Exhibit 10.22
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AEROSPACE PRODUCTS INTERNATIONAL, INC.,
as Borrower
AEROSPACE PRODUITS INTERNATIONAL LTEE
(d/b/a AEROSPACE PRODUCTS INTERNATIONAL LTD.)
as Affiliate Guarantor
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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of January 11, 2007
$28,000,000
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TD BANKNORTH, N.A.,
as Lender
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TABLE OF CONTENTS
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Page
Section 1. DEFINITIONS; RULES OF CONSTRUCTION.................................................................2
1.1. Definitions.....................................................................................2
1.2. Accounting Terms...............................................................................21
1.3. Certain Matters of Construction................................................................21
Section 2. CREDIT FACILITIES.................................................................................22
2.1. Revolver Commitment............................................................................22
2.2. CAPX Loan Facility.............................................................................23
2.3. Letter of Credit Facility......................................................................24
Section 3. INTEREST, FEES AND CHARGES........................................................................25
3.1. Interest.......................................................................................25
3.2. Fees...........................................................................................27
3.3. Computation of Interest, Fees, Yield Protection................................................27
3.4. Reimbursement Obligations......................................................................27
3.5. Illegality.....................................................................................27
3.6. Increased Costs................................................................................28
3.7. Capital Adequacy...............................................................................28
3.8. Mitigation.....................................................................................29
3.9. Funding Losses.................................................................................29
3.10. Maximum Interest...............................................................................29
3.11. Currency Indemnity.............................................................................29
Section 4. LOAN ADMINISTRATION...............................................................................30
4.1. Manner of Borrowing and Funding Revolver Loans.................................................30
4.2. Manner of Borrowing and Funding CAPX Loans.....................................................31
4.3. Number and Amount of LIBOR Loans; Determination of Rate........................................31
4.4. One Obligation.................................................................................31
4.5. Effect of Termination..........................................................................31
Section 5. PAYMENTS..........................................................................................32
5.1. General Payment Provisions.....................................................................32
5.2. Repayment of Revolver Loan and CAPX Loans......................................................32
5.3. Repayment of Converted CAPX Loan...............................................................32
5.4. Payment of Other Obligations...................................................................33
5.5. Marshaling; Payments Set Aside.................................................................33
5.6. Post-Default Allocation of Payments............................................................33
5.7. Application of Payments........................................................................34
5.8. Loan Account; Account Stated...................................................................34
5.9. Taxes..........................................................................................34
Section 6. CONDITIONS PRECEDENT..............................................................................34
6.1. Conditions Precedent to Initial Loans..........................................................34
6.2. Conditions Precedent to All Credit Extensions..................................................36
6.3. Limited Waiver of Conditions Precedent.........................................................36
Section 7. COLLATERAL........................................................................................36
7.1. Grant of Security Interest.....................................................................36
7.2. Lien on Deposit Accounts; Cash Collateral......................................................37
7.3. Other Collateral...............................................................................38
7.4. No Assumption of Liability.....................................................................38
7.5. Further Assurances.............................................................................38
Section 8. COLLATERAL ADMINISTRATION.........................................................................38
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8.1. Borrowing Base Certificates....................................................................38
8.2. Administration of Accounts.....................................................................38
8.3. Administration of Inventory....................................................................39
8.4. Administration of Equipment....................................................................40
8.5. Administration of Deposit Accounts.............................................................40
8.6. General Provisions.............................................................................40
8.7. Power of Attorney..............................................................................42
Section 9. REPRESENTATIONS AND WARRANTIES....................................................................42
9.1. General Representations and Warranties.........................................................42
9.2. Complete Disclosure............................................................................47
Section 10. COVENANTS AND CONTINUING AGREEMENTS...............................................................47
10.1. Affirmative Covenants..........................................................................47
10.2. Negative Covenants.............................................................................50
10.3. Financial Covenants............................................................................52
Section 11. GUARANTY OF AFFILIATE GUARANTOR...................................................................53
11.1. Guaranty of Payment and Performance............................................................53
11.2. Affiliate Guarantor's Agreement to Pay Enforcement Costs, Etc..................................53
11.3. Waivers by Affiliate Guarantor; Lender's Freedom to Act........................................53
11.4. Unenforceability of Obligations Against Borrower...............................................54
11.5. Subrogation; Subordination.....................................................................54
11.6. Termination; Reinstatement.....................................................................54
Section 12. EVENTS OF DEFAULT; REMEDIES ON DEFAULT............................................................55
12.1. Events of Default..............................................................................55
12.2. Remedies upon Default..........................................................................56
12.3. License........................................................................................57
12.4. Setoff.........................................................................................57
12.5. Remedies Cumulative; No Waiver.................................................................57
Section 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS..............................................58
13.1. Successors and Assigns.........................................................................58
13.2. Assignments and Participations.................................................................58
Section 14. MISCELLANEOUS.....................................................................................58
14.1. Amendments and Waivers.........................................................................58
14.2. Indemnity......................................................................................59
14.3. Notices and Communications.....................................................................59
14.4. Performance of Obligations.....................................................................59
14.5. Credit Inquiries...............................................................................60
14.6. Severability...................................................................................60
14.7. Cumulative Effect; Conflict of Terms...........................................................60
14.8. Counterparts; Facsimile Signatures.............................................................60
14.9. Entire Agreement...............................................................................60
14.10. GOVERNING LAW..................................................................................60
14.11. CONSENT TO FORUM...............................................................................60
14.12. CERTAIN WAIVERS BY BORROWER....................................................................61
14.13. Patriot Act Notice.............................................................................61
14.14. NO ORAL AGREEMENT..............................................................................61
14.15. COMMERICAL TRANSACTION; PREJUDGEMENT REMEDY WAIVER.............................................62
14.16. Effective Date.................................................................................62
14.17. Restatement....................................................................................62
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LIST OF EXHIBITS AND SCHEDULES
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Exhibit A Revolver Note
Exhibit B CAPX Note
Exhibit C Converted CAPX Note
Schedule 8.5 Deposit Accounts
Schedule 8.6.1 Business Locations
Schedule 9.1.4 Names and Capital Structure
Schedule 9.1.5 Former Names and Companies
Schedule 9.1.12 Patents, Trademarks, Copyrights and Licenses
Schedule 9.1.15 Environmental Matters
Schedule 9.1.16 Restrictive Agreements
Schedule 9.1.17 Litigation
Schedule 9.1.19 Pension Plans
Schedule 9.1.21 Labor Contracts
Schedule 10.2.2 Existing Liens
Schedule 10.2.17 Existing Affiliate Transactions
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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") is dated as of January 11, 2007, by and among AEROSPACE PRODUCTS
INTERNATIONAL, INC., a Delaware corporation ("Borrower"), AEROSPACE PRODUITS
INTERNATIONAL LTEE (d/b/a AEROSPACE PRODUCTS INTERNATIONAL LTD.), a company
constituted under Part IA of the Companies Act (Quebec) ("Affiliate Guarantor")
and TD BANKNORTH, N.A., a national banking association ("Lender").
R E C I T A L S:
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WHEREAS, Borrower and Lender, as successor by merger to ▇▇▇▇▇▇ United Bank,
are parties to that certain Amended and Restated Commercial Revolving Loan and
Security Agreement dated as of July 29, 2005 (such agreement, as supplemented,
amended and modified from time to time, the "Original LSA") pursuant to which
Lender has extended to Borrower a revolving loan facility in the principal
amount of up to $25,000,000 (the "Revolving Loan Facility") and a line of
credit/term loan facility in the principal amount of up to $3,000,000; and
WHEREAS, as security for the payment and performance of Borrower's present
and future indebtedness and obligations to Lender, including without limitation,
Borrower's indebtedness and obligations to Lender arising under or by virtue the
Original LSA, Borrower has granted in favor of Lender a continuing first
priority security interest in all of its tangible and intangible personal and
fixture property pursuant to the Original LSA; and
WHEREAS, Borrower and Affiliate Guarantor are wholly-owned subsidiaries of
First Aviation Services, Inc., a Delaware corporation ("Parent Guarantor") and
are an integral part of a consolidated enterprise that are Borrower, Affiliate
Guarantor, Parent Guarantor and the other Subsidiaries of Parent Guarantor; and
WHEREAS, Borrower and Affiliate Guarantor have each requested Lender, and
Lender has agreed, to (a) extend the maturity date of the Revolving Loan
Facility from September 1, 2007 to September 1, 2008, (b) provide a $1,000,000
sublimit under the Revolving Loan Facility for the issuance of letters of credit
for the account of Borrower, (c) extend to Borrower a revolving loan/term loan
facility for capital expenditures in the maximum principal amount of up to
$3,000,000, (d) permit Borrower to use the proceeds of Loans made hereunder to
finance the working capital and general corporate requirements of Affiliate
Guarantor and, in connection therewith, allow Borrower to include within the
Borrowing Base any and all Eligible Accounts and Eligible Inventory (each as
defined below) of Affiliate Guarantor, and (e) amend certain other terms and
conditions of the Original LSA; and
WHEREAS, Borrower and Lender desire to amend, restate and supersede the
Original LSA in its entirety as more fully set forth herein and to have all
Loans (including, but not limited to, all existing Loans made pursuant to the
Original LSA) be governed by the terms and conditions of this Agreement.
NOW, THEREFORE, Borrower and Lender agree that on the Effective Date, the
Original LSA shall be amended, restated and supplemented in its entirety as set
forth herein to provide (subject to the terms set forth herein) (a) a working
capital revolving credit facility of up to $25,000,000 which will include a
$1,000,000 sublimit for the issuance of letters of credit, (b) a capital
expenditures revolving loan/term loan facility of up to $3,000,000, and (c) that
all of Borrower's present and future indebtedness and obligations to Lender,
including without limitation, Borrower's present and future indebtedness and
obligations to Lender arising under or by virtue the Original LSA, shall
continue to be secured by a first priority security interest in all tangible and
intangible personal and fixture property of Borrower.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and to induce Lender to continue to extend credit to
Borrower, the parties agree as follows:
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION
1.1. Definitions. As used herein, the following terms have the meanings set
forth below:
Account - as defined in the UCC, including all rights to payment
for goods sold or leased, or for services rendered.
Account Debtor - a Person who is obligated under an Account,
Chattel Paper or General Intangible.
Accounts Formula Amount - 80% of the Value of Eligible Accounts.
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Adjusted LIBOR - for any Interest Period, with respect to LIBOR
Loans, the per annum rate of interest (rounded upward, if necessary, to
the nearest 1/8th of 1%) appearing on Telerate Page 3750, or if such
page is unavailable, the Reuters Screen LIBO Page (or any successor
page of either, as applicable), as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if the Reuters
Screen LIBO Page is used and more than one rate is shown on such page,
the applicable rate shall be the arithmetic mean thereof. If for any
reason none of the foregoing rates is available, the Offshore Prime
Rate shall be the rate per annum determined by Lender as the rate of
interest at which Dollar deposits in the approximate amount of the
applicable LIBOR Loan would be offered to major banks in the offshore
Dollar market at or about 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period. If the Board of Governors shall impose a Reserve
Percentage with respect to LIBOR deposits, then Adjusted LIBOR shall
equal the amount determined above, divided by 1 minus the Reserve
Percentage.
Affiliate - with respect to any Person, another Person (a) who
directly, or indirectly through one or more intermediaries, controls,
is controlled by or is under common control with such first Person; (b)
who beneficially owns 10% or more of the voting securities or any class
of Equity Interests of such first Person; (c) at least 10% of whose
voting securities or any class of Equity Interests is beneficially
owned, directly or indirectly, by such first Person; or (d) who is an
officer, director, partner or managing member of such first Person.
"Control" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person,
whether through ownership of Equity Interests, by contract or
otherwise.
Anti-Terrorism Laws - any laws relating to terrorism or money
laundering, including the Patriot Act.
Applicable Law - all laws, rules, regulations and governmental
guidelines applicable to the Person, conduct, transaction, agreement or
matter in question, including all applicable statutory law, common law
and equitable principles, and all provisions of constitutions,
treaties, statutes, rules, regulations, orders and decrees of
Governmental Authorities.
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Applicable Margin - with respect to any Type of Loan (other than
the FHLB Rate Loan), the margin set forth below, as determined by the
Debt Service Coverage Ratio for the relevant Fiscal Quarter or Fiscal
Quarters, as the case may be:
Debt Service
Level Coverage Ratio Prime Rate Loans LIBOR Loans
----- -------------- ---------------- -----------
I > 1.50 0% 1.50%
II < 1.50 (but not in 0% 1.75%
default)
The Applicable Margin for Prime Rate Loans outstanding on the Effective
Date shall be 0%. The Applicable Margin for LIBOR Loans outstanding as
of the Effective Date shall be as determined under the Original LSA
until the Interest Periods applicable thereto expire. With respect to
all Loans made, continued or converted to another Type on or after the
Effective Date, until the first day of the calendar month following
Lender's receipt of the financial statements and corresponding
Compliance Certificate for the Fiscal Quarter of Parent Guarantor
ending on October 31, 2006, the Applicable Margin shall be determined
as if Level II were applicable. Thereafter, the margins shall be
subject to increase or decrease upon receipt by Lender pursuant to
Section 10.1.2 of the financial statements and corresponding Compliance
Certificate for the last Fiscal Quarter, which change shall be
effective on the first day of the calendar month following receipt. If
Lender fails to receive the financial statements and corresponding
Compliance Certificate for any Fiscal Quarter of Parent Guarantor, then
commencing on the first day of the calendar month following the date
upon which such financial statements and Compliance Certificate were
due to be delivered, the margins shall be determined as if Level II
were applicable, from such day until the first Business Day of the
calendar month following actual receipt.
Approved Fund - any Person (other than a natural person) that is
engaged in making, holding or investing in extensions of credit in its
ordinary course of business and is administered or managed by Lender,
an entity that administers or manages Lender, or an Affiliate of
either.
Asset Disposition - a sale, lease, license, consignment,
transfer or other disposition of Property of an Obligor, including a
disposition of Property in connection with a sale-leaseback transaction
or synthetic lease.
Availability - determined as of any date, the amount that
Borrower is entitled to borrow as Revolver Loans, being the Borrowing
Base minus the principal balance of all Revolver Loans.
Availability Reserve - the sum (without duplication) of (a) the
amount of any reserves established pursuant to the definition of
Eligible Accounts; (b) the LC Reserve; and (c) such additional
reserves, in such amounts and with respect to such matters, as Lender
in its discretion may elect to impose from time to time.
Bank Product - any of the following products, services or
facilities extended to Borrower or Subsidiary by Lender or any of its
Affiliates: (a) Cash Management Services; (b) products under Hedging
Agreements; (c) commercial credit card and merchant card services; (d)
leases; and (e) any and all other banking products or services as may
be requested by Borrower or any Subsidiary of Borrower, other than
Letters of Credit.
Bank Product Debt - Debt and other obligations of an Obligor
relating to Bank Products.
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Bankruptcy Code - Title 11 of the United States Code.
Blocked Account - a special account established by Borrower at
Lender or another bank acceptable to Lender, over which Lender has
exclusive control for withdrawal purposes.
Board of Governors - the Board of Governors of the Federal
Reserve System.
Borrowed Money - with respect to any Obligor, without
duplication, its (a) Debt that (i) arises from the lending of money by
any Person to such Obligor, (ii) is evidenced by notes, drafts, bonds,
debentures, credit documents or similar instruments, (iii) accrues
interest or is a type upon which interest charges are customarily paid
(excluding trade payables owing in the Ordinary Course of Business), or
(iv) was issued or assumed as full or partial payment for Property; (b)
Capital Leases; (c) reimbursement obligations with respect to letters
of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.
Borrowing - a group of Loans of one Type that are made on the
same day or are converted into Loans of one Type on the same day.
Borrowing Base - on any date of determination, an amount equal
to the lesser of (a) the Revolver Commitment, minus the LC Reserve; or
(b) the sum of the Accounts Formula Amount, plus the Inventory Formula
Amount, minus the Availability Reserve.
Borrowing Base Certificate - a certificate, in form and
substance satisfactory to Lender, by which Borrower certify calculation
of the Borrowing Base.
Borrowing Base Obligor - Borrower or Affiliate Guarantor.
Business Day - any day (a) excluding Saturday, Sunday and any
other day on which banks are permitted to be closed under the laws of
the State of Connecticut; and (b) when used with reference to a LIBOR
Loan, also excluding any day on which banks do not conduct dealings in
Dollar deposits on the London interbank market.
Canadian Dollars - lawful money of Canada.
Capital Adequacy Regulation - any law, rule, regulation,
guideline, request or directive of any central bank or other
Governmental Authority, whether or not having the force of law,
regarding capital adequacy of a bank or any Person controlling a bank.
Capital Expenditures - all liabilities incurred, expenditures
made or payments due (whether or not made) by Parent Guarantor or any
of its Subsidiaries for the acquisition of any fixed assets, or any
improvements, replacements, substitutions or additions thereto with a
useful life of more than one year, including the principal portion of
Capital Leases.
Capital Lease - any lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
CAPX Loan - a loan made pursuant to Section 2.2.
CAPX Loan Commitment - Lender's obligation to make CAPX Loans up
to the maximum aggregate principal amount of $3,000,000.
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CAPX Loan Commitment Termination Date - the earliest to occur of
(a) the CAPX Loan Termination Date; or (b) the date on which the CAPX
Loan Commitment is terminated pursuant to Section 12.2.
CAPX Loan Note - a promissory note to be executed by Borrower
in favor of Lender in the form of Exhibit B, which shall evidence the
CAPX Loans (but not the Converted CAPX Loan) made by Lender hereunder.
CAPX Loan Termination Date - September 1, 2008.
Cash Collateral - cash, and any interest or other income
earned thereon, that is delivered to Lender to Cash Collateralize any
Obligations.
Cash Collateral Account - a demand deposit, money market or
other account established by Lender at such financial institution as
Lender may select in its discretion, which account shall be subject to
Lender's Liens for the benefit of Secured Parties.
Cash Collateralize - the delivery of cash to Lender, as security
for the payment of Obligations, in an amount equal to (a) with respect
to LC Obligations, 105% of the aggregate LC Obligations, and (b) with
respect to any inchoate or contingent Obligations (including
Obligations arising under Bank Products), Lender's good faith estimate
of the amount due or to become due, including all fees and other
amounts relating to such Obligations. "Cash Collateralization" has a
correlative meaning.
Cash Equivalents - (a) marketable obligations issued or
unconditionally guaranteed by, and backed by the full faith and credit
of, the United States government, maturing within 12 months of the date
of acquisition; (b) certificates of deposit, time deposits and bankers'
acceptances maturing within 12 months of the date of acquisition, and
overnight bank deposits, in each case which are issued by a commercial
bank organized under the laws of the United States or any state or
district thereof, rated A-1 (or better) by S&P or P-1 (or better) by
▇▇▇▇▇'▇ at the time of acquisition, and (unless issued by Lender) not
subject to offset rights; (c) repurchase obligations with a term of not
more than 30 days for underlying investments of the types described in
clauses (a) and (b) entered into with any bank meeting the
qualifications specified in clause (b); (d) commercial paper rated A-1
(or better) by S&P or P-1 (or better) by ▇▇▇▇▇'▇, and maturing within
nine months of the date of acquisition; and (e) shares of any money
market fund that has substantially all of its assets invested
continuously in the types of investments referred to above, has net
assets of at least $500,000,000 and has the highest rating obtainable
from either ▇▇▇▇▇'▇ or S&P.
Cash Management Services - any services provided from time to
time by Lender or any of its Affiliates to any Obligor in connection
with operating, collections, payroll, trust, or other depository or
disbursement accounts, including automatic clearinghouse, controlled
disbursement, depository, electronic funds transfer, information
reporting, lockbox, stop payment, overdraft and/or wire transfer
services.
CERCLA - the Comprehensive Environmental Response Compensation
and Liability Act (42 U.S.C. ss. 9601 et seq.).
Change of Control - (a) Parent Guarantor ceases to own and
control, beneficially and of record, 100% of all Equity Interests in
Borrower and in Affiliate Guarantor; (b) First Equity Group, Inc., a
Delaware corporation, ceases to own and control, beneficially and of
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record, at least 25% of all Equity Interests in Parent Guarantor; (c) a
change in the majority of directors of Borrower, unless approved by the
then majority of directors; or (d) all or substantially all of
Borrower's assets are sold or transferred.
Chattel Paper - as defined in the UCC.
Claims - all liabilities, obligations, losses, damages,
penalties, judgments, proceedings, costs and expenses of any kind
(including remedial response costs, reasonable attorneys' fees and
Extraordinary Expenses) at any time (including after Full Payment of
the Obligations or replacement of Lender) incurred by or asserted
against any Indemnitee in any way relating to (a) any Loan Documents or
transactions relating thereto, (b) any action taken or omitted to be
taken by any Indemnitee in connection with any Loan Documents, (c) the
existence or perfection of any Liens, or realization upon any
Collateral, (d) exercise of any rights or remedies under any Loan
Documents or Applicable Law, or (e) failure by any Obligor to perform
or observe any terms of any Loan Document, in each case including all
costs and expenses relating to any investigation, litigation,
arbitration or other proceeding (including an Insolvency Proceeding or
appellate proceedings), whether or not the applicable Indemnitee is a
party thereto.
Closing Date - the first date on which the conditions set forth
in Sections 5.01 and 5.02 of the Original LSA were satisfied and any
Loan was made thereunder.
Collateral - all Property described in Section 7.1, all Property
described in any Security Documents as security for any Obligations,
and all other Property that now or hereafter secures (or is intended to
secure) any Obligations.
Commercial Tort Claim - as defined in the UCC.
Commitments - the Revolver Commitment and the CAPX Loan
Commitment.
Compliance Certificate - a certificate, in form and substance
satisfactory to Lender, by which Borrower certifies compliance with
Section 10.2.3 and 10.3 and calculates the applicable Level for the
Applicable Margin.
Confirmation Agreement. The Confirmation and Reaffirmation of
Loan Documents, dated or to be dated on or before the Effective Date,
among Borrower, Parent Guarantor and Lender and in form and substance
satisfactory to Lender.
Contingent Obligation - any obligation of a Person arising from
a guaranty, indemnity or other assurance of payment or performance of
any Debt, lease, dividend or other obligation ("primary obligations")
of another obligor ("primary obligor") in any manner, whether directly
or indirectly, including any obligation of such Person under any (a)
guaranty, endorsement, co-making or sale with recourse of an obligation
of a primary obligor; (b) obligation to make take-or-pay or similar
payments regardless of nonperformance by any other party to an
agreement; and (c) arrangement (i) to purchase any primary obligation
or security therefor, (ii) to supply funds for the purchase or payment
of any primary obligation, (iii) to maintain or assure working capital,
equity capital, net worth or solvency of the primary obligor, (iv) to
purchase Property or services for the purpose of assuring the ability
of the primary obligor to perform a primary obligation, or (v)
otherwise to assure or hold harmless the holder of any primary
obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be the stated or determinable
amount of the primary obligation (or, if less, the maximum amount for
which such Person may be liable under the instrument evidencing the
Contingent Obligation) or, if not stated or determinable, the maximum
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reasonably anticipated liability with respect thereto.
Converted CAPX Loan - as defined in Section 2.2.4.
Converted CAPX Loan Maturity Date - September 1, 2013.
Converted CAPX Loan Note - a promissory note to be executed by
Borrower in favor of Lender in the form of Exhibit C, which shall
evidence the Converted CAPX Loan made by Lender.
CWA - the Clean Water Act (33 U.S.C. ▇▇.▇▇. 1251 et seq.).
Debt - as applied to any Person, without duplication, (a) all
items that would be included as liabilities on a balance sheet in
accordance with GAAP, including Capital Leases, but excluding trade
payables incurred and being paid in the Ordinary Course of Business and
salaries owing to employees and being paid in the Ordinary Course of
Business; (b) all Contingent Obligations; (c) all reimbursement
obligations in connection with letters of credit issued for the account
of such Person; and (d) in the case of Borrower, the Obligations. The
Debt of a Person shall include any recourse Debt of any partnership in
which such Person is a general partner or joint venturer.
Debt Service Coverage Ratio - the ratio, determined on a
consolidated basis for Parent Guarantor and its Subsidiaries for the
relevant Fiscal Quarter or Fiscal Quarters, as the case may be, of (a)
EBITDA, minus all cash taxes paid (net of any cash refunds), minus
Capital Expenditures (except those financed with Borrowed Money
(including CAPX Loans) other than Revolver Loans), minus all
Distributions (other than Distributions made to Parent Guarantor by any
of its Subsidiaries) to (b) Fixed Charges.
Debt Subordination Agreement - the Amended and Restated
Subordination Agreement dated as of July 29, 2005 by and among Parent
Guarantor, Borrower and Lender relating to the Existing Subordinated
Debt.
Default - an event or condition that, with the lapse of time or
giving of notice, would constitute an Event of Default.
Default Rate - for any Obligation (including, to the extent
permitted by law, interest not paid when due), 3% plus the Prime Rate.
Deposit Account - as defined in the UCC.
Deposit Account Control Agreements - the Deposit Account control
agreements to be executed by each institution maintaining a Deposit
Account for Borrower, in favor of Lender, for the benefit of Secured
Parties, as security for the Obligations.
Distribution - any declaration or payment of a distribution,
interest or dividend on any Equity Interest (other than
payment-in-kind); any distribution, advance or repayment of Debt to a
holder of Equity Interests; or any purchase, redemption, or other
acquisition or retirement for value of any Equity Interest.
Document - as defined in the UCC.
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Dollars - lawful money of the United States.
EBITDA - determined on a consolidated basis for Parent
Guarantor and its Subsidiaries, net income, calculated before interest
expense, provision for income taxes, depreciation and amortization
expense, gains or losses arising from the sale of capital assets, gains
or losses arising from the write-up of assets, and any extraordinary
gains or losses (in each case, to the extent included in determining
net income).
Effective Date - as defined in Section 6.1.
Eligible Account - an Account owing to a Borrowing Base Obligor
that arises in the Ordinary Course of Business from the sale of goods,
is payable in Dollars or Canadian Dollars and is deemed by Lender, in
its discretion, to be an Eligible Account. Without limiting the
foregoing, no Account shall be an Eligible Account if (a) it is more
than 90 days after the original invoice date or if it is a dated
invoice more than 60 days after the original due date, whichever occurs
first; (b) 50% or more of the Accounts owing by the Account Debtor and
its Affiliates are not Eligible Accounts under the foregoing clause;
(c) it does not conform with a covenant or representation herein; (d)
it is owing by a creditor or supplier, or is otherwise subject to a
potential offset, counterclaim, dispute, deduction, discount,
recoupment, reserve, defense, chargeback, credit or allowance (but
ineligibility shall be limited to the amount thereof); (e) an
Insolvency Proceeding has been commenced by or against the Account
Debtor; or the Account Debtor has failed, has suspended or ceased doing
business, is liquidating, dissolving or winding up its affairs, or is
not Solvent; (f) the Account Debtor is organized or has its principal
offices or assets outside the United States or Canada, unless the
subject goods shall have been shipped after receipt by such Borrowing
Base Obligor from the Account Debtor, of (1) an irrevocable letter of
credit, which letter of credit shall have been issued or confirmed by a
financial institution acceptable to Lender and shall be in form and
substance acceptable to Lender and shall be transferred, assigned or
otherwise made payable to Lender in form and substance satisfactory to
Lender, or (2) credit insurance in form and substance and issued by an
insurer satisfactory to Lender; (g) it is owing by a Government
Authority, unless the Account Debtor is the United States or Canada or
any department, agency or instrumentality thereof and the Account has
been assigned to Lender in compliance with the Assignment of Claims Act
or the Financial Administration Act (Canada), as applicable; (h) it is
not subject to a duly perfected, first priority Lien in favor of
Lender, or is subject to any other Lien; (i) the goods giving rise to
it have not been delivered to and accepted by the Account Debtor, the
services giving rise to it have not been accepted by the Account
Debtor, or it otherwise does not represent a final sale; (j) it is
evidenced by Chattel Paper or an Instrument of any kind, or has been
reduced to judgment; (k) its payment has been extended, the Account
Debtor has made a partial payment, or it arises from a sale on a
cash-on-delivery basis; (l) it arises from a sale to an Affiliate, or
from a sale on a ▇▇▇▇-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment, or other repurchase or return basis; (m)
it represents a progress billing or retainage; (n) it includes a
billing for interest, fees or late charges, but ineligibility shall be
limited to the extent thereof; or (o) it arises from a retail sale to a
Person who is purchasing for personal, family or household purposes. In
calculating delinquent portions of Accounts under clauses (a) and (b),
credit balances more than 60 days old will be excluded.
Lender may determine, on a daily basis, whether any Account
constitutes an Eligible Account, and if an Eligible Account
subsequently becomes ineligible its ineligibility shall be immediate
and Lender shall set such reserves as Lender deems reasonable and
necessary, and at any time at which the Borrowing Base Obligors'
collective dilution exceeds five percent (5%) based on the results of
Lender's periodic field examinations, establish a dilution reserve of
8
one percent (1%) for each percentage point or fraction thereof by which
the Borrowing Base Obligors' collective dilution exceeds five percent
(5%).
Eligible Equipment - equipment which (a) is or was purchased by
Borrower on or after February 1, 2006 for use in the Ordinary Course of
Business; (b) is in possession of Borrower or Affiliate Guarantor and
located (i) on premises owned by Borrower or Affiliate Guarantor, or
(ii) on leased premises with respect to which an appropriate Lien
Waiver has been executed and delivered to Lender; (c) is subject to
Lender's duly perfected, first priority Lien, and no other Lien, (d) at
all times pertinent hereto is of good and merchantable quality free
from defects and of a type which Lender, in its discretion, deems to be
Eligible Equipment, and (e) meets all standards imposed by any
Governmental Authority.
Eligible Inventory - Inventory owned by a Borrowing Base Obligor
that Lender, in its discretion, deems to be Eligible Inventory. Without
limiting the foregoing, no Inventory shall be Eligible Inventory unless
it (a) is finished goods, and not raw materials or work-in-process,
packaging or shipping materials, labels, samples, display items, bags,
replacement parts, manufacturing supplies or considered a "core" on the
books and records of a Borrowing Base Obligor; (b) is not held on
consignment, nor subject to any deposit or down payment; (c) is in new
and saleable condition and is not damaged, defective, shopworn or
otherwise unfit for sale; (d) is not slow-moving, obsolete or
unmerchantable, and does not constitute returned or repossessed goods;
(e) meets all standards imposed by any Governmental Authority, and does
not constitute hazardous materials under any Environmental Law; (f)
conforms with the covenants and representations herein; (g) is subject
to Lender's duly perfected, first priority Lien, and no other Lien; (h)
is within the continental United States or Canada, is not in transit
except between locations of the Borrowing Base Obligors, and is not
consigned to any Person; (i) is not subject to any warehouse receipt or
negotiable Document; (j) is not subject to any License or other
arrangement that restricts a Borrowing Base Obligor's or Lender's right
to dispose of such Inventory, unless Lender has received an appropriate
Lien Waiver; and (k) is not located on leased premises or in the
possession of a warehouseman, processor, repairman, mechanic, shipper,
freight forwarder or other Person, unless the lessor or such Person has
delivered a Lien Waiver or an appropriate Availability Reserve has been
established.
Enforcement Action - any action to enforce any Obligations or
Loan Documents or to realize upon any Collateral (whether by judicial
action, self-help, notification of Account Debtors, exercise of setoff
or recoupment, or otherwise).
Environmental Laws - all Applicable Laws (including all
programs, permits and guidance promulgated by regulatory agencies),
relating to public health (but excluding occupational safety and
health, to the extent regulated by OSHA) or the protection or pollution
of the environment, including CERCLA, RCRA and CWA.
Environmental Notice - a notice (whether written or oral) from
any Governmental Authority or other Person of any possible
noncompliance with, investigation of a possible violation of,
litigation relating to, or potential fine or liability under any
Environmental Law, or with respect to any Environmental Release,
environmental pollution or hazardous materials, including any
complaint, summons, citation, order, claim, demand or request for
correction, remediation or otherwise.
Environmental Release - a release as defined in CERCLA or under
any other Environmental Law.
9
Equipment - as defined in the UCC, including all machinery,
apparatus, equipment, fittings, furniture, fixtures, motor vehicles and
other tangible personal Property (other than Inventory), and all parts,
accessories and special tools therefor, and accessions thereto.
Equity Interest - the interest of any (a) shareholder in a
corporation, (b) partner in a partnership (whether general, limited,
limited liability or joint venture), (c) member in a limited liability
company, or (d) other Person having any other form of equity security
or ownership interest.
Equivalent Amount - on any date of determination, with respect
to amounts denominated in Canadian Dollars, the amount of Dollars which
would result from the conversion of Canadian Dollars into Dollars at
the 12:00 noon (Toronto time) rate quoted on the Reuters Screen Page
BOFC on the date of the most recent Borrowing Base Certificate required
to be delivered hereunder or, at the discretion of Lender, on a more
recent date (or if such display or service ceases to exist, any other
display and service in existence as of the relevant time designated by
Lender).
ERISA - the Employee Retirement Income Security Act of 1974.
Event of Default - as defined in Section 12.
Exchange Act - the Securities Exchange Act of 1934, as amended.
Excluded Tax - Tax on the overall net income or gross receipts
of Lender imposed by the jurisdiction in which Lender's principal
executive office is located.
Existing Subordinated Debt - the Subordinated Debt owing by
Borrower to Parent Guarantor.
Extraordinary Expenses - all costs, expenses or advances that
Lender may incur during a Default or Event of Default, or during the
pendency of an Insolvency Proceeding of an Obligor, including those
relating to (a) any audit, inspection, repossession, storage, repair,
appraisal, insurance, manufacture, preparation or advertising for sale,
sale, collection, or other preservation of or realization upon any
Collateral; (b) any action, arbitration or other proceeding (whether
instituted by or against Lender, any Obligor, any representative of
creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or
avoidability of Lender's Liens with respect to any Collateral), Loan
Documents or Obligations, including any lender liability or other
Claims; (c) the exercise, protection or enforcement of any rights or
remedies of Lender in, or the monitoring of, any Insolvency Proceeding;
(d) settlement or satisfaction of any taxes, charges or Liens with
respect to any Collateral; (e) any Enforcement Action; (f) negotiation
and documentation of any modification, waiver, workout, restructuring
or forbearance with respect to any Loan Documents or Obligations; or
(g) Protective Advances. Such costs, expenses and advances include
transfer fees, taxes, storage fees, insurance costs, permit fees,
utility reservation and standby fees, legal fees, appraisal fees,
brokers' fees and commissions, auctioneers' fees and commissions,
accountants' fees, environmental study fees, wages and salaries paid to
employees of any Obligor or independent contractors in liquidating any
Collateral, and travel expenses.
FHLB Rate - a fixed rate per annum equal to the sum of (a) the
yield on Federal Home Loan Bank consolidated obligations having a
10
maturity and amortization schedule of up to five (5) years, as quoted
by the Federal Home Loan Bank on and for the date of the Converted CAPX
Loan Note or any subsequent date with respect to which Borrower elects
to have the Converted CAPX Loan bears interest at the FHLB Rate, as the
case may be, plus (ii) two hundred twenty (220) basis points.
FHLB Rate Loan - the Converted CAPX Loan in the event Borrower
elects such Loan to bear interest at the FHLB Rate.
Fiscal Quarter - each period of three months, commencing on the
first day of a Fiscal Year.
Fiscal Year - the fiscal year of Parent Guarantor and its
Subsidiaries for accounting and tax purposes, ending on January 31 of
each year.
Fixed Charges - the sum of interest expense (other than
payment-in-kind) and principal payments made on Borrowed Money (other
than on account of the Revolver Loans).
FLSA - the Fair Labor Standards Act of 1938.
Foreign Plan - any employee benefit plan or arrangement
maintained or contributed to by any Obligor or Subsidiary that is not
subject to the laws of the United States, or any employee benefit plan
or arrangement mandated by a government other than the United States
for employees of any Obligor or Subsidiary.
Full Payment - with respect to any Obligations, (a) the full
and indefeasible cash payment thereof, including any interest, fees and
other charges accruing during an Insolvency Proceeding (whether or not
allowed in the proceeding); (b) if such Obligations are LC Obligations
or inchoate or contingent in nature, Cash Collateralization thereof (or
delivery of a standby letter of credit acceptable to Lender in its
discretion, in the amount of required Cash Collateral); and (c) a
release of any Claims of Obligors against Lender arising on or before
the payment date. No Loans shall be deemed to have been paid in full
until the Commitments have expired or been terminated.
GAAP - generally accepted accounting principles in the United
States in effect from time to time.
General Intangibles - as defined in the UCC, including choses in
action, causes of action, company or other business records,
inventions, blueprints, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, service
marks, goodwill, brand names, copyrights, registrations, licenses,
franchises, customer lists, permits, tax refund claims, computer
programs, operational manuals, internet addresses and domain names,
insurance refunds and premium rebates, all rights to indemnification,
and all other intangible Property of any kind.
Goods - as defined in the UCC.
Governmental Approvals - all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with,
and required reports to, all Governmental Authorities.
Governmental Authority - any federal, state, provincial,
municipal, foreign or other governmental department, agency,
11
commission, board, bureau, court, tribunal, instrumentality, political
subdivision, or other entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions for or
pertaining to any government or court, in each case whether associated
with the United States, a state, district or territory thereof, or a
foreign entity or government.
Guarantor - Affiliate Guarantor, Parent Guarantor and each other
Person who guarantees payment or performance of any Obligations.
Guaranty - each guaranty agreement executed by a Guarantor in
favor of Lender, whether now existing or hereafter arising, including,
but not limited to, the Guaranty of Parent Guarantor executed and
delivered to Lender on or prior to the Closing Date.
Hedging Agreement - an agreement relating to any swap, cap,
floor, collar, option, forward, cross right or obligation, or
combination thereof or similar transaction, with respect to interest
rate, foreign exchange, currency, commodity, credit or equity risk.
Hypothec - the Movable Hypothec, dated or to be dated on or
prior to the Effective Date, by and between Affiliate Guarantor and
Lender and in form and substance satisfactory to the Lender, as
amended, restated, reaffirmed or otherwise modified from time to time.
Indemnitees - Lender Indemnitees.
Insolvency Proceeding - any case or proceeding commenced by or
against a Person under any state, federal or foreign law for, or any
agreement of such Person to, (a) the entry of an order for relief under
the Bankruptcy Code, or any other insolvency, debtor relief or debt
adjustment law, including, but not limited to, the Bankruptcy and
Insolvency Act (Canada) or the Companies' Creditors Arrangement Act
(Canada); (b) the appointment of a receiver, trustee, liquidator,
administrator, conservator or other custodian for such Person or any
part of its Property; or (c) an assignment or trust mortgage for the
benefit of creditors.
Instrument - as defined in the UCC.
Insurance Assignment - each collateral assignment of insurance
pursuant to which an Obligor assigns to Lender, for the benefit of
Secured Parties, such Obligor's rights under key-man life, business
interruption or other insurance policies as Lender deems appropriate,
as security for the Obligations.
Intangible Assets - at any particular date, all assets of Parent
Guarantor and its Subsidiaries that, in accordance with GAAP, would
properly be classified as intangible assets on the consolidated balance
sheet of Parent Guarantor, but in any event including, without
limitation, goodwill, franchises, licenses, patents, trademarks,
copyrights, service marks, brand names, costs in excess of the net
asset value of acquired companies and the amount of any write-up in the
book value of any asset resulting from any revaluation thereof after
the date hereof.
Intellectual Property - all intellectual and similar Property of
a Person, including inventions, designs, patents, patent applications,
copyrights, trademarks, service marks, trade names, trade secrets,
confidential or proprietary information, customer lists, know-how,
software and databases; all embodiments or fixations thereof and all
related documentation, registrations and franchises; all books and
records describing or used in connection with the foregoing; and all
licenses or other rights to use any of the foregoing.
12
Intellectual Property Claim - any claim or assertion (whether in
writing, by suit or otherwise) that Borrower's or Affiliate Guarantor's
ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other Property violates another
Person's Intellectual Property.
Interest Period - as defined in Section 3.1.3.
Interest Rate Contract - any interest rate swap, collar or cap
agreement, or other agreement or arrangement by Borrower or Subsidiary
with Lender, whether now existing or hereafter arising, that is
designed to protect against fluctuations in interest rates.
Internal Control Event - a material weakness in, or fraud that
involves management or other employees who have a significant role in,
Parent Guarantor's internal controls over financial reporting, in each
case as described in the Securities Laws.
Inventory - as defined in the UCC, including all goods intended
for sale, lease, display or demonstration; all work in process; and all
raw materials, and other materials and supplies of any kind that are or
could be used in connection with the manufacture, printing, packing,
shipping, advertising, sale, lease or furnishing of such goods, or
otherwise used or consumed in Borrower's business (but excluding
Equipment).
Inventory Formula Amount - the lesser of (a) $15,000,000; or (b)
50% of the Value of Eligible Inventory.
Investment - any acquisition of all or substantially all assets
of a Person; any acquisition of record or beneficial ownership of any
Equity Interests of a Person; or any advance or capital contribution to
or other investment in a Person.
Investment Property - as defined in the UCC.
LC Application - an application by Borrower to Lender for
issuance of a Letter of Credit, in form and substance satisfactory to
Lender.
LC Conditions - the following conditions necessary for issuance
of a Letter of Credit: (a) each of the conditions set forth in Section
6; (b) after giving effect to such issuance, total LC Obligations do
not exceed the Letter of Credit Subline, no Overadvance exists and, if
no Revolver Loans are outstanding, the LC Obligations then outstanding
do not exceed the Borrowing Base (without giving effect to the LC
Reserve for purposes of this calculation); (c) the expiration date of
such Letter of Credit is (i) no more than 365 days from issuance, in
the case of standby Letters of Credit, and (ii) no more than 180 days
from issuance, in the case of documentary Letters of Credit, and (iii)
at least 20 Business Days prior to the Revolver Termination Date; (d)
the Letter of Credit and payments thereunder are denominated in
Dollars; and (e) the form of the proposed Letter of Credit is
satisfactory to Lender in their discretion.
LC Documents - all documents, instruments and agreements
(including LC Requests and LC Applications) delivered by Borrower or
any other Person to Lender in connection with the issuance, amendment
or renewal of, or payment under, any Letter of Credit.
LC Obligations - the sum (without duplication) of (a) all
amounts owing by Borrower for any drawings under Letters of Credit; (b)
the aggregate undrawn amount of all outstanding Letters of Credit; and
(c) all fees and other amounts owing with respect to Letters of Credit.
13
LC Request - a request for issuance of a Letter of Credit, to be
provided by Borrower to Lender, in form satisfactory to Lender.
LC Reserve - the aggregate of all LC Obligations, other than (a)
those that have been Cash Collateralized, and (b) if no Default or
Event of Default exists, those constituting charges owing to Lender.
Lender Indemnitees - Lender and its officers, directors,
employees, Affiliates, agents and attorneys.
Lender Professionals - attorneys, accountants, appraisers,
auditors, business valuation experts, environmental engineers or
consultants, turnaround consultants, and other professionals and
experts retained by Lender.
Letter of Credit - any standby or documentary letter of credit
issued by Lender for the account of Borrower, or any indemnity,
guarantee, exposure transmittal memorandum or similar form of credit
support issued by Lender for the benefit of Borrower.
Letter-of-Credit Right - as defined in the UCC.
Letter of Credit Subline - $1,000,000.
LIBOR Loan - any Loan that bears interest based on Adjusted
LIBOR.
License - any license or agreement under which an Obligor is
authorized to use Intellectual Property in connection with any
manufacture, marketing, distribution or disposition of Collateral, any
use of Property or any other conduct of its business.
Licensor - any Person from whom an Obligor obtains the right to
use any Intellectual Property.
Lien - any Person's interest in Property securing an obligation
owed to, or a claim by, such Person, whether such interest is based on
common law, statute or contract, including liens, security interests,
pledges, hypothecations, statutory trusts, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances
affecting Property.
Lien Waiver - an agreement, in form and substance satisfactory
to Lender, by which (a) for any material Collateral located on leased
premises, the lessor waives or subordinates any Lien it may have on the
Collateral, and agrees to permit Lender to enter upon the premises and
remove the Collateral or to use the premises to store or dispose of the
Collateral; (b) for any Collateral held by a warehouseman, processor,
shipper or freight forwarder, such Person waives or subordinates any
Lien it may have on the Collateral, agrees to hold any Documents in its
possession relating to the Collateral as agent for Lender, and agrees
to deliver the Collateral to Lender upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person
acknowledges Lender's Lien, waives or subordinates any Lien it may have
on the Collateral, and agrees to deliver the Collateral to Lender upon
request; and (d) for any Collateral subject to a Licensor's
Intellectual Property rights, the Licensor grants to Lender the right,
vis-a-vis such Licensor, to enforce Lender's Liens with respect to the
Collateral, including the right to dispose of it with the benefit of
the Intellectual Property, whether or not a default exists under any
applicable License.
14
Loan - a Revolver Loan, an CAPX Loan or the Converted CAPX Loan,
as the context requires.
Loan Account - the loan account established by Lender on its
books pursuant to Section 5.8.
Loan Documents - this Agreement, Other Agreements and Security
Documents.
Loan Year - each calendar year commencing on the Effective Date
and on each anniversary of the Effective Date.
Margin Stock - as defined in Regulation U of the Board of
Governors.
Material Adverse Effect - the effect of any event or
circumstance that, taken alone or in conjunction with other events or
circumstances, (a) has or could be reasonably expected to have a
material adverse effect on the business, operations, Properties,
prospects or condition (financial or otherwise) of any Obligor, on the
value of any material Collateral, on the enforceability of any Loan
Documents, or on the validity or priority of Lender's Liens on any
Collateral; (b) impairs the ability of any Obligor to perform any
obligations under the Loan Documents, including repayment of any
Obligations; or (c) otherwise impairs the ability of Lender to enforce
or collect any Obligations or to realize upon any Collateral. Material
Contract - any agreement or arrangement to which Borrower or Subsidiary
is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law applicable to such Obligor,
including the Securities Act of 1933, (b) for which breach,
termination, nonperformance or failure to renew could reasonably be
expected to have a Material Adverse Effect, or (c) that relates to
Subordinated Debt, or Debt in an aggregate amount of $500,000 or more.
▇▇▇▇▇'▇ - ▇▇▇▇▇'▇ Investors Service, Inc., and its successors.
Multiemployer Plan - any employee benefit plan or arrangement
described in Section 4001(a)(3) of ERISA that is maintained or
contributed to by any Obligor or Subsidiary.
Net Proceeds - with respect to an Asset Disposition, proceeds
(including, when received, any deferred or escrowed payments) received
by Borrower, Affiliate Guarantor or any Subsidiary of either of them in
cash from such disposition, net of (a) reasonable and customary costs
and expenses actually incurred in connection therewith, including legal
fees and sales commissions; (b) amounts applied to repayment of Debt
secured by a Permitted Lien senior to Lender's Liens on Collateral
sold; (c) transfer or similar taxes; and (d) reserves for indemnities,
until such reserves are no longer needed.
Note - the Revolver Note, the CAPX Loan Note, the Converted CAPX
Loan Note or any other promissory note executed by Borrower to evidence
any Obligations.
Notice of Borrowing - a Notice of Borrowing to be provided by
Borrower to request the funding of a Borrowing of Revolver Loans or
CAPX Loans, in form satisfactory to Lender.
Notice of Conversion/Continuation - a Notice of
Conversion/Continuation to be provided by Borrower to request a
conversion or continuation of any Loans as LIBOR Loans, in form
satisfactory to Lender.
15
Obligations - all (a) principal of and premium, if any, on the
Loans, (b) LC Obligations and other obligations of Obligors with
respect to Letters of Credit, (c) interest, expenses, fees and other
sums payable by Obligors under Loan Documents, (d) obligations of
Obligors under any indemnity for Claims, (e) Extraordinary Expenses,
(f) Bank Product Debt, and (g) other Debts, obligations and liabilities
of any kind owing by Obligors pursuant to the Loan Documents, whether
now existing or hereafter arising, whether evidenced by a note or other
writing, whether allowed in any Insolvency Proceeding, whether arising
from an extension of credit, issuance of a letter of credit,
acceptance, loan, guaranty, indemnification or otherwise, and whether
direct or indirect, absolute or contingent, due or to become due,
primary or secondary, or joint or several.
Obligor - Borrower, each Guarantor or other Person that is
liable for payment of any Obligations or that has granted a Lien in
favor of Lender on its assets to secure any Obligations.
Ordinary Course of Business - the ordinary course of business of
Borrower, Affiliate Guarantor or any Subsidiary of either of them,
consistent with past practices and undertaken in good faith.
Organic Documents - with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of
organization, limited liability agreement, operating agreement, members
agreement, shareholders agreement, partnership agreement, certificate
of partnership, certificate of formation, voting trust agreement, or
similar agreement or instrument governing the formation or operation of
such Person.
OSHA - the Occupational Safety and Hazard Act of 1970.
Other Agreement - each Note, LC Document, Lien Waiver, Debt
Subordination Agreement, Borrowing Base Certificate, Compliance
Certificate, financial statement or report delivered hereunder or other
document, instrument or agreement (other than this Agreement or a
Security Document) now or hereafter delivered by an Obligor or other
Person to Lender in connection with any transactions relating hereto,
or each other "Loan Document" (as defined under the Original LSA) to
the extent such Loan Document was not superseded and replaced by
another Loan Document.
Overadvance - as defined in Section 2.1.5.
Overadvance Loan - a Prime Rate Loan made when an Overadvance
exists or is caused by the funding thereof.
Patriot Act - the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).
Payment Intangible - as defined in the UCC.
Payment Item - each check, draft or other item of payment
payable to Borrower or Affiliate Guarantor, including those
constituting proceeds of any Collateral.
Permitted Asset Disposition - as long as no Default or Event of
Default exists and all Net Proceeds are remitted to Lender, an Asset
Disposition that is (a) a sale of Inventory in the Ordinary Course of
Business; (b) a disposition of Equipment that, in the aggregate during
any 12 month period, has a fair market or book value (whichever is
more) of $500,000 or less; (c) a disposition of Inventory that is
16
obsolete, unmerchantable or otherwise unsalable in the Ordinary Course
of Business; (d) termination of a lease of real or personal Property
that is not necessary for the Ordinary Course of Business, could not
reasonably be expected to have a Material Adverse Effect and does not
result from an Obligor's default; or (e) approved in writing by Lender.
Permitted Contingent Obligations - Contingent Obligations (a)
arising from endorsements of Payment Items for collection or deposit in
the Ordinary Course of Business; (b) arising from Hedging Agreements
permitted hereunder; (c) existing on the Effective Date, and any
extension or renewal thereof that does not increase the amount of such
Contingent Obligation when extended or renewed; (d) incurred in the
Ordinary Course of Business with respect to surety, appeal or
performance bonds, or other similar obligations; (e) arising from
customary indemnification obligations in favor of purchasers in
connection with dispositions of Equipment permitted hereunder; (f)
arising under the Loan Documents; or (g) in an aggregate amount of
$500,000 or less at any time.
Permitted Lien - as defined in Section 10.2.2.
Permitted Purchase Money Debt - Purchase Money Debt of Borrower
and Affiliate Guarantor that is unsecured or secured only by a Purchase
Money Lien, as long as the aggregate amount does not exceed $250,000 at
any time.
Person - any individual, corporation, limited liability company,
partnership, joint venture, joint stock company, land trust, business
trust, unincorporated organization, Governmental Authority or other
entity.
Plan - an employee pension benefit plan that is covered by Title
IV of ERISA or subject to the minimum funding standards under Section
412 of the Internal Revenue Code and that is either (a) maintained by
Borrower or Subsidiary for employees or (b) maintained pursuant to a
collective bargaining agreement, or other arrangement under which more
than one employer makes contributions and to which Borrower or
Subsidiary is making or accruing an obligation to make contributions or
has within the preceding five years made or accrued such contributions.
Prime Rate - the rate of interest announced from time to time by
Lender as the index for setting loan rates and is not necessarily
Lender's lowest or most favorable rate. The Prime Rate will be based on
the rate published in the most recent edition preceding the time of any
interest rate determination of the Wall Street Journal, Eastern
Edition, under the heading "Money Rates" and defined as the "Prime
Rate", or in the event that such rate is no longer published in the
Wall Street Journal, a comparable index or reference rate selected by
Lender, in its sole discretion. If there is more than one Prime Rate
(or comparable reference rate), the highest of such rates shall be the
Prime Rate.
Prime Rate Loan - any Loan that bears interest based on the
Prime Rate.
Properly Contested - with respect to any obligation of an
Obligor, (a) the obligation is subject to a bona fide dispute regarding
amount or the Obligor's liability to pay; (b) the obligation is being
properly contested in good faith by appropriate proceedings promptly
instituted and diligently pursued; (c) appropriate reserves have been
established in accordance with GAAP; (d) non-payment could not have a
Material Adverse Effect, nor result in forfeiture or sale of any assets
of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless
bonded and stayed to the satisfaction of Lender; and (f) if the
17
obligation results from entry of a judgment or other order, such
judgment or order is stayed pending appeal or other judicial review.
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Protective Advances - as defined in Section 2.1.6.
Purchase Money Debt - (a) Debt (other than the Obligations) for
payment of any of the purchase price of fixed assets; (b) Debt (other
than the Obligations) incurred within 10 days before or after
acquisition of any fixed assets, for the purpose of financing any of
the purchase price thereof; and (c) any renewals, extensions or
refinancings (but not increases) thereof.
Purchase Money Lien - a Lien that secures Purchase Money Debt,
encumbering only the fixed assets acquired with such Debt, and
constituting a Capital Lease or a purchase money security interest
under the UCC or a leasing agreement, installment sale or sale with a
right of redemption governed by the Civil Code of Quebec.
RCRA - the Resource Conservation and Recovery Act (42 U.S.C.
▇▇.▇▇. 6991-6991i).
Real Estate - all right, title and interest (whether as owner,
lessor or lessee) in any real Property or any buildings, structures,
parking areas or other improvements thereon.
Refinancing Conditions - the following conditions for
Refinancing Debt: (a) it is in an aggregate principal amount that does
not exceed the principal amount of the Debt being extended, renewed or
refinanced; (b) it has a final maturity no sooner than, a weighted
average life no less than, and an interest rate no greater than, the
Debt being extended, renewed or refinanced; (c) it is subordinated to
the Obligations at least to the same extent as the Debt being extended,
renewed or refinanced; (d) the representations, covenants and defaults
applicable to it are no less favorable to Borrower than those
applicable to the Debt being extended, renewed or refinanced; (e) no
additional Lien is granted to secure it; (f) no additional Person is
obligated on such Debt; and (g) upon giving effect to it, no Default or
Event of Default exists.
Refinancing Debt - Borrowed Money that is the result of an
extension, renewal or refinancing of Debt permitted under Section
10.2.1(b), (c), (d) or (f).
Registered Public Accounting Firm - has the meaning specified in
the Securities Laws and shall be independent of Parent Guarantor as
prescribed by the Securities Laws.
Reimbursement Date - as defined in Section 2.3.2.
Report - as defined in Section 12.2.3.
Reportable Event - any event set forth in Section 4043(b) of
ERISA.
Reserve Percentage - the reserve percentage (expressed as a
decimal, rounded upward to the nearest 1/8th of 1%) applicable to
member banks under regulations issued from time to time by the Board of
Governors for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities").
Restricted Investment - any Investment by Borrower, Affiliate
18
Guarantor or any Subsidiary of either of them, other than (a)
Investments in Subsidiaries to the extent existing on the Effective
Date; (b) Cash Equivalents that are subject to Lender's Lien and
control, pursuant to documentation in form and substance satisfactory
to Lender; and (c) loans and advances permitted under Section 10.2.7.
Restrictive Agreement - an agreement (other than a Loan
Document) that conditions or restricts the right of Borrower,
Subsidiary or other Obligor to incur or repay Borrowed Money, to grant
Liens on any assets, to declare or make Distributions, to modify,
extend or renew any agreement evidencing Borrowed Money, or to repay
any intercompany Debt.
Revolver Commitment - Lender's obligation to make Revolver Loans
and issue Letters of Credit up to the maximum aggregate principal
amount of $25,000,000.
Revolver Commitment Termination Date - the earliest to occur of
(a) the Revolver Termination Date; (b) the date on which Borrower
terminates the Revolver Commitment pursuant to Section 2.1.4; or (c)
the date on which the Revolver Commitment is terminated pursuant to
Section 12.2.
Revolver Loan - a loan made pursuant to Section 2.1, and any
Overadvance Loan or Protective Advance.
Revolver Note - a promissory note to be executed by Borrower in
favor of Lender in the form of Exhibit A, which shall evidence the
Revolver Loans made by Lender hereunder.
Revolver Termination Date - September 1, 2008.
Rolling Period - with respect to any fiscal quarter of Borrower,
such fiscal quarter and the three consecutive fiscal quarters
immediately prior thereto.
Royalties - all royalties, fees, expense reimbursement and
other amounts payable by Borrower under a License.
▇▇▇▇▇▇▇▇-▇▇▇▇▇ - the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
S&P - Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and its successors.
SEC - the United States Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its principal
functions.
Secured Parties - Lender and Affiliates of Lender who provide
Bank Products to Borrower.
Securities Act - the Securities Act of 1933, amended and in
effect on any applicable date hereunder.
"Securities Laws" - the Securities Act, the Exchange Act,
▇▇▇▇▇▇▇▇-▇▇▇▇▇ and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by
the SEC or the Public Company Accounting Oversight Board, as each of
the foregoing may be amended and in effect on any applicable date
hereunder.
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Security Agreement - The General Security Agreement, dated or to
be dated on or prior to the Effective Date, by and between Affiliate
Guarantor and Lender and in form and substance satisfactory to the
Lender, as amended, restated, reaffirmed or otherwise modified from
time to time.
Security Documents - the Guaranties, the Confirmation Agreement,
the Security Agreement, the Hypothec, Insurance Assignments, Deposit
Account Control Agreements, and all other documents, instruments and
agreements now or hereafter securing (or given with the intent to
secure) any Obligations.
Senior Officer - the chairman of the board, president, chief
executive officer or chief financial officer of Borrower or, if the
context requires, an Obligor.
Software - as defined in the UCC.
Solvent - as to any Person, such Person (a) owns Property whose
fair salable value is greater than the amount required to pay all of
its debts (including contingent, subordinated, unmatured and
unliquidated liabilities); (b) owns Property whose present fair salable
value (as defined below) is greater than the probable total liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities) of such Person as they become absolute and matured; (c) is
able to pay all of its debts as they mature; (d) has capital that is
not unreasonably small for its business and is sufficient to carry on
its business and transactions and all business and transactions in
which it is about to engage; (e) is not "insolvent" within the meaning
of Section 101(32) of the Bankruptcy Code; and (f) has not incurred (by
way of assumption or otherwise) any obligations or liabilities
(contingent or otherwise) under any Loan Documents, or made any
conveyance in connection therewith, with actual intent to hinder, delay
or defraud either present or future creditors of such Person or any of
its Affiliates. "Fair salable value" means the amount that could be
obtained for assets within a reasonable time, either through collection
or through sale under ordinary selling conditions by a capable and
diligent seller to an interested buyer who is willing (but under no
compulsion) to purchase.
Statutory Reserves - the percentage (expressed as a decimal)
established by the Board of Governors as the then stated maximum rate
for all reserves (including those imposed by Regulation D of the Board
of Governors, all basic, emergency, supplemental or other marginal
reserve requirements, and any transitional adjustments or other
scheduled changes in reserve requirements) applicable to any member
bank of the Federal Reserve System in respect of Eurocurrency
Liabilities (or any successor category of liabilities under Regulation
D).
Subordinated Debt - Debt incurred by Borrower or Affiliate
Guarantor that is expressly subordinate and junior in right of payment
to Full Payment of all Obligations and is on terms (including maturity,
interest, fees, repayment, covenants and subordination) satisfactory to
Lender, the Subordinated Debt owing by Borrower to Parent Guarantor.
Subsidiary - any entity at least 50% of whose voting securities
or Equity Interests is owned by Borrower (including indirect ownership
by Borrower through other entities in which the Borrower directly or
indirectly owns 50% of the voting securities or Equity Interests).
Supporting Obligation - as defined in the UCC.
Tangible Capital Base - as of any date of determination, (a)
Tangible Net Worth as of such date, plus (b) the principal amount of
all Subordinated Debt outstanding as of such date.
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Tangible Net Worth - as of any date of determination, (a) Total
Assets as of such date, minus (b) the sum of (i) Total Liabilities as
of such date, and (ii) Intangible Assets as of such date.
Total Assets - as of any date of determination without
duplication, all assets of Parent Guarantor and its Subsidiaries that,
in accordance with GAAP, would properly be classified as assets on the
consolidated balance sheet of Parent Guarantor.
Total Liabilities - as of any particular date without
duplication, all Debt and other liabilities of Parent Guarantor and its
Subsidiaries that, in accordance with GAAP, would properly be
classified as liabilities on the consolidated balance sheet of Parent
Guarantor as of such date.
Taxes - any taxes, levies, imposts, duties, fees, assessments,
deductions, withholdings or other charges of whatever nature, including
income, receipts, excise, property, sales, use, transfer, license,
payroll, withholding, social security, franchise, intangibles, stamp or
recording taxes imposed by any Governmental Authority, and all
interest, penalties and similar liabilities relating thereto.
Type - any type of a Loan (i.e., Prime Rate Loan or LIBOR Loan)
that has the same interest option and, in the case of LIBOR Loans, the
same Interest Period.
UCC - the Uniform Commercial Code as in effect in the State of
Connecticut or, when the laws of any other jurisdiction govern the
perfection or enforcement of any Lien, the Uniform Commercial Code of
such jurisdiction.
Value - (a) for Inventory, its value determined on the basis of
the lower of cost or market, calculated on a first-in, first-out basis;
and (b) for an Account, its face amount (with Accounts designated in
Canadian Dollars being converted into an Equivalent Amount of Dollars),
net of any returns, rebates, discounts (calculated on the shortest
terms), credits, allowances or Taxes (including sales, excise or other
taxes) that have been or could be claimed by the Account Debtor or any
other Person.
1.2. Accounting Terms. Under the Loan Documents (except as
otherwise specified herein), all accounting terms shall be interpreted, all
accounting determinations shall be made, and all financial statements shall be
prepared, in accordance with GAAP applied on a basis consistent with the most
recent audited financial statements of Parent Guarantor delivered to Lender
before the Effective Date and using the same inventory valuation method as used
in such financial statements, except for any change required or permitted by
GAAP if Parent Guarantor's certified public accountants concur in such change,
the change is disclosed to Lender, and Section 10.3 is amended in a manner
satisfactory to Lender to take into account the effects of the change.
1.3. Certain Matters of Construction. The terms "herein,"
"hereof," "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. In the computation of periods
of time from a specified date to a later specified date, "from" means "from and
including," and "to" and "until" each mean "to but excluding." The terms
"including" and "include" shall mean "including, without limitation" and, for
purposes of each Loan Document, the parties agree that the rule of ejusdem
generis shall not be applicable to limit any provision. Section titles appear as
a matter of convenience only and shall not affect the interpretation of any Loan
Document. All references to (a) laws or statutes include all related rules,
21
regulations, interpretations, amendments and successor provisions; (b) any
document, instrument or agreement include any amendments, waivers and other
modifications, extensions or renewals (to the extent permitted by the Loan
Documents); (c) any section mean, unless the context otherwise requires, a
section of this Agreement; (d) any exhibits or schedules mean, unless the
context otherwise requires, exhibits and schedules attached hereto, which are
hereby incorporated by reference; (e) any Person include successors and assigns;
(f) time of day mean time of day at Lender's notice address under Section
14.3.1; or (g) discretion of Lender mean the sole and absolute discretion of
Lender. All calculations of Value, fundings of Loans, issuances of Letters of
Credit and payments of Obligations shall be in Dollars and, unless the context
otherwise requires, all determinations (including calculations of Borrowing Base
and financial covenants) made from time to time under the Loan Documents shall
be made in light of the circumstances existing at such time. Borrowing Base
calculations shall be consistent with historical methods of valuation and
calculation, and otherwise satisfactory to Lender (and not necessarily
calculated in accordance with GAAP). Borrower shall have the burden of
establishing any alleged negligence, misconduct or lack of good faith by Lender
under any Loan Documents. No provision of any Loan Documents shall be construed
against any party by reason of such party having, or being deemed to have,
drafted the provision. Whenever the phrase "to the best of Borrower's knowledge"
or words of similar import are used in any Loan Documents, it means actual
knowledge of a Senior Officer, or knowledge that a Senior Officer would have
obtained if he or she had engaged in good faith and diligent performance of his
or her duties, including reasonably specific inquiries of employees or agents
and a good faith attempt to ascertain the matter to which such phrase relates.
SECTION 2. CREDIT FACILITIES
2.1. Revolver Commitment.
2.1.1. Revolver Loans. Lender agrees, up to the Revolver
Commitment, on the terms set forth herein, to make Revolver Loans to Borrower
from time to time from the Effective Date through the Revolver Commitment
Termination Date. The Revolver Loans may be repaid and reborrowed as provided
herein. In no event shall Lender have any obligation to honor a request for a
Revolver Loan if the unpaid balance of Revolver Loans outstanding at such time
(including the requested Loan) would exceed the Borrowing Base.
2.1.2. Revolver Note. The Revolver Loans made by Lender and
interest accruing thereon shall be evidenced by the records of Lender and the
Revolver Note.
2.1.3. Use of Proceeds. The proceeds of Revolver Loans shall be
used by Borrower solely for working capital and other lawful corporate purposes
of Borrower and to fund the working capital and other lawful corporate purposes
of Affiliate Guarantor.
2.1.4. Voluntary Reduction or Termination of Revolver
Commitment.
(a) The Revolver Commitment shall terminate on the Revolver
Termination Date, unless sooner terminated in accordance with this Agreement.
Upon at least 30 days prior written notice to Lender at any time, Borrower may,
at its option, terminate the Revolver Commitment and this credit facility. Any
notice of termination given by Borrower shall be irrevocable. On the termination
date, Borrower shall make Full Payment of all Obligations (including, but not
limited to, all Revolver Loans and CAPX Loans and, if applicable, the Converted
CAPX Loan).
(b) Borrower may permanently reduce the Revolver Commitment
from time to time upon written notice to Lender, which notice shall specify the
amount of the reduction, shall be irrevocable once given, shall be given at
least five Business Days prior to the end of a month and shall be effective as
22
of the first day of the next month. Each reduction shall be in a minimum amount
of $1,000,000, or an increment of $1,000,000 in excess thereof.
(c) If termination of the Revolver Commitment by Borrower
occurs on or before the first anniversary date of this Agreement, then at the
effective date of such termination, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other charges owing under
the terms of this Agreement and any of the other Loan Documents) as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to
one-quarter of one percent (0.25%) of the total Revolver Commitment. If any such
termination occurs after the first anniversary date of this Agreement, no
termination charges shall be payable.
2.1.5. Overadvances. If the aggregate Revolver Loans exceed the
Borrowing Base ("Overadvance"), the excess amount shall be payable by Borrower
on demand by Lender, but all such Revolver Loans shall nevertheless constitute
Obligations secured by the Collateral and entitled to all benefits of the Loan
Documents. Any sufferance of an Overadvance shall not constitute a waiver by
Lender of the Event of Default caused thereby.
2.1.6. Protective Advances. Lender shall be authorized, in its
discretion, at any time that a Default or Event of Default exists or any
conditions in Section 6 are not satisfied, and without regard to the Revolver
Commitment, to make Prime Rate Loans ("Protective Advances") (a) in such amounts
as Lender deems necessary or desirable to preserve or protect any Collateral, or
to enhance the collectibility or repayment of Obligations; or (b) to pay any
other amounts chargeable to Obligors under any Loan Documents, including costs,
fees and expenses. All Protective Advances shall be Obligations, secured by the
Collateral, and shall be treated for all purposes as Extraordinary Expenses.
2.2. CAPX Loan Facility.
2.2.1. CAPX Loans. Lender agrees, up to the CAPX Loan
Commitment, on the terms set forth herein, to make CAPX Loans to Borrower from
time to time from the Effective Date through the CAPX Loan Commitment
Termination Date; provided, however that in no event shall (a) the aggregate
original principal amount of all CAPX Loans exceed the CAPX Loan Commitment; (b)
any one request by Borrower for CAPX Loans be in an aggregate amount of less
than One Hundred Thousand Dollars ($100,000), and (c) the amount of any one
request by Borrower for CAPX Loans exceed 80% of the so-called "hard" cost
(invoice price less taxes and all amounts attributable to installation, freight,
handling, software, rebates, chargebacks and other amounts which in Lender's
reasonable discretion do not constitute "hard" costs of purchase) of the
particular Eligible Equipment being purchased. The CAPX Loans may be repaid and
reborrowed as provided herein
2.2.2. CAPX Loan Note. The CAPX Loans made by Lender and
interest accruing thereon shall be evidenced by the records of Lender and the
CAPX Loan Note.
2.2.3. Use of Proceeds. The proceeds of CAPX Loans shall be used
by Borrower solely to finance Borrower's purchase of Eligible Equipment.
2.2.4. Conversion to Converted CAPX Loan; Converted CAPX Loan
Note. So long as Borrower is in compliance with all of the terms of the Loan
Documents, no Default has occurred and is continuing and the Revolver Commitment
has not been terminated, on the CAPX Loan Termination Date, the aggregate
principal amount of all CAPX Loans then outstanding shall convert into term
indebtedness (the "Converted CAPX Loan") with a final maturity on the Converted
CAPX Loan Maturity Date. With respect to the Converted CAPX Loan, Borrower shall
have the option, on written notice delivered to Lender at least two (2) Business
23
Days prior to CAPX Loan Termination Date (or any subsequent date on which
Borrower desires and Lender agrees to have the Converted CAPX Loan bear interest
at the FHLB Rate), to have the Converted CAPX Loan bear interest on the
outstanding principal amount thereof at a fixed rate per annum equal to the FHLB
Rate. In the event of any such election, the right of Borrower to select any
other pricing option for such Converted CAPX Loan shall cease. On and after the
CAPX Loan Termination Date, Borrower shall have no ability to request, and
Lender shall have no obligation to make, any further CAPX Loans. As a condition
precedent to the conversion of outstanding CAPX Loans to the Converted CAPX
Loan, Borrower shall execute and deliver to Lender the Converted CAPX Note. The
Converted CAPX Loan and interest accruing thereon shall be evidenced by the
records of Lender and the Converted CAPX Loan Note.
2.3. Letter of Credit Facility.
2.3.1. Issuance of Letters of Credit. Lender agrees to issue
Letters of Credit from time to time until 30 days prior to the Revolver
Termination Date (or until the Revolver Commitment Termination Date, if
earlier), on the terms set forth herein, including the following:
(a) Borrower acknowledges that Lender's willingness to issue
any Letter of Credit is conditioned upon Lender's receipt of a LC Application
with respect to the requested Letter of Credit, as well as such other
instruments and agreements as Lender may customarily require for issuance of a
letter of credit of similar type and amount. Lender shall have no obligation to
issue any Letter of Credit unless (i) Lender receives a LC Request and LC
Application at least three Business Days prior to the requested date of
issuance; and (ii) each LC Condition is satisfied.
(b) Letters of Credit may be requested by Borrower only (i)
to support obligations of Borrower incurred in the Ordinary Course of Business;
or (ii) for other purposes as Lender may approve from time to time in writing.
The renewal or extension of any Letter of Credit shall be treated as the
issuance of a new Letter of Credit, except that delivery of a new LC Application
shall be required at the discretion of Lender.
(c) Borrower assumes all risks of the acts, omissions or
misuses of any Letter of Credit by the beneficiary. In connection with issuance
of any Letter of Credit, Lender shall not be responsible for the existence,
character, quality, quantity, condition, packing, value or delivery of any goods
purported to be represented by any Documents; any differences or variation in
the character, quality, quantity, condition, packing, value or delivery of any
goods from that expressed in any Documents; the form, validity, sufficiency,
accuracy, genuineness or legal effect of any Documents or of any endorsements
thereon; the time, place, manner or order in which shipment of goods is made;
partial or incomplete shipment of, or failure to ship, any goods referred to in
a Letter of Credit or Documents; any deviation from instructions, delay, default
or fraud by any shipper or other Person in connection with any goods, shipment
or delivery; any breach of contract between a shipper or vendor and Borrower;
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or
otherwise; errors in interpretation of technical terms; the misapplication by a
beneficiary of any Letter of Credit or the proceeds thereof; or any consequences
arising from causes beyond the control of Lender, including any act or omission
of a Governmental Authority. The rights and remedies of Lender under the Loan
Documents shall be cumulative. Lender shall be fully subrogated to the rights
and remedies of each beneficiary whose claims against Borrower are discharged
with proceeds of any Letter of Credit.
(d) In connection with its administration of and enforcement
of rights or remedies under any Letters of Credit or LC Documents, Lender shall
be entitled to act, and shall be fully protected in acting, upon any
certification, notice or other communication in whatever form believed by
Lender, in good faith, to be genuine and correct and to have been signed, sent
or made by a
24
proper Person. Lender may consult with and employ legal counsel, accountants and
other experts to advise it concerning its obligations, rights and remedies, and
shall be entitled to act upon, and shall be fully protected in any action taken
in good faith reliance upon, any advice given by such experts. Lender may employ
agents and attorneys-in-fact in connection with any matter relating to Letters
of Credit or LC Documents, and shall not be liable for the negligence or
misconduct of any such agents or attorneys-in-fact selected with reasonable
care.
2.3.2. Reimbursement. If Lender honors any request for payment
under a Letter of Credit, Borrower shall pay to Lender, on the same day
("Reimbursement Date"), the amount paid by Lender under such Letter of Credit,
together with interest at the interest rate for Prime Rate Loans from the
Reimbursement Date until payment by Borrower. The obligation of Borrower to
reimburse Lender for any payment made under a Letter of Credit shall be
absolute, unconditional and irrevocable, and shall be paid without regard to any
lack of validity or enforceability of any Letter of Credit or the existence of
any claim, setoff, defense or other right that Borrower may have at any time
against the beneficiary. Whether or not Borrower submits a Notice of Borrowing,
Borrower shall be deemed to have requested a Borrowing of Prime Rate Loans in an
amount necessary to pay all amounts due Lender on any Reimbursement Date.
2.3.3. Cash Collateral. If any LC Obligations, whether or not
then due or payable, shall for any reason be outstanding at any time (a) that an
Event of Default exists, (b) that Availability is less than zero, (c) after the
Revolver Commitment Termination Date, or (d) within 20 Business Days prior to
the Revolver Termination Date, then Borrower shall, at Lender's request, pay to
Lender the amount of all outstanding LC Obligations and Cash Collateralize all
outstanding Letters of Credit. If Borrower fails to Cash Collateralize
outstanding Letters of Credit as required herein, Lender may advance, as
Revolver Loans, the amount of the Cash Collateral required (whether or not the
Commitments have terminated, an Overadvance exists, or the conditions in Section
6 are satisfied).
SECTION 3. INTEREST, FEES AND CHARGES
3.1. Interest.
3.1.1. Rates and Payment of Interest.
(a) Subject to the limitation on Revolving Loans set forth
below, the Obligations shall bear interest (i) if a Prime Rate Loan, at the
Prime Rate in effect from time to time, plus the Applicable Margin; (ii) if a
LIBOR Loan, at Adjusted LIBOR for the applicable Interest Period, plus the
Applicable Margin; (iii) if the FHLB Rate Loan, at the FHLB Rate; and (iv) if
any other Obligation (including, to the extent permitted by law, interest not
paid when due), at the Prime Rate in effect from time to time, plus the
Applicable Margin for Prime Rate Loans. Interest shall accrue from the date the
Loan is advanced or the Obligation is incurred or payable, until paid by
Borrower. If a Loan is repaid on the same day made, one day's interest shall
accrue. Notwithstanding anything herein to the contrary, Borrower acknowledges
and agrees that not less than $1,000,000 of outstanding Revolver Loans (or if
the aggregate principal amount of Revolver Loans then outstanding is less than
$1,000,000, then all such Revolver Loans) shall be Prime Rate Loans.
(b) During an Insolvency Proceeding with respect to
Borrower, or during any other Event of Default if Lender in its sole discretion
so elects, Obligations shall bear interest at the Default Rate. Borrower
acknowledges that the cost and expense to Lender due to an Event of Default are
difficult to ascertain and that the Default Rate is a fair and reasonable
estimate to compensate Lender for such added cost and expense.
25
(c) Interest accrued on the Loans shall be due and payable
in arrears, (i) on the first day of each month and, for any LIBOR Loan, the last
day of its Interest Period; (ii) on any date of prepayment, with respect to the
principal amount of Loans being prepaid; and (iii) on the Revolver Commitment
Termination Date. Interest accrued on any other Obligations shall be due and
payable as provided in the Loan Documents and, if no payment date is specified,
shall be due and payable on demand. Notwithstanding the foregoing, interest
accrued at the Default Rate shall be due and payable on demand.
3.1.2. Application of Adjusted LIBOR to Outstanding Loans.
(a) Subject to the limits of Section 3.1.1, Borrower may on
any Business Day, subject to delivery of a Notice of Conversion/Continuation,
elect to convert any portion of the Prime Rate Loans to, or to continue any
LIBOR Loan at the end of its Interest Period as, a LIBOR Loan. During any
Default or Event of Default, Lender may declare that no Loan may be made,
converted or continued as a LIBOR Loan.
(b) Whenever Borrower desires to convert or continue Loans
as LIBOR Loans, Borrower shall give Lender a Notice of Conversion/Continuation,
no later than 11:00 a.m. at least two Business Days before the requested
conversion or continuation date. Each Notice of Conversion/Continuation shall be
irrevocable, and shall specify the aggregate principal amount of Loans to be
converted or continued, the conversion or continuation date (which shall be a
Business Day), and the duration of the Interest Period (which shall be deemed to
be one month if not specified). If, upon the expiration of any Interest Period
in respect of any LIBOR Loans, Borrower shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Prime Rate Loans.
3.1.3. Interest Periods. In connection with the making,
conversion or continuation of any LIBOR Loans, Borrower shall select an interest
period ("Interest Period") to apply, which interest period shall be one, two or
three months; provided, however, that:
(a) the Interest Period shall commence on the date the Loan
is made or continued as, or converted into, a LIBOR Loan, and shall expire on
the numerically corresponding day in the calendar month at its end;
(b) if any Interest Period commences on a day for which
there is no corresponding day in the calendar month at its end or if such
corresponding day falls after the last Business Day of such month, then the
Interest Period shall expire on the last Business Day of such month; and if any
Interest Period would expire on a day that is not a Business Day, the period
shall expire on the next Business Day;
(c) with respect to Revolver Loans, no Interest Period shall
extend beyond the Revolver Termination Date;
(d) with respect to CAPX Loans, no Interest Period shall
extend beyond the CAPX Loan Termination Date; and
(e) with respect to the Converted CAPX Loan, no Interest
Period shall extend beyond (i) the next regularly scheduled principal payment
date set forth in the Note evidencing such Loan, unless at the time of any such
election and after giving effect thereto a portion of the Converted CAPX Loan
remains as a Prime Rate Loan in an amount at least equal to the sum of all
installments of principal due thereunder prior to the expiration of such
Interest Period, or (ii) the Converted CAPX Loan Maturity Date.
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3.1.4. Interest Rate Not Ascertainable. If Lender shall
determine that on any date for determining Adjusted LIBOR, due to any
circumstance affecting the London interbank market, adequate and fair means do
not exist for ascertaining such rate on the basis provided herein, then Lender
shall immediately notify Borrower of such determination. Until Lender notifies
Borrower that such circumstance no longer exists, the obligation of Lender to
make LIBOR Loans shall be suspended, and no further Loans may be converted into
or continued as LIBOR Loans.
3.2. Fees.
3.2.1. Unused Line Fee. Commencing for the monthly period in
which the Effective Date occurs, Borrower shall pay to Lender a fee equal to
..25% per annum times the amount by which the Revolver Commitment exceeds the
average daily balance of Revolver Loans and aggregate stated amount of Letters
of Credit during any month. Such fee shall be payable in arrears, on the first
day of each month and on the Revolver Commitment Termination Date.
3.2.2. LC Facility Fees. Borrower shall pay to Lender (a) a fee
equal to 1.5% per annum times the average daily stated amount of Letters of
Credit, which fee shall be payable quarterly in arrears, on the first day of
each fiscal quarter of Borrower; and (b) all customary charges associated with
the issuance, amending, negotiating, payment, processing, transfer and
administration of Letters of Credit, which charges shall be paid as and when
incurred. During an Event of Default, the fee payable under clause (a) shall be
increased by 3% per annum.
3.3. Computation of Interest, Fees, Yield Protection. All
interest, as well as fees and other charges calculated on a per annum basis,
shall be computed for the actual days elapsed, based on a year of 360 days. Each
determination by Lender of any interest, fees or interest rate hereunder shall
be final, conclusive and binding for all purposes, absent manifest error. All
fees shall be fully earned when due and shall not be subject to rebate or
refund, nor subject to proration except as specifically provided herein. All
fees payable under Section 3.2 are compensation for services and are not, and
shall not be deemed to be, interest or any other charge for the use, forbearance
or detention of money. A certificate as to amounts payable by Borrower under
Section 3.4, 3.6, 3.7, 3.9 or 5.9, submitted to Borrower by Lender, shall be
final, conclusive and binding for all purposes, absent manifest error. For the
purposes of the Interest Act (Canada) and disclosure thereunder, whenever any
interest or any fee to be paid hereunder or in connection herewith is to be
calculated on the basis of a 360-day year, the yearly rate of interest to which
the rate used in such calculation is equivalent is the rate so used multiplied
by the actual number of days in the calendar year in which the same is to be
ascertained and divided by 360.
3.4. Reimbursement Obligations. Borrower and Affiliate
Guarantor jointly and severally agree to reimburse Lender for all Extraordinary
Expenses. Borrower and Affiliate Guarantor also jointly and severally agree to
reimburse Lender for all legal, accounting, appraisal, consulting, and other
fees, costs and expenses actually incurred by it in connection with (a)
negotiation and preparation of any Loan Documents, including any amendment or
other modification thereof; (b) administration of and actions relating to any
Collateral, Loan Documents and transactions contemplated thereby, including any
actions taken to perfect or maintain priority of Lender's Liens on any
Collateral, to maintain any insurance required hereunder or to verify
Collateral; and (c) subject to the limits of Section 10.1.1(b), each inspection,
audit or appraisal with respect to any Obligor or Collateral, whether prepared
by Lender's personnel or a third party. All amounts reimbursable by Borrower and
Affiliate Guarantor under this Section shall constitute Obligations secured by
the Collateral and shall be payable on demand.
3.5. Illegality. Notwithstanding anything to the contrary
herein, if (a) any change in any law or interpretation thereof by any
Governmental Authority makes it unlawful for Lender to make or maintain a LIBOR
27
Loan or to maintain either Commitment with respect to LIBOR Loans or (b) Lender
determines that the making or continuance of a LIBOR Loan has become
impracticable as a result of a circumstance that adversely affects the London
interbank market or the position of Lender in such market, then Lender shall
give notice thereof to Borrower and may (i) declare that LIBOR Loans will not
thereafter be made by Lender, whereupon any request for a LIBOR Loan from Lender
shall be deemed to be a request for a Prime Rate Loan unless Lender's
declaration has been withdrawn (and it shall be withdrawn promptly upon
cessation of the circumstances described in clause (a) or (b) above); and/or
(ii) require that all outstanding LIBOR Loans made by Lender be converted to
Prime Rate Loans immediately, in which event all outstanding LIBOR Loans of
Lender shall be immediately converted to Prime Rate Loans.
3.6. Increased Costs. If, by reason of (a) the introduction of
or any change (including any change by way of imposition or increase of
Statutory Reserves or other reserve requirements) in any law or interpretation
thereof, or (b) the compliance with any guideline or request from any
Governmental Authority or other Person exercising control over banks or
financial institutions generally (whether or not having the force of law):
(i) Lender shall be subject to any Tax with respect to any
LIBOR Loan, or Letter of Credit or its obligation to make LIBOR Loans
or issue Letters of Credit, or a change shall result in the basis of
taxation of any payment to Lender with respect to its LIBOR Loans or
its obligation to make LIBOR Loans, or issue Letters of Credit (except
for Excluded Taxes); or
(ii) any reserve (including any imposed by the Board of
Governors), special deposits or similar requirement against assets of,
deposits with or for the account of, or credit extended by, Lender
shall be imposed or deemed applicable, or any other condition affecting
Lender's LIBOR Loans or the Letters of Credit or obligation to make
LIBOR Loans or issue Letters of Credit shall be imposed on Lender or
the London interbank market;
and as a result there shall be an increase in the cost to Lender of agreeing to
make or making, funding or maintaining LIBOR Loans or Letters of Credit (except
to the extent already included in determination of Adjusted LIBOR), or there
shall be a reduction in the amount receivable by Lender, then Lender shall
promptly notify Borrower of such event, and Borrower shall, within five days
following demand therefor, pay Lender the amount of such increased costs or
reduced amounts.
If Lender determines that, because of circumstances described above or
any other circumstances arising hereafter affecting Lender, the London interbank
market or the Lender's position in such market, Adjusted LIBOR or its Applicable
Margin, as applicable, will not adequately and fairly reflect the cost to Lender
of funding LIBOR Loans or issuing Letters of Credit, then (A) Lender shall
promptly notify Borrower of such event; (B) Lender's obligation to make LIBOR
Loans or issue Letters of Credit shall be immediately suspended, until each
condition giving rise to such suspension no longer exists; and (C) Lender shall
make a Prime Rate Loan as part of any requested Borrowing of LIBOR Loans, which
Prime Rate Loan shall, for all purposes, be considered part of such Borrowing.
3.7. Capital Adequacy. If Lender determines that any
introduction of or any change in a Capital Adequacy Regulation, any change in
the interpretation or administration of a Capital Adequacy Regulation by a
Governmental Authority charged with interpretation or administration thereof, or
any compliance by Lender or any Person controlling Lender with a Capital
Adequacy Regulation, increases the amount of capital required or expected to be
maintained by Lender or Person (taking into consideration its capital adequacy
policies and desired return on capital) as a consequence of either Commitment,
the Loans, the LC Obligations or other obligations under the Loan Documents,
then Borrower shall, within five days following demand therefor, pay Lender an
amount sufficient to compensate for such increase. Lender's demand for payment
28
shall set forth the nature of the occurrence giving rise to such compensation
and a calculation of the amount to be paid. In determining such amount, Lender
may use any reasonable averaging and attribution method.
3.8. Mitigation. Lender agrees that, upon becoming aware that
it is subject to Section 3.5, 3.6, 3.7 or 5.9, it will take reasonable measures
to reduce Borrower's obligations under such Sections, including funding or
maintaining either Commitment or Loans through another office, as long as use of
such measures would not adversely affect either Commitment, the Loans, business
or interests, and would not be inconsistent with any internal policy or
applicable legal or regulatory restriction.
3.9. Funding Losses. If for any reason (other than default by
Lender) (a) any Borrowing of, or conversion to or continuation of, a LIBOR Loan
does not occur on the date specified therefor in a Notice of Borrowing or Notice
of Conversion/Continuation (whether or not withdrawn), (b) any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest
Period, or (c) Borrower prepays all or any portion of the FHLB Rate Loan, then
Borrower shall pay to Lender all losses and expenses that it actually sustains
as a consequence thereof, including any loss or expense arising from liquidation
or redeployment of funds or from fees payable to terminate deposits of matching
funds. Lender shall not be required to purchase Dollar deposits in the London
interbank market or any other offshore Dollar market to fund any LIBOR Loan, but
the provisions hereof shall be deemed to apply as if Lender had purchased such
deposits to fund its LIBOR Loans.
3.10. Maximum Interest. In no event shall interest, charges or
other amounts that are contracted for, charged or received by Lender pursuant to
any Loan Documents and that are deemed interest under Applicable Law
("interest") exceed the highest rate permissible under Applicable Law ("maximum
rate"). If, in any month, any interest rate, absent the foregoing limitation,
would have exceeded the maximum rate, then the interest rate for that month
shall be the maximum rate and, if in a future month, that interest rate would
otherwise be less than the maximum rate, then the rate shall remain at the
maximum rate until the amount of interest actually paid equals the amount of
interest which would have accrued if it had not been limited by the maximum
rate. If, upon Full Payment of the Obligations, the total amount of interest
actually paid under the Loan Documents is less than the total amount of interest
that would, but for this Section, have accrued under the Loan Documents, then
Borrower shall, to the extent permitted by Applicable Law, pay to Lender, for
the account of Lender, (a) the lesser of (i) the amount of interest that would
have been charged if the maximum rate had been in effect at all times, or (ii)
the amount of interest that would have accrued had the interest rate otherwise
set forth in the Loan Documents been in effect, minus (b) the amount of interest
actually paid under the Loan Documents. If a court of competent jurisdiction
determines that Lender has received interest in excess of the maximum amount
allowed under Applicable Law, such excess shall be deemed received on account
of, and shall automatically be applied to reduce, Obligations other than
interest (regardless of any erroneous application thereof by Lender), and upon
Full Payment of the Obligations, any balance shall be refunded to Borrower. In
determining whether any excess interest has been charged or received by Lender,
all interest at any time charged or received from Borrower in connection with
the Loan Documents shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated and spread in equal parts throughout the full
term of the Obligations.
3.11. Currency Indemnity. If, for the purposes of obtaining
judgment in any court in any jurisdiction with respect to this Agreement or any
other Loan Document, it becomes necessary to convert into the currency of such
jurisdiction (the "Judgment Currency") any amount due under this Agreement or
under any other Loan Document in any currency other than the Judgment Currency
(the "Currency Due"), then conversion shall be made at the rate of exchange
prevailing on the Business Day before the day on which judgment is given. For
this purpose "rate of exchange" means the rate at which Lender is able, on the
relevant date, to purchase the Currency Due with the Judgment Currency in
accordance with its normal practice at its head office in Portland, Maine. In
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the event that there is a change in the rate of exchange prevailing between the
Business Day before the day on which the judgment is given and the date of
receipt by Lender of the amount due, the applicable Obligor will, on the date of
receipt by Lender, pay such additional amounts, if any, or be entitled to
receive reimbursement of such amount, if any, as may be necessary to ensure that
the amount received by Lender on such date is the amount in the Judgment
Currency which when converted at the rate of exchange prevailing on the date of
receipt by Lender is the amount then due under this Agreement or such other Loan
Document in the Currency Due. If the amount of the Currency Due which Lender is
so able to purchase is less than the amount of the Currency Due originally due
to it, the applicable Obligor shall indemnify and save Lender harmless from and
against all loss or damage arising as a result of such deficiency. This
indemnity shall constitute an obligation separate and independent from the other
obligations contained in this Agreement and the other Loan Documents, shall give
rise to a separate and independent cause of action, shall apply irrespective of
any indulgence granted by the Lender from time to time and shall continue in
full force and effect notwithstanding any judgment or order for a liquidated sum
in respect of an amount due under this Agreement or any other Loan Document or
under any judgment or order.
SECTION 4. LOAN ADMINISTRATION
4.1. Manner of Borrowing and Funding Revolver Loans.
4.1.1. Notice of Borrowing.
(a) Whenever Borrower desire funding of a Borrowing of
Revolver Loans, Borrower shall give Lender a Notice of Borrowing. Such notice
must be received by Lender no later than 11:00 a.m. (i) on the Business Day of
the requested funding date, in the case of Prime Rate Loans, and (ii) at least
two Business Days prior to the requested funding date, in the case of LIBOR
Loans. Notices received after 11:00 a.m. shall be deemed received on the next
Business Day. Each Notice of Borrowing shall be irrevocable and shall specify
(A) the principal amount of the Borrowing, (B) the requested funding date (which
must be a Business Day), (C) whether the Borrowing is to be made as Prime Rate
Loans or LIBOR Loans, and (D) in the case of LIBOR Loans, the duration of the
applicable Interest Period (which shall be deemed to be one month if not
specified).
(b) Unless payment is otherwise timely made by Borrower, the
becoming due of any Obligations (whether principal, interest, fees or other
charges, including Extraordinary Expenses, LC Obligations, Cash Collateral and
Bank Product Debt) shall be deemed to be a request for Prime Rate Loans on the
due date, in the amount of such Obligations. The proceeds of such Revolver Loans
shall be disbursed as direct payment of the relevant Obligation.
(c) If Borrower establishes a controlled disbursement
account with Lender or any Affiliate of Lender, then the presentation for
payment of any check or other item of payment drawn on such account at a time
when there are insufficient funds to cover it shall be deemed to be a request
for Prime Rate Loans on the date of such presentation, in the amount of the
check and items presented for payment. The proceeds of such Revolver Loans may
be disbursed directly to the controlled disbursement account or other
appropriate account.
4.1.2. Notices. Borrower authorizes Lender to extend, convert or
continue Revolver Loans, effect selections of interest rates, and transfer funds
to or on behalf of Borrower based on telephonic or e-mailed instructions.
Borrower shall confirm each such request by prompt delivery to Lender of a
Notice of Borrowing or Notice of Conversion/Continuation, if applicable, but if
it differs in any material respect from the action taken by Lender, the records
of Lender shall govern. Lender shall not be liable to Borrower for any loss
suffered by Borrower as a result of Lender acting upon its understanding of
telephonic or e-mailed instructions from a person believed in good faith by
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Lender to be a person authorized to give such instructions on Borrower's behalf.
4.2. Manner of Borrowing and Funding CAPX Loans.
4.2.1. Notice of Borrowing; Supporting Documents.
(a) Whenever Borrower desire funding of a Borrowing of CAPX
Loans, Borrower shall give Lender a Notice of Borrowing. Such notice must be
received by Lender no later than 11:00 a.m. (i) on the Business Day of the
requested funding date, in the case of Prime Rate Loans, and (ii) at least two
Business Days prior to the requested funding date, in the case of LIBOR Loans.
Notices received after 11:00 a.m. shall be deemed received on the next Business
Day. Each Notice of Borrowing shall be irrevocable and shall specify (A) the
principal amount of the Borrowing, (B) the requested funding date (which must be
a Business Day), (C) whether the Borrowing is to be made as Prime Rate Loans or
LIBOR Loans, and (D) in the case of LIBOR Loans, the duration of the applicable
Interest Period (which shall be deemed to be one month if not specified).
(b) Prior to the funding of any CAPX Loan, Borrower shall
provide Lender with copies of the invoices or other comparable documentation for
any such proposed purchase of Equipment, together with such other supporting
details as requested by Lender.
4.2.2. Notices. Borrower authorizes Lender to extend, convert or
continue CAPX Loans, effect selections of interest rates, and transfer funds to
or on behalf of Borrower based on telephonic or e-mailed instructions. Borrower
shall confirm each such request by prompt delivery to Lender of a Notice of
Borrowing or Notice of Conversion/Continuation, if applicable, but if it differs
in any material respect from the action taken by Lender, the records of Lender
shall govern. Lender shall not be liable to Borrower for any loss suffered by
Borrower as a result of Lender acting upon its understanding of telephonic or
e-mailed instructions from a person believed in good faith by Lender to be a
person authorized to give such instructions on Borrower's behalf.
4.3. Number and Amount of LIBOR Loans; Determination of Rate.
For ease of administration, all LIBOR Loans having the same length and beginning
date of their Interest Periods shall be aggregated together. No more than seven
(7) aggregated LIBOR Loans may be outstanding at any time, and each aggregate
LIBOR Loan when made, continued or converted shall be in a minimum amount of
$500,000, or an increment of $250,000 in excess thereof. Upon determining
Adjusted LIBOR for any Interest Period requested by Borrower, Lender shall
promptly notify Borrower thereof by telephone or electronically and, if
requested by Borrower, shall confirm any telephonic notice in writing.
4.4. One Obligation. The Loans, LC Obligations and other
Obligations shall constitute one general obligation of Borrower and (unless
otherwise expressly provided in any Loan Document) shall be secured by Lender's
Lien upon all Collateral.
4.5. Effect of Termination. On the effective date of any
termination of the Revolver Commitment, all Obligations (including, but not
limited to, any and all Loans then outstanding) shall be immediately due and
payable. All undertakings of Borrower contained in the Loan Documents shall
survive any termination, and Lender shall retain its Liens in the Collateral and
all of its rights and remedies under the Loan Documents until Full Payment of
the Obligations. Notwithstanding Full Payment of the Obligations, Lender shall
not be required to terminate its Liens in any Collateral unless, with respect to
any damages Lender may incur as a result of the dishonor or return of Payment
Items applied to Obligations, Lender receives (a) a written agreement, executed
by Borrower and any Person whose advances are used in whole or in part to
satisfy the Obligations, indemnifying Lender from any such damages; or (b) such
31
Cash Collateral as Lender, in its discretion, deems necessary to protect against
any such damages. The provisions of Section 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9,
12, 14.2 and this Section, and the obligation of each Obligor and Lender with
respect to each indemnity given by it in any Loan Document, shall survive Full
Payment of the Obligations and any release relating to this credit facility.
SECTION 5. PAYMENTS
5.1. General Payment Provisions. All payments of Obligations
shall be made in Dollars, without offset, counterclaim or defense of any kind,
free of (and without deduction for) any Taxes, and in immediately available
funds, not later than 12:00 noon on the due date. Any payment after such time
shall be deemed made on the next Business Day. Borrower may, at the time of
payment, specify to Lender the Obligations to which such payment is to be
applied, but Lender shall in all events retain the right to apply such payment
in such manner as Lender, subject to the provisions hereof, may determine to be
appropriate. If any payment under the Loan Documents shall be stated to be due
on a day other than a Business Day, the due date shall be extended to the next
Business Day and such extension of time shall be included in any computation of
interest and fees. Any payment of a LIBOR Loan prior to the end of its Interest
Period shall be accompanied by all amounts due under Section 3.9. Any prepayment
of Loans shall be applied first to Prime Rate Loans and then to LIBOR Loans.
Lender shall be entitled (but shall not be obligated) to charge any account of
Borrower with Lender for any sum due and payable by Borrower to Lender hereunder
or under any of the other Loan Documents.
5.2. Repayment of Revolver Loan and CAPX Loans. Revolver Loans
shall be due and payable in full on the Revolver Termination Date, unless
payment is sooner required hereunder. CAPX Loans shall be due and payable in
full on the CAPX Loan Termination Date, unless payment is sooner required
hereunder or the CAPX Loans are converted into the Converted CAPX Loan as
provided hereunder. Except as otherwise provided in Section 2.1.4, Revolver
Loans and CAPX Loans may be prepaid from time to time, without penalty or
premium. If any Asset Disposition includes the disposition of Accounts or
Inventory, then Net Proceeds equal to the greater of (a) the net book value of
such Accounts and Inventory, or (b) the reduction in the Borrowing Base upon
giving effect to such disposition, shall be applied to the Revolver Loans.
Notwithstanding anything herein to the contrary, if an Overadvance exists,
Borrower shall, on the sooner of Lender's demand or the first Business Day after
Borrower has knowledge thereof, repay the outstanding Revolver Loans in an
amount sufficient to reduce the principal balance of Revolver Loans to the
Borrowing Base.
5.3. Repayment of Converted CAPX Loan.
5.3.1. Payment of Principal. The principal amount of the
Converted CAPX Loan shall be repaid on the first Business Day of each month in
consecutive 60 equal monthly installments, commencing on October 1, 2008 and
continuing until the Converted CAPX Loan Maturity Date, on which date all
principal, interest and other amounts owing with respect to the Converted CAPX
Loan shall be due and payable in full. Once repaid, whether such repayment is
voluntary or required, the Converted CAPX Loan may not be reborrowed.
5.3.2. Mandatory Prepayments.
(a) Concurrently with any Permitted Asset Disposition of
Equipment purchased by Borrower, in whole or in part, with proceeds of one or
more CAPX Loans, Borrower shall prepay the Converted CAPX Loan in an amount
32
equal to the Net Proceeds of such disposition;
(b) Concurrently with the receipt of any proceeds of
insurance or condemnation awards paid in respect of any Equipment purchased by
Borrower, in whole or in part, with proceeds of one or more CAPX Loans, Borrower
shall prepay the Converted CAPX Loan in an amount equal to such proceeds,
subject to Section 8.6.2; and
(c) On the Revolver Commitment Termination Date, Borrower
shall prepay the Converted CAPX Loan (unless sooner repaid hereunder).
5.3.3. Optional Prepayments. Borrower may, at its option from
time to time, prepay the Converted CAPX Loan in whole or in part. Borrowers
shall give written notice to Lender of an intended prepayment of the Converted
CAPX Loan, which notice shall specify the amount of the prepayment, shall be
irrevocable once given, shall be given at least 5 Business Days prior to the end
of a month and shall be effective as of the first day of the next month.
5.3.4. Premium; Interest; Application of Prepayments. Each
prepayment of the Converted CAPX Loan (whether mandatory or voluntary) shall be
accompanied by all interest accrued thereon and any amounts payable under
Section 3.9, and shall be applied to principal in inverse order of maturity.
5.4. Payment of Other Obligations. Obligations other than
Loans, including LC Obligations and Extraordinary Expenses, shall be paid by
Borrower as provided in the Loan Documents or, if no payment date is specified,
on demand.
5.5. Marshaling; Payments Set Aside. Lender shall not be under
any obligation to marshal any assets in favor of any Obligor or against any
Obligations. If any Obligor makes a payment to Lender, or if Lender receives
payment from the proceeds of Collateral, exercise of setoff or otherwise, and
such payment is subsequently invalidated or required to be repaid to a trustee,
receiver or any other Person, then the Obligations originally intended to be
satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been received and
any enforcement or setoff had not occurred.
5.6. Post-Default Allocation of Payments.
5.6.1. Allocation. Notwithstanding anything herein to the
contrary, during an Event of Default, monies to be applied to the Obligations,
whether arising from payments by Obligors, realization on Collateral, setoff or
otherwise, shall be allocated as follows:
(a) first, to all costs and expenses, including Extraordinary
Expenses, owing to Lender;
(b) second, to all amounts owing to Lender on Protective
Advances;
(c) third, to all amounts owing to Lender on LC Obligations;
(d) fourth, to all Obligations constituting fees (excluding
amounts relating to Bank Products);
(e) fifth, to all Obligations constituting interest
(excluding amounts relating to Bank Products);
(f) sixth, to provide Cash Collateral for outstanding Letters
of Credit;
(g) seventh, to all other Obligations, other than Bank
Product Debt; and
33
(h) last, to Bank Product Debt.
Amounts shall be applied to each category of Obligations set forth above until
Full Payment thereof and then to the next category. If amounts are insufficient
to satisfy a category, they shall be applied on a pro rata basis among the
Obligations in the category. The allocations set forth in this Section are
solely to determine the rights and priorities of Lender and the other Secured
Parties as among themselves, and may be changed by agreement among them without
the consent of any Obligor. This Section is not for the benefit of or
enforceable by Borrower.
5.7. Application of Payments. The ledger balance in the main
Blocked Account as of the end of a Business Day shall be applied to the
Obligations at the beginning of the next Business Day. Borrower irrevocably
waives the right to direct the application of any payments or Collateral
proceeds, and agrees that Lender shall have the continuing, exclusive right to
apply and reapply same against the Obligations, in such manner as Lender deems
advisable, notwithstanding any entry by Lender in its records. If, as a result
of Lender's receipt of Payment Items or proceeds of Collateral, a credit balance
exists, the balance shall not accrue interest in favor of Borrower and shall be
made available to Borrower as long as no Default or Event of Default exists.
5.8. Loan Account; Account Stated.
5.8.1. Loan Account. Lender shall maintain in accordance with
its usual and customary practices an account or accounts ("Loan Account")
evidencing the Debt of Borrower resulting from each Loan or issuance of a Letter
of Credit from time to time. Any failure of Lender to record anything in the
Loan Account, or any error in doing so, shall not limit or otherwise affect the
obligation of Borrower to pay any amount owing hereunder.
5.8.2. Entries Binding. Entries made in the Loan Account shall
constitute presumptive evidence of the information contained therein. If any
information contained in the Loan Account is provided to or inspected by any
Person, then such information shall be conclusive and binding on such Person for
all purposes absent manifest error, except to the extent such Person notifies
Lender in writing within 30 days after receipt or inspection that specific
information is subject to dispute.
5.9. Taxes. If any Taxes (except Excluded Taxes) shall be
payable by any party due to the execution, delivery, issuance or recording of
any Loan Documents, or the creation or repayment of any Obligations, Borrower
shall pay (and shall promptly reimburse Lender for their payment of) all such
Taxes, including any interest and penalties thereon, and will indemnify and hold
harmless Indemnitees against all liability in connection therewith. If Borrower
shall be required by Applicable Law to withhold or deduct any Taxes (except
Excluded Taxes) with respect to any sum payable under any Loan Documents, (a)
the sum payable to Lender shall be increased as may be necessary so that, after
making all required withholding or deductions, Lender receives an amount equal
to the sum it would have received had no such withholding or deductions been
made; (b) Borrower shall make such withholding or deductions; and (c) Borrower
shall pay the full amount withheld or deducted to the relevant taxing or other
authority in accordance with Applicable Law.
SECTION 6. CONDITIONS PRECEDENT
6.1. Conditions Precedent to Initial Loans. Lender shall not
be required to amend and restate the Original LSA in its entirety as provided
herein and to fund any requested Loan, issue any Letter of Credit or otherwise
extend credit to Borrower hereunder, until the date ("Effective Date") that each
of the following conditions has been satisfied:
34
(a) a Revolver Note and an CAPX Loan Note shall have
been executed by Borrower and delivered to Lender. Each other Loan Document
shall have been duly executed and delivered to Lender by each of the signatories
thereto, and each Obligor shall be in compliance with all terms thereof.
(b) Lender shall have received acknowledgments of all
filings or recordations necessary to perfect its Liens in the Collateral, as
well as UCC and Lien searches and other evidence satisfactory to Lender that
such Liens are the only Liens upon the Collateral, except Permitted Liens.
(c) Lender shall have received duly executed agreements
establishing each Blocked Account and related lockbox, in form and substance,
and with financial institutions, satisfactory to Lender.
(d) Lender shall have received certificates, in form and
substance satisfactory to it, from a knowledgeable Senior Officer of Borrower
certifying that, after giving effect to the initial Loans and transactions
hereunder, (i) Borrower is Solvent; (ii) no Default or Event of Default exists;
(iii) the representations and warranties set forth in Section 9 are true and
correct; and (iv) Borrower has complied with all agreements and conditions to be
satisfied by it under the Loan Documents.
(e) Lender shall have received a certificate of a duly
authorized officer of each Obligor, certifying (i) that attached copies of such
Obligor's Organic Documents are true and complete, and in full force and effect,
without amendment except as shown, (ii) that an attached copy of resolutions
authorizing execution and delivery of the Loan Documents is true and complete,
and that such resolutions are in full force and effect, were duly adopted, have
not been amended, modified or revoked, and constitute all resolutions adopted
with respect to this credit facility, and (iii) to the title, name and signature
of each Person authorized to sign the Loan Documents. Lender may conclusively
rely on this certificate until it is otherwise notified by the applicable
Obligor in writing.
(f) Lender shall have received a written opinion of legal
counsel of Obligors in form and substance satisfactory to Lender.
(g) Lender shall have received copies of the charter
documents of each Obligor, certified as appropriate by the Secretary of State or
another official of such Obligor's jurisdiction of organization. Lender shall
have received good standing certificates for each Obligor, issued by the
Secretary of State or other appropriate official of such Obligor's jurisdiction
of organization and each jurisdiction where such Obligor's conduct of business
or ownership of Property necessitates qualification.
(h) Lender shall have received copies of policies or
certificates of insurance for the insurance policies carried by Borrower, all in
compliance with the Loan Documents.
(i) Borrower shall have paid all fees and expenses to be
paid to Lender on the Effective Date.
(j) Lender shall have received a Borrowing Base Certificate
prepared as of the Effective Date. Upon giving effect to all Loans (including
the initial funding of Loans hereunder) and all Letters of Credit (including the
initial issuance of Letters of Credit hereunder), and the payment by Borrower of
all fees and expenses incurred in connection herewith as well as any payables
stretched beyond their customary payment practices, Availability shall be at
least $500,000.
(k) Lender shall have received a duly executed Lien Waiver
with respect to Borrower's leased premises at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.
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(l) Lender shall have received a duly executed reaffirmation
and confirmation agreement in form and substance satisfactory to Lender from the
Parent Guarantor with respect to its obligations under its Guaranty and the Debt
Subordination Agreement.
6.2. Conditions Precedent to All Credit Extensions. Lender
shall not be required to fund any Loans, issue any Letters of Credit, convert
the CAPX Loans to the Converted CAPX Loan or grant any other accommodation to or
for the benefit of Borrower, in each case whether on or after the Effective
Date, unless the following conditions are satisfied:
(a) No Default or Event of Default shall exist at the time
of, or result from, such funding, issuance, conversion or grant;
(b) The representations and warranties of each Obligor in
the Loan Documents shall be true and correct on the date of, and upon giving
effect to, such funding, issuance or grant (except for representations and
warranties that expressly relate to an earlier date);
(c) All conditions precedent in any other Loan Document
shall be satisfied;
(d) No event shall have occurred or circumstance exist that
has or could reasonably be expected to have a Material Adverse Effect;
(e) With respect to the conversion of the CAPX Loans to the
Converted CAPX Loan, a Converted CAPX Loan Note shall have been executed by
Borrower and delivered to Lender; and
(f) With respect to the issuance of a Letter of Credit, the
LC Conditions shall be satisfied.
Each request (or deemed request) by Borrower for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrower that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant. As an
additional condition to any funding, issuance or grant, Lender shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.
6.3. Limited Waiver of Conditions Precedent. If Lender funds
any Loan, issues any Letter of Credit or grants any other accommodation when any
conditions precedent are not satisfied (regardless of whether the lack of
satisfaction was known or unknown at the time), it shall not operate as a waiver
of (a) the right of Lender to insist upon satisfaction of all conditions
precedent with respect to any subsequent funding, issuance, creation or grant;
nor (b) any Default or Event of Default due to such failure of conditions or
otherwise.
SECTION 7. COLLATERAL
7.1. Grant of Security Interest. To secure the prompt payment
and performance of all Obligations, Borrower hereby grants to Lender, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
personal Property of Borrower, including all of the following Property, whether
now owned or hereafter acquired, and wherever located:
(a) all Accounts;
(b) all Chattel Paper, including electronic chattel paper;
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(c) all Commercial Tort Claims;
(d) all Deposit Accounts;
(e) all Documents;
(f) all General Intangibles, including Payment Intangibles,
Software and Intellectual Property;
(g) all Goods, including Inventory, Equipment and fixtures;
(h) all Instruments;
(i) all Investment Property;
(j) all Letter-of-Credit Rights;
(k) all Supporting Obligations;
(l) all monies, whether or not in the possession or under
the control of Lender or a bailee or Affiliate of Lender, including any Cash
Collateral;
(m) all accessions to, substitutions for, and all
replacements, products, and cash and non-cash proceeds of the foregoing,
including proceeds of and unearned premiums with respect to insurance policies,
and claims against any Person for loss, damage or destruction of any Collateral;
and
(n) all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs and computer records)
pertaining to the foregoing.
7.2. Lien on Deposit Accounts; Cash Collateral.
7.2.1. Deposit Accounts. To further secure the prompt payment
and performance of all Obligations, Borrower hereby grants to Lender, for the
benefit of Secured Parties, a continuing security interest in and Lien upon all
of Borrower's right, title and interest in and to each Deposit Account of
Borrower and any deposits or other sums at any time credited to any such Deposit
Account, including any sums in any blocked or lockbox accounts or in any
accounts into which such sums are swept. Borrower authorizes and directs each
bank or other depository to deliver to Lender, on a daily basis, all balances in
each Deposit Account maintained by Borrower with such depository for application
to the Obligations then outstanding. Borrower irrevocably appoints Lender as
Borrower's attorney-in-fact to collect such balances to the extent any such
delivery is not so made.
7.2.2. Cash Collateral. Any Cash Collateral may be invested, in
Lender's discretion, in Cash Equivalents, but Lender shall have no duty to do
so, regardless of any agreement, understanding or course of dealing with
Borrower, and shall have no responsibility for any investment or loss. Borrower
hereby grants to Lender, for the benefit of Secured Parties, a security interest
in all Cash Collateral held from time to time and all proceeds thereof, as
security for the Obligations, whether such Cash Collateral is held in the Cash
Collateral Account or elsewhere. Lender may apply Cash Collateral to the payment
of any Obligations, in such order as Lender may elect, as they become due and
payable. The Cash Collateral Account and all Cash Collateral shall be under the
sole dominion and control of Lender. Neither Borrower nor any Person claiming
through or on behalf of Borrower shall have any right to any Cash Collateral,
until Full Payment of all Obligations.
37
7.3. Other Collateral.
7.3.1. Commercial Tort Claims. Borrower shall promptly notify
Lender in writing if Borrower has a Commercial Tort Claim (other than, as long
as no Default or Event of Default exists, a Commercial Tort Claim for less than
$100,000) and, upon Lender's request, shall promptly execute such documents and
take such actions as Lender deems appropriate to confer upon Lender (for the
benefit of Secured Parties) a duly perfected, first priority Lien upon such
claim.
7.3.2. Certain After-Acquired Collateral. Borrower shall
promptly notify Lender in writing if, after the Effective Date, Borrower obtains
any interest in any Collateral consisting of Deposit Accounts, Chattel Paper,
Documents, Instruments, Intellectual Property, Investment Property or
Letter-of-Credit Rights and, upon Lender's request, shall promptly execute such
documents and take such actions as Lender deems appropriate to effect Lender's
duly perfected, first priority Lien upon such Collateral, including obtaining
any appropriate possession, control agreement or Lien Waiver. If any Collateral
is in the possession of a third party, at Lender's request, Borrower shall
obtain an acknowledgment that such third party holds the Collateral for the
benefit of Lender.
7.4. No Assumption of Liability. The Lien on Collateral
granted hereunder is given as security only and shall not subject Lender to, or
in any way modify, any obligation or liability of Borrower relating to any
Collateral.
7.5. Further Assurances. Promptly upon request, Borrower shall
deliver such instruments, assignments, title certificates, or other documents or
agreements, and shall take such actions, as Lender deems appropriate under
Applicable Law to evidence or perfect its Lien on any Collateral, or otherwise
to give effect to the intent of this Agreement. Borrower authorizes Lender to
file any financing statement that indicates the Collateral as "all assets" or
"all personal property" of Borrower, or words to similar effect, and ratifies
any action taken by Lender before the Effective Date to effect or perfect its
Lien on any Collateral.
SECTION 8. COLLATERAL ADMINISTRATION
8.1. Borrowing Base Certificates. By the close of business on
the 20th day of each month, Borrower shall deliver to Lender a Borrowing Base
Certificate prepared as of the close of business of the last Business Day of the
preceding month, and at such other times as Lender may request. All calculations
of Availability in any Borrowing Base Certificate shall originally be made by
Borrower and certified by a Senior Officer, provided that Lender may from time
to time review and adjust any such calculation (a) to reflect its reasonable
estimate of declines in value of any Collateral, due to collections received in
the Blocked Account or otherwise; (b) to adjust advance rates to reflect changes
in dilution, quality, mix and other factors affecting Collateral; and (c) to the
extent the calculation is not made in accordance with this Agreement or does not
accurately reflect the Availability Reserve.
8.2. Administration of Accounts.
8.2.1. Records and Schedules of Accounts. Borrower and Affiliate
Guarantor shall keep accurate and complete records of its Accounts, including
all payments and collections thereon, and Borrower shall submit to Lender, on
such periodic basis as Lender may request, a sales and collections reports for
Borrower and Affiliate Guarantor, in form satisfactory to Lender. Borrower shall
also provide to Lender, on or before the 20th day of each month and together
with each monthly Borrowing Base Certificate, a detailed aged trial balance of
all Accounts of Borrower and Affiliate Guarantor as of the end of the preceding
month, specifying each Account's Account Debtor name and address, amount,
invoice date and due date, showing any discount, allowance, credit, authorized
38
return or dispute, and including such proof of delivery, copies of invoices and
invoice registers, copies of related documents, repayment histories, status
reports and other information as Lender may reasonably request. If Accounts in
an aggregate face amount of $100,000 or more cease to be Eligible Accounts,
Borrower shall notify Lender of such occurrence promptly (and in any event
within one Business Day) after Borrower has knowledge thereof.
8.2.2. Taxes. If an Account of Borrower or Affiliate Guarantor
includes a charge for any Taxes, Lender is authorized, in its discretion, to pay
the amount thereof to the proper taxing authority for the account of Borrower
and to charge Borrower therefor; provided, however, that Lender shall not be
liable for any Taxes that may be due from Borrower or Affiliate Guarantor or
with respect to any Collateral.
8.2.3. Account Verification. Whether or not a Default or Event
of Default exists, Lender shall have the right at any time, in the name of
Lender, any designee of Lender or Borrower or Affiliate Guarantor, as the case
may be, to verify the validity, amount or any other matter relating to any
Accounts of Borrower or Affiliate Guarantor by mail, telephone or otherwise.
Borrower and Affiliate Guarantor shall cooperate fully with Lender in an effort
to facilitate and promptly conclude any such verification process.
8.2.4. Maintenance of Blocked Account. Borrower and Affiliate
Guarantor shall maintain Blocked Accounts pursuant to lockbox or other
arrangements acceptable to Lender. Borrower shall obtain an agreement (in form
and substance satisfactory to Lender) from each lockbox servicer and Blocked
Account bank, establishing Lender's control over and Lien in the lockbox or
Blocked Account, requiring immediate deposit of all remittances received in the
lockbox to a Blocked Account and, if such Blocked Account is not maintained with
Lender, requiring immediate transfer of all funds in the Blocked Account to a
Blocked Account maintained with Lender, and waiving offset rights of such
servicer or bank against any funds in the lockbox or Blocked Account, except
offset rights for customary administrative charges. Lender assumes no
responsibility to Borrower or Affiliate Guarantor for any lockbox arrangement or
Blocked Account, including any claim of accord and satisfaction or release with
respect to any Payment Items accepted by any bank.
8.2.5. Proceeds of Collateral. Borrower and Affiliate Guarantor
shall request in writing and otherwise take all reasonable steps to ensure that
all payments on Accounts or otherwise relating to Collateral are made directly
to a Blocked Account (or a lockbox relating to a Blocked Account). If Borrower,
Affiliate Guarantor or any Subsidiary of either of them receives cash or Payment
Items with respect to any Collateral, it shall hold same in trust for Lender and
promptly (not later than the next Business Day) deposit same into a Blocked
Account.
8.3. Administration of Inventory.
8.3.1. Records and Reports of Inventory. Borrower and Affiliate
Guarantor shall keep accurate and complete records of its Inventory, including
costs and daily withdrawals and additions, and Borrower shall provide to Lender,
on or before the 20th day of each month and together with each monthly Borrowing
Base Certificate, inventory reports for Borrower and Affiliate Guarantor in form
satisfactory to Lender, on such periodic basis as Lender may request.
8.3.2. Returns of Inventory. Neither Borrower nor Affiliate
Guarantor shall return any Inventory to a supplier, vendor or other Person,
whether for cash, credit or otherwise, unless (a) such return is in the Ordinary
Course of Business; (b) no Default, Event of Default or Overadvance exists or
would result therefrom; (c) Lender is promptly notified if the aggregate Value
of all Inventory returned in any month exceeds $100,000; and (d) any payment
received by Borrower or Affiliate Guarantor for a return is promptly remitted to
39
Lender for application to the Obligations.
8.3.3. Acquisition, Sale and Maintenance. Neither Borrower nor
Affiliate Guarantor shall acquire or accept any Inventory on consignment or
approval, and shall take all steps to assure that all Inventory is produced in
accordance with Applicable Law, including the FLSA. Neither Borrower nor
Affiliate Guarantor shall sell any Inventory on consignment or approval or any
other basis under which the customer may return or require Borrower to
repurchase such Inventory. Borrower and Affiliate Guarantor shall use, store and
maintain all Inventory with reasonable care and caution, in accordance with
applicable standards of any insurance and in conformity with all Applicable Law,
and shall make current rent payments (within applicable grace periods provided
for in leases) at all locations where any Collateral is located.
8.4. Administration of Equipment.
8.4.1. Records and Schedules of Equipment. Borrower and
Affiliate Guarantor shall keep accurate and complete records of its Equipment,
including kind, quality, quantity, cost, acquisitions and dispositions thereof,
and shall submit to Lender, on such periodic basis as Lender may request, a
current schedule thereof, in form satisfactory to Lender. Promptly upon request,
Borrower and Affiliate Guarantor shall deliver to Lender evidence of its
ownership or interests in any Equipment.
8.4.2. Dispositions of Equipment. Neither Borrower nor Affiliate
Guarantor shall sell, lease or otherwise dispose of any Equipment, without the
prior written consent of Lender, other than (a) a Permitted Asset Disposition;
and (b) replacement of Equipment that is worn, damaged or obsolete with
Equipment of like function and value, if the replacement Equipment is acquired
substantially contemporaneously with such disposition and is free of Liens.
8.4.3. Condition of Equipment. The Equipment of Borrower and
Affiliate Guarantor is in good operating condition and repair, and all necessary
replacements and repairs have been made so that the value and operating
efficiency of the Equipment is preserved at all times, reasonable wear and tear
excepted. Borrower and Affiliate Guarantor shall ensure that the Equipment is
mechanically and structurally sound, and capable of performing the functions for
which it was designed, in accordance with the manufacturer's published and
recommended specifications. Neither Borrower nor Affiliate Guarantor shall
permit any Equipment to become affixed to real Property unless any landlord or
mortgagee delivers a Lien Waiver or similar instrument.
8.5. Administration of Deposit Accounts. Schedule 8.5 sets
forth all Deposit Accounts maintained by Borrower and Affiliate Guarantor,
including all Blocked Accounts. Borrower and Affiliate Guarantor shall take all
actions necessary to establish Lender's control of each such Deposit Account
(other than an account exclusively used for payroll, payroll taxes or employee
benefits, or an account containing not more that $10,000 at any time). Borrower
or Affiliate Guarantor, as the case may be, shall be the sole account holder of
each Deposit Account and shall not allow any other Person (other than Lender) to
have control over a Deposit Account or any Property deposited therein. Borrower
and Affiliate Guarantor shall promptly notify Lender of any opening or closing
of a Deposit Account and, with the consent of Lender, will amend Schedule 8.5 to
reflect same.
8.6. General Provisions.
8.6.1. Location of Collateral. All tangible items of Collateral,
other than Inventory in transit, shall at all times be kept by Borrower or
Affiliate Guarantor, as the case may be, at the business locations set forth in
Schedule 8.6.1, except that Borrower and Affiliate Guarantor may (a) make sales
or other dispositions of Collateral in accordance with Section 10.2.6; and (b)
40
move Collateral to another location in the United States or Canada, upon 30
Business Days prior written notice to Lender.
8.6.2. Insurance of Collateral; Condemnation Proceeds.
(a) Borrower and Affiliate Guarantor shall maintain
insurance with respect to the Collateral, covering casualty, hazard, public
liability, theft, malicious mischief, and such other risks, in such amounts,
with such endorsements, and with such insurers (rated A+ or better by A.M. Best
Rating Guide) as are satisfactory to Lender. All proceeds under each policy
shall be payable to Lender. From time to time upon request, Borrower shall
deliver to Lender the originals or certified copies of its insurance policies
and updated flood plain searches. Unless Lender shall agree otherwise, each
policy shall include satisfactory endorsements (i) showing Lender as sole loss
payee or additional insured, as appropriate; (ii) requiring 30 days prior
written notice to Lender in the event of cancellation of the policy for any
reason whatsoever; and (iii) specifying that the interest of Lender shall not be
impaired or invalidated by any act or neglect of Borrower or the owner of the
Property, nor by the occupation of the premises for purposes more hazardous than
are permitted by the policy. If Borrower or Affiliate Guarantor fail to provide
and pay for such insurance, Lender may, at its option, but shall not be required
to, procure the insurance and charge Borrower therefor. Borrower and Affiliate
Guarantor agree to deliver to Lender, promptly as rendered, copies of all
reports made to insurance companies. While no Event of Default exists, Borrower
and Affiliate Guarantor may settle, adjust or compromise any insurance claim, as
long as the proceeds are delivered to Lender. If an Event of Default exists,
only Lender shall be authorized to settle, adjust and compromise such claims.
(b) Any proceeds of insurance (other than proceeds from
workers' compensation or D&O insurance) and any awards arising from condemnation
of any Collateral shall be paid to Lender. Any such proceeds or awards that
relate to Inventory shall be applied to payment of the Revolver Loans and then
to any other Obligations outstanding. Subject to clause (c) below, any proceeds
or awards that relate to Equipment or Real Estate shall be applied to payment of
the Revolver Loans and then to any other Obligations outstanding.
(c) If requested by Borrower or Affiliate Guarantor in
writing within 15 days after Lender's receipt of any insurance proceeds or
condemnation awards relating to any loss or destruction of Equipment or Real
Estate, Borrower or Affiliate Guarantor may use such proceeds or awards to
repair or replace such Equipment or Real Estate (and until so used, the proceeds
shall be held by Lender as Cash Collateral) as long as (i) no Default or Event
of Default exists; (ii) such repair or replacement is promptly undertaken and
concluded, in accordance with plans satisfactory to Lender; (iii) replacement
buildings are constructed on the sites of the original casualties and are of
comparable size, quality and utility to the destroyed buildings; (iv) the
repaired or replaced Property is free of Liens, other than Permitted Liens that
are not Purchase Money Liens; (v) Borrower or Affiliate Guarantor, as the case
may be, complies with disbursement procedures for such repair or replacement as
Lender may reasonably require; and (vi) the aggregate amount of such proceeds or
awards from any single casualty or condemnation does not exceed $250,000.
8.6.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping any
Collateral, all Taxes payable with respect to any Collateral (including any sale
thereof), and all other payments required to be made by Lender to any Person to
realize upon any Collateral, shall be borne and paid by Borrower. Lender shall
not be liable or responsible in any way for the safekeeping of any Collateral,
for any loss or damage thereto (except for reasonable care in its custody while
Collateral is in Lender's actual possession), for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency or other Person whatsoever, but the same shall be at Borrower's or
Affiliate Guarantor's sole risk.
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8.6.4. Defense of Title to Collateral. Borrower and Affiliate
Guarantor shall at all times defend its title to Collateral and Lender's Liens
therein against all Persons, claims and demands whatsoever, except Permitted
Liens.
8.7. Power of Attorney. Borrower and Affiliate Guarantor
hereby irrevocably constitutes and appoints Lender (and all Persons designated
by Lender) as Borrower's and Affiliate Guarantor's true and lawful attorney (and
agent-in-fact) for the purposes provided in this Section. Lender, or Lender's
designee, may, without notice and in either its or Borrower's or Affiliate
Guarantor's name, but at the cost and expense of Borrower and Affiliate
Guarantor:
(a) Endorse such Obligor's name on any Payment Item or other
proceeds of Collateral (including proceeds of insurance) that come into Lender's
possession or control; and
(b) During an Event of Default, (i) notify any Account
Debtors of the assignment of their Accounts, demand and enforce payment of
Accounts, by legal proceedings or otherwise, and generally exercise any rights
and remedies with respect to Accounts; (ii) settle, adjust, modify, compromise,
discharge or release any Accounts or other Collateral, or any legal proceedings
brought to collect Accounts or Collateral; (iii) sell or assign any Accounts and
other Collateral upon such terms, for such amounts and at such times as Lender
deems advisable; (iv) take control, in any manner, of any proceeds of
Collateral; (v) prepare, file and sign such Obligor's name to a proof of claim
or other document in a bankruptcy of an Account Debtor, or to any notice,
assignment or satisfaction of Lien or similar document; (vi) receive, open and
dispose of mail addressed to such Obligor, and notify postal authorities to
change the address for delivery thereof to such address as Lender may designate;
(vii) endorse any Chattel Paper, Document, Instrument, invoice, freight ▇▇▇▇,
▇▇▇▇ of lading, or similar document or agreement relating to any Accounts,
Inventory or other Collateral; (viii) use such Obligor's stationery and sign its
name to verifications of Accounts and notices to Account Debtors; (ix) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to any Collateral; (x) make and adjust
claims under policies of insurance; (xi) take any action as may be necessary or
appropriate to obtain payment under any letter of credit or banker's acceptance
for which such Obligor is a beneficiary; and (xii) take all other actions as
Lender deems appropriate to fulfill each Obligor's obligations under the Loan
Documents.
SECTION 9. REPRESENTATIONS AND WARRANTIES
9.1. General Representations and Warranties. To induce Lender
to enter into this Agreement and to make available the Commitments, Loans and
Letters of Credit, each of Borrower and Affiliate Guarantor represents and
warrants that:
9.1.1. Organization and Qualification. Each Obligor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Obligor is duly qualified, authorized to
do business and in good standing as a foreign corporation in each jurisdiction
where failure to be so qualified could reasonably be expected to have a Material
Adverse Effect.
9.1.2. Power and Authority. Each Obligor is duly authorized to
execute, deliver and perform its Loan Documents. The execution, delivery and
performance of the Loan Documents have been duly authorized by all necessary
action, and do not (a) require any consent or approval of any holders of Equity
Interests of any Obligor, other than those already obtained; (b) contravene the
Organic Documents of any Obligor; (c) violate or cause a default under any
Applicable Law or Material Contract; or (d) result in or require the imposition
of any Lien (other than Permitted Liens) on any Property of any Obligor.
42
9.1.3. Enforceability. Each Loan Document is a legal, valid and
binding obligation of each Obligor party thereto, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
9.1.4. Capital Structure. Schedule 9.1.4 shows, for each
Obligor, its name and the name of each Subsidiary of such Obligor, its and each
Subsidiary's jurisdiction of organization, its and each Subsidiaries authorized
and issued Equity Interests, the holders of its Equity Interests, and all
agreements binding on such holders with respect to their Equity Interests. Each
Obligor has good title to its Equity Interests in its Subsidiaries, subject only
to Lender's Lien, and all such Equity Interests are duly issued, fully paid and
non-assessable. There are no outstanding options to purchase, warrants,
subscription rights, agreements to issue or sell, convertible interests, phantom
rights or powers of attorney relating to any Equity Interests of Borrower or
Affiliate Guarantor.
9.1.5. Corporate Names; Locations. During the five years
preceding the Effective Date, except as shown on Schedule 9.1.5, neither Obligor
has been known as or used any corporate, fictitious or trade names, has been the
surviving corporation of a merger or combination, or has acquired any
substantial part of the assets of any Person. The chief executive offices and
other places of business of each Obligor are shown on Schedule 8.6.1. During the
five years preceding the Effective Date, no Obligor has had any other office or
place of business.
9.1.6. Title to Properties; Priority of Liens. Borrower and
Affiliate Guarantor has good and marketable title to (or valid leasehold
interests in) all of its Real Estate, and good title to all of its personal
Property, including all Property reflected in any financial statements delivered
to Lender, in each case free of Liens except Permitted Liens. Borrower and
Affiliate Guarantor has paid and discharged all lawful claims that, if unpaid,
could become a Lien on its Properties, other than Permitted Liens. All Liens of
Lender in the Collateral are duly perfected, first priority Liens, subject only
to Permitted Liens that are expressly allowed to have priority over Lender's
Liens.
9.1.7. Accounts. Lender may rely, in determining which Accounts
are Eligible Accounts, on all statements and representations made by Borrower
and Affiliate Guarantor with respect thereto. Borrower and Affiliate Guarantor
warrant, with respect to each of its own Accounts at the time it is shown as an
Eligible Account in a Borrowing Base Certificate, that:
(a) it is genuine and in all respects what it purports to
be, and is not evidenced by a judgment;
(b) it arises out of a completed, bona fide sale and
delivery of goods or rendition of services in the Ordinary Course of Business,
and substantially in accordance with any purchase order, contract or other
document relating thereto;
(c) it is for a sum certain, maturing as stated in the
invoice covering such sale or rendition of services, a copy of which has been
furnished or is available to Lender on request;
(d) it is not subject to any offset, Lien (other than
Lender's Lien), deduction, defense, dispute, counterclaim or other adverse
condition except as arising in the Ordinary Course of Business and disclosed to
Lender; and it is absolutely owing by the Account Debtor, without contingency in
any respect;
(e) no purchase order, agreement, document or Applicable Law
restricts assignment of the Account to Lender (regardless of whether, under the
UCC, the restriction is ineffective);
43
(f) no extension, compromise, settlement, modification,
credit, deduction or return has been authorized with respect to the Account,
except discounts or allowances granted in the Ordinary Course of Business for
prompt payment that are reflected on the face of the invoice related thereto and
in the reports submitted to Lender hereunder; and
(g) to the best of such Obligor's knowledge, (i) there are
no facts or circumstances that are reasonably likely to impair the
enforceability or collectibility of such Account; (ii) the Account Debtor had
the capacity to contract when the Account arose, continues to meet the
applicable Obligor's customary credit standards, is Solvent, is not
contemplating or subject to an Insolvency Proceeding, and has not failed, or
suspended or ceased doing business; and (iii) there are no proceedings or
actions threatened or pending against any Account Debtor that could reasonably
be expected to have a material adverse effect on the Account Debtor's financial
condition.
9.1.8. Financial Statements. The consolidated and consolidating
balance sheets, and related statements of income, cash flow and shareholder's
equity, of Parent Guarantor and its Subsidiaries that have been and are
hereafter delivered to Lender, are prepared in accordance with GAAP, and fairly
present the financial positions and results of operations of Parent Guarantor
and its Subsidiaries at the dates and for the periods indicated. All projections
delivered from time to time to Lender have been prepared in good faith, based on
reasonable assumptions in light of the circumstances at such time. Since October
31, 2006, there has been no change in the condition, financial or otherwise, of
Parent Guarantor or any of its Subsidiary that could reasonably be expected to
have a Material Adverse Effect and no Internal Control Event has occurred. No
financial statement delivered to Lender at any time contains any untrue
statement of a material fact, nor fails to disclose any material fact necessary
to make such statement not materially misleading. Each of Borrower and Affiliate
Guarantor is Solvent.
9.1.9. Surety Obligations. Neither Borrower nor Affiliate
Guarantor is obligated as surety or indemnitor under any bond or other contract
that assures payment or performance of any obligation of any Person, except as
permitted hereunder.
9.1.10. Taxes. Borrower and Affiliate Guarantor has filed all
federal, state, provincial and local tax returns and other reports that it is
required by law to file, and has paid, or made provision for the payment of, all
Taxes upon it, its income and its Properties that are due and payable, except to
the extent being Properly Contested. The provision for Taxes on the books of
Borrower and Affiliate Guarantor is adequate for all years not closed by
applicable statutes, and for its current Fiscal Year.
9.1.11. Brokers. There are no brokerage commissions, finder's
fees or investment banking fees payable in connection with any transactions
contemplated by the Loan Documents.
9.1.12. Intellectual Property. Borrower and Affiliate Guarantor
owns or has the lawful right to use all Intellectual Property necessary for the
conduct of its business, without conflict with any rights of others. There is no
pending or, to Borrower's or Affiliate Guarantor's knowledge, threatened
Intellectual Property Claim with respect to Borrower, Affiliate Guarantor or any
of their Property (including any Intellectual Property). Except as disclosed on
Schedule 9.1.12, neither Borrower nor Affiliate Guarantor pays or owes any
Royalty or other compensation to any Person with respect to any Intellectual
Property. All Intellectual Property owned, used or licensed by, or otherwise
subject to any interests of, Borrower or Affiliate Guarantor is shown on
Schedule 9.1.12.
9.1.13. Governmental Approvals. Borrower and Affiliate Guarantor
has, is in compliance with, and is in good standing with respect to, all
Governmental Approvals necessary to conduct its business and to own, lease and
operate its Properties. All necessary import, export or other licenses, permits
or certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Borrower and Affiliate Guarantor have
complied with all foreign and domestic laws with respect to the shipment and
importation of any goods or Collateral, except where noncompliance could not
44
reasonably be expected to have a Material Adverse Effect.
9.1.14. Compliance with Laws. Borrower and Affiliate Guarantor
has duly complied, and its Properties and business operations are in compliance,
in all material respects with all Applicable Law, except where noncompliance
could not reasonably be expected to have a Material Adverse Effect. There have
been no citations, notices or orders of material noncompliance issued to
Borrower or Affiliate Guarantor under any Applicable Law. No Inventory has been
produced in violation of the FLSA.
9.1.15. Compliance with Environmental Laws. Except as disclosed
on Schedule 9.1.15, neither Borrower's nor Affiliate Guarantor's past or present
operations, Real Estate or other Properties are subject to any federal, state or
local investigation to determine whether any remedial action is needed to
address any environmental pollution, hazardous material or environmental
clean-up. Neither Borrower nor Affiliate Guarantor has received any
Environmental Notice. Neither Borrower nor Affiliate Guarantor has any
contingent liability with respect to any Environmental Release, environmental
pollution or hazardous material on any Real Estate now or previously owned,
leased or operated by it.
9.1.16. Burdensome Contracts. Neither Borrower nor Affiliate
Guarantor is a party or subject to any contract, agreement or charter
restriction that could reasonably be expected to have a Material Adverse Effect.
Neither Borrower nor Affiliate Guarantor is party or subject to any Restrictive
Agreement, except as shown on Schedule 9.1.16, none of which prohibit the
execution or delivery of any Loan Documents by an Obligor nor the performance by
an Obligor of any obligations thereunder.
9.1.17. Litigation. Except as shown on Schedule 9.1.17, there
are no proceedings or investigations pending or, to Borrower's or Affiliate
Guarantor's knowledge, threatened against Borrower or Affiliate Guarantor, or
any of their businesses, operations, Properties, prospects or conditions, that
(a) relate to any Loan Documents or transactions contemplated thereby; or (b)
could reasonably be expected to have a Material Adverse Effect if determined
adversely to Borrower or Affiliate Guarantor. Neither Borrower nor Affiliate
Guarantor is in default with respect to any order, injunction or judgment of any
Governmental Authority.
9.1.18. No Defaults. No event or circumstance has occurred or
exists that constitutes a Default or Event of Default. Neither Borrower nor
Affiliate Guarantor is in default, and no event or circumstance has occurred or
exists that with the passage of time or giving of notice would constitute a
default, under any Material Contract or in the payment of any Borrowed Money.
There is no basis upon which any party (other than Borrower or Affiliate
Guarantor) could terminate a Material Contract prior to its scheduled
termination date.
9.1.19. ERISA. Except as disclosed on Schedule 9.1.19, neither
Borrower nor Affiliate Guarantor has any Multiemployer Plan or Foreign Plan.
Borrower and Affiliate Guarantor is in full compliance with the requirements of
all Applicable Law, including ERISA, relating to each Multiemployer Plan and
Foreign Plan. No fact or situation exists that could reasonably be expected to
result in a Material Adverse Effect in connection with any Multiemployer Plan or
Foreign Plan. Neither Borrower nor Affiliate Guarantor has any withdrawal
liability in connection with a Multiemployer Plan or Foreign Plan. All employer
and employee contributions to Foreign Plans, to the extent required by law or
the terms of such plans, have been made or accrued in accordance with normal
accounting principles. The fair market value of the assets of each funded
Foreign Plan, the liability of each insurer for any Foreign Plan funded through
insurance and/or the book reserve established for each Foreign Plan, together
with any accrued contributions, are sufficient to provide the accrued benefit
obligations of all participants in such plans according to the actuarial
45
assumptions and valuations most recently used to account for such obligations in
accordance with applicable generally accepted accounting principles. Each
Foreign Plan required to be registered has been registered and is maintained in
good standing with all applicable regulatory authorities.
9.1.20. Trade Relations. There exists no actual or threatened
termination, limitation or modification of any business relationship between
Borrower or Affiliate Guarantor and any customer or supplier, or any group of
customers or suppliers, who individually or in the aggregate are material to the
business of Borrower or Affiliate Guarantor. There exists no condition or
circumstance that could reasonably be expected to impair the ability of Borrower
or Affiliate Guarantor to conduct its business at any time hereafter in
substantially the same manner as conducted on the Effective Date.
9.1.21. Labor Relations. Except as described on Schedule 9.1.21,
neither Borrower nor Affiliate Guarantor is party to or bound by any collective
bargaining agreement, management agreement or consulting agreement. There are no
material grievances, disputes or controversies with any union or other
organization of Borrower's or Affiliate Guarantor's employees, or, to Borrower's
or Affiliate Guarantor's knowledge, any asserted or threatened strikes, work
stoppages or demands for collective bargaining.
9.1.22. Payable Practices. Neither Borrower nor Affiliate
Guarantor has made any material change in its historical accounts payable
practices from those in effect on the Effective Date.
9.1.23. Not a Regulated Entity. No Obligor is (a) an "investment
company" or a "person directly or indirectly controlled by or acting on behalf
of an investment company" within the meaning of the Investment Company Act of
1940; (b) a "holding company," a "subsidiary company" of a "holding company," or
an "affiliate" of either, within the meaning of the Public Utility Holding
Company Act of 1935; or (c) subject to regulation under the Federal Power Act,
the Interstate Commerce Act, any public utilities code or any other Applicable
Law regarding its authority to incur Debt.
9.1.24. Margin Stock. Neither Borrower nor Affiliate Guarantor
is engaged, principally or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying any Margin Stock.
No Loan proceeds or Letters of Credit or other credit extension hereunder will
be used by Borrower to purchase or carry, or to reduce or refinance any Debt
incurred to purchase or carry, any Margin Stock or for any related purpose
governed by Regulations T, U or X of the Board of Governors.
9.1.25. Plan Assets. Neither Borrower nor Parent Guarantor is an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R.
ss.2510.3-101 of any "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is subject to Title I of ERISA or any "plan" (within the meaning of
Section 4975 of the Internal Revenue Code), and neither the execution of this
Agreement nor the funding of any Loans gives rise to a prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Internal
Revenue Code.
9.1.26. Joint Enterprise. Borrower and Affiliate Guarantor are
an integral part of a consolidated enterprise that are Borrower, Affiliate
Guarantor, Parent Guarantor and Parent Guarantor's other Subsidiaries, and that
each of Borrower and Affiliate Guarantor will receive direct and indirect
benefits from the availability of the credit facilities provided for herein.
Affiliate Guarantor recognizes that credit available to it as a result of the
credit facilities provided for herein is in excess of and on better terms than
it otherwise could obtain on and for its own account and that one of the reasons
therefor is its agreement to execute and deliver to Lender this Agreement and
the other Loan Documents to which Affiliate Guarantor is a party.
46
9.2. Complete Disclosure. No Loan Document contains any untrue
statement of a material fact, nor fails to disclose any material fact necessary
to make the statements contained therein not materially misleading. There is no
fact or circumstance that any Obligor has failed to disclose to Lender in
writing that could reasonably be expected to have a Material Adverse Effect.
SECTION 10. COVENANTS AND CONTINUING AGREEMENTS
10.1. Affirmative Covenants. For so long as either Commitment
or any Obligations are outstanding, Borrower and Affiliate Guarantor shall, and
shall cause each Subsidiary to:
10.1.1. Inspections; Appraisals.
(a) Permit Lender from time to time, subject (except when
a Default or Event of Default exists) to reasonable notice and normal business
hours, to visit and inspect the Properties of Borrower or Affiliate Guarantor,
inspect, audit and make extracts from Borrower's or Affiliate Guarantor's books
and records, and discuss with its officers, employees, agents, advisors and
independent accountants Borrower's or Affiliate Guarantor's business, financial
condition, assets, prospects and results of operations. Lender shall have no
duty to Borrower or Affiliate Guarantor to make any inspection, nor to share any
results of any inspection or report with Borrower or Affiliate Guarantor (but
agrees to share the results of any appraisal with Borrower or Affiliate
Guarantor). To the extent any appraisal or other information is shared by Lender
with Borrower or Affiliate Guarantor, such Obligor acknowledges that it was
prepared by Lender for its purposes and such Obligor shall not be entitled to
rely upon it.
(b) Reimburse Lender for all charges and out-of-pocket costs
and expenses of Lender in connection with (i) examinations of its books and
records or any other financial or Collateral matters as Lender deems
appropriate, up to three times per Loan Year (with such charges not to exceed
$15,000, in the aggregate, per Loan Year, plus out-of-pocket costs and
expenses); and (ii) full appraisals of Inventory one time per Loan Year;
provided, however, that if an examination or appraisal is initiated during a
Default or Event of Default, all charges, costs and expenses therefor shall be
reimbursed by Borrower without regard to such limits. Subject to the foregoing,
Borrower shall pay Lender's then standard charges for each day that an employee
of Lender or its Affiliates is engaged in any examination activities, and shall
pay the standard charges of Lender's internal appraisal group. This Section
shall not be construed to limit Lender's right to conduct examinations or to
obtain appraisals at any time in its discretion, nor to use third parties for
such purposes.
10.1.2. Financial and Other Information. Keep adequate records
and books of account with respect to its business activities, in which proper
entries are made in accordance with GAAP reflecting all financial transactions;
and furnish or cause to be furnished to Lender:
(a) as soon as available, but in any event within 92 days
after the end of each Fiscal Year (but no later than the date on which Parent
Guarantor is required to file a Form 10-K under the Exchange Act), a
consolidated and consolidating balance sheet of Parent Guarantor and its
Subsidiaries as at the end of such Fiscal Year, and the related consolidated and
consolidating statements of income or operations, shareholders' equity and cash
flows for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all prepared in accordance with Regulation
S-X under the Securities Act and accompanied by (i) a report and opinion of a
Registered Public Accounting Firm of nationally recognized standing reasonably
acceptable to Lender, which report and opinion shall be prepared in accordance
with GAAP and applicable Securities Laws and shall not be subject to any "going
concern" or like qualification or exception or any qualification or exception as
to the scope of such audit and (ii) if applicable, an attestation report of such
47
Registered Public Accounting Firm as to the Borrower's internal controls
pursuant to Section 404 of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ expressing a conclusion to which
Lender does not object, and such consolidating statements to be certified by the
chief financial officer of Parent Guarantor to the effect that such statements
are fairly stated in all material respects when considered in relation to the
consolidated financial statements of Parent Guarantor and its Subsidiaries;
(b) as soon as available, but in any event within 47 days
after the end of each Fiscal Quarter of Parent Guarantor (but no later than the
date on which Borrower is required to file a Form 10-Q under the Exchange Act),
commencing with the Fiscal Quarter ended October 31, 2006, (i) a consolidated
and consolidating balance sheet of Parent Guarantor and its Subsidiaries as at
the end of such Fiscal Quarter, and the related consolidated and consolidating
statements of income or operations, shareholders' equity and cash flows for such
fiscal quarter and for the portion of the Fiscal Year then ended, setting forth
in each case in comparative form the figures for the corresponding Fiscal
Quarter of the previous Fiscal Year and the corresponding portion of the
previous fiscal year, all prepared in accordance with Regulation S-X under the
Securities Act and accompanied by a certificate of the chief financial officer
of Parent Guarantor stating that such consolidated statements fairly present the
financial condition, results of operations, shareholders' equity and cash flows
of Parent Guarantor and its Subsidiaries in accordance with GAAP, subject only
to normal year-end audit adjustments and the absence of footnotes, and that such
consolidating statements are fairly stated in all material respects when
considered in relation to the consolidated financial statements of Parent
Guarantor and its Subsidiaries;
(c) as soon as available, and in any event within 30 days
after the end of each month, unaudited balance sheets as of the end of such
month and the related statements of income and cash flow for such month and for
the portion of the Fiscal Year then elapsed bases for each of Borrower and
Affiliate Guarantor, setting forth in comparative form corresponding figures for
the preceding Fiscal Year and certified by the chief financial officer of
Borrower or Affiliate Guarantor as prepared in accordance with GAAP and fairly
presenting the financial position and results of operations for such month and
period, subject to normal year-end adjustments and the absence of footnotes;
(d) concurrently with delivery of financial statements
under clauses (a) and (b) above, or more frequently if requested by Lender while
a Default or Event of Default exists, a Compliance Certificate executed by the
chief financial officer of Borrower and Affiliate Guarantor;
(e) concurrently with delivery of the annual financial
statements under clause (a) above, copies of the final management letter and
other material reports submitted to Parent Guarantor by its accountants in
connection with such financial statements;
(f) not later than 90 days after the end of each Fiscal
Year, projections of Parent Guarantor's consolidated and consolidating balance
sheets, results of operations, cash flow and Availability for the current Fiscal
Year, month by month;
(g) on or before the 20th day of each month and together
with each monthly Borrowing Base Certificate, a listing of each Borrowing Base
Obligor's trade payables, specifying the trade creditor and balance due, and a
detailed trade payable aging, all in form satisfactory to Lender;
(h) promptly after the sending or filing thereof, copies of
any proxy statements, financial statements or reports that Parent Guarantor has
made generally available to its shareholders; copies of any regular, periodic
and special reports or registration statements or prospectuses that Parent
Guarantor files with the SEC or any other Governmental Authority, or any
securities exchange; and copies of any press releases or other statements made
available by Parent Guarantor to the public concerning material changes to or
developments in the business of Parent Guarantor;
48
(i) promptly after the sending or filing thereof, copies of
any annual report to be filed in connection with each Plan or Foreign Plan; and
(j) such other reports and information (financial or
otherwise) as Lender may request from time to time in connection with any
Collateral or any Obligor's financial condition or business.
10.1.3. Notices. Notify Lender in writing, promptly after
Borrower's or Affiliate Guarantor's obtaining knowledge thereof, of any of the
following that affects an Obligor: (a) the threat or commencement of any
proceeding or investigation, whether or not covered by insurance, if an adverse
determination could have a Material Adverse Effect; (b) any pending or
threatened labor dispute, strike or walkout, or the expiration of any material
labor contract; (c) any default under or termination of a Material Contract; (d)
the existence of any Default or Event of Default; (e) any judgment in an amount
exceeding $150,000; (f) the assertion of any Intellectual Property Claim, if an
adverse resolution could have a Material Adverse Effect; (g) any violation or
asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any
Environmental Laws), if an adverse resolution could have a Material Adverse
Effect; (h) any Environmental Release by an Obligor or on any Property owned,
leased or occupied by an Obligor; or receipt of any Environmental Notice; (i)
the discharge of or any withdrawal or resignation by Parent Guarantor's
independent accountants; (j) of the occurrence of any Internal Control Event; or
(k) any opening of a new office or place of business, at least 30 days prior to
such opening.
10.1.4. Landlord and Storage Agreements. Upon request, provide
Lender with copies of all existing agreements, and promptly after execution
thereof provide Lender with copies of all future agreements, between Borrower or
Affiliate Guarantor and any landlord, warehouseman, processor, shipper, bailee
or other Person that owns any premises at which any Collateral may be kept or
that otherwise may possess or handle any Collateral.
10.1.5. Compliance with Laws. Comply with all Applicable Laws,
including ERISA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws
regarding collection and payment of Taxes, and maintain all Governmental
Approvals necessary to the ownership of its Properties or conduct of its
business, unless failure to comply (other than failure to comply with
Anti-Terrorism Laws) or maintain could not reasonably be expected to have a
Material Adverse Effect. Without limiting the generality of the foregoing, if
any Environmental Release occurs at or on any Properties of Borrower or
Affiliate Guarantor, it shall act promptly and diligently to investigate and
report to Lender and all appropriate Governmental Authorities the extent of, and
to make appropriate remedial action to eliminate, such Environmental Release,
whether or not directed to do so by any Governmental Authority.
10.1.6. Taxes. Pay and discharge all Taxes prior to the date on
which they become delinquent or penalties attach, unless such Taxes are being
Properly Contested.
10.1.7. Insurance. In addition to the insurance required
hereunder with respect to Collateral, maintain insurance with insurers (rated A+
or better by Best Rating Guide) satisfactory to Lender with respect to the
Properties and business of Borrower and Affiliate Guarantor of such type
(including product liability, workers' compensation, larceny, embezzlement, or
other criminal misappropriation insurance), in such amounts, and with such
coverages and deductibles as are customary for companies similarly situated.
10.1.8. Licenses. Keep each License affecting any Collateral
(including the manufacture, distribution or disposition of Inventory) or any
other material Property of Borrower and Affiliate Guarantor in full force and
effect; promptly notify Lender of any proposed modification to any such License,
or entry into any new License, in each case at least 30 days prior to its
49
effective date; pay all Royalties when due; and notify Lender of any default or
breach asserted by any Person to have occurred under any License.
10.1.9. Future Subsidiaries. Promptly notify Lender upon any
Person becoming a Subsidiary and cause it to guaranty the Obligations in a
manner satisfactory to Lender, and to execute and deliver such documents,
instruments and agreements and to take such other actions as Lender shall
require to evidence and perfect a Lien in favor of Lender (for the benefit of
Secured Parties) on all assets of such Person, including delivery of such legal
opinions, in form and substance satisfactory to Lender, as it shall deem
appropriate.
10.2. NegativeCovenants. For so long as either Commitment or
any Obligations are outstanding, neither Borrower nor Affiliate Guarantor shall:
10.2.1. Permitted Debt. Create, incur, guarantee or suffer to
exist any Debt, except:
(a) the Obligations;
(b) Subordinated Debt;
(c) Permitted Purchase Money Debt;
(d) Borrowed Money (other than the Obligations, Subordinated
Debt and Permitted Purchase Money Debt), but only to the extent outstanding on
the Effective Date and not satisfied with proceeds of the initial Loans
hereunder;
(e) Bank Product Debt;
(f) Permitted Contingent Obligations; and
(g) Refinancing Debt as long as each Refinancing Condition
is satisfied.
10.2.2. Permitted Liens. Create or suffer to exist any Lien upon
any of its Property, except the following (collectively, "Permitted Liens"):
(a) Liens in favor of Lender;
(b) Purchase Money Liens securing Permitted Purchase Money
Debt;
(c) Liens for Taxes not yet due or being Properly Contested;
(d) statutory Liens (other than Liens for Taxes or imposed
under ERISA) arising in the Ordinary Course of Business, but only if (i) payment
of the obligations secured thereby is not yet due or is being Properly
Contested, and (ii) such Liens do not materially impair the value or use of the
Property or materially impair operation of the business of Borrower or
Subsidiary;
(e) Liens incurred or deposits made in the Ordinary Course
of Business to secure the performance of tenders, bids, leases, contracts
(except those relating to Borrowed Money), statutory obligations and other
similar obligations, or arising as a result of progress payments under
government contracts, as long as such Liens are at all times junior to Lender's
Liens;
(f) Liens arising by virtue of a judgment or judicial order
against Borrower or Affiliate Guarantor, or any Property of Borrower or
Affiliate Guarantor, as long as such Liens are (i) in existence for less than 20
50
consecutive days or being Properly Contested, and (ii) at all times junior to
Lender's Liens;
(g) easements, rights-of-way, restrictions, servitudes,
covenants or other agreements of record, and other similar charges or
encumbrances on Real Estate, that do not secure any monetary obligation and do
not interfere with the Ordinary Course of Business;
(h) normal and customary rights of setoff upon deposits in
favor of depository institutions, and Liens of a collecting bank on Payment
Items in the course of collection; and
(i) existing Liens shown on Schedule 10.2.2.
10.2.3. Capital Expenditures. Make Capital Expenditures during
any Fiscal Year which, when aggregated with all other Capital Expenditures made
during such Fiscal Year by Parent Guarantor and its other Subsidiaries, are in
excess of $4,000,000 during such Fiscal Year.
10.2.4. Distributions. Declare or make any Distributions.
10.2.5. Restricted Investments. Make any Restricted Investment.
10.2.6. Disposition of Assets. Make any Asset Disposition,
except a Permitted Asset Disposition, a disposition of Equipment under Section
8.4.2, or a transfer of Property by Borrower to Affiliate Guarantor or to
Borrower by Affiliate Guarantor.
10.2.7. Loans. Make any loans or other advances of money to any
Person, except (a) advances to an officer or employee for salary, travel
expenses, commissions and similar items in the Ordinary Course of Business; (b)
prepaid expenses and extensions of trade credit made in the Ordinary Course of
Business; and (c) deposits with financial institutions permitted hereunder.
10.2.8. Restrictions on Payment of Certain Debt. Make any
payments (whether voluntary or mandatory, or a prepayment, redemption,
retirement, defeasance or acquisition) with respect to any (a) Subordinated
Debt, except to the extent permitted under any subordination agreement relating
to such Debt (and a Senior Officer of Borrower shall certify to Lender, not less
than five Business Days prior to the date of payment, that all conditions under
such agreement have been satisfied); or (b) Borrowed Money (other than the
Obligations) prior to its due date under the agreements evidencing such Debt as
in effect on the Effective Date (or as amended thereafter with the consent of
Lender).
10.2.9. Fundamental Changes. Merge, combine or consolidate with
any Person, or liquidate, wind up its affairs or dissolve itself, in each case
whether in a single transaction or in a series of related transactions; change
its name or conduct business under any fictitious name; change its tax, charter
or other organizational identification number; or change its form or state of
organization.
10.2.10. Subsidiaries. Form or acquire any Subsidiary after the
Effective Date, except in accordance with Section 10.1.9 and 10.2.5; or permit
any existing Subsidiary to issue any additional Equity Interests except
director's qualifying shares.
10.2.11. Organic Documents. Amend, modify or otherwise change
any of its Organic Documents as in effect on the Effective Date.
10.2.12. Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than Parent Guarantor.
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10.2.13. Accounting Changes. Make any material change in
accounting treatment or reporting practices, except as required by GAAP and in
accordance with Section 1.2; or change its Fiscal Year.
10.2.14. Restrictive Agreements. Become a party to any
Restrictive Agreement, except (a) a Restrictive Agreement as in effect on the
Effective Date and shown on Schedule 9.1.16; (b) a Restrictive Agreement
relating to secured Debt permitted hereunder, if such restrictions apply only to
the collateral for such Debt; and (c) customary provisions in leases and other
contracts restricting assignment thereof.
10.2.15. Hedging Agreements. Enter into any Hedging Agreement,
except to hedge risks arising in the Ordinary Course of Business and not for
speculative purposes.
10.2.16. Conduct of Business. Engage in any business, other than
its business as conducted on the Effective Date and any activities incidental
thereto.
10.2.17. Affiliate Transactions. Enter into or be party to any
transaction with an Affiliate, except (a) transactions contemplated by the Loan
Documents; (b) payment of reasonable compensation to officers and employees for
services actually rendered, and loans and advances permitted by Section 10.2.7;
(c) payment of customary directors' fees and indemnities; (d) transactions
solely between Borrower and Affiliate Guarantor; (e) transactions with
Affiliates that were consummated prior to the Effective Date, as shown on
Schedule 10.2.17; and (f) transactions with Affiliates in the Ordinary Course of
Business, upon fair and reasonable terms fully disclosed to Lender and no less
favorable than would be obtained in a comparable arm's-length transaction with a
non-Affiliate.
10.2.18. Plans. Become party to any Multiemployer Plan or
Foreign Plan, other than any in existence on the Effective Date.
10.2.19. Amendments to Subordinated Debt. Amend, supplement or
otherwise modify any document, instrument or agreement relating to any
Subordinated Debt, if such modification (a) increases any required payment of
principal or interest; (b) accelerates the date on which any installment of
principal or any interest is due, or adds any additional redemption, put or
prepayment provisions; (c) shortens the final maturity date or otherwise
accelerates amortization; (d) increases the interest rate; (e) increases or adds
any fees or charges; (f) modifies any covenant in a manner or adds any
representation, covenant or default that is more onerous or restrictive in any
material respect for Borrower or Affiliate Guarantor, or that is otherwise
materially adverse to Borrower, Affiliate Guarantor or Lender; or (g) results in
the Obligations not being fully benefited by the subordination provisions
thereof.
10.3. Financial Covenants. For so long as either Commitment or
any Obligations are outstanding:
10.3.1. Debt Service Coverage Ratio. Parent Guarantor shall
maintain a Debt Service Coverage Ratio of at least (a) 1.05 to 1.0 calculated
for the Fiscal Quarter ending on January 31, 2007, (b) 1.15 to 1.0 calculated
for the two Fiscal Quarters ending on April 30, 2007, (c) 1.15 to 1.0 calculated
for the three Fiscal Quarters ending on June 30, 2007, and (d) 1.15 to 1.0
calculated at the end of each Fiscal Quarter thereafter for the four Fiscal
Quarters then ending.
10.3.2. Tangible Capital Base. Parent Guarantor shall maintain a
Tangible Capital Base of not less than $28,000,000, such amount to be increased
annually on January 31 of each year commencing January 31, 2007 by an amount
equal to fifty percent (50%) of positive net income, if any, for the Fiscal Year
then ended, measured quarterly.
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10.3.3. Minimum Excess Availability. Borrower shall maintain
excess Availability of at least $500,000 at all times.
SECTION 11. GUARANTY OF AFFILIATE GUARANTOR
11.1. Guaranty of Payment and Performance. As Affiliate
Guarantor expects to receive substantial direct and indirect benefits from the
extensions of credit by Lender to Borrower, for value received and hereby
acknowledged, and as an inducement to Lender to make the Loans and issue Letters
of Credit, Affiliate Guarantor hereby guarantees to the Lender the full and
punctual payment when due (whether at stated maturity, by required prepayment,
by acceleration or otherwise), as well as the performance, of all of the
Obligations including all such which would become due but for the operation of
the automatic stay pursuant to Section 362(a) of the Bankruptcy Code and the
operation of Sections 502(b) and 506(b) of the Bankruptcy Code. The Guaranty of
Affiliate Guarantor contained herein is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectability only and is in no way
conditioned upon any requirement that Lender first attempt to collect any of the
Obligations from Borrower or resort to any collateral security or other means of
obtaining payment. If an Event of Default shall occur, the obligations of the
Affiliate Guarantor hereunder with respect to such Obligations in default shall
become immediately due and payable to Lender, without demand or notice of any
nature, all of which are expressly waived by the Affiliate Guarantor. Payments
by the Affiliate Guarantor hereunder may be required by Lender on any number of
occasions.
11.2. Affiliate Guarantor's Agreement to Pay Enforcement
Costs, Etc.. Affiliate Guarantor further agrees, as the principal obligor and
not as a guarantor only, to pay to Lender, on demand, all costs and expenses
(including court costs and legal expenses) incurred or expended by the Lender in
connection with the Obligations, the Guaranty of Affiliate Guarantor contained
herein and the enforcement thereof, together with interest on amounts
recoverable under this Section 11.2 from the time when such amounts become due
until payment, whether before or after judgment, at the rate of interest for
overdue principal set forth in this Agreement, provided that if such interest
exceeds the maximum amount permitted to be paid under applicable law, then such
interest shall be automatically reduced to such maximum permitted amount.
11.3. Waivers by Affiliate Guarantor; Lender's Freedom to Act.
Affiliate Guarantor agrees that the Obligations will be paid and performed
strictly in accordance with their respective terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of Lender with respect thereto. Affiliate Guarantor
waives promptness, diligence, presentment, demand, protest, notice of
acceptance, notice of any Obligations incurred and all other notices of any
kind, all defenses which may be available by virtue of any valuation, stay,
moratorium law or other similar law now or hereafter in effect, any right to
require the marshalling of assets of Borrower, any other Guarantor or any other
entity or other person primarily or secondarily liable with respect to any of
the Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, Affiliate Guarantor agrees to the provisions of any
Loan Document or other instrument evidencing, securing or otherwise executed in
connection with any Obligation and agrees that the obligations of Affiliate
Guarantor hereunder shall not be released or discharged, in whole or in part, or
otherwise affected by (a) the failure of Lender to assert any claim or demand or
to enforce any right or remedy against Borrower, Parent Guarantor or any other
entity or other Person primarily or secondarily liable with respect to any of
the Obligations; (b) any extensions, compromise, refinancing, consolidation or
renewals of any Obligation; (c) any change in the time, place or manner of
payment of any of the Obligations or any rescissions, waivers, compromise,
refinancing, consolidation, amendments or modifications of any of the terms or
provisions of this Agreement, the Notes, the other Loan Documents, any Hedging
Agreements, or any other agreement evidencing, securing or otherwise executed in
53
connection with any of the Obligations; (d) the addition, substitution or
release of any entity or other Person primarily or secondarily liable for any
Obligation, (e) the adequacy of any rights which Lender may have against any
collateral security or other means of obtaining repayment of any of the
Obligations; (f) the impairment of any collateral securing any of the
Obligations, including without limitation the failure to perfect or preserve any
rights which Lender might have in such collateral security or the substitution,
exchange, surrender, release, loss or destruction of any such collateral
security; or (g) any other act or omission which might in any manner or to any
extent vary the risk of Affiliate Guarantor or otherwise operate as a release or
discharge of Affiliate Guarantor, all of which may be done without notice to
Affiliate Guarantor. To the fullest extent permitted by law, Affiliate Guarantor
hereby expressly waives any and all rights or defenses arising by reason of (i)
any "one action" or "anti-deficiency" law which would otherwise prevent Lender
from bringing any action, including any claim for a deficiency, or exercising
any other right or remedy (including any right of set-off), against Affiliate
Guarantor before or after Lender's commencement or completion of any foreclosure
action, whether judicially, by exercise of power of sale or otherwise, or (ii)
any other law which in any other way would otherwise require any election of
remedies by Lender.
11.4. Unenforceability of Obligations Against Borrower. If for
any reason Borrower has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from Borrower by reason of Borrower's insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, the
Guaranty contained herein shall nevertheless be binding on Affiliate Guarantor
to the same extent as if the Affiliate Guarantor at all times had been the
principal obligor on all such Obligations. In the event that acceleration of the
time for payment of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of Borrower, or for any other reason, all such
amounts otherwise subject to acceleration under the terms of this Agreement, the
Notes, the other Loan Documents or any other agreement evidencing, securing or
otherwise executed in connection with any Obligation shall be immediately due
and payable by Affiliate Guarantor.
11.5. Subrogation; Subordination. Until the Full Payment of
all of the Obligations and any and all other obligations of Borrower to Lender
or any Affiliate of Lender, Affiliate Guarantor shall not exercise any rights
against Borrower arising as a result of payment by the Parent Guarantor
hereunder, by way of subrogation, reimbursement, restitution, contribution or
otherwise, and will not prove any claim in competition with Lender or such
Affiliate in respect of any payment hereunder in any bankruptcy, insolvency or
reorganization case or proceedings of any nature; Affiliate Guarantor will not
claim any setoff, recoupment or counterclaim against Borrower in respect of any
liability of Affiliate Guarantor to Borrower; and Affiliate Guarantor waives any
benefit of and any right to participate in any collateral security which may be
held by Lender or any such Affiliate. The payment of any amounts due with
respect to any indebtedness of Borrower now or hereafter owed to Affiliate
Guarantor is hereby subordinated to the prior Full Payment of all of the
Obligations and any and all other obligations of Borrower to Lender or any
Affiliate of Lender. Affiliate Guarantor agrees that, after the occurrence of
any Default or Event or Default, Affiliate Guarantor will not demand, ▇▇▇ for or
otherwise attempt to collect any such indebtedness of Borrower to Affiliate
Guarantor until Full Payment of all of the Obligations. If, notwithstanding the
foregoing sentence, Affiliate Guarantor shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by Affiliate Guarantor as trustee for Lender and be paid
over to Lender on account of the Obligations without affecting in any manner the
liability of Affiliate Guarantor under the other provisions of the guaranty
contained herein.
11.6. Termination; Reinstatement. The Guaranty of Affiliate
Guarantor contained herein shall remain in full force and effect until Lender is
given written notice of Affiliate Guarantor's intention to discontinue the
guaranty contained herein, notwithstanding any intermediate or temporary payment
54
or settlement of the whole or any part of the Obligations. No such notice shall
be effective unless received and acknowledged by an officer of Lender at the
address of Lender for notices set forth in this Agreement. No such notice shall
affect any rights of Lender or of any Affiliate of Lender hereunder, including
without limitation the rights set forth in Section 11.3 and 11.5, with respect
to any Obligations incurred or accrued prior to the receipt of such notice or
any Obligations incurred or accrued pursuant to any contract or commitment in
existence prior to such receipt, all of which Obligations shall continue to be
unconditionally guaranteed by Affiliate Guarantor. All checks, drafts, notes,
instruments (negotiable or otherwise) and writings made by or for the account of
Borrower and drawn on Lender purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by Lender
after that date, shall form part of the Obligations and shall continue to be
unconditionally guaranteed by Affiliate Guarantor. The Guaranty of Affiliate
Guarantor contained herein shall continue to be effective or be reinstated,
notwithstanding any such notice, if at any time any payment made or value
received with respect to any Obligation is rescinded or must otherwise be
returned by Lender upon the insolvency, bankruptcy or reorganization of the
Borrower, or otherwise, all as though such payment had not been made or value
received.
SECTION 12. EVENTS OF DEFAULT; REMEDIES ON DEFAULT
12.1. Events of Default. Each of the following shall be an
"Event of Default" hereunder, if the same shall occur for any reason whatsoever,
whether voluntary or involuntary, by operation of law or otherwise:
(a) Borrower fails to pay any Obligations when due (whether
at stated maturity, on demand, upon acceleration or otherwise);
(b) Any representation, warranty or other written statement
of any Obligor made in connection with any Loan Documents or transactions
contemplated thereby is incorrect or misleading in any material respect when
given;
(c) Borrower or Affiliate Guarantor breaches or fail to
perform any covenant contained in Section 7.3, 7.5, 8.1, 8.2.4, 8.2.5, 10.1.1,
10.1.2, 10.2 or 10.3;
(d) Any Obligor breaches or fails to perform any other
covenant contained in any Loan Documents, and such breach or failure is not
cured within 15 days after a Senior Officer of such Obligor has knowledge
thereof or receives notice thereof from Lender, whichever is sooner; provided,
however, that such notice and opportunity to cure shall not apply if the breach
or failure to perform is not capable of being cured within such period or is a
willful breach by an Obligor;
(e) Parent Guarantor, Affiliate Guarantor or any other
Guarantor repudiates, revokes or attempts to revoke its Guaranty; any Obligor
denies or contests the validity or enforceability of any Loan Documents or
Obligations, or the perfection or priority of any Lien granted to Lender; or any
Loan Document ceases to be in full force or effect for any reason (other than a
waiver or release by Lender);
(f) Any breach or default of an Obligor occurs under any
document, instrument or agreement to which it is a party or by which it or any
of its Properties is bound, relating to any Debt (other than the Obligations) in
excess of $100,000, if the maturity of or any payment with respect to such Debt
may be accelerated or demanded due to such breach;
(g) Any judgment or order for the payment of money is
entered against an Obligor in an amount that exceeds, individually or
cumulatively with all unsatisfied judgments or orders against all Obligors,
55
$250,000 (net of any insurance coverage therefor acknowledged in writing by the
insurer), unless a stay of enforcement of such judgment or order is in effect,
by reason of a pending appeal or otherwise;
(h) Any loss, theft, damage or destruction occurs with
respect to any Collateral if the amount not covered by insurance exceeds
$250,000;
(i) Any Obligor is enjoined, restrained or in any way
prevented by any Governmental Authority from conducting any material part of its
business; any Obligor suffers the loss, revocation or termination of any
material license, permit, lease or agreement necessary to its business; there is
a cessation of any material part of an Obligor's business for a material period
of time; any material Collateral or Property of an Obligor is taken or impaired
through condemnation; any Obligor agrees to or commences any liquidation,
dissolution or winding up of its affairs; or any Obligor ceases to be Solvent;
(j) Any Insolvency Proceeding is commenced by any Obligor;
an Insolvency Proceeding is commenced against any Obligor and: such Obligor
consents to the institution of the proceeding against it, the petition
commencing the proceeding is not timely controverted by such Obligor, such
petition is not dismissed within 30 days after its filing, or an order for
relief is entered in the proceeding; a trustee (including an interim trustee) is
appointed to take possession of any substantial Property of or to operate any of
the business of any Obligor; or any Obligor makes an offer of settlement,
extension or composition to its unsecured creditors generally;
(k) A Reportable Event occurs that constitutes grounds for
termination by the Pension Benefit Guaranty Corporation of any Multiemployer
Plan or appointment of a trustee for any Multiemployer Plan; any Multiemployer
Plan is terminated or any such trustee is requested or appointed; any Obligor is
in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from any withdrawal therefrom; or any
event similar to the foregoing occurs or exists with respect to a Foreign Plan;
(l) Any Obligor or any of its Senior Officers is criminally
indicted or convicted for (i) a felony committed in the conduct of such
Obligor's business, or (ii) any state or federal law (including the Controlled
Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of
War Materials Act) that could lead to forfeiture of any material Property or any
Collateral; or
(m) A Change of Control occurs; or any event occurs or
condition exists that has a Material Adverse Effect.
12.2. Remedies upon Default. If an Event of Default described
in Section 12.1(j) occurs with respect to any Obligor, then to the extent
permitted by Applicable Law, all Obligations shall become automatically due and
payable and the Commitments shall terminate, without any action by Lender or
notice of any kind. In addition, or if any other Event of Default exists, Lender
may in its discretion do any one or more of the following from time to time:
(a) declare any Obligations immediately due and payable,
whereupon they shall be due and payable without diligence, presentment, demand,
protest or notice of any kind, all of which are hereby waived by Borrower to the
fullest extent permitted by law;
(b) terminate, reduce or condition either or both of the
Commitments, or make any adjustment to the Borrowing Base;
(c) require Borrower to Cash Collateralize LC Obligations,
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Bank Product Debt and other Obligations that are contingent or not yet due and
payable, and, if Borrower fails promptly to deposit such Cash Collateral, Lender
may advance the required Cash Collateral as Revolver Loans (whether or not an
Overadvance exists or is created thereby, or the conditions in Section 6 are
satisfied); and
(d) exercise any other rights or remedies afforded under
any agreement, by law, at equity or otherwise, including the rights and remedies
of a secured party under the UCC. Such rights and remedies include the rights to
(i) take possession of any Collateral; (ii) require Borrower or Affiliate
Guarantor to assemble Collateral, at Borrower's and Affiliate's Guarantor's
expense, and make it available to Lender at a place designated by Lender; (iii)
enter any premises where Collateral is located and store Collateral on such
premises until sold (and if the premises are owned or leased by any Obligor,
such Obligor agrees not to charge for such storage); and (iv) sell or otherwise
dispose of any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale, with such notice
as may be required by Applicable Law, in lots or in bulk, at such locations, all
as Lender, in its discretion, deems advisable. Borrower and Affiliate Guarantor
agrees that 10 days notice of any proposed sale or other disposition of
Collateral by Lender shall be reasonable. Lender shall have the right to conduct
such sales on any Obligor's premises, without charge, and such sales may be
adjourned from time to time in accordance with Applicable Law. Lender shall have
the right to sell, lease or otherwise dispose of any Collateral for cash, credit
or any combination thereof, and Lender may purchase any Collateral at public or,
if permitted by law, private sale and, in lieu of actual payment of the purchase
price, may set off the amount of such price against the Obligations.
12.3. License. Lender is hereby granted an irrevocable,
non-exclusive license or other right to use, license or sub-license (without
payment of royalty or other compensation to any Person) any or all Intellectual
Property of Borrower and Affiliate Guarantor, computer hardware and software,
trade secrets, brochures, customer lists, promotional and advertising materials,
labels, packaging materials and other Property, in advertising for sale,
marketing, selling, collecting, completing manufacture of, or otherwise
exercising any rights or remedies with respect to, any Collateral. Borrower's
and Affiliate Guarantor's rights and interests under Intellectual Property shall
inure to Lender's benefit.
12.4. Setoff. Lender and its Affiliates are each authorized by
Borrower and Affiliate Guarantor at any time during an Event of Default, without
notice to Borrower, Affiliate Guarantor or any other Person, to set off and to
appropriate and apply any deposits (general or special), funds, claims,
obligations, liabilities or other Debt at any time held or owing by Lender or
any such Affiliate to or for the account of Borrower or Affiliate Guarantor
against any Obligations, whether or not demand for payment of such Obligation
has been made, any Obligations have been declared due and payable, are then due,
or are contingent or unmatured, or the Collateral or any guaranty or other
security for the Obligations is adequate.
12.5. Remedies Cumulative; No Waiver.
12.5.1. Cumulative Rights. All covenants, conditions,
provisions, warranties, guaranties, indemnities and other undertakings of each
Obligor contained in the Loan Documents are cumulative and not in derogation or
substitution of each other. In particular, the rights and remedies of Lender are
cumulative, may be exercised at any time and from time to time, concurrently or
in any order, and shall not be exclusive of any other rights or remedies that
Lender may have, whether under any agreement, by law, at equity or otherwise.
12.5.2. Waivers. The failure or delay of Lender to require
strict performance by any Obligor with any terms of the Loan Documents, or to
exercise any rights or remedies with respect to Collateral or otherwise, shall
57
not operate as a waiver thereof nor as establishment of a course of dealing. All
rights and remedies shall continue in full force and effect until Full Payment
of all Obligations. No modification of any terms of any Loan Documents
(including any waiver thereof) shall be effective, unless such modification is
specifically provided in a writing directed to Borrower and Affiliate Guarantor
and executed by Lender, and such modification shall be applicable only to the
matter specified. No waiver of any Default or Event of Default shall constitute
a waiver of any other Default or Event of Default that may exist at such time,
unless expressly stated. If Lender accepts performance by any Obligor under any
Loan Documents in a manner other than that specified therein, or during any
Default or Event of Default, or if Lender shall delay or exercise any right or
remedy under any Loan Documents, such acceptance, delay or exercise shall not
operate to waive any Default or Event of Default nor to preclude exercise of any
other right or remedy. It is expressly acknowledged by Borrower and Affiliate
Guarantor that any failure of any financial covenant to be satisfied on a
measurement date shall not be cured or remedied by satisfaction of such covenant
on a subsequent date.
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
13.1. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower, Affiliate Guarantor, Lender and their
respective successors and assigns, except that neither Borrower nor Affiliate
Guarantor shall have the right to assign its rights or delegate its obligations
under any Loan Documents.
13.2. Assignments and Participations. Borrower and Affiliate
Guarantor hereby consents to Lender's participation, sale, assignment, transfer
or other disposition, at any time or times hereafter, of this Agreement and any
of the other Loan Documents, or of any portion hereof or thereof, including,
without limitation, Lender's rights, title, interests, remedies, powers, and
duties hereunder or thereunder. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were "Lender" hereunder and Lender shall be
relieved of all obligations hereunder upon any such assignments. Borrower and
Affiliate Guarantor agrees that it will use its best efforts to assist and
cooperate with Lender in any manner reasonably requested by Lender to effect the
sale of participations in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation, assisting in
the preparation of appropriate disclosure documents. Nothing herein shall limit
the right of Lender to pledge or assign any rights under the Loan Documents to
(i) any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors and any Operating
Circular issued by such Federal Reserve Bank, or (ii) counterparties to swap
agreements relating to any Loans; provided, however, that any payment by
Borrower to Lender in respect of any Obligations assigned as described in this
sentence shall satisfy Borrower's obligations hereunder to the extent of such
payment, and no such assignment shall release Lender from its obligations
hereunder.
SECTION 14. MISCELLANEOUS
14.1. Amendments and Waivers.
14.1.1. Amendment. No modification of any Loan Document,
including any extension or amendment of a Loan Document or any waiver of a
Default or Event of Default, shall be effective without the prior written
agreement of Lender and each Obligor party to such Loan Document.
14.1.2. Limitations. No Affiliate of Lender that is party to a
Bank Product agreement shall have any other right to consent to or participate
in any manner in modification of any other Loan Document. The making of any
Loans during the existence of a Default or Event of Default shall not be deemed
to constitute a waiver of such Default or Event of Default, nor to establish a
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course of dealing. Any waiver or consent granted by Lender hereunder shall be
effective only if in writing, and then only in the specific instance and for the
specific purpose for which it is given.
14.2. Indemnity. BORROWER AND AFFILIATE GUARANTOR SHALL
JOINTLY AND SEVERALLY INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY
CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING
CLAIMS ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE. In no event shall any party
to a Loan Document have any obligation thereunder to indemnify or hold harmless
an Indemnitee with respect to a Claim that is determined in a final,
non-appealable judgment by a court of competent jurisdiction to result from the
gross negligence or willful misconduct of such Indemnitee.
14.3. Notices and Communications.
14.3.1. Notice Address. Subject to Section 4.1.2 and 4.2.2, all
notices, requests and other communications by or to a party hereto shall be in
writing and shall be given to Borrower and/or Affiliate Guarantor, at Borrower's
and/or Affiliate Guarantor's address shown on the signature pages hereof, and to
any other Person at its address shown on the signature pages hereof, or at such
other address as a party may hereafter specify by notice in accordance with this
Section 14.3. Each such notice, request or other communication shall be
effective only (a) if given by facsimile transmission, when transmitted to the
applicable facsimile number, if confirmation of receipt is received; (b) if
given by mail, three Business Days after deposit in the U.S. mail, with
first-class postage pre-paid, addressed to the applicable address; or (c) if
given by personal delivery, when duly delivered to the notice address with
receipt acknowledged. Notwithstanding the foregoing, no notice to Lender
pursuant to Section 2.1.4, 2.3, 3.1.2, 4.1.1 or 5.3.3 shall be effective until
received by the individual to whose attention at Lender such notice is required
to be sent unless such notice is sent to and received by ▇▇▇▇▇▇ Girmard at her
address at Lender at TD Banknorth, N.A., ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or by facsimile transmission at (▇▇▇) ▇▇▇-▇▇▇▇. Any written
notice, request or other communication that is not sent in conformity with the
foregoing provisions shall nevertheless be effective on the date actually
received by the noticed party.
14.3.2. Electronic Communications; Voice Mail. Electronic mail
and internet websites may be used only for routine communications, such as
financial statements, Borrowing Base Certificates and other information required
by Section 10.1.2, administrative matters, distribution of Loan Documents for
execution, and matters permitted under Section 4.1.2 and 4.2.2. Lender makes no
assurances as to the privacy and security of electronic communications.
Electronic and voice mail may not be used as effective notice under the Loan
Documents.
14.3.3. Non-Conforming Communications. Lender may rely upon any
notices purportedly given by or on behalf of Borrower or Affiliate Guarantor
even if such notices were not made in a manner specified herein, were incomplete
or were not confirmed, or if the terms thereof, as understood by the recipient,
varied from a later confirmation. Borrower and Affiliate Guarantor shall jointly
and severally indemnify and hold harmless each Indemnitee from any liabilities,
losses, costs and expenses arising from any telephonic communication purportedly
given by or on behalf of Borrower or Affiliate Guarantor.
14.4. Performance of Obligations. Lender may, in its
discretion at any time and from time to time, at Borrower's and Affiliate
Guarantor's joint and several expense, pay any amount or do any act required of
any Obligor under any Loan Documents or otherwise lawfully requested by Lender
to (a) enforce any Loan Documents or collect any Obligations, in each case in a
commercially reasonable manner; (b) protect, insure, maintain or realize upon
any Collateral; or (c) defend or maintain the validity or priority of Lender's
Liens in any Collateral, including any payment of a judgment, insurance premium,
59
warehouse charge, finishing or processing charge, or landlord claim, or any
discharge of a Lien. All payments, costs and expenses (including Extraordinary
Expenses) of Lender under this Section shall be reimbursed to Lender by Borrower
and Affiliate Guarantor, on demand, with interest from the date incurred to the
date of payment thereof at the Default Rate applicable to Prime Rate Loans. Any
payment made or action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default or to exercise any other
rights or remedies under the Loan Documents.
14.5. Credit Inquiries. Borrower and Affiliate Guarantor
hereby authorizes Lender (but Lender shall have no obligation) to respond to
usual and customary credit inquiries from third parties concerning Borrower or
Affiliate Guarantor.
14.6. Severability. Wherever possible, each provision of the
Loan Documents shall be interpreted in such manner as to be valid under
Applicable Law. If any provision is found to be invalid under Applicable Law, it
shall be ineffective only to the extent of such invalidity and the remaining
provisions of the Loan Documents shall remain in full force and effect.
14.7. Cumulative Effect; Conflict of Terms. The provisions of
the Loan Documents are cumulative. The parties acknowledge that the Loan
Documents may use several different limitations, tests or measurements to
regulate the same or similar matters, and they agree that these are cumulative
and that each must be performed as provided. Except as otherwise specifically
provided in another Loan Document (by specific reference to the applicable
provision of this Agreement), if any provision contained herein is in direct
conflict with any provision in another Loan Document, the provision herein shall
govern and control.
14.8. Counterparts; Facsimile Signatures. Any Loan Document
may be executed in counterparts, each of which taken together shall constitute
one instrument. Loan Documents may be executed and delivered by facsimile, and
they shall have the same force and effect as manually signed originals. Lender
may require confirmation by a manually-signed original, but failure to request
or deliver same shall not limit the effectiveness of any facsimile signature.
14.9. Entire Agreement. Time is of the essence of the Loan
Documents. The Loan Documents embody the entire understanding of the parties
with respect to the subject matter thereof and supersede all prior
understandings regarding the same subject matter.
14.10. GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CONNECTICUT, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES
(BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).
14.11. CONSENT TO FORUM. BORROWER AND AFFILIATE GUARANTOR
HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT
SITTING IN OR WITH JURISDICTION OVER CONNECTICUT, IN ANY PROCEEDING OR DISPUTE
RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING
SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. TO THE FULLEST EXTENT ALLOWED
BY APPLICABLE LAW, BORROWER AND AFFILIATE GUARANTOR IRREVOCABLY WAIVES ALL
CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT'S PERSONAL
OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM. Nothing herein
shall limit the right of Lender to bring proceedings against any Obligor in any
other court. Nothing in this Agreement shall be deemed to preclude enforcement
60
by Lender of any judgment or order obtained in any forum or jurisdiction.
14.12. CERTAIN WAIVERS BY BORROWER. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, BORROWER AND AFFILIATE GUARANTOR KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES (A) ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY LITIGATION, ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY HEDGING
AGREEMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF LENDER RELATING
TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND
HEDGING AGREEMENTS AND AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED; (B) PRESENTMENT, DEMAND, PROTEST, NOTICE OF PRESENTMENT, DEFAULT,
NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF
ANY COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER OR AFFILIATE
GUARANTOR MAY IN ANY WAY BE LIABLE, AND HEREBY RATIFIES ANYTHING LENDER MAY DO
IN THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF ANY
COLLATERAL; (D) ANY BOND OR SECURITY THAT MIGHT BE REQUIRED BY A COURT PRIOR TO
ALLOWING LENDER TO EXERCISE ANY RIGHTS OR REMEDIES; (E) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (F) ANY CLAIM AGAINST LENDER, ON ANY
THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE
DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) IN ANY WAY RELATING TO ANY
ENFORCEMENT ACTION, OBLIGATIONS, LOAN DOCUMENTS OR TRANSACTIONS RELATING
THERETO; AND (G) NOTICE OF ACCEPTANCE HEREOF. Borrower and Affiliate Guarantor
acknowledges that the foregoing waivers are a material inducement to Lender
entering into this Agreement and that Lender is relying upon the foregoing in
its dealings with Borrower and Affiliate Guarantor. Borrower and Affiliate
Guarantor has reviewed the foregoing waivers with its legal counsel and has
knowingly and voluntarily waived its jury trial and other rights following
consultation with legal counsel. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
14.13. Patriot Act Notice. Lender hereby notifies Borrower and
Affiliate Guarantor that pursuant to the requirements of the Patriot Act, Lender
is required to obtain, verify and record information that identifies Borrower
and Affiliate Guarantor, including its legal name, address, tax ID number and
other information that will allow Lender to identify it in accordance with the
Patriot Act. Lender will also require information regarding each personal
guarantor, if any, and may require information regarding Borrower's or Affiliate
Guarantor's management and owners, such as legal name, address, social security
number and date of birth.
14.14. NO ORAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
61
14.15. COMMERICAL TRANSACTION; PREJUDGEMENT REMEDY WAIVER.
BORROWER AND AFFILIATE GUARANTOR REPRESENT, WARRANT AND ACKNOWLEDGE THAT THE
TRANSACTION OF WHICH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE A PART IS A
"COMMERCIAL TRANSACTION" WITHIN THE MEANING OF CHAPTER 903A OF CONNECTICUT
GENERAL STATUTES, AS AMENDED. BORROWER AND AFFILIATE GUARANTOR HEREBY WAIVE
THEIR RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT
GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE
OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES LENDER MAY
EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER LOAN
DOCUMENTS AND THE HEDGING AGREEMENTS. MORE SPECIFICALLY, BORROWER AND AFFILIATE
GUARANTOR ACKNOWLEDGE THAT LENDER' ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT.
ss.52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT
ORDER. BORROWER AND AFFILIATE GUARANTOR ACKNOWLEDGE AND RESERVE THEIR RIGHT TO
NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY
AS AFORESAID AND LENDER ACKNOWLEDGES BORROWER'S AND AFFILIATE GUARANTOR'S RIGHT
TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. BORROWER AND AFFILIATE
GUARANTOR FURTHER WAIVE THEIR RIGHTS TO REQUEST THAT LENDER POST A BOND, WITH OR
WITHOUT SURETY, TO PROTECT BORROWER OR AFFILIATE GUARANTOR AGAINST DAMAGES THAT
MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER AND WAIVE
ANY OBJECTIONS TO ANY PREJUDGMENT REMEDY OBTAINED BY THE LENDER.
14.16. Effective Date. This Agreement shall become effective
among the parties hereto as of the Effective Date. Until the Effective Date, the
terms of the Original LSA shall remain in full force and effect.
14.17. Restatement. This Agreement amends, restates and
supersedes the Original LSA. All references in the Loan Documents or any other
document or instrument executed or delivered in connection therewith to the
Original LSA shall hereafter be deemed to be references to this Agreement. It is
the intention of the parties hereto that this Agreement shall not constitute a
novation or discharge of the indebtedness evidenced by the Original LSA, nor
shall this Agreement affect or impair the priority of the security interests and
mortgages created by the Original LSA, it being the intention of the parties
hereto to preserve all security interests and mortgages securing payment of the
Obligations, which security interests and mortgages are acknowledged by Borrower
to be valid and subsisting against the Collateral.
62
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date set forth above.
BORROWER:
---------
AEROSPACE PRODUCTS INTERNATIONAL,
INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
AFFILIATE GUARANTOR:
-------------------
AEROSPACE PRODUITS INTERNATIONAL
LTEE
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
LENDER:
-------
TD BANKNORTH, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
63
EXHIBIT A
to
Second Amended and Restated Loan and Security Agreement
(see attached)
EXHIBIT B
to
Second Amended and Restated Loan and Security Agreement
(see attached)
EXHIBIT C
to
Second Amended and Restated Loan and Security Agreement
(see attached)
SCHEDULE 8.5
to
Second Amended and Restated Loan and Security Agreement
DEPOSIT ACCOUNTS
Borrower:
--------------------------------------------------------------------------------
Depository Bank Type of Account Account Number
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Affiliate Guarantor:
--------------------------------------------------------------------------------
Depository Bank Type of Account Account Number
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 8.6.1
to
Second Amended and Restated Loan and Security Agreement
BUSINESS LOCATIONS
1. Borrower currently has the following business locations, and no others:
Chief Executive Office:
Other Locations:
2. Borrower maintains its books and records relating to Accounts and
General Intangibles at:
3. Borrower has had no office, place of business or agent for process
located in any county other than as set forth above, except:
4. Affiliate Guarantor currently has the following business locations, and
no others:
Chief Executive Office:
Other Locations:
5. Affiliate Guarantor maintains its books and records relating to
Accounts and General Intangibles at:
6. Affiliate Guarantor has had no office, place of business or agent for
process located in any county other than as set forth above, except:
7. The following bailees, warehouseman, similar parties and consignees hold
inventory of Borrower or Affiliate Guarantor:
--------------------------------------------------------------------------------
Nature of
Name and Address of Party Relationship Amount of Inventory Owner of Inventory
------------------------- ------------ ------------------- ------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 9.1.4
to
Second Amended and Restated Loan and Security Agreement
NAMES AND CAPITAL STRUCTURE
1. The corporate names, jurisdictions of incorporation, and authorized and
issued Equity Interests of each Obligor are as follows:
--------------------------------------------------------------------------------
Number and Class Number and Class
Name Jurisdiction of Authorized Shares of Issued Shares
---- ------------ -------------------- ----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2. The record holders of Equity Interests of each Obligor are as follows:
--------------------------------------------------------------------------------
Name Class of Stock Number of Shares Record Owner
---- -------------- ---------------- ------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3. All agreements binding on holders of Equity Interests of any Obligor
with respect to such interests are as follows:
4. The name of each Affiliate of Borrower and Affiliate Guarantor and the
nature of the affiliation are as follows:
SCHEDULE 9.1.5
to
Second Amended and Restated Loan and Security Agreement
FORMER NAMES AND COMPANIES
1. Each Obligor's correct corporate name, as registered with the Secretary
of State of its state of incorporation (or the like), is shown on
Schedule 9.1.4.
2. In the conduct of their businesses during five years preceding the
Effective Date, Obligors have used the following names:
--------------------------------------------------------------------------------
Entity Fictitious, Trade or Other Name
------ -------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3. In the five years preceding the Effective Date, no Obligor has been the
surviving corporation of a merger or combination, except:
4. In the five years preceding the Effective Date, no Obligor has acquired
any substantial part of the assets of any Person, except:
SCHEDULE 9.1.12
to
Second Amended and Restated Loan and Security Agreement
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
1. Borrower's and Affiliate Guarantor's patents:
--------------------------------------------------------------------------------
Patent Owner Status in Federal Registration
------ ----- Patent Office Registration Date
------------- Number ------------
------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2. Borrower's and Affiliate Guarantor's trademarks:
--------------------------------------------------------------------------------
Trademark Owner Status in Federal Registration
--------- ----- Trademark Office Registration Date
---------------- Number ------------
------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3. Borrower's and Affiliate Guarantor's copyrights:
--------------------------------------------------------------------------------
Copyrights Owner Status in Federal Registration
---------- ----- Copyright Office Registration Date
---------------- Number ------------
------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4. Borrower's and Affiliate Guarantor's licenses (other than routine
business licenses, authorizing them to transact business in local
jurisdictions):
--------------------------------------------------------------------------------
Licensor Description of License Term of License Royalties Payable
-------- ---------------------- --------------- -----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 9.1.15
to
Second Amended and Restated Loan and Security Agreement
ENVIRONMENTAL MATTERS
---------------------
SCHEDULE 9.1.16
to
Second Amended and Restated Loan and Security Agreement
RESTRICTIVE AGREEMENTS
----------------------
--------------------------------------------------------------------------------
Entity Agreement Restrictive Provisions
------ --------- ----------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 9.1.17
to
Second Amended and Restated Loan and Security Agreement
LITIGATION
----------
1. Proceedings and investigations pending against Borrower or Affiliate
Guarantor:
--------------------------------------------------------------------------------
Title of Action Nature of Action Complaining Parties Jurisdiction or Tribunal
--------------- ---------------- ------------------- ------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2. The only threatened proceedings or investigations of which Borrower or
Affiliate Guarantor is aware are as follows:
SCHEDULE 9.1.19
to
Second Amended and Restated Loan and Security Agreement
PENSION PLANS
-------------
1. Borrower and Affiliate Guarantor have the following Multiemployer Plans:
--------------------------------------------------------------------------------
Party Type of Multiemployer Plan
----- --------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2. Borrower and Affiliate Guarantor have the following Foreign Plans:
--------------------------------------------------------------------------------
Party Description of Plan
----- -------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 9.1.21
to
Second Amended and Restated Loan and Security Agreement
LABOR CONTRACTS
---------------
Borrower and Affiliate Guarantor are party to the following collective
bargaining agreements, management agreements and consulting agreements:
--------------------------------------------------------------------------------
Parties Type of Agreement Term of Agreement
------- ----------------- -----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 10.2.2
to
Second Amended and Restated Loan and Security Agreement
EXISTING LIENS
--------------
SCHEDULE 10.2.17
to
Second Amended and Restated Loan and Security Agreement
EXISTING AFFILIATE TRANSACTIONS
-------------------------------