Warrantholders Rights Agreement.
Section 6.21. Compliance with Environmental Requirements; No Hazardous
Materials. After giving effect to the Acquisition and except as provided on
Schedule 6.21:
(a) Other than in compliance with all applicable Environmental Laws, no
Hazardous Materials are located on any properties now or previously owned,
leased or operated by the Company or any of its Subsidiaries or have been
released into the environment, or deposited, discharged, placed or disposed
of at, on, under or, to the knowledge of the Company, near any of such
properties. No portion of any such property is being used, or has been used
at any previous time, for the disposal, storage, treatment, processing or
other handling of Hazardous Materials (other than processing, use, disposal,
storage, treatment or handling in compliance with all applicable
Environmental Laws), nor is any such property affected in any material
respect by any Hazardous Materials Contamination.
(b) No asbestos or asbestos-containing materials are present on any of
the properties now or previously owned, leased or operated by the Company or
any of its Subsidiaries.
(c) No polychlorinated biphenyls are located on or in any properties now
or previously owned, leased or operated by the Company or any of its
Subsidiaries, in the form of electrical transformers, fluorescent light
fixtures with ballasts, cooling oils or any other device or form other than
non-leaking polychlorinated biphenyls within a transformer, capacitor, or
other piece of equipment or a flourescent light fixture, the presence and
retention of which is permitted by and is maintained in compliance with all
Environmental Laws.
(d) No underground storage tanks are located on any properties now or to
the knowledge of the Company previously owned, leased or operated by the
46
Company or any of its Subsidiaries, or were located on any such property and
subsequently removed or filled.
(e) No notice, notification, demand, request for information, complaint,
citation, summons, investigation, administrative order, consent order and
agreement, litigation or settlement with respect to Hazardous Materials or
Hazardous Materials Contamination is pending against the Company or any
Subsidiaries or, to the Company's knowledge, proposed, threatened or
anticipated with respect to or in connection with the operation of any
properties now or previously owned, leased or operated by the Company or any
of its Subsidiaries. All such properties and their existing and, to the
knowledge of the Company, prior uses comply and at all times have complied,
in all material respects, with any applicable governmental requirements
relating to Environmental Laws. There is no condition on any of such
properties which is in violation of any applicable governmental requirements
relating to Hazardous Materials, and neither the Company nor any of its
Subsidiaries has received any communication from or on behalf of any
governmental authority that any such condition exists. None of such
properties nor any property to which the Company has, directly or indirectly,
transported or arranged for the transportation of any material is listed or,
to the Company's knowledge, proposed for listing on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on
any similar federal, state or foreign list of sites requiring investigation
or cleanup, nor, to the knowledge of the Company, is any such property
anticipated or threatened to be placed on any such list.
(f) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has knowledge in
relation to the current or prior business of the Company or any property or
facility now or previously owned, leased or operated by the Company or any of
its Subsidiaries which has not been delivered to the Lenders at least five
days prior to the date hereof.
(g) For purposes of this Section 6.21, the terms "Company" and
"Subsidiary" shall include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of the Company or
any Subsidiary.
(h) For purposes of this Section 6.21, any representation or warranty
made with respect to properties not presently owned, leased or operated by
the Company or any of its Subsidiaries (other than the representations made
in the first and last sentences of clause (e) and in clause (f)) is made only
with respect to conditions existing, activities occurring or compliance with
governmental
47
requirements, as the case may be, during the period of such ownership,
leasing or operation.
Section 6.22. Initial Capitalization. Set forth on Schedule 6.22 is a
schedule of the initial capitalization of the Company and of Holdings after
giving effect to the transactions contemplated to take place on the Closing
Date, the issuance of the Warrant Shares upon exercise of the Warrants and
the issuance of the Option Shares upon exercise of the Management Options,
specifying each class of interest held and the amount and holder thereof.
Section 6.23. Real Property Interests. Except for the ownership,
leasehold or other interests set forth in Schedule 6.23, the Company and its
Subsidiaries have, as of the Closing Date, no ownership, leasehold or other
interest in real property.
ARTICLE 7
AFFIRMATIVE COVENANTS
The Company (and in the cases of Sections 7.08, 7.09 and 7.11, Holdings)
agrees that, so long as any Lender has any Commitment hereunder or any amount
payable under any Note remains unpaid:
Section 7.01. Financial Statements and Other Reports. The Company will
maintain a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements
in accordance with GAAP, and will deliver to each of the Lenders:
(a) as soon as practicable and in any event within 45 days after the end
of each month, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of operations and cash flows for such month, and for
the portion of the Fiscal Year ended at the end of such month setting forth
in each case in comparative form, for any such financial statements for any
month ended on or after June 30, 1998, the figures for the corresponding
periods of the previous Fiscal Year and the figures for such month and for
such portion of the Fiscal Year ended at the end of such month set forth in
the annual operating and capital expenditure budgets and cash flow forecast
delivered pursuant to Section 7.01(k), all in reasonable detail and certified
by the chief financial officer of the Company as fairly presenting in all
material respects the financial condition and results of operations of the
Company and its Consolidated Subsidiaries and as having been prepared in
48
accordance with GAAP applied on a basis consistent with the audited financial
statements of Holdings, subject to changes resulting from audit and normal
year-end adjustments and to the absence of footnotes;
(b) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, stockholders' equity and cash flows
for such Fiscal Year, setting forth in each case (except with respect to the
consolidated financial statements of Holdings as of and for the Fiscal Year
ending December 31, 1997) in comparative form the figures for the previous
Fiscal Year, such consolidated financial statements to be certified without
qualification by Deloitte & Touche, or other independent public accountants
of nationally recognized standing. In addition, each set of consolidated
financial statements delivered by the Company pursuant to this Section
7.01(b) with respect to any Fiscal Year (except with respect to the
consolidated financial statements of the Company as of and for the Fiscal
Year ending December 31, 1997) shall set forth in comparative form the
figures for such Fiscal Year set forth in the annual operating and capital
expenditure budgets and cash flow forecast delivered pursuant to Section
7.01(k), it being understood that the certification of such consolidated
financial statements by independent public accountants referred to in the
immediately preceding sentence shall in no event be required to be made with
respect to any such budgets and forecasts;
(c) (i) together with each delivery of financial statements pursuant to
(a) and (b) above, an Officers' Certificate of the Company stating that the
officers executing such certificate have reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of the Company during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that such officers do not have knowledge of the existence as at
the date of such Officers' Certificate, of any Default, or, if any such
Default existed or exists, specifying the nature and period of existence
thereof and what action the Company has taken or is taking or proposes to
take with respect thereto; (ii) together with each delivery of financial
statements for each month and Fiscal Year, a compliance certificate of the
chief financial officer or treasurer of the Company (w) providing details of
all transactions between the Company and any Person referred to in Section
8.08, (x) demonstrating in reasonable detail compliance during and at the end
of such accounting period with the restrictions contained in Sections 8.13
through 8.17 and (y) if not specified in the financial statements delivered
pursuant to (a) or (b) above, as the case may be, specifying the aggregate
amount of interest paid or
49
accrued and the aggregate amount of depreciation and amortization charged,
during such accounting period; and (iii) together with each delivery of
financial statements pursuant to (b) above, a statement setting forth in
reasonable detail the computation of Excess Cash Flow, if any, for such
Fiscal Year, certified by the chief financial officer of the Company as
having been prepared from such financial statements in accordance with this
Agreement;
(d) together with each delivery of financial statements pursuant to (b)
above, a written statement by the independent public accountants giving the
report thereon (i) stating that their audit examination has included a review
of the terms of this Agreement as it relates to accounting matters and (ii)
stating whether, in connection with their audit examination, any Default has
come to their attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof;
(e) promptly upon receipt thereof, copies of all reports submitted to
the Company or Holdings by independent public accountants in connection with
each annual, interim or special audit of the financial statements of the
Company or Holdings made by such accountants, including the comment letter,
if any, submitted by such accountants to management in connection with their
annual audit;
(f) promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company or Holdings to its security holders,(ii) all regular
and periodic reports and all registration statements and prospectuses filed by
the Company or Holdings with any securities exchange or with the Securities and
Exchange Commission or any governmental authority succeeding to any of its
functions and (iii) all press releases and other statements made available
generally by the Company or Holdings to the public concerning material
developments in the business of the Company or Holdings;
(g) promptly upon any officer of the Company obtaining knowledge (i) of
the existence of any Default, or becoming aware that the holder of any Debt
of the Company has given any notice or taken any other action with respect to
a claimed default thereunder, (ii) of any change in the Company's certified
accountant,(iii) that any Person has given any notice to the Company or taken
any other action with respect to a claimed default under any material
agreement or instrument (other than the Financing Documents) to which the
Company or any of its Subsidiaries is a party or by which any of their assets
are bound or (iv) of the institution of any litigation or arbitration
involving an alleged liability of the Company or any of its Subsidiaries
equal to or greater than $100,000 or any
50
adverse determination in any litigation or arbitration involving a potential
liability of the Company or any of its Subsidiaries equal to or greater than
$100,000, an Officers' Certificate of the Company specifying the nature and
period of existence of any such condition or event, or specifying the notice
given or action taken by such holder or Person and the nature of such claimed
default (including any Default), event or condition, and what action the
Company has taken, is taking or proposes to take with respect thereto;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any required payment or required contribution
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement
within the period required by applicable law, including ERISA and the Code,
and by the terms of the Plan, Multiemployer Plan or Benefit Arrangement to
make such contribution or payment or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien under Section 412(n) of the Code or the posting of a bond or other
security under Section 307 of ERISA, a certificate of the chief financial
officer or the chief accounting officer of the Company setting forth details
as to such occurrence and action, if any, which the Company or applicable
member of the ERISA Group is required or proposes to take;
(i) simultaneously with the financial statements referred to in (a)
above, operating plans and financial forecasts, including cash flow
projections covering proposed fundings, repayments, additional advances,
investments and other cash receipts and disbursements, as prepared from time
to time by the management of
51
the Company for internal use (but only if any such plans and forecasts have
in fact been prepared by the management of the Company for internal use);
(j) upon the reasonable request of any Lender, copies of any reports or
notices related to taxes and any other material reports or notices received
by the Company from, or filed by the Company with, any Federal, state or
local governmental agency or body regulating the activities of the Company;
(k) within 30 days following the conclusion of each Fiscal Year, the
Company's annual operating and capital expenditure budgets and cash flow
forecast for the following Fiscal Year presented on a monthly basis, which
shall be in a format reasonably consistent with projections, budgets and
forecasts theretofore provided to the Lenders;
(l) on the date on which each Notice of Borrowing is delivered and on
the first Business Day of each week or, during any month in which no Working
Capital Loans shall be outstanding, the first Business Day of such month, a
Borrowing Base Certificate setting forth (i) Eligible Inventory as of the
close of business of the last day of the calendar month most recently ended
prior to the date on which such Borrowing Base Certificate is being delivered
and (ii) Eligible Receivables as of the close of business of the last day of
the calendar week most recently ended prior to the date on which such
Borrowing Base Certificate is being delivered;
(m) within two Business Days after any request therefor, such
information in such detail concerning the amount, composition and manner of
calculation of the Borrowing Base as any Lender may reasonably request;
(n) within ten days after the end of each month, a report, in form and
substance reasonably acceptable to the Required Lenders, as to all accounts
receivable of the Company outstanding as of the last day of such month (a
"Receivables Report"), which shall set forth in summary form an aging of such
receivables and which shall, if any Lender reasonably so requests, include a
detailed aged trial balance of all such receivables specifying the names,
addresses, face amount and dates of all invoices for each account debtor
obligated on a receivable so listed; upon the reasonable request of any
Lender and to the extent available, each Receivables Report shall be
accompanied by copies of customer statements, and all documents, including
repayment histories and present status reports, relating to the receivables
so scheduled and such other matters and information relating to the status of
any receivables as any Lender shall reasonably request;
52
(o) together with the next delivery of a Receivables Report after the
Company becomes aware thereof, notice of any dispute between any account
debtor and the Company with respect to any amounts due and owing in excess of
$10,000 in the aggregate, with an explanation in reasonable detail of the
reason for the dispute, all claims related thereto and the amount in
controversy; and
(p) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries or Holdings as from time to
time may be reasonably requested by any Lender.
Section 7.02. Payment of Obligations. The Company (i) will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, at
or before maturity, all of their respective material obligations and
liabilities, including tax liabilities, except where the same may be the
subject of a Permitted Contest, (ii) shall maintain, and cause each of its
Subsidiaries to maintain, in accordance with GAAP, appropriate reserves for
the accrual of any of the same and (iii) shall not breach or permit any of
its Subsidiaries to breach, in any material respect, or permit to exist any
material default under, the terms of any material lease, commitment,
contract, instrument or obligation to which it is a party, or by which its
properties or assets are bound, except where the same is the subject of a
Permitted Contest.
Section 7.03. Conduct of Business and Maintenance of Existence. The
Company will continue, and will cause each of its Subsidiaries to continue,
to engage in business of the same general type as now conducted by the
Company and its Subsidiaries, and except as permitted by or as a result of
any transaction permitted by Section 8.06 hereof, will preserve, renew and
keep in full force and effect, and will cause each Subsidiary to preserve,
renew and keep in full force and effect their respective partnership or
corporate existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business.
Section 7.04. Maintenance of Property; Insurance. (a)The Company will
keep, and will cause each of its Subsidiaries to keep, all property used and
necessary in its business in good working order and condition, ordinary wear
and tear excepted.
(b) The Company will maintain, and will cause each of its Subsidiaries
to maintain, (i) physical damage insurance on all real and personal property
on an all risks basis (including the perils of flood to the extent that any
buildings or
53
personal property are located in a flood zone), covering the repair and
replacement cost of all such property and consequential loss coverage for
business interruption and extra expense, covering such risks, for amounts not
less than those, and with deductible amounts not greater than those, set forth
in Part I of Schedule 7.04, (ii) public liability insurance (including
products/completed operations liability coverage) covering such risks, for
amounts not less than those, and with deductible amounts not greater than those,
set forth in Part II of Schedule 7.04 and (iii) such other insurance coverage in
such amounts and with respect to such risks as the Required Lenders may
reasonably request. All such insurance shall be provided by insurers having an
A.M. Best policyholders rating of not less than B+ or such other insurers as the
Required Lenders may approve in writing. On or prior to the Closing Date, the
Company shall cause the Agent to be named as an additional insured and loss
payee on each insurance policy required to be maintained pursuant to this
Section 7.04(b). The Company will deliver to the Lenders (i) on the Closing
Date, a certificate from the Company's insurance broker dated such date showing
the amount of coverage as of such date, and certifying that, in the opinion of
such broker, such amounts are reasonable and customary for companies of
established repute engaged in the same or a similar business, that such policies
will include effective waivers (whether under the terms of any such policy or
otherwise) by the insurer of all claims for insurance premiums against all loss
payees and additional insureds and of all rights of subrogation against all loss
payees and additional insureds, and that if all or any part of such policy is
canceled, terminated or expires, the insurer will forthwith give notice thereof
to each additional insured and loss payee and that no cancellation, reduction in
amount or material change in coverage thereof shall be effective until at least
30 days after receipt by each additional insured and loss payee of written
notice thereof, (ii) upon the request of any Lender through the Agent from time
to time full information as to the insurance carried, (iii) within five days of
receipt of notice from any insurer, a copy of any notice of cancellation,
nonrenewal or material change in coverage from that existing on the date of this
Agreement and (iv) forthwith, notice of any cancellation or nonrenewal of
coverage by the Company. Any proceeds in excess of $100,000 from any Property
Insurance Policy which are payable to the insured in respect of any claim, or
any condemnation award or other compensation in respect of a condemnation (or
any transfer or disposition of property in lieu of condemnation) for which the
Company or any of its Subsidiaries receives a condemnation award or other
compensation in excess of $100,000, shall be paid to the Agent to be held,
applied or released for application in accordance with Section 5 of the Company
Security Agreement and each Property Insurance Policy shall provide that all
insurance proceeds in excess of $100,000 per claim which are payable to the
insured shall be payable to the Company and the Agent and, if an Event of
Default has occurred and is continuing, adjusted with the Agent. The Company
54
hereby appoints the Agent as its attorney-in-fact to make, solely while an Event
of Default has occurred and is continuing, proof of loss, claim for insurance
and adjustments with insurers, and to execute or endorse all documents, checks
or drafts in connection with payments under Property Insurance Policies.
Section 7.05. Compliance with Laws. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including Environmental Laws and ERISA and the
rules and regulations thereunder).
Section 7.06. Inspection of Property, Books and Records. The Company
will keep, and will cause each of its Subsidiaries to keep, proper books of
record and account in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and activities; and
will permit, and will cause each of its Subsidiaries to permit,
representatives of any Lender at such Lender's expense to visit and inspect
any of their respective properties, to examine and make abstracts or copies
from any of their respective books and records, to conduct a collateral audit
and analysis of their respective inventories and accounts receivable and to
discuss their respective affairs, finances and accounts with their respective
executive officers and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
Section 7.07. Use of Proceeds. The Company will use the proceeds of
Loans borrowed on the Closing Date solely for payment of amounts due under
the Acquisition Documents (including the repayment of Debt thereunder) and
transaction fees incurred in connection with the Operative Documents. Working
Capital Loans borrowed after the Closing Date and the Letters of Credit shall
be used by the Company solely for working capital needs of the Company and
its Subsidiaries and the repayment of Tranche A Loans or Tranche B Loans
pursuant to Section 2.04(a) or Section 2.04(b). None of such proceeds will be
used in violation of any applicable law or regulation.
Section 7.08. Further Assurances. Each of Holdings and the Company will,
and the Company will cause each of its Subsidiaries to, at its own cost and
expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances (x) as may from
time to time be necessary or as the Required Lenders may from time to time
reasonably request in order to carry out the intent and purposes of the
Financing Documents and the transactions contemplated thereby, including all
such actions to establish, preserve, protect and perfect the estate, right,
title and interest of the Lenders to
55
the Collateral (including Collateral acquired after the date hereof), including
first priority Liens thereon, subject only to Permitted Liens and (y) as the
Required Lenders may from time to time reasonably request, to establish,
preserve, protect and perfect first priority Liens in favor of the Lenders on
any and all assets of Holdings, the Company and its Subsidiaries, now owned or
hereafter acquired, that are not Collateral on the date hereof. The Company
shall promptly give notice to the Agent of the acquisition after the Closing
Date by the Company or any Subsidiary of any real property (including leaseholds
in respect of real property), trademark, copyright or patent.
Section 7.09. Board Meetings. The Company will notify the Lenders of all
meetings and actions by written consent of the board of directors of the
Company and each committee thereof at the same time and in the same manner as
notice of any meetings of such board or committee is required to be given to
its directors who do not waive such notice (or, if such action requires no
notice, then prior written notice thereof describing the matters upon which
action is to be taken). The Lenders shall have the right to send two
representatives selected by them to each such meeting, who shall be permitted
to attend such meeting and any adjournments thereof (other than any portion
of such meeting devoted to discussion of the Lenders solely in their
respective capacities as holders of the Notes or the Warrants).
Section 7.10. Lenders' Meetings. Upon the reasonable request of any
Lender, the Company will conduct a meeting of the Lenders to discuss any
fiscal quarter's results and the financial condition of the Company at which
shall be present the chief executive officer and the chief financial officer
of the Company and such other officers of the Company as the Company's chief
executive officer shall designate. Such meetings shall be held at the Company
and at a time convenient to the Lenders and to the Company. The costs and
expenses incurred by any Lender with respect to any such meeting shall be for
such Lender's own account.
Section 7.11. Consummation of the Acquisition. Each of the Company and
Holdings will cause the closing of the Acquisition to occur concurrently with
the making of the Loans on the Closing Date, and will not without the prior
written consent of the Required Lenders waive any condition to its
obligations to consummate the Acquisition.
Section 7.12. Hazardous Materials; Remediation. The Company will (i)
promptly give notice to the Lenders in writing of any complaint, order,
citation, notice or other written communication from any Person with respect
to, or if the Company becomes aware of, (x) the existence or alleged
existence of a material
56
violation of any applicable Environmental Law or the incurrence of any
material liability, obligation, loss, damage, cost, expense, fine, penalty or
sanction or the requirement to commence any remedial action resulting from or
in connection with any air emission, water discharge, noise emission,
Hazardous Material or any other environmental, health or safety matter at,
upon, under or within any of the properties now or previously owned, leased
or operated by the Company or any of its Subsidiaries, or due to the
operations or activities of the Company, any Subsidiary or any other Person
on or in connection with any such property or any part thereof or (y) any
release on any of such properties of Hazardous Materials in a quantity that
is reportable under any applicable Environmental Law; and (ii) promptly
comply with any governmental requirements requiring the removal, treatment or
disposal of such Hazardous Materials or Hazardous Materials Contamination and
provide evidence reasonably satisfactory to the Required Lenders of such
compliance.
Section 7.13. Collateral Reports. The Company shall keep accurate and
complete records of its accounts receivable in at least so much detail as to
enable the Company to provide the Receivables Reports and other information
described in Section 7.01.
Section 7.14. Collections; Right to Notify Account Debtors. At any time
following the occurrence of an Event of Default and during the continuance
thereof, in addition to the Lenders' rights under the Security Documents, the
Company hereby authorizes the Agent, at any time, to (i) notify any or all
account debtors that the accounts receivable of the Company and its
Subsidiaries have been assigned to the Agent and that the Agent has a
security interest therein and (ii) direct such account debtors to make all
payments due from them to the Company upon such accounts receivable directly
to the Agent or to a lockbox designated by the Agent. The Agent shall
contemporaneously furnish the Company with a copy of any such notice sent.
Any such notice, in the Agent's sole discretion, may be sent on the Company's
stationery, in which event the Company shall, if requested by the Agent,
co-sign such notice with the Agent.
Section 7.15. Enforcement of Covenant Not to Compete. The Company shall
preserve, protect and defend, to the extent permitted by applicable law, all
of its rights, if any, with respect to any covenant not to compete contained
in any of the material contracts of the Company or contained in any
employment agreement with any employee whose annual salary and other
compensation payable by the Company and its Subsidiaries is $50,000 or more,
if the board of directors of the Company shall determine in its good faith
that such preservation, protection and defense is necessary or advisable.
57
Section 7.16. Landlord and Warehouseman Waivers. The Company shall use
its best efforts (i) to deliver to the Agent waivers of contractual and
statutory landlord's, landlord's mortgagee's and warehouseman's Liens in form
and substance satisfactory to the Agent under each existing lease, warehouse
agreement or similar agreement to which the Company or any Subsidiary is a
party, (ii) to cause such waivers to be incorporated when the existing lease,
warehouse agreement or similar agreement is amended, renewed or extended and
(iii) to obtain waivers of both contractual and statutory landlord's,
landlord's mortgagee's and warehouseman's Liens in form and substance
reasonably satisfactory to the Agent in connection with each new lease,
warehouse agreement or similar agreement entered into by the Company or any
Subsidiary. Without limiting the obligations of the Company under this
Section 7.16, it is understood and agreed that unless otherwise agreed to in
writing by the Agent, any Inventory that is subject to a landlord's,
landlord's mortgagee's or warehouseman's Lien or any other Lien not created
by the Security Documents shall not be included in Eligible Inventory.
ARTICLE 8
Negative Covenants
The Company (and, in the case of Sections 8.03, 8.09 and 8.11, Holdings)
agrees that, so long as any Lender has any Commitment hereunder or any amount
payable under any Note remains unpaid:
Section 8.01. Debt. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except for:
(a) Debt of the Company outstanding on the date of this Agreement as set
forth in Schedule 8.01;
(b) Debt of the Company under the Financing Documents;
(c) Debt of the Company or any of its Subsidiaries incurred or assumed
for the purpose of financing all or any part of the cost of acquiring any
fixed asset (including through Capital Leases), in an aggregate principal
amount at any time outstanding not greater than $250,000;
58
(d) Debt of the Company or any of its Subsidiaries to a wholly-owned
Subsidiary of the Company, or of any Subsidiary of the Company to the Company;
(e) Debt of the Company under the Security Capital Note to the extent
permitted by Section 8.11(b); provided that the aggregate amount of such Debt
shall not exceed the Excess Amount;
(f) Debt of the Company owed to the holders of Management Options or
their respective estates incurred for the purpose of making distributions
referred to in Section 8.04(a)(v) to purchase shares (or options to purchase
shares) of Company Common Stock held by such holders of Management Options or
their respective estates, in an aggregate outstanding principal amount not
greater than $300,000; provided that any such Debt shall be subordinated on
terms acceptable to the Required Lenders in their sole and reasonable
discretion;
(g) Debt of the Company owed to the Seller (as defined in the Asset
Purchase Agreement) pursuant to Sections 3.2.1 and 3.2.3 of the Asset
Purchase Agreement; provided that any such Debt shall be subordinated
pursuant to the terms of the Seller Earnout Subordination Agreement; and
(h) Debt of the Company not otherwise permitted by the foregoing clauses
of this Section 8.01 in an aggregate principal amount at any time outstanding
not greater than $50,000.
Section 8.02. Negative Pledge. Neither the Company nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) any Lien on any asset securing Debt permitted under Section 8.01(c)
incurred or assumed for the purpose of financing all or any part of the cost
of acquiring such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(b) Liens existing on the date of this Agreement securing Debt
outstanding on such date permitted by Section 8.01(a);
(c) Liens arising in the ordinary course of its business which (i) do
not secure Debt, (ii) do not secure any obligation in an amount exceeding
$25,000 and (iii) do not in the aggregate materially detract from the value
of its assets or materially impair the use thereof in the operation of its
business; and
59
(d) Liens created by the Security Documents.
Section 8.03. Capital Stock. Except for the Warrants, the Warrant
Shares, the Management Options and the Option Shares, neither the Company nor
any of its Subsidiaries shall issue any shares of capital stock except shares
of capital stock issued by any Subsidiary to the Company and shares of
capital stock of the Company issued to Holdings; provided that any shares
issued upon exercise of the Management Options shall be pledged to the Agent
and the holder of such shares shall execute all agreements and instruments
and take all other action necessary to create a first priority lien in favor
of the Agent for the benefit of the Lenders. As a condition to any
registration or transfer of shares issued pursuant to the exercise of the
Management Options, the Company shall cause such transferee to sign all
necessary agreements and instruments and take all other action necessary to
create a first priority lien on such transferred shares in favor of the Agent
for the benefit of the Lenders. Neither the Company nor Holdings shall issue
any capital stock that under its certificate of incorporation is entitled to
a preference over the Holdings Common Stock as to payment of dividends or
distributions.
Section 8.04. Restricted Payments. (a) The Company will not, and will
not permit any Subsidiary to, directly or indirectly, declare, order, pay,
make or set apart any sum for any Restricted Payment; provided that the
foregoing shall not restrict or prohibit the following:
(i) purchases or redemptions of Warrants under the terms thereof;
(ii) dividends or distributions to Holdings at such times and in
such amounts as are necessary to permit payments on Debt permitted pursuant
to Section 8.11(a)(i)(y) required, subject to the provisions of the Seller
Earnout Subordination Agreement, to be paid pursuant to Section 3.3.4(iii)
of the Asset Purchase Agreement; provided that the aggregate amount paid
pursuant to Section 3.3.4(iii) of the Asset Purchase Agreement shall not at
any time exceed the cumulative sum of 20% of Excess Cash Flow (if any) for
the period from the Closing Date through December 31, 1997 and for each
Fiscal Year thereafter ended prior to such time;
(iii) dividends or distributions to Holdings at such times and in
such amounts as are necessary to permit payment of taxes (other than taxes
for any period with respect to which the returns and obligations of
Holdings have been consolidated with the comparable returns and
60
obligations of Security Capital for such period) and administrative
expenses payable by Holdings in compliance with Section 8.11;
(iv) dividends or distributions to Holdings at such times and in
such amounts as are necessary to enable Holdings to make cash payments to
Security Capital pursuant to the terms of the Tax Sharing Agreement to the
extent permitted by Section 8.11(b); provided that the aggregate amount of
such dividends or distributions made with respect to any period shall not
exceed the aggregate amount of Income Taxes (as defined in Section 8.11(b))
which would have been payable by Holdings with respect to such period but
for the fact that Income Taxes returns of Holdings for such period have
been consolidated with corresponding returns of Security Capital with
respect to such period;
(v) purchases of shares of (or options to purchase shares of)
Company Common Stock from employees of the Company holding shares of
Company Common Stock issued pursuant to Management Options, so long as,
(x) before and after giving effect to any such dividend or distribution
for such purpose, no Event of Default shall have occurred and be
continuing and (y) such purchases or payments after the date hereof do
not exceed in any one Fiscal Year $75,000 and do not exceed in the
aggregate $200,000; and
(vi) dividends or distributions to Holdings at such times and in
such amounts as are necessary to enable Holdings to make payments to the
Seller pursuant to the second proviso to Section 3.2.2 of the Purchase
Agreement to enable the Seller to pay its federal, state and local tax
liabilities then due in respect of the taxable income of the Seller
attributable solely to payments payable but not paid to the Seller pursuant
to the second proviso to Section 3.2.2 of the Asset Purchase Agreement (but
in no event at a higher rate than the amounts payable by the Seller
assuming the then-highest federal, state and local taxes applicable to the
Seller in the applicable jurisdiction).
(b) Without the prior written consent of the Required Lenders, neither the
Company nor any of its Subsidiaries will (i) consent to the transfer of the
Security Capital Note, (ii) pay, repay, prepay, redeem, purchase, acquire or
make any other payment in respect of the Security Capital Note, except as
specifically provided therein and expressly permitted thereby and by the terms
of the Security Capital Subordination Agreement, or (iii) make any payment in
respect of the Earnout Amount or the Additional Payment (each as defined in the
▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇), except as specifically provided for in the Asset
Purchase Agreement and by the terms of the Seller Earnout Subordination
Agreement.
Section 8.05. ERISA. The Company will not, and will not permit any of its
Subsidiaries to:
(a) engage in any transaction in connection with which the Company or any
of its Subsidiaries could be subject to any liability arising from either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code;
(b) terminate any Plan in a manner, or take any other action, which could
result in any liability;
(c) fail to make full payment when due of all amounts which, under the
provisions of any Plan, it is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan;
(d) permit the present value of all accrued benefits (whether or not
vested) under all Plans at the end of any Plan year to exceed the fair market
value of the assets of such Plans as determined by the Plans' actuaries in good
faith using reasonable actuarial assumptions and in a manner consistent with
Statement of Accounting Standards No. 35 by an amount in excess of $50,000; or
(e) fail to make any payments to any Multiemployer Plan that it may be
required to make under any agreement relating to such Multiemployer Plan or any
law pertaining thereto.
Section 8.06. Consolidations, Mergers and Sales of Assets. The Company
will not, and will not permit any of its Subsidiaries to, (i) consolidate or
merge with or into any other Person; provided that nothing in this Section
8.06 shall prohibit the merger of a Subsidiary into the Company or the merger
or consolidation of a Subsidiary into or with another Subsidiary or (ii)
sell, lease or otherwise transfer, directly or indirectly, any of its or
their assets, other than (w) sales of inventory in the ordinary course of
their respective businesses, (x) dispositions of Temporary Cash Investments,
(y) dispositions of fixed assets so long as the proceeds of any such
disposition are applied to purchase comparable assets and (z) dispositions
for cash and fair value of assets that the board of directors of the Company
determines in good faith are no longer used or useful in the business of the
Company and its Subsidiaries, provided that immediately after any such
disposition, the aggregate fair market value of all such assets disposed of
62
pursuant to this clause (z) after the date hereof does not exceed $100,000
and the aggregate fair market value of all such assets during the Fiscal Year
in which such disposition is made does not exceed $50,000.
Section 8.07. Purchase of Assets; Investments. The Company will not, and
will not permit any Subsidiary to, acquire any assets other than in the
ordinary course of business. The Company will not, and will not permit any
Subsidiary to, make, acquire or own any Investment in any Person other than
(a) Temporary Cash Investments,(b) Investments in Subsidiaries; provided that
the aggregate amount of Investments in Subsidiaries (whether now existing or
hereafter created or acquired) made after the date hereof shall not exceed
$100,000,(c) Investments in Holdings as contemplated by Section 8.11(a)(i)
and (d) Investments in joint ventures; provided that the aggregate amount of
Investments in joint ventures made after the date hereof shall not exceed
$100,000. Without limiting the generality of the foregoing, the Company will
not, and will not permit any Subsidiary to,(i) acquire or create any
Subsidiary without the consent of the Required Lenders and arrangements
satisfactory to the Required Lenders for (x) a pledge of the stock of such
Subsidiary to the Agent for the benefit of the Lenders, (y) a guaranty by
such Subsidiary of the obligations of the Company hereunder and (z) a grant
of a Lien on all of the assets of such Subsidiary to the Agent for the
benefit of the Lenders to secure such guaranty or (ii) engage in any joint
venture or partnership with any other Person except as contemplated in clause
(d) above.
Section 8.08. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate
of the Company, any stockholder of Holdings or any affiliate of any such
stockholder on terms that are less favorable to the Company or such
Subsidiary, as the case may be, than those which might be obtained at the
time from a Person who is not an Affiliate of the Company, a stockholder of
Holdings or an affiliate of such stockholder, as the case may be; provided
that the Company shall be permitted to (i) make payments to Holdings to the
extent permitted by Section 8.04, (ii) make Investments in Holdings as
contemplated by Section 8.11(a)(i), (iii) pay fees to Investors and
compensation to Management Stockholders to the extent permitted by Sections
8.12 and 8.13, respectively, and (iv) make payments to the Management
Stockholders pursuant to the ▇▇▇▇▇▇▇ Leases.
Section 8.09. Amendments or Waivers. Without the prior written consent
of the Required Lenders, neither Holdings nor the Company will, nor will
either of them permit any Subsidiary to, agree to any amendment to or waiver
of
63
or in respect of the certificate of incorporation of Holdings or the Company
or any Operative Document.
Section 8.10. Fiscal Year. The Company shall not change its fiscal year
from a fiscal year ending on December 31.
Section 8.11. Limitations on Activities by Holdings; Payments by
Holdings and the Company under the Tax Sharing Agreement. (a) Holdings shall
not, directly or indirectly,(i) enter into or permit to exist any transaction
or agreement (including any agreement for incurrence or assumption of Debt,
any purchase, sale, lease or exchange of any property or the rendering of any
service), between itself and any other Person, other than (x) the Operative
Documents to which it is a party (the "Holdings Documents"), (y) the
incurrence of Debt to the Seller (as defined in the Asset Purchase Agreement)
evidenced by the promissory note described in Section 3.3.4(iii) of the Asset
Purchase Agreement that is in form and substance satisfactory to
NationsCredit or (z) the incurrence of Debt to the Company solely to the
extent that Holdings applies the proceeds of such Debt to finance the
payments referred to in Section 8.04(ii),(ii) engage in any business or
conduct any activity (including the making of any Investment or payment or
any distribution) or transfer any of its assets, other than the making of the
Investments in the Company contemplated in Schedule 6.22, the performance of
the Holdings Documents in accordance with the terms thereof and performance
of ministerial activities and payment of taxes and administrative fees
necessary for compliance with the next succeeding sentence and, subject to
Section 8.11(b), the making of any payments to Security Capital in order to
comply with the provisions of the Tax Sharing Agreement or (iii) consolidate
or merge with or into any other Person. Holdings shall preserve, renew and
keep in full force and effect its corporate existence and any rights,
privileges and franchises necessary or desirable in the conduct of its
business, and shall comply in all material respects with all material
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities, provided that Holdings may terminate any such
right, privilege or franchise (other than its corporate existence) if its
board of directors in good faith determines that such termination is in the
best interests of Holdings and not materially disadvantageous to the Lenders.
(b) Neither Holdings nor the Company shall make any payments or any
distributions to any holders of Holdings Common Stock, as such, other than
payments permitted under subsection (a) above or payments to be made by
Holdings or the Company to Security Capital pursuant to the provisions of the
Tax Sharing Agreement with respect to any period so long as the returns and
obligations of Holdings or the Company, as the case may be, for such period
have been consolidated with the returns and obligations of Security Capital
for such
64
period; (ii) provided that (x) the aggregate amount of cash payments made,
directly or indirectly, by Holdings or the Company to Security Capital with
respect to any period shall not exceed the aggregate amount of federal, state
and local income taxes ("Income Taxes") which would have been payable by
Holdings with respect to such period but for the fact that Income Taxes returns
of Holdings for such period have been consolidated with corresponding returns of
Security Capital with respect to such period and (y) solely with respect to cash
distributions and other payments made by Holdings or the Company with respect to
any period ending on or prior to December 31, 1999, Holdings or the Company, as
the case may be, shall (A) deposit the excess (the "Excess Amount") of (1) the
aggregate amount of such distributions and other payments over (2) the Permitted
Distribution Amount into the Cash Collateral Account (as defined in the Security
Capital Pledge Agreement) or (B) shall distribute or make payments to Security
Capital in an aggregate amount equal to the Excess Amount; provided that
Security Capital applies the proceeds of such distributions or payments to make
a loan to the Company in an amount equal to the Excess Amount, pursuant to the
terms of the Security Capital Note and the Security Capital Subordination
Agreement or (C) apply or deposit the Excess Amount in any combination permitted
by clauses (A) or (B) above. "Permitted Distribution Amount" means, with respect
to any period ending on or prior to December 31, 1999, an amount equal to the
aggregate amount of Income Taxes payable in cash by Security Capital with
respect to such period and properly allocable to net income generated by
Holdings and its Subsidiaries, such allocation to be determined by multiplying
the aggregate amount of Income Taxes payable in cash by Security Capital for
such period by a fraction (1) the numerator of which shall be the consolidated
taxable income of Holdings and its Subsidiaries for such period and (2) the
denominator of which shall be the consolidated taxable income of Security
Capital and its consolidated subsidiaries for such period (without taking into
account the application of any net operating loss carryforward in such period).
Section 8.12. Investor Fees. The Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, pay or become obligated to pay any
fees or other amounts to or for the account of any Investor except (i) so
long as no Event of Default is then continuing or would result therefrom,
pursuant to the Management Agreement and subject to the terms of the
Investors Subordination Agreement, (ii) amounts payable to Capital Partners
for investment advisory services rendered in connection with the Closing in
an aggregate amount not to exceed $120,000, and (iii) distributions by the
Company permitted pursuant to Section 8.04(a)(iv).
Section 8.13. Management Compensation. The Company shall not, and shall
not permit any Subsidiary to, directly or indirectly, pay or become obligated
65
to pay, any compensation for services in any form to or for the account of
any Management Stockholder, except as expressly provided in the Employment
Contracts.
Section 8.14. Lease Payments. The Company will not, and will not permit
any Subsidiary to, incur or assume (whether pursuant to a Guarantee or
otherwise) any liability for rental payments under a lease with a lease term
(as defined in Financial Accounting Standards Board Statement No. 13, as in
effect on the date hereof) of one year or more if, after giving effect
thereto, the aggregate amount of minimum lease payments that the Company and
its Consolidated Subsidiaries have so incurred or assumed will exceed, on a
consolidated basis, $75,000 for any calendar year under all such leases
(excluding Capital Leases).
Section 8.15. Capital Expenditures. The aggregate amount of Consolidated
Capital Expenditures for any Fiscal Year shall exceed $150,000.
Section 8.16. Total Debt Coverage Ratio. The Company shall not permit
the ratio on the last day of any fiscal quarter ending on or after June 30,
1998 of (i) Consolidated Free Cash Flow to (ii) Total Debt Service, in each
case for the Measuring Period ending at such day, to be less than 1.1 to 1.0.
Minimum EBITDAAs of the last day of each fiscal quarter set forth below,
EBITDA for the Measuring Period at such day shall not be less than the
corresponding amount set forth below opposite such period:
First Quarter Ended Amount
------------------- ------
September 30, 1997 $2,600,000
December 31, 1997 2,200,000
March 31, 1998 2,000,000
June 30, 1998 1,800,000
September 30, 1998 1,850,000
December 31, 1998 1,850,000
March 31, 1999 1,850,000
June 30, 1999 1,850,000
September 30, 1999 1,900,000
December 31, 1999 1,900,000
March 31, 2000 1,900,000
June 30, 2000 1,900,000
September 30, 2000 1,950,000
December 30, 2000 1,950,000
March 31, 2001 1,950,000
66
June 30, 2001 1,950,000
The last day of each Fiscal
Quarter thereafter 2,000,000
ARTICLE 9
Events of Default
Section 9.01. Events of Default. If any one or more of the following
events (hereinafter called "Events of Default") shall occur and be continuing
for any reason whatsoever (whether voluntary or involuntary, by operation of
law or otherwise):
(a) the Company shall fail to pay when due any principal, or shall fail
to pay within five days after the due date thereof any interest, premium,
fees or other amount payable hereunder;
(b) the Company shall fail to observe or perform any covenant contained
in Article 8 hereof, or Section 5 or Sections 4(A), (E) or (I) of the Company
Security Agreement or Holdings shall fail to perform any covenant contained
in Section 3(B) of the Holdings Pledge Agreement or Security Capital shall
fail to perform any covenant contained in the Security Capital Pledge
Agreement;
(c) the Company or Holdings shall fail to observe or perform any
covenant or agreement required to be observed or performed by the Company or
Holdings, as the case may be, contained in the Financing Documents (other
than those covered by clause (a) or (b) above) for 30 days after notice
thereof has been given to the Company by the Agent;
(d) any representation, warranty, certification or statement made by the
Company, Holdings or Security Capital in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to the
Financing Documents shall prove to have been incorrect in any respect (or in
any material respect if such representation, warranty, certification or
statement is not by its terms already qualified as to materiality) when made
(or deemed made);
(e) the Company or any of its Subsidiaries shall fail to make any
payment in respect of any Debt (other than the Notes) arising in one or more
related or unrelated transactions, in an aggregate principal amount exceeding
$50,000;
67
(f) any event or condition shall occur which results in the acceleration
of the maturity of any Debt (other than the Notes) of the Company or any of
its Subsidiaries arising in one or more related or unrelated transactions, in
an aggregate principal amount exceeding $50,000, or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) Holdings, the Company or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
Holdings, the Company or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against Holdings, the Company or any of its Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $50,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
under Section 4014(c) of ERISA shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one
or more
68
Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $50,000;
(j) a judgment or order not covered by insurance for the payment of
money in excess of $50,000 shall be rendered against Holdings, the Company or
any of its Subsidiaries and such judgment or order shall continue unsatisfied
and unstayed for a period of 30 days;
(k) except as the result of any transfer made by Capital Partners to any
of its affiliates, Capital Partners shall cease to be the record and
beneficial owner of at least 50% of the capital stock of Security Capital
owned by Capital Partners on the Closing Date; or Capital Partners shall
cease at any time to have the ability to elect a majority of the board of
directors of Security Capital (either through the ownership of voting stock,
by contract or otherwise); or, except as the result of any transfer made
pursuant to the Holdings Pledge Agreement or as a result of the exercise of
any Warrants or Management Options, Holdings shall cease to be the record and
beneficial owner of 100% of the issued and outstanding capital stock of the
Company; or, exclusive of shares of Holdings Common Stock issued in an IPO by
Holdings, shares of Holdings Common Stock shall be held by any Person other
than the Investors, the Management Stockholders or Permitted Transferees (as
defined in the Asset Purchase Agreement) of the Management Stockholders; or
Gay ▇▇▇▇▇ shall cease to be chief executive officer of the Company and a
successor shall not have been appointed by the Company and approved by the
Required Lenders within 180 days thereafter; or except as the result of
repurchases or redemptions referred to in Section 8.04(a)(ii), each
Management Stockholder and his Permitted Transferees (as defined in the Asset
Purchase Agreement) shall cease to own beneficially in the aggregate at least
the number of shares (determined assuming the exercise of all options or
warrants to purchase Common Stock held by such Person and adjusted for stock
splits, combinations and similar events) of Common Stock owned by such
Management Stockholder and the members of his immediate family on the Closing
Date (determined as aforesaid);
(l) the auditor's report or reports on the audited statements delivered
pursuant to Section 7.01 shall include any material qualification (including
with respect to the scope of audit) or exception;
(m) the Lien created by any of the Security Documents shall at any time
fail to constitute a valid and perfected Lien on all of the Collateral
purported to be secured thereby, subject to no prior or equal Lien except
Permitted Liens, or Holdings or the Company or any of its Subsidiaries shall
so assert in writing;
69
(n) the Company shall be prohibited or otherwise materially restrained from
conducting substantially the business theretofore conducted by it by virtue of
any determination, ruling, decision, decree or order of any court or regulatory
authority of competent jurisdiction and such determination, ruling, decision,
decree or order remains unstayed and in effect for any period of 10 days beyond
any period for which any business interruption insurance policy of the Company
shall provide full coverage to the Company of any losses and lost profits; or
(o) any of the Operative Documents shall for any reason fail to
constitute the valid and binding agreement of any party thereto, or the
Company shall so assert in writing;
then, and in every such event and at any time thereafter during the
continuance of such event, the Agent shall if requested by the Required
Lenders, (i) by notice to the Company terminate the Commitments and they
shall thereupon terminate and/or (ii) by notice to the Company declare the
Notes (together with accrued and unpaid interest thereon) to be, and the
Notes shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company; provided that in the case of any of the Events
of Default specified in Section 9.01(g) or 9.01(h) above with respect to the
Company, without any notice to the Company or any other act by the Agent or
the Lenders, the Commitments shall thereupon terminate and all of the Notes
(together with accrued and unpaid interest thereon) shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company.
Section 9.02. Cash Collateral. If any Event of Default specified in
Sections 9.01(g) or 9.01(h) with respect to the Company shall occur or the
Loans shall have otherwise been accelerated pursuant to Section 9.01, then
without any request or the taking of any other action by the Agent or any of
the Lenders, the Company shall be obligated forthwith to deposit in the LC
Collateral Account (as defined in the Company Security Agreement) an amount
in immediately available funds equal to the then aggregate amount available
for drawings (regardless of whether any conditions to any such drawing can
then be met) under all Letters of Credit at the time outstanding.
70
ARTICLE 10
Fees, Expenses and Indemnities; General Provisions Relating to
Payments
Section 10.01. Fees. (a) Participation Fees. On the Closing Date, the
Company shall pay to each Lender a fee in an amount equal to 1.5% of the sum
of such Lender's Tranche A Commitment, Tranche B Commitment and Working
Capital Commitment.
(b) Unused Commitment Fee. During the period from the Closing Date
through the date on which Working Capital Commitments are terminated, the
Company shall pay to each Lender a fee at the rate of 1/2 of 1% per annum on
the daily average amount by which the amount of such Lender's Working Capital
Commitment exceeds such Lender's Working Capital Outstandings. Accrued fees
under this Section shall be payable quarterly in arrears on each Quarterly
Date prior to the date on which the Working Capital Commitments are
terminated and on the date of such termination.
(c) Letter of Credit Fee. The Company agrees to pay to the Agent
exclusively for the benefit of the Lenders, ratably in proportion to their
respective Working Capital Commitments, a letter of credit fee with respect
to each Letter of Credit, computed for each day from and including the date
of issuance of such Letter of Credit to but excluding the last day a drawing
is available under such Letter of Credit, at a rate of 1.5% per annum on the
aggregate amount available for drawing under such Letter of Credit from time
to time (whether or not any conditions to drawing can then be met). Such fee
shall be payable in arrears on each Quarterly Date prior to the date on which
the Working Capital Commitments are terminated and on the Termination Date.
Section 10.02. Computation of Interest and Fees. Commitment fees
pursuant to Section 10.01(b) and all interest hereunder and under the Notes
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed.
Section 10.03. General Provisions Regarding Payments. All payments
(including prepayments) to be made by the Company under any Financing
Document, including payments of principal of and premium and interest on the
Notes, fees, expenses and indemnities, shall be made without set-off or
counterclaim and in immediately available funds. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. The Company shall make all payments in
immediately available funds
71
to each Lender's Payment Account before 2:00 P.M. (New York City time) on the
date when due. Each payment (including prepayments) by the Company on account
of principal of and interest on any Loans shall be made pro rata according to
the respective outstanding principal amounts of such Class of Loans held by
each Lender. All amounts payable by the Company hereunder or under any other
Financing Document not paid when due (other than payments of principal and
interest on the Notes, which shall bear interest as set forth therein) shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to 5% plus the rate announced by NationsBank, N.A. from time to time as
its prime rate (calculated on the basis of a 360-day year for the actual
number of days elapsed).
Section 10.04. Expenses. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to pay on demand (i) all
costs and expenses of preparation of this Agreement, the other Financing
Documents and the Warrants and of the Company's performance of and compliance
with all agreements and conditions contained herein and therein, (ii)the
reasonable fees, expenses and disbursements of counsel (including the
reasonable allocation of the compensation, costs and expenses of in-house
counsel, based upon time spent) to, and independent appraisers and
consultants retained by, the Lenders in connection with the negotiation,
preparation, execution and administration of this Agreement, the other
Financing Documents and the Warrants and any amendments hereto or thereto and
waivers hereof and thereof,(iii) all costs and expenses of creating,
perfecting and maintaining Liens pursuant to the Financing Documents,
including filing and recording fees and expenses, the costs of any bonds
required to be posted in respect of future filing and recording fees and
expenses, title investigations and reasonable fees and expenses of such local
counsel as the Agent shall request,(iv) the fees, expenses and disbursements
(in an aggregate amount in any calendar year of not more than $5,000) of
independent accountants or other experts retained by the Agent in connection
with not more than one accounting and collateral audit or review of the
Company and its affairs during each calendar year and (v)if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent and each
Lender, including fees and disbursements of counsel (including the reasonable
allocation of the compensation, costs and expenses of in-house counsel, based
upon time spent), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
Section 10.05. Indemnity. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to indemnify, pay and hold
harmless the Agent and each Lender and any subsequent holder of any of the
Notes, Warrants, Warrant Shares and Letter of Credit Liabilities and the
officers,
72
directors, employees and agents of the Agent, each Lender and such holders
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for
such Indemnitee) in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitee shall be designated a
party thereto and including any such proceeding initiated by or on behalf of
an Obligor, and the reasonable expenses of investigation by engineers,
environmental consultants and similar technical personnel and any commission,
fee or compensation claimed by any broker (other than any broker retained by
NationsCredit) asserting any right to payment for the transactions
contemplated hereby, which may be imposed on, incurred by or asserted against
such Indemnitee as a result of or in connection with the transactions
contemplated hereby or by the other Operative Documents (including (i)(A)as a
direct or indirect result of the presence on or under, or escape, seepage,
leakage, spillage, discharge, emission or release from, any property now or
previously owned, leased or operated by the Company or any of its
Subsidiaries of any Hazardous Materials or any Hazardous Materials
Contamination,(B) arising out of or relating to the offsite disposal of any
materials generated or present on any such property or (C) arising out of or
resulting from the environmental condition of any such property or the
applicability of any governmental requirements relating to Hazardous
Materials, whether or not occasioned wholly or in part by any condition,
accident or event caused by any act or omission of the Company or any of its
Subsidiaries, and (ii) proposed and actual extensions of credit under this
Agreement) and the use or intended use of the proceeds of the Notes and
Warrants, except that the Company shall have no obligation hereunder to an
Indemnitee with respect to any liability resulting from the gross negligence
or wilful misconduct of such Indemnitee. To the extent that the undertaking
set forth in the immediately preceding sentence may be unenforceable, the
Company shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all such
indemnified liabilities incurred by the Indemnitees or any of them. Without
limiting the generality of any provision of this Section, to the fullest
extent permitted by law, the Company hereby waives all rights for
contribution or any other rights of recovery with respect to liabilities,
losses, damages, costs and expenses arising under or relating to
Environmental Laws that it might have by statute or otherwise against any
Indemnitee, except that the Company shall have no obligation under this
sentence to an Indemnitee with respect to any liability resulting from the
gross negligence or wilful misconduct of such Indemnitee.
Section 10.06. Taxes. The Company agrees to pay all governmental
assessments, charges or taxes (except income or other similar taxes imposed
on
73
any Lender or any holder of a Note), including any interest or penalties
thereon, at any time payable or ruled to be payable in respect of the
existence, execution or delivery of this Agreement, the other Financing
Documents or the Warrants, or the issuance of the Notes, Warrants, Warrant
Shares or any Letter of Credit, and to indemnify and hold each Lender and
each and every holder of the Notes, Warrants, Warrant Shares and Letter of
Credit Liabilities harmless against liability in connection with any such
assessments, charges or taxes.
Section 10.07. Funding Losses. If the Company fails to borrow any
Working Capital Loans after notice has been given to any Lender in accordance
with Section 4.04 or make any payment when due (including pursuant to a
notice of optional prepayment), the Company shall reimburse each Lender
within 15 days after demand for any resulting loss or expense incurred by it
(or by an existing or prospective participant in the related Loan), including
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment
or failure to borrow; provided that such Lender shall have delivered to the
Company a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
Section 10.08. Maximum Interest. (a) In no event shall the interest
charged with respect to the Notes or any other obligations of the Company
under the Financing Documents exceed the maximum amount permitted under the
laws of the State of New York or of any other applicable jurisdiction.
(b) Notwithstanding anything to the contrary herein or elsewhere, if at
any time the rate of interest charged or payable for the account of any
Lender hereunder or under any Note or other Financing Document (the "Stated
Rate") would exceed the highest rate of interest permitted under any
applicable law to be charged by such Lender (the "Maximum Lawful Rate"), then
for so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable for the account of such Lender shall be equal to the Maximum
Lawful Rate; provided, that if at any time thereafter the Stated Rate is less
than the Maximum Lawful Rate, the Company shall, to the extent permitted by
law, continue to pay interest for the account of such Lender at the Maximum
Lawful Rate until such time as the total interest received by such Lender is
equal to the total interest which such Lender would have received had the
Stated Rate been (but for the operation of this provision) the interest rate
payable. Thereafter, the interest rate payable for the account of such Lender
shall be the Stated Rate unless and until the Stated Rate again would exceed
the Maximum Lawful Rate, in which event this provision shall again apply.
74
(c) In no event shall the total interest received by any Lender exceed
the amount which such Lender could lawfully have received had the interest
been calculated for the full term hereof at the Maximum Lawful Rate with
respect to such Lender.
(d) In computing interest payable with reference to the Maximum Lawful
Rate applicable to any Lender, such interest shall be calculated at a daily
rate equal to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made.
(e) If any Lender has received interest hereunder in excess of the
Maximum Lawful Rate with respect to such Lender, such excess amount shall be
applied to the reduction of the principal balance of its Loans or to other
amounts (other than interest) payable hereunder, and if no such principal or
other amounts are then outstanding, such excess or part thereof remaining
shall be paid to the Company.
ARTICLE 11
The Agent
Section 11.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes the Agent to enter into each of the Security
Documents on its behalf and to take such action as agent on its behalf and to
exercise such powers under the Financing Documents as are delegated to the
Agent by the terms thereof, together with all such powers as are reasonably
incidental thereto.
Section 11.02. Agents and Affiliates. NationsCredit shall have the same
rights and powers under the Financing Documents as any other Lender and may
exercise or refrain from exercising the same as though it were not the Agent,
and NationsCredit and its affiliates may lend money to and generally engage
in any kind of business with the Company or any Subsidiary or affiliate of
the Company as if it were not the Agent hereunder.
Section 11.03. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein and under the other Financing
Documents. Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 9.
Section 11.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action
75
taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
Section 11.05. Liability of Agent. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or not taken by it in connection with the Financing Documents (i) with the
consent or at the request of the Required Lenders or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Company; (iii) the satisfaction of any
condition specified in Article 5, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness, sufficiency or
genuineness of any Financing Document or any other instrument or writing
furnished in connection therewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex, facsimile transmission or similar
writing) believed by it to be genuine or to be signed by the proper party or
parties.
Section 11.06. Indemnification. Each Lender shall, ratably in accordance
with its Working Capital Commitment (whether or not the Working Capital
Commitments have been terminated), indemnify the Agent (to the extent not
reimbursed by the Company) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from the Agent's gross negligence or willful misconduct) that the
Agent may suffer or incur in connection with the Financing Documents or any
action taken or omitted by the Agent hereunder or thereunder.
Section 11.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under the Financing
Documents.
Section 11.08. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Company. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
76
Agent. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be an
institution organized or licensed under the laws of the United States of
America or of any State thereof. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 11 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
ARTICLE 12
Miscellaneous
Section 12.01. Survival. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement and
the other Operative Documents and the execution, sale and delivery of the
Notes, Warrants and Warrant Shares. The indemnities and agreements set forth
in Articles 10 and 11 shall survive the payment of the Notes, the exercise,
redemption or expiration of the Warrants and the termination of this
Agreement.
Section 12.02. No Waivers. No failure or delay by the Agent or any
Lender in exercising any right, power or privilege under any Financing
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein and therein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 12.03. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including prepaid overnight
courier, telex, facsimile transmission or similar writing) and shall be given
to such party at its address or telecopy or telex number set forth on the
signature pages hereof (or, in the case of any such Lender who becomes a
Lender after the date hereof, in a notice delivered to the Company and the
Agent by the assignee Lender forthwith upon such assignment) or at such other
address or telecopy or telex number as such party may hereafter specify for
the purpose by notice to the Agent and the Company. Each such notice, request
or other communication shall be effective (i) if given by telex or telecopy,
when such telex or telecopy is transmitted to the telex or telecopy number
specified in this Section and the appropriate answerback
77
is received (in the case of telex) or telephonic confirmation of receipt
thereof is obtained (in the case of telecopy) or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified in this Section or when delivery at such address is refused.
Section 12.04. Severability. In case any provision of or obligation
under this Agreement or the Notes or any other Financing Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Section 12.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by Holdings, the Company and the Required
Lenders (and, if the rights or duties of the Agent are affected thereby, by
the Agent); provided that no such amendment or waiver shall, unless signed by
all the Lenders, (i) increase or decrease any Commitment of any Lender
(except for a ratable decrease in the Commitments of all Lenders) or subject
any Lender to any additional obligation, (ii) reduce the principal of or rate
of interest on any Loan or fees hereunder, (iii) postpone the date fixed for
any payment of principal of any Loan pursuant to Section 2.04(a), 3.04(a) or
4.05, or of interest on any Loan or any fees hereunder or for any termination
of any Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes which shall be required for
the Lenders or any of them to take any action under this Section or any other
provision of this Agreement.
Section 12.06. Successors and Assigns; Registration. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns (including any
transferee of any Note or Warrant), except that neither Holdings nor the
Company may assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Lenders.
(b) The terms and provisions of this Agreement shall inure to the
benefit of any transferee or assignee of any Note or Warrant and, in the
event of such transfer or assignment, the rights and privileges herein
conferred upon the assigning Lender shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and
conditions hereof. Any assignment shall be for an equal percentage of each
Class of such assignor Lender's Loans and its Working Capital Commitment, and
any such assignee Lender shall, upon its registration in the Note Register
referred to below, become a "Lender" for all
78
purposes hereunder. Upon any such assignment, the assignor Lender shall be
released from its Working Capital Commitment to the extent assigned to and
assumed by the assignee Lender.
(c) Upon any assignment of any Note(s), the assigning Lender shall
surrender its Note(s) to the Company for exchange or registration of
transfer, and the Company will promptly execute and deliver in exchange
therefor a new Note or Note(s) of the same tenor and registered in the name
of the assignor Lender (if less than all of such Lender's Notes are assigned)
and the name of the assignee Lender.
(d) The Company shall maintain a register (the "Note Register") of the
Lenders and all assignee Lenders that are the holders of all the Notes issued
pursuant to this Agreement. The Company will allow any Lender to inspect and
copy such list at the Company's principal place of business during normal
business hours. Prior to the due presentment for registration of transfer of
any Note, the Company may deem and treat the Person in whose name a Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of and premium and interest on such Note and for all
other purposes whatsoever, and the Company shall not be affected by notice to
the contrary.
(e) Each Lender (including any assignee Lender at the time of such
assignment) represents that it (i) is acquiring its Notes solely for
investment purposes and not with a view toward, or for sale in connection
with, any distribution thereof, (ii) has received and reviewed such
information as it deems necessary to evaluate the merits and risks of its
investment in the Notes, (iii) is an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act and (iv) has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Notes, including a complete
loss of its investment.
(f) Each Lender understands that the Notes are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future such Lender decides to resell,
pledge or otherwise transfer any of the Notes, such Notes may be resold,
pledged or transferred only (i) to the Company, (ii) to a person who such
Lender reasonably believes is a qualified institutional buyer that purchases
for its own account or for the account of a qualified institutional buyer to
whom notice is given that such resale, pledge or transfer is being made in
reliance on Rule 144A under the Securities Act or (iii) pursuant to an
exemption from registration under the Securities Act.
79
(g) Each Lender understands that the Notes will, unless otherwise agreed
by the Company and the holder thereof, bear a legend to the following effect:
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
(h) If any Note becomes mutilated and is surrendered by the Lender with
respect thereto to the Company, or if any Lender claims that any of its Notes
has been lost, destroyed or wrongfully taken, the Company shall execute and
deliver to such Lender a replacement Note, upon the affidavit of such Lender
attesting to such loss, destruction or wrongful taking with respect to such
Note and such lost, destroyed, mutilated, surrendered or wrongfully taken
Note shall be deemed to be canceled for all purposes hereof. Such affidavit
shall be accepted as satisfactory evidence of the loss, wrongful taking or
destruction thereof and no surety or bond shall be required as a condition of
the execution and delivery of a replacement Note. Any costs and expenses of
the Company in replacing any such Note shall be for the account of such
Lender.
Section 12.07. Collateral. Each of the Lenders represents to the Agent
and each of the other Lenders that it in good faith is not relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
Section 12.08. Headings. Headings and captions used in the Financing
Documents (including the Exhibits and Schedules hereto and thereto) are
included herein and therein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
80
Section 12.09. Governing Law; Submission to Jurisdiction. THIS AGREEMENT
AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE COMPANY AND HOLDINGS HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE COMPANY
AND HOLDINGS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 12.03. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
Section 12.10. Notice of Breach by Agent or Lender. Each of the Company
and Holdings agrees to give the Agent and the Lenders notice of any action or
inaction by the Agent or any Lender or any agent or attorney of the Agent or
any Lender in connection with this Agreement or any other Financing Document
or the obligations of the Company or Holdings under this Agreement or any
other Financing Document that may be actionable against the Agent or any
Lender or any agent or attorney of the Agent or any Lender or a defense to
payment of any obligations of the Company or Holdings under this Agreement or
any other Financing Document for any reason, including commission of a tort
or violation of any contractual duty or duty implied by law. Each of the
Company and Holdings agrees, to the fullest extent that it may lawfully do
so, that unless such notice is given promptly (and in any event within thirty
(30) days after the Company or Holdings has knowledge, or with the exercise
of reasonable diligence could have had knowledge, of any such action or
inaction), the Company and Holdings shall not assert, and the Company and
Holdings shall be deemed to have waived, any claim or defense arising
therefrom to the extent that the Agent or any Lender could have mitigated
such claim or defense after receipt of such notice.
81
Section 12.11. Waiver of Jury Trial. EACH OF THE COMPANY, HOLDINGS, THE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT
PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE
CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
Section 12.12. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement, the other Financing Documents, the Warrantholders
Rights Agreement and the Warrants constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
Section 12.13. Knowledge of Any Person. As used herein, "knowledge"
means, with respect to any Person, any fact, circumstance or situation of
which such Person has actual knowledge or any fact, circumstance or situation
of which such Person would have had knowledge upon due inquiry but without
expenditure of funds for special studies and the like. The knowledge of the
Company or Holdings shall be limited to the knowledge of the directors and
Chairman, President and Chief Executive Officer of the Company or Holdings,
as the case may be.
82
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PUMPKIN, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy number: 203-625-0770
Company Account Designation:
ABA No.:
Account No.:
Account Name:
Reference:
PUMPKIN MASTERS HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy number: ▇▇▇-▇▇▇-▇▇▇▇
83
NATIONSCREDIT COMMERCIAL
CORPORATION, as Lender and
Agent
By /s/ ▇▇▇▇▇▇ ▇. Alt
-----------------------------
Title: Authorized Signatory
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Payment Account Designation:
First Chicago National Bank
Chicago, Illinois
BA No.: 071000013
Account No.: 52-56933
Account Name: NationsCredit
Commercial Corporation
SCHEDULE 6.17
EMPLOYMENT AGREEMENTS
SCHEDULE 6.21
ENVIRONMENTAL MATTERS
SCHEDULE 6.22
INITIAL CAPITALIZATION
PART 1: EQUITY
Initial Capital
Contribution or
Name Equity Classification Consideration
--------------- ----------------------------------- ----------------------------
PART 2: DEBT (OTHER THAN THE LANS)
Description and Principal
Name Obligor Amount of Debt
--------------- ----------------------------------- ----------------------------
SCHEDULE 6.23
REAL PROPERTY INTERESTS
SCHEDULE 7.04
REQUIRED INSURANCE
SCHEDULE 8.01
DEBT OUTSTANDING AFTER GIVING EFFECT
TO THE TRANSACTIONS ON THE CLOSING DATE
(Other than Debt owed to NationsCredit)
NONE
EXHIBIT A
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
PUMPKIN LTD.
TRANCHE A NOTE
$ __________ ___, 199_
PUMPKIN LTD., a Delaware corporation (together with its successors, the
"Company"), for value received, promises to pay [NAME OF LENDER] (the "Lender"),
or registered assigns, an aggregate principal amount of Three Million Dollars
($3,000,000), by paying on each of the dates set forth in Schedule A attached
hereto (or, if any such day is not a Business Day, on the next succeeding
Business Day) (each, an "Amortization Date"), the aggregate principal amount set
forth opposite such Amortization Date on such Schedule A, together with accrued
and unpaid interest thereon to but excluding the date of payment, and to pay,
monthly in arrears with respect to each calendar month on the first Business Day
of the next succeeding calendar month, commencing with [July], 1997, interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) on the aggregate unpaid principal amount hereof from time to time at a
rate equal to the sum of 4.5% per annum plus the Commercial Paper Rate (as
hereinafter defined) and to pay on demand interest at a rate equal to the sum of
6.5% per annum plus the Commercial Paper Rate (in each case subject to Section
10.08 of the Credit Agreement referred to below) on any overdue principal,
premium and interest from the due date thereof to the date of actual payment
(after as well as before judgment and during any bankruptcy proceeding). Changes
in the rate of interest applicable hereto shall occur as of the opening of
business on any day on which the Commercial Paper Rate changes.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the 30-day Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate
is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York and published weekly by the Board of Governors of the
Federal Reserve System in its H.15 report, or any successor publication
published by the Board of Governors of the Federal Reserve System or, if such
rate for such date is not yet published in such statistical release, the rate
for that date will be the rate set forth in the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Interest Determination Date" means
June __, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Tranche A Notes referred to in the Credit Agreement
dated as of June __, 1997 (as amended from time to time, the "Credit Agreement")
among the Company, Holdings, the lenders referred to therein and NationsCredit
Commercial Corporation, as Agent. The Credit Agreement and the Security
Documents referred to therein contain additional rights of the holder of, and
the security for, this Note. Capitalized terms used but not defined herein have
the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance
of the principal of this Note together with all accrued but unpaid interest
hereon may become or be declared forthwith due and payable in the manner and
with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit Agreement,
together with any premiums set forth therein, under the circumstances therein
described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
2
construction, validity and performance, without regard to the choice of law
provisions thereof.
3
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written.
PUMPKIN LTD.
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
4
SCHEDULE A
TO TRANCHE A NOTE
Amortization Schedule
Payment Due Date Principal Amount
----------------------- -----------------------
The first Business
Day of each of the
following months:
EXHIBIT B
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
PUMPKIN LTD.
TRANCHE B NOTE
$ ____________ ___, 199_
PUMPKIN LTD., a Delaware corporation (together with its successors, the
"Company"), for value received, promises to pay [NAME OF LENDER] (the "Lender"),
or registered assigns, an aggregate principal amount of
____________________ Dollars ($__________), by paying on each July 1, October 1,
January 1 and April 1, commencing with the earlier of (i) the second such date
following June __, 2002 and (ii) the first such date following the date on which
the Tranche A Notes (as defined in the Credit Agreement referred to below) shall
have been repaid in their entirety (or if any such day is not a Business Day, on
the next succeeding Business Day) (each, an "Amortization Date"), the aggregate
principal amount of Two Hundred Thousand Dollars ($200,000), together with
accrued and unpaid interest thereon to but excluding the date of payment, and to
pay, monthly in arrears with respect to each calendar month on the first
Business Day of the next succeeding calendar month, commencing with [July] 1997,
interest (computed on the basis of the actual number of days elapsed over a year
of 360 days) on the aggregate unpaid principal amount hereof from time to time
at a rate equal to the sum of 6.5% per annum plus the Commercial Paper Rate (as
hereinafter defined) and to pay on demand interest at a rate equal to the sum of
8.5% per annum plus the Commercial Paper Rate (in each case subject to Section
10.08 of the Credit Agreement referred to below) on any overdue principal,
premium and interest from the due date thereof to the date of actual payment
(after as well as before judgment and during any bankruptcy
proceeding). Changes in the rate of interest applicable hereto shall occur as
of the opening of business or any day on which the Commercial Paper Rate
changes.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the 30-day Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate
is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York and published weekly by the Board of Governors of the
Federal Reserve System in its H.15 report, or any successor publication
published by the Board of Governors of the Federal Reserve System or, if such
rate for such date is not yet published in such statistical release, the rate
for that date will be the rate set forth in the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Interest Determination Date" means
June __, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Tranche B Notes refrered to in the Credit
Agreement dated as of June __, 1997 (as amended from time to time, the
"Credit Agreement") among the Company, Holdings, the lenders referred to
therein and NationsCredit Commercial Corporation, as Agent. The Credit
Agreement and the Security Documents referred to therein contain additional
rights of the holder of, and the security for, this Note. Capitalized terms
used but not defined herein have the meanings assigned thereto in the Credit
Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance
of the principal of this Note together with all accrued but unpaid interest
hereon may become or be declared forthwith due and payable in the manner and
with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the
circumstances therein described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
construction, validity and performance, without regard to the choice of law
provisions thereof.
2
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written.
PUMPKIN LTD.
By:
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
3
EXHIBIT C
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
PUMPKIN LTD.
WORKING CAPITAL NOTE
$ __________ __, 199_
PUMPKIN LTD., a Delaware corporation (together with its successors, the
"Company"), for value received, promises to pay [NAME OF LENDER] (the "Lender"),
or registered assigns, the principal amount of Two Hundred Fifty
Thousand Dollars ($250,000) or the aggregate outstanding principal amount of the
Working Capital Loans made by the Lender, whichever is less, on the Working
Capital Termination Date (as herein defined), and to pay, monthly in arrears
with respect to each calendar month on the first Business Day of the next
succeeding calendar month, commencing with [July], 1997, until the Working
Capital Termination Date and on the Working Capital Termination Date, interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) on the aggregate unpaid principal amount hereof on each day from time to
time at a rate equal to the sum of 4.25% per annum plus the Commercial Paper
Rate (as hereinafter defined) and to pay on demand interest at a rate equal to
the sum of 6.25% per annum plus the Commercial Paper Rate (in each case subject
to Section 10.08 of the Credit Agreement referred to below) on any overdue
principal and interest from the due date thereof to the date of actual payment
(after as well as before judgment and during any bankruptcy proceeding). Changes
in the rate of interest applicable hereto shall occur as of the opening of
business on any day on which the Commercial Paper Rate changes.
"Working Capital Termination Date" means the earlier of July 1, 2003 and
the date on which all of the Tranche A Notes and the Tranche B Notes shall
have been paid in full in accordance with their terms.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the 30-day Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate
is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York and published weekly by the Board of Governors of the
Federal Reserve System in its H.15 report, or any successor publication
published by the Board of Governors of the Federal Reserve System or, if such
rate for such date is not yet published in such statistical release, the rate
for that date will be the rate set forth in the weekly statistical release
designated as such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. "Interest Determination Date" means
June __, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Working Capital Notes referred to in the Credit
Agreement dated as of June __, 1997 (as amended from time to time, the
"Credit Agreement") among the Company, Holdings, the lenders referred to
therein and NationsCredit Commercial Corporation, as Agent. The Credit
Agreement and the Security Documents referred to therein contain additional
rights of the holder of, and the security for, this Note. Capitalized terms
used but not defined herein have the meanings assigned thereto in the Credit
Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance
of the principal of this Note together with all accrued but unpaid interest
hereon may become or be declared forthwith due and payable in the manner and
with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the
circumstances therein described.
Payments of principal hereof and interest hereon shall be made in lawful
money of the United States of America.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
2
construction, validity and performance, without regard to the choice of law
provisions thereof.
3
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written.
PUMPKIN LTD.
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
4
SCHEDULE A TO WORKING CAPITAL NOTE
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Principal Amount of Notation
Date Loan Payment of Principal Made By
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