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EXHIBIT 4.4
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CREDIT AND SECURITY AGREEMENT
(U.S. $32,000,000)
Dated as of April 1, 1998
among
PARAGON CORPORATE HOLDINGS INC.
as Borrower
and
THE BANKS WHICH ARE SIGNATORIES HERETO
and
KEY CORPORATE CAPITAL INC.
as Agent
and
KEY CORPORATE CAPITAL INC.
as Letter of Credit Bank
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TABLE OF CONTENTS
Section Page
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Section 1 DEFINITIONS AND ACCOUNTING TERMS
1.1 Certain Defined Terms........................................................ 1
1.2 Computation of Time Periods.................................................. 1
1.3 Accounting Terms............................................................. 1
Section 2 STATEMENT OF TERMS.
2.1 Revolving Credit Facility.................................................... 1
(a) Revolving Credit Advances........................................... 1
(b) Revolving Credit Borrowings......................................... 2
(c) Revolving Credit Notes.............................................. 2
(d) Control Account Maintained by Agent................................. 2
2.2 Permitted Discretion......................................................... 3
2.3 Requests for Revolving Credit Advances....................................... 3
(a) Credit Requests Executed by the Borrower............................ 3
(b) Requests for Borrowing Deemed Given................................. 4
2.4 Funding of Revolving Credit Advances......................................... 4
(a) Agent Election as to Funding........................................ 4
(b) Same Day Funding by Banks........................................... 4
(c) Periodic Funding by Banks; KCCI Settlement Advances................. 5
(d) Periodic Funding by Banks; Agent Special Advances................... 6
(e) Settlement of Settlement Advances and Agent Special Advances........ 7
2.5 Failure of Bank to Fund...................................................... 9
(a) Payment Constituting Ratable Portion................................ 9
(b) Treatment of Defaulting Bank........................................ 10
(c) Continuing Obligation of Banks to Fund.............................. 10
2.6 Repayments and Prepayments................................................... 10
(a) Repayment........................................................... 10
(b) Mandatory Prepayment of Revolving Credit Advances and Agent
Special Advances.................................................... 10
(c) Reduction of Revolving Credit Commitment............................ 11
(d) Permitted Prepayments............................................... 11
(e) Mandatory Application of Net Proceeds............................... 12
(f) Prepayment Premium.................................................. 12
2.7 Rate Conversion and Rate Continuation........................................ 12
2.8 Letters of Credit............................................................ 14
(a) Term; Form and Conditions of Letters of Credit...................... 14
(b) Requests for Letters of Credit...................................... 14
(c) Participation by Banks.............................................. 15
(d) Reimbursement....................................................... 15
(e) Failure to Reimburse................................................ 15
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Section Page
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(f) Obligations Absolute................................................ 16
(g) Liability of Letter of Credit Bank.................................. 16
(h) Letter of Credit Bank Indemnity..................................... 17
(i) Effect of Applicable Law or Custom.................................. 17
(j) Termination of Letter of Credit Commitment.......................... 17
2.9 Fees......................................................................... 18
(a) Agent's Fee......................................................... 18
(b) Unused Line Fee..................................................... 18
(c) Letter of Credit Fees............................................... 18
(d) Collateral Management Fee........................................... 18
(e) Per Diem Audit Fees................................................. 18
(f) Late Charges........................................................ 19
(g) Payment of Fees; NonRefundable...................................... 19
2.10 Interest on Advances......................................................... 19
(a) Interest Rate-Revolving Credit Advances............................. 19
(b) Applicable Margin; Terms of Adjustment.............................. 20
2.11 Default Interest............................................................. 21
2.12 Interest Rate Determination.................................................. 21
2.13 Payments and Computations.................................................... 21
(a) Payments............................................................ 21
(b) Payment Procedures.................................................. 22
(c) Application of Payments............................................. 22
(d) Authorization to Charge Account..................................... 22
(e) Computations of Interest and Fees................................... 22
(f) Payment not on Business Day......................................... 23
(g) Presumption of Payment in Full by the Borrower...................... 23
2.14 Change in Law; LIBOR Rate Advances Unlawful.................................. 23
2.15 Unavailability............................................................... 24
(a) Inadequate Rate..................................................... 24
(b) Unavailable Quotations.............................................. 24
(c) Unavailable Deposits................................................ 24
2.16 Pro Rata Treatment........................................................... 24
Section 3 CONDITIONS OF LENDING.
3.1 Conditions Precedent to Initial Advances..................................... 24
3.2 Conditions Precedent to all Advances......................................... 24
(a) Representation Bringdown............................................ 25
(b) No Default; Compliance with Terms................................... 25
(c) No Material Adverse Change.......................................... 25
(d) Confirmation of Borrowing Base...................................... 25
(e) Other Deliveries.................................................... 25
Section 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL
REQUIREMENTS
4.1 Grant of Security Interest................................................... 25
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Section Page
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4.2 Perfection................................................................... 26
4.3 General Representations as to Collateral..................................... 26
4.4 Title to Collateral; Liens; Transfers........................................ 26
4.5 Changes Affecting Perfection................................................. 26
4.6 Power of Attorney for Insurance.............................................. 27
4.7 Protection of Collateral; Reimbursement...................................... 27
4.8 Inspection; Verification..................................................... 28
4.9 Assignments, Records and Schedules of Accounts............................... 28
4.10 Reporting Regarding Inventory................................................ 29
4.11 Other Collateral Reports..................................................... 29
4.12 Status of Collateral......................................................... 30
4.13 Reinstatement................................................................ 30
4.14 Termination of Security Interest; Release of Collateral...................... 30
Section 5 PROCEEDS OF ACCOUNTS AND INVENTORY
5.1 Receipt in Trust............................................................. 30
5.2 Cash Collateral Accounts..................................................... 30
5.3 Application of Deposits to Loan Account...................................... 31
5.4 Crediting of Collections and Remittances..................................... 32
5.5 Cost of Collection........................................................... 32
5.6 Return of Funds.............................................................. 32
5.7 Notice to Account Debtors.................................................... 33
5.8 Appointment of Attorney-in-Fact.............................................. 33
Section 6 SPECIFIC REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations and Warranties Regarding Accounts............................ 34
6.2 Disputes and Claims Regarding Accounts....................................... 34
6.3 Accounts..................................................................... 34
6.4 Compliance with Terms of Accounts............................................ 34
6.5 No Waivers, Extensions, Amendments........................................... 35
6.6 Lien Priority................................................................ 35
6.7 Location of Collateral....................................................... 35
6.8 Lien Waivers, Landlord Waivers, Warehouse Receipts........................... 35
6.9 Maintenance of Insurance..................................................... 36
6.10 Limitations on Dispositions of Inventory..................................... 36
Section 7 GENERAL REPRESENTATIONS AND WARRANTIES.
7.1 Existence.................................................................... 36
7.2 Authorization................................................................ 37
7.3 Enforceability............................................................... 37
7.4 Litigation; Proceedings...................................................... 37
7.5 Taxes........................................................................ 37
7.6 Title........................................................................ 38
7.7 Consents; Approvals.......................................................... 38
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Section Page
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7.8 Lawful Operations............................................................ 38
7.9 Environmental Compliance..................................................... 38
7.10 Environmental Laws and Permits............................................... 40
7.11 ERISA........................................................................ 40
7.12 Agreements; Adverse Obligations; Labor Disputes.............................. 40
7.13 Financial Statements......................................................... 40
7.14 Intellectual Property........................................................ 41
7.15 Insurance.................................................................... 41
7.16 Value; Solvency.............................................................. 41
7.17 Investment Company Act Status................................................ 41
7.18 Regulation U/Regulation X Compliance......................................... 41
7.19 Full Disclosure.............................................................. 42
Section 8 COVENANTS OF THE BORROWER.
8.1 Reporting and Notice Covenants............................................... 42
(a) Monthly Financial Statements........................................ 42
(b) Quarterly Financial Statements...................................... 42
(c) Annual Financial Statements......................................... 43
(d) Officer's Certificate............................................... 43
(e) Annual Business Plan................................................ 43
(f) Intercompany Loans.................................................. 44
(g) Other Information................................................... 44
(h) Notices............................................................. 44
(i) Notice of Default under ERISA....................................... 44
(j) Environmental Reporting............................................. 45
(k) Multiemployer Plan Withdrawal Liability............................. 45
8.2 Affirmative Covenants........................................................ 45
(a) Corporate Existence................................................. 45
(b) Financial Records................................................... 45
(c) Visitation.......................................................... 45
(d) Compliance with Law................................................. 46
(e) Compliance with Environmental Laws.................................. 46
(f) Properties.......................................................... 47
(g) Use of Proceeds; Intercompany Loans................................. 47
(h) Compliance with Terms of All Material Contracts..................... 47
(i) Taxes............................................................... 47
(j) Insurance........................................................... 47
(k) License to Third Parties and Subsidiaries........................... 48
(l) Year 2000 Compliance................................................ 48
(m) Refinancing......................................................... 48
8.3 Negative Covenants........................................................... 48
(a) Equity Transactions; Permitted Acquisitions......................... 48
(b) Credit Extensions................................................... 49
(c) Indebtedness........................................................ 49
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Section Page
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(d) Liens; Leases....................................................... 50
(e) Investments......................................................... 50
(f) Dividends; Management Fee........................................... 51
(g) Change in Nature of Business........................................ 51
(h) Charter Amendments.................................................. 51
(i) Accounting Changes.................................................. 51
(j) Compliance with ERISA............................................... 52
(k) Additional Bank Accounts; Excess Cash............................... 53
(l) Regulation U Compliance............................................. 53
(m) Arm's-Length Transactions........................................... 53
8.4 Financial Covenants.......................................................... 53
(a) Minimum Consolidated EBITDA......................................... 54
(b) Consolidated Fixed Charge Coverage Ratio............................ 54
Section 9 EVENTS OF DEFAULT
9.1 Payment...................................................................... 54
9.2 Representations and Warranties............................................... 54
9.3 Reporting and Notice Provisions; Violation of Certain Affirmative
Covenants.................................................................... 54
9.4 Violation of Negative Covenants and Financial Covenants...................... 55
9.5 Other Loan Documents......................................................... 55
9.6 Cross-Default................................................................ 55
9.7 False or Misleading Reports.................................................. 55
9.8 Destruction of Collateral.................................................... 55
9.9 Material Adverse Effect...................................................... 55
9.10 Termination of Existence..................................................... 55
9.11 Control...................................................................... 55
9.12 Failure of Enforceability of this Agreement, Credit Document; Security....... 55
9.13 ERISA........................................................................ 56
9.14 Judgments.................................................................... 56
9.15 Forfeiture Proceedings....................................................... 56
9.16 Financial Impairment......................................................... 56
Section 10 REMEDIES
10.1 Optional Defaults............................................................ 57
10.2 Automatic Defaults........................................................... 57
10.3 General Rights and Remedies of Agent and the Banks........................... 57
10.4 Additional Remedies.......................................................... 57
(a) Possession of Collateral............................................ 57
(b) Foreclosure of Liens................................................ 58
(c) Disposition of Collateral........................................... 58
(d) Application of Collateral........................................... 58
10.5 Termination; Effect on Borrower Obligations.................................. 58
10.6 Set-off...................................................................... 58
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Section Page
10.7 Authority to Execute Transfers............................................... 58
10.8 Limited License to Liquidate................................................. 59
10.9 Actions in Respect of the Letters of Credit Upon Default..................... 59
10.10 Letter of Credit Collateral Account.......................................... 59
(a) Application......................................................... 59
(b) No Borrower or Third Party Claims................................... 60
(c) No Liens or Transfers of Account.................................... 60
(d) Reasonable Care..................................................... 60
10.11 Equalization................................................................. 60
10.12 Remedies Cumulative.......................................................... 60
Section 11 THE AGENT
11.1 The Agent.................................................................... 60
11.2 Nature of Appointment........................................................ 61
11.3 Agent as a Bank; Other Transactions.......................................... 61
11.4 Instructions from Banks...................................................... 61
11.5 Bank's Diligence............................................................. 61
11.6 No Implied Representations................................................... 61
11.7 Sub-Agents................................................................... 62
11.8 Agent's Diligence............................................................ 62
11.9 Notice of Default............................................................ 62
11.10 Agent's Liability............................................................ 62
11.11 Agent's Indemnity............................................................ 63
11.12 Resignation or Removal of Agent.............................................. 63
Section 12 TRANSFERS AND ASSIGNMENTS.
12.1 Transfer of Commitments...................................................... 63
(a) Prior Consent....................................................... 64
(b) Agreement; Transfer Fee............................................. 64
(c) Notes............................................................... 64
(d) Parties............................................................. 64
12.2 Sale of Participations....................................................... 65
(a) Benefits of Participant............................................. 65
(b) Rights Reserved..................................................... 65
(c) No Delegation....................................................... 65
12.3 Confidentiality.............................................................. 65
Section 13 INDEMNITIES.
13.1 Increased Costs.............................................................. 66
13.2 Risk-Based Capital........................................................... 67
13.3 Taxes........................................................................ 67
(a) Taxes; Withholding.................................................. 67
(b) Stamp Taxes......................................................... 67
(c) Other Taxes......................................................... 68
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Section Page
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(d) Request for Refund.................................................. 68
(e) Exemption Certificate............................................... 68
(f) Furnishing of Certificate........................................... 69
(g) Survival of Provision............................................... 69
13.4 Losses....................................................................... 69
13.5 Indemnification for Requests................................................. 69
13.6 General Indemnity............................................................ 70
13.7 Certificate for Indemnification.............................................. 70
13.8 Duty To Mitigate; Standard Treatment......................................... 70
Section 14 GENERAL
14.1 Amendments and Waivers....................................................... 70
14.2 General Appointment as Attorney-in-Fact...................................... 71
(a) Agent Not Liable.................................................... 72
(b) Performance by Agent of the Borrower's Obligations.................. 72
14.3 Cumulative Provisions........................................................ 72
14.4 Binding Effect............................................................... 72
14.5 Costs and Expenses........................................................... 72
14.6 Survival of Provisions....................................................... 73
14.7 Immediate U.S. Funds......................................................... 73
14.8 Captions..................................................................... 73
14.9 Sharing of Information....................................................... 73
14.10 Interest Rate Limitation..................................................... 73
14.11 Limitation of Liability...................................................... 74
14.12 Illegality................................................................... 74
14.13 Notices...................................................................... 74
14.14 Governing Law................................................................ 74
14.15 Entire Agreement............................................................. 75
14.16 JURY TRIAL WAIVER............................................................ 75
14.17 Jurisdiction; Venue; Inconvenient Forum...................................... 75
(a) Jurisdiction........................................................ 75
(b) Venue; Inconvenient Forum........................................... 75
14.18 Execution in Counterparts.................................................... 76
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EXHIBITS AND SCHEDULES
Exhibit A (Form of Revolving Credit Note)
Exhibit B (Form of Credit Request)
Exhibit C (Form of Rate Conversion/Continuation Request)
Exhibit D [ Intentionally Omitted ]
Exhibit E (Form of Subsidiary Guaranty)
Exhibit F-1 (Form of ▇▇▇▇▇▇ Security Agreement)
Exhibit F-2 (Form of A.B. Dick Security Agreement)
Exhibit G (Form of Borrowing Base Certificate)
Exhibit H (Form of Restricted Account Agreement)
Exhibit I (Form of Assignment Agreement)
Exhibit J-1 (Form of Landlord Waiver)
Exhibit J-2 (Form of Mortgagee Waiver)
Exhibit J-3 (Form of Warehouseman's Waiver)
Exhibit K-1 (Form of Limited License--Borrower)
Exhibit K-2 (Form of Limited License--Subsidiary Guarantor)
Exhibit K-3 (Form of Limited License--Third Party Licensor)
Annex I Commitments
Annex II Definitions
Annex III Conditions Precedent to Initial Advances
Annex IV Supplemental Schedule
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CREDIT AND SECURITY AGREEMENT
U.S. $32,000,000
Dated as of April 1, 1998
PARAGON CORPORATE HOLDINGS INC., a Delaware corporation, the
BANKS listed on the signature pages of this Agreement, KEY CORPORATE CAPITAL
INC., a Michigan corporation, as Agent for the Banks under this Agreement, and
KEY CORPORATE CAPITAL INC., a Michigan corporation, as Letter of Credit Bank
under this Agreement, hereby agree as follows:
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS. Certain capitalized terms used in this
Agreement are defined on ANNEX II attached hereto and incorporated herein by
reference.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement, for the purpose of
computing periods of time from a specified date to a later specified date, the
word "from" means "from and including" and the words "to" and "until" each mean
"to but excluding".
1.3 ACCOUNTING TERMS. All accounting and financial terms not
specifically defined herein shall be construed in accordance with GAAP as in
effect from time to time and shall be applied on a basis consistent with those
applied in the preparation of the Borrower's audited financial statements for
the Fiscal Year ending December 31, 1997; PROVIDED, HOWEVER, that (a) all
financial statements shall reflect the Borrower's adoption of FAS 106 and (b) if
any change in GAAP itself affects the calculation of any financial covenant in
Section 8.4 of this Agreement, the Borrower may by written notice to the Agent,
or the Agent (upon request by the Required Banks), may by written notice to the
Borrower, require that such covenant thereafter be calculated in accordance with
GAAP as in effect, and applied by the Borrower, immediately before such change
in GAAP occurs. If any such notice is given, the compliance certificates
delivered pursuant to Section 8.1(d) of this Agreement after such change occurs
shall be accompanied by reconciliations of the difference between the
calculation set forth therein and a calculation made in accordance with GAAP as
in effect from time to time after such change occurs.
SECTION 2 STATEMENT OF TERMS.
2.1 REVOLVING CREDIT FACILITY.
(a) REVOLVING CREDIT ADVANCES. Subject to the terms and
conditions set forth in this Agreement, each Bank, severally agrees to
make, from time to time from and after the Closing Date until the
Business Day immediately preceding the Revolving Credit Termination
Date, advances to or for the account of the Borrower on a revolving
credit basis (each a "Revolving Credit Advance"); PROVIDED, HOWEVER,
that the outstanding principal amount of Revolving Credit Advances by
or on behalf of such
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Bank shall not at any time exceed the lesser of: (x) an amount equal to
such Bank's Ratable Portion of the Borrowing Base at such time minus
the LC Exposure of such Bank at such time or (y) such Bank's Ratable
Portion of the Revolving Credit Commitment in effect at such time minus
the LC Exposure of such Bank at such time. Within the limits set forth
in this Agreement, the Borrower may borrow, prepay and reborrow
Revolving Credit Advances.
(b) REVOLVING CREDIT BORROWINGS. Each Revolving Credit
Borrowing shall be: (i) if comprised of Alternate Base Rate Advances,
in an amount at the option of the Borrower, and (ii) if comprised of
LIBOR Rate Advances, in an aggregate amount of not less than Five
Hundred Thousand Dollars ($500,000) or an integral multiple of One
Hundred Thousand Dollars ($100,000) in excess thereof. The Borrower
shall be entitled to have more than one Revolving Credit Borrowing
outstanding at one time; provided, however, that the Borrower shall not
be entitled to request any Revolving Credit Borrowing which, together
with all other outstanding Revolving Credit Borrowings, would result in
any Bank's having an aggregate of more than ten (10) LIBOR Rate
Advances outstanding at any one time.
(c) REVOLVING CREDIT NOTES; LOAN ACCOUNT. Each Bank's
Revolving Credit Advances shall be evidenced at all times by a
Revolving Credit Note executed and delivered by the Borrower, payable
to the order of such Bank and in a principal amount equal to such
Bank's Revolving Credit Commitment in effect at the execution and
delivery of the Revolving Credit Note. Whenever the Borrower obtains a
Revolving Credit Borrowing, each Bank shall endorse an appropriate
entry in respect of the Revolving Credit Advance of such Bank
comprising such Revolving Credit Borrowing on such Bank's Revolving
Credit Note or make an appropriate entry in a loan account (the "Loan
Account") maintained in such Bank's books and records, or both, to
evidence such Bank's Revolving Credit Advances. The Loan Account shall
also evidence: (i) accrued interest on the Revolving Credit Advances of
such Bank, (ii) all other amounts due to the Bank in respect of such
Revolving Credit Advances and (iii) all payments by the Borrower in
respect of such Revolving Credit Advances and the Ratable Portion of
Collections and Remittances received by such Bank from the Agent for
application to such Revolving Credit Advances. Each entry on a Bank's
Revolving Credit Note, books and records or Loan Account shall be prima
facie evidence of the data entered. Such entries by a Bank shall not be
a condition to the Borrower's obligation to pay.
(d) CONTROL ACCOUNT MAINTAINED BY AGENT. The Agent shall
maintain on its books and records a control account (the "Control
Account") in respect of the Borrower and the Revolving Credit
Borrowings hereunder. The Agent shall record in the Control Account:
(i) advances of Revolving Credit Borrowings to the Borrower, (ii) the
Ratable Portion of each Bank in the outstanding Revolving Credit
Borrowings, (iii) the amounts of any Collections and Remittances
received and credited to reduce the Revolving Credit Advances and (iv)
the Ratable Portion of each Bank in such credited Collections and
Remittances. Each entry by the Agent in the Control Account shall be
prima facie evidence of the data entered.
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2.2 PERMITTED DISCRETION. The Agent may, but shall not be obligated to,
rely on each Borrowing Base Certificate and any other schedules or reports in
evaluating Accounts and Inventory for purposes of calculating the Borrowing
Base. The Borrower and the Banks agree that the Agent, in the good faith
exercise of its Permitted Discretion, may from time to time: (a) establish
reserves against, and increase or decrease the amount of reserves against,
Eligible Accounts and Eligible Inventory, (b) reduce the advance rates provided
for in the definition of Borrowing Base or restore such reduced rates of advance
to any level up to the rates of advance stated in the definition of Borrowing
Base, (c) impose additional restrictions to the standards of eligibility set
forth in the definition of Eligible Accounts and Eligible Inventory, and (d)
determine whether Accounts and Inventory constitute Eligible Accounts or
Eligible Inventory, as the case may be. The Agent shall use reasonable efforts
to notify the Borrower prior to any actions taken under clauses (a)-(d) of this
Section 2.2, but shall not be liable for any damages arising out of any failure
to so notify the Borrower.
2.3 REQUESTS FOR REVOLVING CREDIT ADVANCES. Revolving Credit Advances
comprising a Revolving Credit Borrowing shall be made upon request of the
Borrower in accordance with clause (a) below or upon a request deemed to be made
by the Borrower pursuant to clause (b) below or in conjunction with Section
2.8(e) of this Agreement.
(a) CREDIT REQUESTS EXECUTED BY THE BORROWER. Requests
from the Borrower for Revolving Credit Advances comprising a Revolving
Credit Borrowing shall be given by the Borrower to the Agent not later
than 12:00 noon (Cleveland, Ohio time): (i) on the Business Day which
is the requested date of a proposed Revolving Credit Borrowing
comprised of Alternate Base Rate Advances (Revolving Credit Advances
made on the Closing Date must consist entirely of Alternate Base Rate
Advances) and (ii) on the Business Day which is three (3) Business Days
before the requested date of a proposed Revolving Credit Borrowing
comprised of LIBOR Rate Advances. Except as herein after permitted,
each such request (a "Credit Request") for a Revolving Credit Borrowing
shall be in writing signed by the Borrower and transmitted by the
Borrower to the Agent by telecopier, telex or cable (in the case of
telex or cable, confirmed in writing prior to the date of the requested
Revolving Credit Borrowing), in substantially the form of Exhibit B
hereto. Each Credit Request shall specify: (A) the requested date of
the Revolving Credit Advances comprising such Revolving Credit
Borrowing, (B) the aggregate amount of such Revolving Credit Advances,
(C) whether such Revolving Credit Borrowing is to be comprised of
Alternate Base Rate Advances or LIBOR Rate Advances, and (D) in the
case of a proposed Revolving Credit Borrowing comprised of LIBOR Rate
Advances, the initial Interest Period for such LIBOR Rate Advances.
Each Credit Request shall be irrevocable and binding on the Borrower
and be subject to the indemnification provisions of Section 13 of this
Agreement. The Borrower may give a Credit Request telephonically so
long as: (I) a written Credit Request confirmation is received by the
Agent by 12:30 p.m. (Cleveland, Ohio time) on the same day such
telephonic Credit Request was given and (II) that the other
requirements of this Section 2.3(a) are complied with. The Agent may
rely on such telephonic Credit Request to the same extent that the
Agent may rely on a written Credit Request. The Borrower shall bear all
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risks related to the giving of a Credit Request by the Borrower whether
given telephonically or by such other method of transmission as the
Borrower shall elect.
(b) REQUESTS FOR BORROWING DEEMED GIVEN. The Borrower
shall be deemed to have made a request for a Revolving Credit Borrowing
comprised of Alternate Base Rate Advances (a "Deemed Credit Request"),
which Deemed Credit Request shall be deemed to be irrevocable, upon the
occurrence of any of the following:
(i) LETTER OF CREDIT DRAWING. As specified in Section
2.8(e) of this Agreement, upon a drawing under a Letter of
Credit, the Borrower shall be deemed to have made a request
for a Revolving Credit Borrowing comprised of Alternate Base
Rate Advances in an amount equal to the amount necessary to
reimburse the Letter of Credit Bank for any drawing upon the
Letter of Credit.
(ii) PAYMENT OF INTEREST AND OBLIGATIONS. Unless
payment is otherwise made by the Borrower, upon any interest,
fee or other payment Obligation hereunder becoming due without
payment by or on behalf of the Borrower, the Borrower shall be
deemed to have made a request for a Revolving Credit Borrowing
comprised of Alternate Base Rate Advances in an amount equal
to the amount necessary to pay such interest or fee.
Each Bank acknowledges and agrees that its obligation to participate in
and make Advances comprising a Borrowing pursuant to a Deemed Credit
Request is absolute and unconditional and shall not be affected by any
event or circumstance whatsoever, including the occurrence of any
Potential Default or Event of Default hereunder or the failure of any
condition precedent set forth in Section 3 of this Agreement to be
satisfied at the time of the making of such Deemed Credit Request, and
each Advance made by a Bank in satisfaction of its obligation shall be
made without any offset, abatement, withholding or reduction
whatsoever.
2.4 FUNDING OF REVOLVING CREDIT ADVANCES.
(a) AGENT ELECTION AS TO FUNDING. Promptly after receipt
of a Credit Request for a Revolving Credit Borrowing or a Deemed Credit
Request, the Agent shall elect, in its sole discretion, either: (i) to
require same day funding pursuant to Section 2.4(b) for Revolving
Credit Advances in connection with such requested Revolving Credit
Borrowing or (ii) to request KCCI to make a Settlement Advance pursuant
to Section 2.4(c) in the amount of the requested Revolving Credit
Borrowing; provided, however, that, if KCCI declines, in its sole
discretion, to make such a Settlement Advance, the Agent shall elect to
have the terms of Section 2.4(b) apply to such requested Borrowing.
(b) SAME DAY FUNDING BY BANKS. In the event the Agent has
elected to have same day funding of Revolving Credit Advances pursuant
to this Section 2.4(b), the Agent shall notify each Bank of each Credit
Request or Deemed Credit Request no later than 12:30 p.m. (Cleveland,
Ohio time) on the date received by telecopy, telephone
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or similar form of transmission. Unless the Agent elects to have
periodic funding of Advances by the Banks in accordance with Section
2.4(c) below, each Bank shall, before 3:00 p.m. (Cleveland, Ohio time)
on the date of each Revolving Credit Borrowing requested, make
available to the Agent, in immediately available funds at the account
of the Agent maintained at the Payment Office as shall have been
notified by the Agent to the Banks prior to such date, such Bank's
Ratable Portion of such Revolving Credit Borrowing.
(i) DISBURSEMENT OF FUNDS RECEIVED. On the date
requested by the Borrower for a Revolving Credit Borrowing,
after the Agent's receipt of the funds representing a Bank's
Ratable Portion of such Revolving Credit Borrowing and subject
to the terms and conditions set forth in this Agreement, the
Agent shall make such Revolving Credit Advance of such Bank
available to the Borrower, in immediately available funds, by
wire transfer or intrabank transfer to the Operating Account.
(ii) AVAILABILITY OF REVOLVING CREDIT ADVANCE FUNDS.
Unless the Agent shall have received notice from a Bank prior
to the time of any Revolving Credit Borrowing that such Bank
will not make available to the Agent such Bank's Ratable
Portion of such Borrowing, the Agent may assume that such Bank
has made its Ratable Portion of such Borrowing available to
the Agent on the date of such Borrowing in accordance with
Section 2.4(b) of this Agreement. In reliance upon such
assumption, the Agent may, but shall not be obligated to, make
available to the Borrower on such date, a corresponding
portion of such Borrowing. Any disbursement by the Agent in
reliance on such assumption shall be deemed to be a Revolving
Credit Advance by such Bank.
(c) PERIODIC FUNDING BY BANKS; KCCI SETTLEMENT ADVANCES.
In the event the Agent elects, in its sole discretion, with the consent
of KCCI, to have periodic funding of Revolving Credit Borrowings
pursuant to Section 2.4(e) below, KCCI shall, upon the request of the
Agent, on the date requested by the Borrower for a Revolving Credit
Borrowing, make a Revolving Credit Advance to the Borrower from its own
funds and on a nonratable basis pending settlement pursuant to Section
2.4(e) below in the amount of such requested Revolving Credit Borrowing
(any such Revolving Credit Advance made solely by KCCI pursuant to this
Section 2.4(c) being hereinafter referred to as a "Settlement Advance"
and, collectively with all such Advances, as "Settlement Advances");
PROVIDED, HOWEVER, that the outstanding principal amount of Settlement
Advances advanced by KCCI shall not at any time exceed the lesser of:
(x) an amount equal to the Borrowing Base of the Borrower at such time
MINUS the aggregate outstanding principal of Revolving Credit Advances
(excluding Settlement Advances but including Agent Special Advances) at
such time AND MINUS the aggregate LC Exposure of the Banks at such time
or (y) an amount equal to the aggregate Revolving Credit Commitments of
the Banks in effect at such time MINUS the aggregate outstanding
Revolving Credit Advances (excluding Settlement Advances but including
Agent Special Advances) at such time AND MINUS the aggregate LC
Exposure of the Banks at such time.
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(i) DISBURSEMENT OF KCCI FUNDS. If KCCI has agreed to
make a requested Settlement Advance, KCCI shall, before 2:00
p.m. (Cleveland, Ohio time) on the date requested by the
Borrower for such Revolving Credit Borrowing, make such
Settlement Advance available to the Borrower, in immediately
available funds, by wire transfer or intrabank transfer to the
Operating Account.
(ii) SETTLEMENT ADVANCES AS REVOLVING CREDIT
ADVANCES. Each Settlement Advance shall be deemed for all
purposes hereof to be a Revolving Credit Advance hereunder and
shall be subject to all the terms and conditions applicable to
other Revolving Credit Advances except that all payments
thereon shall be payable to KCCI solely for its own account
(and for the account of the holder of any participation
interest with respect to such Revolving Credit Advance
purchased pursuant to Section 2.4(e)(iii) of this Agreement).
(iii) DISBURSEMENT OF KCCI FUNDS. The Agent shall not
request KCCI to make any Settlement Advance if the Agent has
received written notice from any Bank that one or more of the
conditions set forth in Section 3 will not be satisfied on the
date requested by the Borrower for such Borrowing. Prior to
making, in its sole discretion, any Settlement Advance, KCCI
shall not otherwise be required to determine whether the
conditions precedent set forth in Section 3 of this Agreement
have been satisfied or whether the requested Borrowing would
exceed the Borrowing Base and Revolving Credit Commitments of
the Banks then in effect.
(d) PERIODIC FUNDING BY BANKS; AGENT SPECIAL ADVANCES. The
Agent is hereby authorized by the Borrower and the Banks, to make from
time to time, in the Agent's sole discretion, (i) after the occurrence
of a Potential Default or the occurrence of an Event of Default that
has not been waived by the Required Banks or (ii) at any time that any
of the other applicable conditions precedent set forth in Section 3 of
this Agreement have not been satisfied, to make Revolving Credit
Advances to the Borrower, from its own funds, on a nonratable basis, in
the amount of any requested Revolving Credit Borrowing (any such
Advance being hereinafter referred to as an "Agent Special Advance,"
and, collectively with all such advances, as "Agent Special Advances")
on behalf of the Banks, which the Agent, in its sole discretion, deems
necessary or desirable; provided; however, that: (A) the aggregate
amount of such Agent Special Advances shall not at any time exceed an
amount equal to (x) Five Hundred Thousand Dollars ($500,000) minus (y)
the amount by which Revolving Credit Advances (including Settlement
Advances but excluding Agent Special Advances) outstanding at such
time, together with the aggregate LC Exposure of all Banks at such
time, exceeds the Borrowing Base at such time, and (B) the Agent
Special Advances shall be subject to the periodic settlement with the
Banks pursuant to Section 2.4(e) of this Agreement.
(i) REVOCATION OF AUTHORITY. The Required Banks may
at any time revoke or limit the amount of the Agent's
authorization contained in this Section
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2.4(d) to make Agent Special Advances, any such revocation to
be in writing and to become effective prospectively upon the
Agent's receipt thereof.
(ii) TREATMENT OF AGENT SPECIAL ADVANCES. The Agent
Special Advances shall be repayable on demand, be secured by
the Collateral, constitute in all respects Revolving Credit
Advances and Obligations hereunder, and bear interest at the
rate applicable from time to time to the Revolving Credit
Advances.
(e) SETTLEMENT OF SETTLEMENT ADVANCES AND AGENT SPECIAL
ADVANCES. The Agent and the Banks hereby agree that, except in the case
of Revolving Credit Advances consisting of Settlement Advances or Agent
Special Advances pending settlement as provided in this Section 2.4(e),
each Bank's funded portion of such Revolving Credit Advances is
intended to be equal at all times to such Bank's Ratable Portion of the
outstanding Revolving Credit Advances. The Agent and the Banks agree
(which agreement shall not be for the benefit of or enforceable by the
Borrower) that, in order to facilitate the administration of this
Agreement and other Loan Documents, the Agent may elect, with the
consent of KCCI, to settle accounts (each such settlement of accounts
hereunder, a "Settlement") as to the Settlement Advances and Agent
Special Advances among the Banks on a periodic basis in accordance with
the following provisions:
(i) SETTLEMENT DATE. The Agent shall request
such Settlement of accounts of the Banks as to Settlement
Advances and Agent Special Advances on a basis not less
frequently than once during each five (5) Business Day period,
or on a more frequent basis if so determined by the Agent: (A)
on behalf of KCCI, with respect to each outstanding Settlement
Advance, and (B) for itself, with respect to each Agent
Special Advance, by notifying the other Banks by telecopy,
telephone or other similar form of transmission, of such
requested Settlement, no later than 12:30 p.m. (Cleveland,
Ohio time) on the date of such requested Settlement (the
"Settlement Date"). The Settlement Date for outstanding
Settlement Advances and Agent Special Advances shall be such
day of each calendar week as the Agent shall notify the Banks
of from time to time.
(ii) SETTLEMENT. Each Bank (other than KCCI,
in the case of Settlement Advances) shall make the amount of
such Bank's Ratable Portion of the outstanding principal
amount of the Settlement Advances and Agent Special Advances
with respect to which Settlement is requested available to the
Agent, for itself or for the account of KCCI, in immediately
available funds at the account of the Agent maintained at the
Payment Office not later than 2:00 p.m. (Cleveland, Ohio
time), on the Settlement Date applicable thereto. Such
Settlement shall occur regardless of whether the applicable
conditions precedent set forth in Section 3 have then been
satisfied. Such amounts made available to the Agent shall be
applied against the amounts of the applicable Settlement
Advance or Agent Special Advance and, together with the
portion of such
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Settlement Advance or Agent Special Advance representing
KCCI's Ratable Portion thereof, shall constitute Revolving
Credit Advances of such Banks.
(iii) PARTICIPATION IN SETTLEMENT ADVANCES
AND AGENT SPECIAL ADVANCES. Notwithstanding the occurrence of
a Potential Default or an Event of Default and regardless of
whether the Agent has requested a Settlement with respect to a
Settlement Advance or Agent Special Advance, in the event that
any Revolving Credit Advance pursuant to Subsection (i) above
cannot be made by the Banks because one or more of the Banks
shall determine that such Banks are legally prohibited from
making such a Revolving Credit Advance, each such Bank shall
irrevocably and unconditionally purchase and receive from KCCI
or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such Settlement
Advance or Agent Special Advance to the extent of such Bank's
Ratable Portion thereof by paying to the Agent, in immediately
available funds, an amount equal to such Bank's Ratable
Portion of such Settlement Advance or Agent Special Advance on
the date the Revolving Credit Advance would have been made
pursuant to Subsection (i) above. If such amount is not in
fact made available to the Agent by any Bank, the Agent shall
be entitled to recover such amount on demand from such Bank
together with interest thereon at the Federal Funds Rate for
the first three (3) days from and after such demand and
thereafter at the Interest Rate then applicable to the
Revolving Credit Advances. From and after the date, if any, on
which a Bank purchases an undivided interest and participation
in any Settlement Advance or Agent Special Advance pursuant to
this Section 2.4(e)(iii), and subject to Section 2.13(c) and
Sections 5.3 and 5.4 of this Agreement, such Bank shall be
entitled to its Ratable Portion of all payments made by or on
behalf of the Borrower in respect of, and all Collections and
Remittances received by the Agent and credited to, such
Settlement Advance or Agent Special Advance.
(iv) DISTRIBUTIONS OF PAYMENTS PRIOR TO
SETTLEMENT DATE. If, prior to any Settlement Date, any
payments made by or on behalf of the Borrower or any
Collections and Remittances are received by the Agent which,
in accordance with the terms of this Agreement, are to be
applied to the reduction of the Revolving Credit Advances, and
no Revolving Credit Advances comprised of Settlement Advances
or Agent Special Advances are then outstanding as to which
such Collections and Remittances can be applied pursuant to
Section 5.3, the Agent may pay over such amounts to KCCI for
application to KCCI's Ratable Portion of such Revolving Credit
Advances, unless application would result in an early
prepayment of a LIBOR Borrowing, in which case the Agent shall
immediately settle with the Banks. As of any Settlement Date,
if payments, Collections or Remittances received since the
then immediately preceding Settlement Date have been applied
to KCCI's Ratable Portion of the Revolving Credit Advances
other than Settlement Advances and Agent Special Advances, as
provided for in the immediately preceding sentence, then KCCI
shall pay to the Agent, for the accounts of the Banks, to be
applied to the outstanding Revolving Credit Advances of such
Banks, an amount such
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that each Bank shall have outstanding after giving effect to
such payments by KCCI, its Ratable Portion of such Revolving
Credit Advances; PROVIDED, HOWEVER, that the Agent may net
payments due from KCCI pursuant to this sentence against
payments due to KCCI pursuant to Section 2.4(e)(i) on the
applicable Settlement Date, and require either KCCI or the
other Banks, as applicable, to make only the amount of the
payment due after such netting.
(v) ALLOCATION AND ACCRUAL OF INTEREST.
Pursuant to the Agent's election for periodic funding, the
Agent or KCCI may be advancing and may be receiving repayments
in respect of Revolving Credit Advances prior to the time the
Banks actually advance or are actually repaid Revolving Credit
Advances. Each of: (A) KCCI with respect to Settlement
Advances, (B) the Agent with respect to Agent Special
Advances, and (C) each Bank with respect to the Revolving
Credit Advances other than Settlement Advances and Agent
Special Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement accruing
on the amount of funds employed by reason of actual Advances
by KCCI, the Agent or such Bank. Funds shall be deemed
employed by KCCI, the Agent or the Banks, as the case may be,
until such time as: (I) in the case of the Agent or KCCI,
payments are credited to the Borrower pursuant to Section 2.13
or Collections or Remittances are received by the Agent by
reason of deposit to the Borrower Cash Collateral Account and
credited to the Borrower pursuant to Sections 5.3 and 5.4 or
(II) in the case of a Bank, funds representing such Bank's
Ratable Portion of such payment or Collections and Remittances
are received by such Bank from the Agent pursuant to Section
2.13(a) of this Agreement.
2.5 FAILURE OF BANK TO FUND. If and to the extent that any Bank shall
not have made available to the Agent such Bank's Ratable Portion of any
Revolving Credit Borrowing advanced by the Agent on behalf of the Banks on the
Closing Date or thereafter (whether advanced by KCCI on behalf of the Banks
pursuant to Section 2.4(c), the Agent on behalf of the Banks pursuant to Section
2.4(d), or the Banks otherwise pursuant to this Agreement), such Bank agrees to
pay, and the Borrower agrees to repay to the Agent, severally and not jointly
and severally, immediately upon demand by the Agent, an amount equal to such
Bank's Ratable Portion of such Revolving Credit Borrowing, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at: (A) in the case
of the Bank, Federal Funds Rate for the first three (3) days from and after the
date of the Revolving Credit Borrowing and thereafter at the Interest Rate then
applicable to Alternate Base Rate Advances of such Borrowings and (B) in the
case of the Borrower, the interest rate applicable at the time to such
Borrowings.
(a) PAYMENT CONSTITUTING RATABLE PORTION. If such Bank
pays to the Agent the Bank's Ratable Portion of such Revolving Credit
Borrowing prior to repayment of such amount by the Borrower, the amount
so repaid shall constitute such Bank's Ratable Portion of such
Revolving Credit Borrowing, and the Borrower shall have no further
obligation to make the payment required by this Section.
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(b) TREATMENT OF DEFAULTING BANK. The Agent shall not be
obligated to transfer to a defaulting Bank any payments made by the
Borrower to the Agent for the benefit of such defaulting Bank if such
Bank has not made available to the Agent such Bank's Ratable Portion of
any Borrowing advanced pursuant to this Agreement. Until the earlier of
such defaulting Bank's cure of such failure or the termination of the
Commitments, all amounts repaid to the Agent by the Borrower which
would otherwise be required to be applied to such Bank's Ratable
Portion of the Obligations shall be advanced to the Borrower by the
Agent on behalf such defaulting Bank to cure, in full or in part, the
failure by such Bank, but shall nevertheless be deemed to have been
paid to such defaulting Bank in satisfaction of the Obligations to
which such payment would otherwise have been applied. Notwithstanding
anything contained herein to the contrary, no such defaulting Bank
shall have any voting or consent rights under or with respect to the
Loan Documents or constitute a "Bank" (or be included in the
calculation of "Required Banks" hereunder) for any voting or consent
rights under or with respect to any Loan Document. The terms of this
Section 2.5(b) shall: (i) remain effective with respect to such
defaulting Bank until such time as the defaulting Bank shall no longer
be in default of any of its obligations under this Agreement and (ii)
shall not relieve or excuse the performance by the Borrower of any of
its duties or obligations hereunder.
(c) CONTINUING OBLIGATION OF BANKS TO FUND. It is
understood that: (i) a Bank shall not be responsible for any failure by
any other Bank to perform its obligation to make any Advances
hereunder, (ii) any one or more of the Commitments of a Bank shall not
be increased or decreased as a result of any failure by any other Bank
to perform its obligation to make any Advances hereunder, (iii) failure
by any Bank to perform its obligation to make any Advances hereunder
shall not excuse any other Bank from its obligation to make any
Advances hereunder, and (iv) the obligations of each Bank hereunder
shall be several, not joint and several.
2.6 REPAYMENTS AND PREPAYMENTS.
(a) REPAYMENT. The Borrower shall repay to the Agent for
the account of the Banks the outstanding principal amount of the
aggregate Revolving Credit Advances on the Revolving Credit Termination
Date; PROVIDED, HOWEVER, that Collections and Remittances deposited
into the Borrower Cash Collateral Account will be applied to the
Revolving Credit Advances on an ongoing basis in accordance with
Section 5.4.
(b) MANDATORY PREPAYMENT OF REVOLVING CREDIT ADVANCES AND
AGENT SPECIAL ADVANCES.
(i) PREPAYMENT OF REVOLVING CREDIT ADVANCES. If, on
any Business Day, the aggregate Revolving Credit Advances
(including Settlement Advances but excluding Agent Special
Advances) then outstanding exceeds the lesser of (x) the
Borrowing Base minus the aggregate LC Exposure then existing
or (y) the aggregate Revolving Credit Commitments of all of
the Banks then applicable minus the aggregate LC Exposure then
existing, then the Borrower
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shall on such day prepay to the Agent for the account of the
Banks an amount at least equal to such excess.
(ii) PREPAYMENT OF AGENT SPECIAL ADVANCE. The
aggregate outstanding amount of each Agent Special Advance
shall be prepaid by the Borrower to the Agent for the benefit
of the Banks on or before the fifth (5th) Business Day after
the Agent shall have made such Agent Special Advance.
(c) REDUCTION OF REVOLVING CREDIT COMMITMENT. Upon five
(5) Business Days prior written notice to the Agent, the Borrower may
request that the Banks permanently reduce, in whole or in part, the
aggregate Revolving Credit Commitments, whereupon the aggregate
Revolving Credit Commitments shall be so reduced. Each reduction shall
be subject to the following: (i) each such reduction shall be in an
aggregate principal amount of not less than Five Hundred Thousand
Dollars ($500,000) or a multiple of One Hundred Thousand Dollars
($100,000) in excess thereof, and (ii) the Borrower shall not be
permitted to reduce the aggregate Revolving Credit Commitments unless,
concurrently with any reduction, the Borrower shall make a principal
payment on each Bank's then outstanding Revolving Credit Advances in an
amount equal to the excess, if any, of such Revolving Credit Advances
over the Revolving Credit Commitment of such Bank as so reduced. Each
reduction in the aggregate Revolving Credit Commitments hereunder shall
be made among the Banks ratably in accordance with their Revolving
Credit Commitments. On the date of each reduction, the Borrower shall
pay to the Agent for the account of the Banks (x) the commitment fees
and interest accrued through the date of such reduction in respect of
the aggregate Revolving Credit Commitments, and (y) any amounts
required pursuant to the provisions of Section 13.4 of this Agreement.
Each reduction in the Revolving Credit Commitments hereunder, if any,
shall be a permanent reduction and no amount in excess of such reduced
commitment may be borrowed or reborrowed.
(D) PERMITTED PREPAYMENTS. The Borrower may prepay all or
any part of Revolving Credit Advances by giving notice to the Agent for
the account of the Banks stating the proposed date of prepayment, the
Type of Borrowing being prepaid and the aggregate principal amount of
the prepayment: (i) not later than 11:00 A.M. (Cleveland, Ohio time) on
any Business Day, with respect to Alternate Base Rate Advances and (ii)
not later than 11:00 A.M. (Cleveland, Ohio time) on the second Business
Day prior to such prepayment, with respect to LIBOR Rate Advances. Upon
such notice the Borrower shall: (A) prepay the outstanding aggregate
principal amount of the Alternate Base Rate Advances comprising part of
the same Revolving Credit Borrowing, in whole or ratably in part and
(B) in respect of LIBOR Rate Advances comprising part of the same
Revolving Credit Borrowing, pay the accrued interest to the date of
such prepayment on the principal amount of such Borrowing so prepaid;
PROVIDED, HOWEVER, that: (I) each partial prepayment of LIBOR Rate
Advances shall be in an aggregate principal amount not less than Five
Hundred Thousand Dollars ($500,000), or an integral multiple of One
Hundred Thousand Dollars ($100,000) in excess thereof, and (II) any
prepayment of any LIBOR Rate Advances made on other than the last day
of
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an Interest Period shall obligate the Borrower to reimburse the Bank in
respect thereof pursuant to Section 13.4 of this Agreement.
(e) MANDATORY APPLICATION OF NET PROCEEDS. The Borrower
shall apply all Net Proceeds promptly upon receipt thereof to prepay
the Advances outstanding at the time of such receipt. Net Proceeds
shall be applied to the Advances in the following order: (i) first, to
any Related Expenses or past due amounts owing to the Agent or the
Banks, (ii) second, to the outstanding Revolving Credit Advances
constituting Alternate Base Rate Borrowings and (iii) third, to the
outstanding Revolving Credit Advances constituting LIBOR Rate
Borrowings.
(f) PREPAYMENT PREMIUM. As consideration for the
Borrower's ability to prepay the Obligations as set forth in Section
2.6(d) above, the Borrower shall, in the event the Borrower prepays the
Obligations in full, or refinances all or any part, of the Obligations
from other than internally generated funds (including Collections and
Remittances) and other than as required by Section 2.6(e),
contemporaneously pay to the Agent, for the benefit of the Banks, as
compensation for the costs of being prepared to hold funds available to
the Borrower under this Agreement, an amount equal to the following:
(i) if the date of such prepayment occurs on or prior to April 1, 1999,
an amount equal to two percent (2%) of the Average Commitments
applicable to such date and (ii) if the date of such prepayment occurs
after April 1, 1999, one percent (1%) of the Average Commitments
applicable to such date. Notwithstanding the foregoing provisions of
this Section 2.6(f), in the event that Borrower prepays the Obligations
in full with the proceeds of (i) a public offering of debt or equity or
(ii) a private placement of debt or equity, no prepayment premium shall
be due and owing by Borrower.
2.7 RATE CONVERSION AND RATE CONTINUATION. The Borrower shall have the
right to convert all or any portion of any Borrowing into, or continue all or
any portion of any Borrowing as, a Borrowing comprised of LIBOR Rate Advances or
Alternate Base Rate Advances, as the case may be, upon request delivered by the
Borrower to the Agent not later than 11:00 A.M. (Cleveland time) as follows: (a)
on the Business Day that the Borrower desires to convert all or a portion of a
Revolving Credit Borrowing comprised of LIBOR Rate Advances into a Revolving
Credit Borrowing comprised of Alternate Base Rate Advances, (b) three Business
Days prior to the Business Day on which the Borrower desires to convert any
Alternate Base Rate Advances comprising a Revolving Credit Borrowing into LIBOR
Rate Advances for a given permissible Interest Period comprising a Revolving
Credit Borrowing, (c) three Business Days prior to the Business Day on which
Borrower desires to continue any LIBOR Rate Advances comprising a Revolving
Credit Borrowing as LIBOR Rate Advances for an additional Interest Period of the
same duration comprising a Revolving Credit Borrowing, and (d) three Business
Days prior to the Business Day on which Borrower desires to convert any LIBOR
Rate Advances having a particular Interest Period comprising a Revolving Credit
Borrowing into LIBOR Rate Advances having a different permissible Interest
Period comprising a Revolving Credit Borrowing; PROVIDED, HOWEVER, that each
such Rate Conversion or Rate Continuation shall be subject to the following:
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(i) each Rate Conversion or Rate Continuation shall be
made among the Banks based upon such Bank's Ratable Portion of such
converted or continued Advance comprising a Revolving Credit Borrowing;
(ii) if less than all of the outstanding principal amount
of an Advance comprising a Revolving Credit Borrowing is converted or
continued, the aggregate principal amount of such Advances converted or
continued shall be: (A) in the case of LIBOR Rate Advances, not less
than Five Hundred Thousand Dollars ($500,000), or an integral multiple
of One Hundred Thousand Dollars ($100,000) in excess thereof and (B) in
the case of Alternate Base Rate Advances, One Hundred Thousand Dollars
($100,000);
(iii) each Rate Conversion or Rate Continuation shall be
effected as if each Bank were applying the proceeds of the Advances
resulting from such Rate Conversion or Rate Continuation to the
Advances being converted or continued, as the case may be, and the
accrued interest on any such Advances (or portion thereof) being
converted or continued shall be paid to the Agent on behalf of each
Bank by the Borrower at the time of such Rate Conversion or Rate
Continuation;
(iv) LIBOR Rate Advances shall not be converted or
continued at a time other than the end of an Interest Period applicable
thereto unless the Borrower shall pay, upon demand, any amounts due to
the Agent for the benefit of the Banks pursuant to Section 13 of this
Agreement;
(v) Revolving Credit Advances may not be converted into or
continued as LIBOR Rate Advances comprising a Revolving Credit
Borrowing if the Interest Period applicable thereto will expire less
than one month prior to the Revolving Credit Termination Date;
(vi) after and during the continuance of a Potential
Default, and after the occurrence of an Event of Default that has not
been waived by the Required Banks, Advances may not be converted or
continued as LIBOR Rate Advances;
(vii) Advances that cannot be converted into or continued as
LIBOR Rate Advances by reason of clause (iv), (v), (vi) or (vii) of
this definition shall be automatically converted at the end of the
Interest Period in effect for such LIBOR Rate Advances into Alternate
Base Rate Advances.
Each such request for a conversion or continuation (a "Rate
Conversion/Continuation Request") in respect of Advances comprising a Revolving
Credit Borrowing shall be transmitted by the Borrower to the Agent by
telecopier, telex or cable (in the case of telex or cable, confirmed in writing
prior to the effective date of the Rate Conversion or Rate Continuation
requested), in substantially the form of EXHIBIT C hereto. The Rate
Conversion/Continuation Request shall specify: (A) the identity and amount of
the Advances comprising a Revolving Credit Borrowing that the Borrower requests
be converted or continued, (B) the Type of Advances into which such Advances are
to be converted or continued, (C) if such notice requests a Rate Conversion,
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the date of the Rate Conversion (which shall be a Business Day) and (D) in the
case of Advances comprising a Revolving Credit Borrowing being converted into or
continued as LIBOR Rate Advances, the Interest Period for such LIBOR Rate
Advances. The Borrower may make Rate Conversion/Continuation Requests
telephonically so long as written confirmation of such Revolving Credit
Borrowing is received by the Agent by 12:30 p.m. (Cleveland, Ohio time) on the
same day of such telephonic Rate Conversion/Continuation Request. The Agent may
rely on such telephonic Rate Conversion/Continuation Request to the same extent
that the Agent may rely on a written Rate Conversion/Continuation Request. Each
Rate Conversion/Continuation Request, whether telephonic or written, shall be
irrevocable and binding on the Borrower and subject the Borrower to the
indemnification provisions of Section 13 of this Agreement. The Borrower shall
bear all risks related to giving any Rate Conversion/Continuation Request
telephonically or by such other method of transmission as Borrower shall elect.
2.8 LETTERS OF CREDIT. Subject to the terms and conditions set forth in
this Agreement, the Letter of Credit Bank agrees, at any time and from time to
time, from and including the Closing Date but in no event after the thirtieth
calendar day immediately preceding the Revolving Credit Termination Date, to
issue and deliver, or to extend the expiration of, Letters of Credit for the
account of the Borrower; PROVIDED, HOWEVER, that, the aggregate LC Exposure of
the Banks shall not at any time exceed the lesser of: (x) Three Million Dollars
($3,000,000) outstanding at any time and (y) the Borrowing Base MINUS the sum of
the aggregate outstanding Revolving Credit Advances of the Banks and (z) the
aggregate Revolving Credit Commitments of the Banks MINUS the sum of the
aggregate outstanding Revolving Credit Advances of the Banks.
(a) TERM; FORM AND CONDITIONS OF LETTERS OF CREDIT. Each Letter of
Credit shall be issued in such form as the Letter of Credit Bank may reasonably
require subject to the Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, and any
subsequent revisions thereof. Each Letter of Credit shall: (A) permit drawings
upon presentation of one or more sight drafts and such other documents as
specified by the Borrower in the Credit Request delivered pursuant to Section
2.3(a) of this Agreement and agreed to by the Letter of Credit Bank, which
drawings shall occur on or prior to the applicable expiration date of such
Letter of Credit, (B) by its terms expire not later than the earlier of one (1)
year after the date of the Letter of Credit or the third (3rd) Business Day
prior to the Revolving Credit Termination Date and (C) by its terms provided for
payment of drawings in Dollars.
(b) REQUESTS FOR LETTERS OF CREDIT. Letters of Credit shall be issued
upon request given by the Borrower to the Agent not later than 12:00 noon
(Cleveland, Ohio time) three (3) Business Days prior to the specified date for
the issuance of the requested Letter of Credit. Each such request for a Letter
of Credit shall be made in the form of a Credit Request transmitted by the
Borrower to the Agent by telecopier, telex or cable (in the case of telex or
cable, confirmed in writing prior to the date of the requested issuance of the
Letter of Credit), specifying with respect to each Letter of Credit requested:
(i) the face amount thereof, (ii) the beneficiary, (iii) the intended date of
issuance, (iv) the terms of the Letter of Credit, and shall be promptly
forwarded by the Agent to the Letter of Credit Bank. Concurrently with each
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Credit Request requesting a Letter of Credit, the Borrower shall execute and
deliver to the Letter of Credit Bank a Reimbursement Agreement, in the Letter of
Credit Bank's then standard form of application for and reimbursement agreement
with respect to letters of credit (such documents being hereinafter collectively
referred to as a "Reimbursement Agreement"); PROVIDED, HOWEVER, that in the
event of any conflict between the provisions of any such Reimbursement Agreement
and this Agreement, the provisions of this Agreement shall govern.
(c) PARTICIPATION BY BANKS. By the issuance of a Letter of Credit by
the Letter of Credit Bank and without further action on the part of the Letter
of Credit Bank or any Bank, the Letter of Credit Bank hereby grants to each
Bank, and each Bank hereby acquires from the Letter of Credit Bank, a
participation in such Letter of Credit equal to such Bank's Ratable Portion,
effective on the date of the issuance of such Letter of Credit. In
consideration, each Bank hereby absolutely and unconditionally agrees to pay to
the Agent for the account of the Letter of Credit Bank such Bank's Ratable
Portion of each disbursement made by the Letter of Credit Bank in respect of
such Letter of Credit and not reimbursed by the Borrower forthwith on the date
due as provided in clause (d) below. Each Bank acknowledges and agrees that its
obligation to acquire risk participations pursuant to this Section 2.8(c) is
absolute and unconditional and shall not be affected by any event or
circumstance whatsoever, including the occurrence of any Potential Default or
Event of Default hereunder or the failure of any condition precedent set forth
in Section 3 of this Agreement to be satisfied and each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.
(d) REIMBURSEMENT; INTEREST. The Borrower agrees that whenever there is
a drawing on a Letter of Credit issued by the Letter of Credit Bank, the
Borrower shall pay to the Agent on the date of such drawing, an amount equal to
such drawing. The Agent shall promptly remit any such payment to the Letter of
Credit Bank. If there is a drawing on a Letter of Credit, then, unless the
Borrower shall reimburse such amount in full on such date, the unpaid amount
thereof shall bear interest for the account of the Letter of Credit Bank for
each day from and including the date of such drawing, to but excluding the
earlier of the date of reimbursement or the date on which such drawing is
reimbursed by a Revolving Credit Borrowing, at the rate per annum that would
apply to such amount if such amount were an Alternate Base Rate Advance by a
Bank.
(e) FAILURE TO REIMBURSE. In the event that the Borrower fails to make
a timely reimbursement, together with any interest thereon, to the Agent on the
date of any drawing on a Letter of Credit pursuant to this Section, such failure
shall constitute a Deemed Credit Request requesting an Alternate Base Rate
Advance in an aggregate amount equal to the amount reimbursable to the Letter of
Credit Bank plus any interest thereon. The Agent shall disburse all such loan
proceeds directly to the Letter of Credit Bank to satisfy the Borrower's
aforesaid reimbursement liability. The obligations of the Banks to the Agent
under this Section are in addition to and not in limitation of the obligations
of the Banks under Section 11 of this Agreement. In the event that an Advance
cannot be legally made pursuant to this Section 2.8(e) for any reason, each of
the Banks shall reimburse the Letter of Credit Bank in an amount equal to such
Bank's Ratable Portion of the drawing on the Letter of Credit.
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(f) OBLIGATIONS ABSOLUTE. The obligation of the Banks to make, and of
the Borrower to pay any Revolving Credit Advances required by Section 2.8(e) of
this Agreement shall be absolute and unconditional and shall be performed under
all circumstances including, without limitation: (i) any lack of validity or
enforceability of any Letter of Credit, (ii) the existence of any claim, offset,
defense or other right that the Borrower may have against the beneficiary of any
Letter of Credit or any successor in interest thereto, (iii) the existence of
any claim, offset, defense or other right that any Bank or the Agent may have
against the Borrower or against the beneficiary of any Letter of Credit or
against any successor in interest thereto, (iv) the existence of any fraud or
misrepresentation in the presentment of any draft or other item drawn and paid
under any Letter of Credit by any person other than the Letter of Credit Bank or
(v) any payment of any draft or other item by the Letter of Credit Bank which
does not strictly comply with the terms of any Letter of Credit PROVIDED the
payment shall not have constituted gross negligence or willful misconduct on the
part of the Letter of Credit Bank.
(g) LIABILITY OF LETTER OF CREDIT BANK. Without limiting the generality
of Section 2.8(f) of this Agreement, it is expressly understood and agreed that
the absolute and unconditional obligation of the Borrower hereunder to reimburse
disbursements in respect of Letters of Credit issued by the Letter of Credit
Bank will not be excused by the gross negligence or willful misconduct of the
Letter of Credit Bank. However, the foregoing shall not be construed to excuse
the Letter of Credit Bank from liability to the Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the Borrower to the extent permitted by applicable Law)
suffered by the Borrower or any Subsidiary of the foregoing that are caused by
the gross negligence or willful misconduct of the Letter of Credit Bank in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties agree that the Letter of
Credit Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary, and may make payment upon presentation of documents
that appear on their face to be in substantial compliance with the terms of such
Letter of Credit; PROVIDED that the Letter of Credit Bank shall have the right
in its sole discretion to decline to accept such documents and to make such
payment if such documents are not in strict compliance with the terms of such
Letter of Credit. In making any payment under any Letter of Credit, the Letter
of Credit Bank's (i) exclusive reliance on the documents, signatures and
endorsements, presented to it under such Letter of Credit and which appear to be
in order on the face of such documents, as to any and all matters set forth
therein, including reliance on the amount of any draft presented under such
Letter of Credit, whether or not the amount due to the beneficiary thereunder
equals the amount of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be in order, and whether or not any
other statement or any other document or any signature or endorsement with
respect thereto presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) making payment upon presentation of documents not
complying in any immaterial respect with the terms of the Letter of Credit
shall, in each case, not be deemed to constitute willful misconduct or gross
negligence of the Letter of Credit Bank. Any action, inaction or omission on the
part of the Letter of Credit Bank or any of its correspondents, under or in
connection with any Letter of Credit or any renewal or extension thereof or the
related instruments or documents, if in good faith and in conformity with such
Laws,
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regulations or customs as are applicable to the Letter of Credit Bank and the
terms of this Section 2.8(g), shall be binding upon the Borrower and shall not
place the Letter of Credit Bank or any of its correspondents under any liability
to the Borrower. The Letter of Credit Banks' rights, powers, privileges and
immunities specified in or arising under this Agreement are in addition to any
heretofore or at any time hereafter otherwise created or arising rights, powers,
privileges and immunities, whether by statute or rule of Law or contract.
(h) LETTER OF CREDIT BANK INDEMNITY. The Borrower shall indemnify the
Letter of Credit Bank from and against: (i) any loss or liability (other than
any caused by such Letter of Credit Bank's negligence or willful misconduct as
determined by the final judgment of a court of competent jurisdiction) incurred
by the Letter of Credit Bank in respect of this Agreement and the Letters of
Credit and (ii) any reasonable out-of-pocket expenses incurred by the Letter of
Credit Bank in defending itself or otherwise related to this Agreement or any
Letter of Credit (other than any caused by the Letter of Credit Bank's
negligence or willful misconduct as determined by the final judgment of a court
of competent jurisdiction) including, without limitation, reasonable fees and
expenses of legal counsel incurred by such Letter of Credit Bank (including,
without limitation, the reasonable interdepartmental charges of its salaried
attorneys) in the defense of any claim against it or in the prosecution of its
rights and remedies.
(i) EFFECT OF APPLICABLE LAW OR CUSTOM. All Letters of Credit issued
hereunder, all reimbursement obligations hereunder and all reimbursement
obligations under any Reimbursement Agreement will, except to the extent
otherwise expressly provided in this Agreement, the Reimbursement Agreements or
the Letters of Credit, be governed by the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any subsequent revisions thereof. In the event that the
revisions to Article 5 of the UCC become effective in the State of Ohio during
the term of this Agreement, the Borrower, the Agent, the Letter of Credit Bank
and the Banks agree to amend this Agreement to make such changes as are
necessary and appropriate and as mutually agreed by the parties hereto to
reflect such revisions and the effects thereof.
(j) TERMINATION OF LETTER OF CREDIT COMMITMENT. In the event that: (i)
any restriction is imposed on the Letter of Credit Bank (including, without
limitation, any legal lending or acceptance limits imposed by the United States
of America or any political subdivision thereof or of any foreign government or
central bank) which in the judgment of the Letter of Credit Bank would prevent
the Letter of Credit Bank from issuing Letters of Credit or maintaining its
commitment to issue Letters of Credit or (ii) there shall have occurred, at any
time during the term of this Agreement: (A) any outbreak of hostilities or other
national or international crisis or change in economic conditions if the effect
of such outbreak, crisis or change would make the creation of Letters of Credit
impracticable, (B) the enactment, publication, decree or other promulgation of
any statute, regulation, rule or order of any court or other governmental
authority which would materially and adversely affect the ability of the
Borrower to perform its obligations under this Agreement, or (C) the taking of
any action by any government or agency in respect of its monetary or fiscal
affairs which would have a material adverse effect on the issuance of Letters of
Credit, THEN the Letter of Credit Bank, in the case of the occurrence of any
event described hereinabove, shall give written notice of the occurrence of such
event to the Borrower and the Agent whereupon the commitment of the
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Letter of Credit Bank to issue Letters of Credit shall be suspended on the
effective date of such notice and shall continue suspended until the effect of
such event shall cease to exist.
2.9 FEES.
(a) AGENT'S FEE. The Borrower agrees to pay to the Agent
for the sole account of the Agent a closing fee in the amount provided
for in that certain fee letter from Agent, addressed to Borrower and
dated April 1, 1998, due and payable on the Closing Date.
(b) UNUSED LINE FEE. The Borrower agrees to pay to the
Agent for the ratable benefit of the Banks, allocable to the Banks in
accordance with each Bank's Ratable Portion thereof, an unused line fee
on the average daily unused portion of the total of the Revolving
Credit Commitments from the Closing Date until the Revolving Credit
Termination Date at the rate of three hundred seventy-five
one-thousandths of one percent (0.375%) per annum, payable monthly in
arrears on the first day of each calendar month commencing May 1, 1998,
and on the Revolving Credit Termination Date.
(c) LETTER OF CREDIT FEES. The Borrower shall pay the
following fees with respect to each Letter of Credit:
(i) LETTER OF CREDIT RISK PARTICIPATION FEE. The
Borrower agrees to pay to the Agent for the ratable benefit of
the Banks, annually in advance on the Closing Date and on the
first Business Day of each calendar year thereafter, a risk
participation fee equal to (A) with respect to Standby Letters
of Credit, an amount equal to the Applicable Revolving Credit
Margin with respect to LIBOR Rate Advances then in effect
MULTIPLIED BY the face amount of each Standby Letter of Credit
then outstanding and (B) with respect to Trade Letters of
Credit, an amount equal to one and one-half percent (1-1/2%)
per annum MULTIPLIED BY the face amount of each Trade Letter
of Credit then outstanding.
(ii) OTHER FEES RELATING TO LETTERS OF CREDIT. The
Borrower agrees to pay to the Agent for the sole account of
the Letter of Credit Bank, for its sole account, upon issuance
of any Letters of Credit any standard amendment and
modification fees, issuance fees, draw fees and any other
standard fees and charges charged by the Letter of Credit Bank
in connection with Standby Letters of Credit and Trade Letters
of Credit.
(d) COLLATERAL MANAGEMENT FEE. The Borrower agrees to pay
to the Agent, for its sole account, a collateral management fee, One
Thousand Dollars ($1,000) per calendar month, payable on the Closing
Date and on the first day of each calendar month thereafter.
(e) PER DIEM AUDIT FEES. The Borrower agrees to pay for
the services associated with any inspection, audit or verification by
the Agent of the Borrower's
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financial or other records, the Collateral or the premises upon which
the Collateral is located or any other security for the Obligations, as
the fees for such services may be increased from time to time. The
Borrower acknowledges that the fees for such inspection, audit and
verification are currently charged at $600 per day (plus out-of-pocket
expenses) per auditor or field examiner.
(f) LATE CHARGES. If the Borrower fails to pay any amount
due under this Agreement, or any fee in connection herewith, in full
within ten (10) days after its due date, the Agent shall be entitled
to, in addition to its remedies under Section 10 hereof, and the
Borrower will incur and shall pay to the Agent for the ratable benefit
of the Banks (in accordance with each Bank's Ratable Portion), in each
such case, a late charge equal to one percent (1%) of the amount failed
to be paid. The payment of a late charge will not cure or constitute a
waiver of any Potential Default or Event of Default under this
Agreement.
(g) PAYMENT OF FEES; NONREFUNDABLE. All fees set forth in
this Section 2.9 shall be paid on the date due, in immediately
available funds, to the Agent for distribution, if and as appropriate,
to the Banks or the Letter of Credit Bank. Once paid, to the extent
permitted by applicable Law, none of such fees shall be refundable
under any circumstances.
2.10 INTEREST ON ADVANCES.
(a) INTEREST RATE-REVOLVING CREDIT ADVANCES. The Borrower shall pay
interest on the unpaid principal amount of each Revolving Credit Advance made by
each Bank from the date of such Revolving Credit Advance until such principal
amount shall be paid in full as follows:
(i) ALTERNATE BASE RATE ADVANCES - REVOLVING CREDIT.
During such periods as any Alternate Base Rate Advance
comprising a Revolving Credit Borrowing is outstanding, the
Borrower shall pay interest on such Alternate Base Rate
Advance at a rate per annum equal to the sum of the Alternate
Base Rate PLUS the Applicable Revolving Credit Margin for
Alternate Base Rate Advances in effect as of the most recently
preceding Margin Adjustment Date occurring prior to the date
of the making, conversion or continuation of such Alternate
Base Rate Advance in accordance with Section 2.7, payable
monthly, in arrears, on the first day of each calendar month
and on the date such Alternate Base Rate Advance comprising a
Revolving Credit Borrowing shall be converted or paid in full
(whether at maturity, by reason of acceleration or otherwise)
and, after maturity, on demand.
(ii) LIBOR RATE ADVANCES. During such periods as any LIBOR
Rate Advance comprising a Revolving Credit Borrowing is
outstanding, the Borrower shall pay interest on such LIBOR
Rate Advance at a rate per annum equal to the sum of the
London Interbank Offered Rate PLUS the Applicable Revolving
Credit Margin for LIBOR Rate Advances in effect as of the most
recently preceding
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Margin Adjustment Date occurring prior to the date of the
making of such LIBOR Rate Advance, or the conversion or
continuation of such LIBOR Rate Advance in accordance with
Section 2.7, payable: (A) on the last day of each Interest
Period and (B) if such Interest Period has a duration of more
than three months, three months after the first day of such
Interest Period and (C) on the date such LIBOR Rate Advance
comprising a Revolving Credit Borrowing shall be converted to
an Alternate Base Rate Advance or paid in full (whether at
maturity, by reason of acceleration or otherwise) and (D)
after maturity, on demand.
(B) APPLICABLE MARGIN; TERMS OF ADJUSTMENT.
(i) COMMENCEMENT; CONDITIONS. So long as no Event of
Default shall have occurred which has not been waived in
writing by all of the Banks, the Applicable Margin shall be
calculated as herein specified as of the Closing Date and as
of the first day of each July and January occurring during any
Fiscal Year commencing January 1, 1999 (each a "Margin
Adjustment Date"), commencing after the date the Agent shall
have received: (A) in respect of any Margin Adjustment Date
made as of any first day of January, financial statements
required by Sections 8.1(a) and 8.1(b) for the Fiscal Month
ending on June 30 of immediately preceding Fiscal Year during
which such Margin Adjustment Date is occurring (each a
"January Determination Date") or (B) in respect of any Margin
Adjustment Date made as of any first day of July, financial
statements required by Sections 8.1(a) and 8.1(c) for the
Fiscal Year immediately preceding the Fiscal Year during which
such Margin Adjustment Date is occurring (each, together with
each January Determination Date, a "Determination Date") and
(C) in each case, a certificate complying with Section 8.1(d)
certifying the Borrower's Consolidated Fixed Charge Coverage
Ratio for the Cumulative Four Fiscal Quarter Period ending as
of any such Determination Date.
(ii) CALCULATION AND DURATION OF ADJUSTMENT. On each Margin
Adjustment Date, the Applicable Revolving Credit Margin shall
be the Applicable Revolving Credit Margin set forth in the
definition of "Applicable Revolving Credit Margin" for
Alternate Base Rate Advances or the LIBOR Rate Advances, as
the case may be, and corresponds to the Borrower's Fixed
Charge Coverage Ratio as of the Determination Date applicable
to such Margin Adjustment Date. The Applicable Revolving
Credit Margin effective as of a particular Margin Adjustment
Date shall remain effective only until the next succeeding
Margin Adjustment Date at which time the Applicable Revolving
Credit Margin shall be recalculated pursuant to this
Subsection (b); PROVIDED, HOWEVER, that:
(A) if an Event of Default shall have occurred which
has not been waived in writing by all of the Banks or
if the Borrower shall not have delivered as of any
Margin Adjustment Date the financial statements
required to have been delivered under Sections 8.1(a)
and 8.1(c), then the
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Applicable Revolving Credit Margin shall be (a) with
respect to Alternate Base Rate Advances, the Alternate
Base Rate plus one percent (1.00%) per annum and (b)
with respect to LIBOR Rate Advances, the London
Interbank Offered Rate PLUS three percent (3.00%) per
annum, and
(B) if an Event of Default shall have occurred which
has not been waived in writing by the Required Banks,
the interest rate shall, upon the request of the
Required Banks, be the interest rate applicable
pursuant to 2.11 of this Agreement.
2.11 DEFAULT INTEREST. If any principal, interest or fees due under
this Agreement shall not be paid when due or if any Note or any amounts due
under any Note shall not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision of acceleration of
maturity therein contained, or if there shall otherwise occur an Event of
Default which has not been waived in writing by the Required Banks, the
principal thereof and the unpaid interest and fees thereon shall, at the
election of the Required Banks, bear interest, payable on demand, at a rate per
annum which shall be equal at all times to three percent (3%) in excess of the
interest rate otherwise then payable pursuant to the terms of this Agreement.
2.12 INTEREST RATE DETERMINATION.
(a) AGENT DETERMINATION; NOTICE. The Agent shall determine the London
Interbank Offered Rate in accordance with the definition of London Interbank
Offered Rate set forth in Section 1.1 of this Agreement. The Agent shall give
prompt notice to each of the Banks and the Borrower of the applicable interest
rate determined by the Agent for purposes of Sections 2.7 and 2.10 of this
Agreement.
(b) FAILURE OF BORROWER TO ELECT. If no Interest Period is specified in
any Credit Request or any Rate Conversion/Continuation Request for any LIBOR
Rate Advances, the Borrower shall be deemed to have selected an Interest Period
with a duration of one month. If the Borrower shall not have given notice in
accordance with Section 2.7 of this Agreement to continue any LIBOR Rate
Advances into a subsequent Interest Period (and shall not have otherwise
delivered a Rate Conversion/Continuation Request in accordance with Section 2.7
of this Agreement to convert such Advances), such LIBOR Rate Advances shall, at
the end of the Interest Period applicable thereto (unless repaid pursuant to the
terms hereof), automatically convert into Alternate Base Rate Advances.
2.13 PAYMENTS AND COMPUTATIONS.
(a) PAYMENTS. In addition to payments otherwise made by or
on behalf of the Borrower by reason of Collections and Remittances
deposited to the Borrower Cash Collateral Account as specified in
Section 5.3, the Borrower shall make any payment to be directly made by
the Borrower under this Agreement and under the Notes with respect to
principal of, interest on, and other amounts relating to Advances, not
later than 12:00 noon (Cleveland, Ohio time) on the day when due by
deposit of Dollars, in
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immediately available funds, to the Agent's account maintained at the
Payment Office of the Agent as specified in this Agreement for
distribution by the Agent to the Banks and application thereof by the
Banks to the Borrower's Loan Account. Payments received by such deposit
of Dollars, in immediately available funds, after 12:00 noon
(Cleveland, Ohio time) shall be deemed to have been received on the
next succeeding Business Day. Except to the extent otherwise provided
in Section 2.4(e)(i) in respect of the settlement of accounts among
the Agent and the Banks on any Settlement Date, after receipt of any
such payment, the Agent will promptly distribute like funds relating to
such payment (other than amounts payable pursuant to 2.9(d) of this
Agreement solely to the Agent and amounts payable pursuant to Section
2.9(c)(ii) of this Agreement solely to the Letter of Credit Bank)
ratably to each of the Banks for the account of its respective Lending
Office.
(b) PAYMENT PROCEDURES. The Control Account of the
Borrower will be charged with all Advances made by the Banks to the
Borrower and all other Obligations of the Borrower under this Agreement
or any other Loan Document. The Borrower hereby authorizes each Bank to
charge the Loan Account of the Borrower with such Obligations. The
Control Account of the Borrower will be credited in accordance with
this Section 2.13(c) with all payments received by the Agent directly
from the Borrower or for the account of the Borrower. The Control
Account of the Borrower will also be credited in accordance with
Section 5.3, to the extent of any outstanding Revolving Credit
Advances, with all Collections and Remittances received by the Agent in
the Borrower Cash Collateral Account. The Agent shall send the Borrower
a monthly statement reflecting the activity in the Control Account.
Absent manifest error, each monthly statement shall be final,
conclusive and binding on the Borrower. The Loan Accounts of each Bank
shall reflect the activity in the Control Account applicable to such
Bank's Loan Account.
(c) APPLICATION OF PAYMENTS. Payments distributed to each
Bank pursuant to Section 2.13(a) above shall in each case be applied by
such Bank in accordance with the terms of this Agreement. Prior to the
occurrence of an Event of Default that has not been waived in
accordance with the terms of this Agreement, all funds received under
this Section 2.13 shall be applied to the Advances in the order that
the Borrower directs. The Borrower shall at the time of making a
payment under this Section 2.13 specify to the Agent the Obligations to
which such payment is to be applied. If the Borrower does not specify
an application or if an Event of Default has occurred that has not been
waived in writing by the Required Banks, the funds will be applied in
the manner described in the second sentence of Section 5.3.
(d) AUTHORIZATION TO CHARGE ACCOUNT. If and to the extent
payment owed to the Agent or any Bank is not made when due hereunder or
under the Notes, the Borrower hereby authorizes the Agent and each Bank
to charge from time to time against the Loan Account maintained by the
Agent or such Bank, as the case may be.
(e) COMPUTATIONS OF INTEREST AND FEES. All computations of
interest, fees and other compensation shall be made by the Agent on the
basis of a year of 360 days
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in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest
or fees are payable. Each determination by the Agent of interest, fees
or other amounts of compensation due hereunder shall be rebuttably
presumed to be correct.
(f) PAYMENT NOT ON BUSINESS DAY. Whenever any payment
hereunder or under the Notes shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding
Business Day. Any such extension of time shall in such case be included
in the computation of payment of interest, fees or other compensation,
as the case may be.
(g) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWER. Unless
the Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date.
In reliance upon such assumption, the Agent may, but shall not be
obligated to, distribute to each Bank on such due date the amount then
due such Bank. If and to the extent the Borrower shall not have made
such payment in full to the Agent, each Bank shall repay to the Agent
promptly upon demand the amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed
to such Bank until the date such Bank repays such amount to the Agent,
at the rate applicable to the Borrower plus the amount of any costs,
expenses, liabilities or losses incurred by the Agent in connection
with its distribution of such funds.
2.14 CHANGE IN LAW; LIBOR RATE ADVANCES UNLAWFUL. Notwithstanding any
other provision of this Agreement, if any Bank determines that any applicable
Law, or any change therein, or any change in the interpretation or
administration of any Law by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Bank (or its Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible, or any such
governmental authority, central bank or agency asserts that it is unlawful, for
any Bank or its Lending Office to perform its obligations hereunder to make
LIBOR Rate Advances or to fund or maintain LIBOR Rate Advances hereunder, then,
upon notice to the Agent and the Borrower by such Bank: (a) the obligation of
all of the Banks to make, or to convert Advances into, LIBOR Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist and (b) the Borrower shall
immediately, or at such later date, if any, as may thereafter be permitted by
relevant Law, prepay in full the then outstanding principal amount of all LIBOR
Rate Advances of all Banks, together with interest accrued thereon and any other
amounts payable to the Banks hereunder unless the Borrower, within five (5)
Business Days of notice from the Agent, converts all LIBOR Rate Advances of all
Banks then outstanding into Advances of another Type in accordance with Section
2.7 of this Agreement as to which such circumstances do not exist. Any such
payment or Rate Conversion shall be subject to the provisions of Section 13.4 of
this Agreement.
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2.15 UNAVAILABILITY. Notwithstanding any other provision in this
Agreement, if at any time with respect to any LIBOR Rate Advances:
(a) INADEQUATE RATE. Any Bank notifies the Agent that the London
Interbank Offered Rate for any Interest Period for such LIBOR Rate Advances will
not adequately reflect the cost to such Bank of making, funding or maintaining
its LIBOR Rate Advances for such Interest Period, the Agent shall promptly
notify the Borrower and the Banks;
(b) UNAVAILABLE QUOTATIONS. The Agent determines (which determination
shall be conclusive) that quotations of interest rates for Dollar deposits are
not being provided in the relevant amounts or for the relevant maturities to, or
the circumstances affecting the London interbank market of deposits in Dollars
make it impracticable to, determine the London Interbank Offered Rate, or
(c) UNAVAILABLE DEPOSITS. Any Bank determines that Dollar deposits of
the relevant amount for the relevant Interest Period are not available in the
London interbank market of deposits of Dollars for the purpose of funding the
LIBOR Rate Advances, then: (i) each LIBOR Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, convert into an
Alternate Base Rate Advance and (ii) the obligation of the Banks to make or to
convert Advances into LIBOR Rate Advances or continue LIBOR Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist.
2.16 PRO RATA TREATMENT. Except as set forth in Sections 2.4, 2.9(a),
2.9(c)(ii), 2.9(d) or 10.6 of this Agreement, each Borrowing, each payment or
prepayment of principal of any Borrowing, each payment of interest on the
Advances, each payment of the fees provided for hereunder shall be allocated
among the Banks in accordance with each Bank's Ratable Portion thereof.
SECTION 3 CONDITIONS OF LENDING.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCES. The obligation of each
Bank to make an Advance on the occasion of each Borrowing, and the obligation of
the Letter of Credit Bank to issue any Letters of Credit, are subject to the
condition precedent that: (i) the conditions set forth in ANNEX III, attached
hereto and incorporated herein by reference, shall have been satisfied, as
determined by the Agent, in its sole discretion, on or before the Closing Date
of this Agreement and (ii) the Agent shall have received on or before the
Closing Date of this Agreement the documents and deliveries set forth on said
ANNEX III.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of each Bank
to make an Advance on the occasion of each Borrowing, Rate Conversion and Rate
Continuation, and the obligation of the Letter of Credit Bank to issue any
Letter of Credit, are subject to the condition precedent that, as of the date of
any such Advance or issuance, and before and after giving effect thereto:
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(a) REPRESENTATION BRINGDOWN. The representations and
warranties contained in Sections 4, 6 and 7 of this Agreement are true
and correct in all respects on and as of the date of such Credit Event
with the same effect as though made on and as of such date, except to
the extent such representations and warranties expressly relate to an
earlier date; and
(b) NO DEFAULT; COMPLIANCE WITH TERMS. The Borrower shall
be in compliance with all other terms and provisions set forth herein
and in each other Loan Document on its part to be observed or
performed, and at the time of and immediately after such Credit Event,
no Potential Default or Event of Default shall have occurred and be
continuing;
(c) NO MATERIAL ADVERSE CHANGE. There has been no event
which would or which might reasonably be expected to have a Material
Adverse Effect;
(d) CONFIRMATION OF BORROWING BASE. The Borrower shall
have delivered to the Agent a Borrowing Base Certificate for the period
in which such Credit Event occurs; and
(e) OTHER DELIVERIES. The Agent and the Banks shall have
received such other approvals, opinions or documents as the Agent and
the Banks may reasonably request consistent with the terms of this
Agreement.
Each Credit Event shall constitute a representation and warranty by the Borrower
that on the date of such Credit Event, the foregoing statements are true and
correct as of such date.
SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL
REQUIREMENTS.
4.1 GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance of the Obligations, and in addition to any other collateral or Lien
securing the Obligations, the Borrower hereby grants to the Agent for itself and
for the benefit of the Banks and the Letter of Credit Bank a continuing security
interest in and to and a pledge of all of the Borrower's right title and
interest in and to the following property, whether now existing or hereafter
arising or acquired: (a) all Accounts, (b) all Inventory, (c) any and all
deposits or other sums at any time credited by or due from the Banks to the
Borrower in the Borrower Cash Collateral Account, (d) all Collateral which now
or hereafter is at any time in the possession or control of any of the Banks or
in transit by mail or carrier to or from any of the Banks or in the possession
of any Person acting in a Bank's behalf, without regard to whether such Bank
received the same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether such Bank had conditionally released the
same, and any and all balances, sums, proceeds and credits of the Borrower with
such Bank, (e) all accessions to, substitutions for, and all replacements,
Products and Proceeds of the herein above-referenced property of the Borrower
described in this Section 4.1, including, but not limited to, proceeds of
insurance policies insuring such property and (f) all books, records, and other
property (including, but not limited to, credit files, printouts, computer
software and programs owned by the Borrower or
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any Subsidiary Guarantor, and disks, magnetic tape and other magnetic media, and
other materials and records) of the Borrower pertaining to any such
above-referenced property of the Borrower.
4.2 PERFECTION. The Borrower shall, and shall cause the Subsidiary
Guarantors to, execute such financing statements provided for by applicable law,
and otherwise take such other action and execute such assignments or other
instruments, control agreements or documents, in each case as the Agent may
request, to evidence, perfect, or record the Agent's security interest in the
Collateral or to enable the Agent to exercise and enforce its rights and
remedies under this Agreement with respect to any Collateral. The Borrower
hereby authorizes the Agent on behalf of the Banks to execute and file any such
financing statement or continuation statement on the Borrower's behalf. The
parties acknowledge that a carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement to the extent permitted
by law.
4.3 GENERAL REPRESENTATIONS AS TO COLLATERAL. The Borrower represents
that the Supplemental Schedule sets forth: (a) the principal place of business
of the Borrower and each of the Subsidiary Guarantors, and the locations of each
of their respective chief executive offices and accounting officers, (b) the
offices where Borrower and the Subsidiary Guarantors keep their respective
records concerning their respective Accounts and General Intangibles, (c) the
location of the Borrower's and each Subsidiary Guarantor's registered office,
(d) each location at which any Inventory of the Borrower or a Subsidiary
Guarantor is located, including, without limitation, the location of any
warehouse or bailee at which such Collateral is located and of any consignee at
which Collateral in excess of Fifty Thousand Dollars ($50,000) is located, (e)
the locations and addresses of all of the Borrower's and each Subsidiary
Guarantor's owned or leased real property, (f) the locations of the Borrower's
and each Subsidiary Guarantor's registered offices, agents, other offices and
places of business during the five (5) years prior to the Closing Date, and (g)
all trade names, assumed names, fictitious names and other names used by
Borrower or any Subsidiary Guarantor during the five (5) years prior to the
Closing Date.
4.4 TITLE TO COLLATERAL; LIENS; TRANSFERS. The Borrower has good,
indefeasible and, in the case of personal property, merchantable title to and
ownership of the Collateral described in Section 4.1, free and clear of all
Liens, except for Liens permitted under Section 8.3(d). Except as permitted by
Section 8.3(d) or 8.3(a) hereof or as otherwise provided herein or in any other
Loan Document, the Borrower shall not encumber, pledge, mortgage, grant a
security interest in, assign, sell, lease or otherwise dispose of or transfer,
whether by sale, merger, consolidation, liquidation, dissolution or otherwise,
any of such Collateral.
4.5 CHANGES AFFECTING PERFECTION. The Borrower shall not, and shall not
permit any of its Subsidiary Guarantors to, without giving the Agent thirty (30)
days prior notice thereof: (a) make any change in any location where Borrower's
or such Subsidiary Guarantor's Inventory is maintained, or locate any of
Borrower's or such Subsidiary Guarantor's Inventory at any new locations (other
than in connection with sales of Inventory in the ordinary course of business),
(b) make any change in the location of its chief executive office, principal
place of business or the office where the Borrower's or such Subsidiary
Guarantor's records pertaining
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to its Accounts are kept, (c) add any new places of business or close any of its
existing places of business, (d) make any change in its name or corporate
structure, adopt new trade names, assumed names or fictitious names or otherwise
add any name under which it does business, (e) make any other change (other than
sales of Inventory in the ordinary course of business) which might affect the
perfection or priority of the Agent's Lien in the Collateral. Neither the
Borrower nor any of the Subsidiary Guarantors shall maintain Inventory at any
consignee in an amount in excess of Fifty Thousand Dollars ($50,000) per
location unless Borrower gives the Agent notice of the location and amount of
such consigned Inventory for each location at which the Inventory exceeds Fifty
Thousand Dollars ($50,000) within five (5) business days after the Inventory is
moved, delivered or taken to such location.
4.6 POWER OF ATTORNEY FOR INSURANCE. The Borrower shall promptly
deliver to the Agent true copies of all reports regarding Collateral in excess
of One Hundred Thousand Dollars ($100,000) made to insurance companies. The
Borrower hereby irrevocably makes, constitutes, and appoints the Agent (and all
officers, employees, or agents designated by the Agent) as its true and lawful
attorney-in-fact and agent, with full power of substitution, such that the Agent
shall have the right and authority to make and adjust claims under such policies
of insurance, receive and endorse the name of the Borrower on, any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and make all determinations and decisions with respect to such
policies of insurance; PROVIDED, HOWEVER, that the Agent may not exercise the
power of attorney granted by this Section 4.6 except after (a) the occurrence of
an Event of Default that has not been waived by the Required Banks, or (b) the
occurrence of an event of loss with respect to which the Agent in good faith
determines that the Borrower is not diligently pursuing its claims. The Borrower
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and
shall be irrevocable. Without waiving or releasing any obligation, Potential
Default or Event of Default by the Borrower under this Agreement, the Agent may
(but shall not be required to) at any time or times thereafter maintain such
action with respect thereto as the Agent deems advisable. All sums disbursed by
the Agent in connection therewith (including, but not limited to, reasonable
attorneys' and paralegals' fees and disbursements, court costs, expenses and
other charges relating thereto) shall be payable on demand and upon the
expiration of five (5) calendar days after such demand the Borrower shall be
deemed to have delivered a Deemed Credit Request in the relevant amount.
4.7 PROTECTION OF COLLATERAL; REIMBURSEMENT. All reasonable insurance
expenses and all expenses of protecting, storing, warehousing, insuring,
handling, maintaining, and shipping any Collateral, any and all excise,
property, sales, use, or other taxes imposed by any state, Federal, or local
authority on any of the Collateral, or in respect of the sale thereof, or
otherwise in respect of the Borrower's or the Subsidiary Guarantor's business
operations which, if unpaid, could result in the imposition of any Lien upon the
Collateral, shall be borne and paid by the Borrower or such Subsidiary
Guarantor, subject to the provisions of Section 8.2(i). If the Borrower or such
Subsidiary Guarantor fails to promptly pay any portion thereof when due, except
as may otherwise be permitted under this Agreement or under any of the other
Loan Documents, the Agent, at its option, may, but shall not be required to, pay
the same. All sums so paid or incurred by the Agent for any of the foregoing and
any and all other sums for which the Borrower may become liable under this
Agreement and all costs and expenses
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(including reasonable attorneys' fees and paralegals' fees, legal expenses, and
court costs, expenses and other charges related thereto) which the Agent may
incur in enforcing or protecting its Liens on or rights and interests in the
Collateral or any of its rights or remedies under this Agreement or any other
agreement between the parties to this Agreement or in respect of any of the
transactions to be had under this Agreement shall be repayable on demand and
upon the expiration of five (5) calendar days after such demand the Borrower
shall be deemed to have delivered a Deemed Credit Request in the relevant
amount. Unless otherwise provided by Law, the Agent shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto or for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever.
4.8 INSPECTION; VERIFICATION. During regular business hours and after
reasonable notice to the Borrower, the Agent and each of the Banks (by any of
its officers, employees, agents, representatives, or designees, including any
Bank) shall have the right to inspect the Borrower's and each Subsidiary
Guarantor's Collateral and to inspect and audit, all books, records, journals,
orders, receipts, or other correspondence related thereto (and to make extracts
or copies thereof as the Agent may desire) and to inspect the premises upon
which any of the Collateral is located for the purpose of verifying the amount,
quality, quantity, value, and condition of, or any other matter relating to, the
Collateral; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
(unless waived in writing in accordance with Section 14.1), the Agent and the
Banks may exercise such access and other rights at any time the Agent or any
Bank deems such action necessary or desirable. In addition to inspections as
outlined above, the Agent or its designee shall have the right, upon reasonable
notice to and consultation with the Borrower, to make test verifications of the
Accounts and other Collateral and physical verifications of the Inventory and
other tangible items of the Collateral at the expense of the Borrower and in any
manner and through any commercially reasonable medium that the Agent considers
advisable, and the Borrower agrees to furnish, and shall cause the Subsidiary
Guarantors to furnish, all such assistance and information as the Agent may
require in connection therewith. The Borrower at its expense will prepare and
deliver to the Agent at any time and from time to time promptly upon the Agent's
request, the following reports: (a) a reconciliation of all its Accounts and the
Subsidiary Guarantor's Accounts, (b) an aging of all its and the Subsidiary
Guarantor's Accounts and accounts payable, (c) trial balances, and (d) a test
verification of such Accounts as the Agent may request. The Agent shall deliver
to each of the Banks copies of each audit report prepared pursuant to this
Section 4.8 and all other reports prepared and delivered to the Agent pursuant
to this Section 4.8.
4.9 ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. On or before the
fifteenth (15th) calendar day of each month from and after the date of this
Agreement, the Borrower shall deliver to the Agent, in form and substance
acceptable to the Agent, a summary aged trial balance of the Borrower's and each
of the Subsidiary Guarantor's Accounts, dated as of the last day of the
preceding month (and upon the Bank's request, a detailed aged trial balance, of
all such then existing Accounts specifying the names, face value and dates of
invoices for each Account Debtor obligated on any Account so listed). In
addition, upon the Agent's request, the Borrower shall furnish the Agent with
copies of proof of delivery and a copy of all documents relating to such
Accounts including, but not limited to, repayment histories and present status
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reports, and such other matters and information relating to the status of then
existing Accounts of the Borrower and each of the Subsidiary Guarantors as the
Agent shall reasonably request. If, upon the occurrence of an Event of Default,
the Agent so requests, the Borrower shall execute and deliver to the Agent, and
shall cause each Subsidiary Guarantor to execute and deliver to the Agent, on
forms supplied by the Agent and at such intervals as the Agent may from time to
time require, written assignments of all of its Accounts after shipment of the
subject goods, together with copies of invoices and/or invoice registers related
thereto. Upon request of a Bank, the Agent shall deliver to such Bank, and shall
cause each of its Subsidiary Guarantors to deliver to such Bank, copies of each
report and all other items delivered pursuant to this Section 4.9.
4.10 REPORTING REGARDING INVENTORY. The Borrower shall report inventory
figures for its Inventory and the Inventory of each of the Subsidiary Guarantors
no later than fifteen (15) calendar days after the end of each month (or more
frequently, if the Agent shall so request, in its reasonable discretion), based
upon month-end balances reconciled to the period end balance sheet. The
Borrower's and the Subsidiary Guarantors' Inventory shall be reported based upon
reconciliation of the financial statements to the perpetual inventory system or
a monthly physical count, as the case may be, and: (a) the Borrower shall
deliver monthly to the Agent and the Banks, inventory records and general ledger
with respect to all Inventory of the Borrower and the Subsidiary Guarantors,
broken down into such detail and with such categories as the Agent shall require
(including, but not limited to, a report indicating the type, location and
amount of raw materials, work-in-process and finished goods and all other
information deemed necessary by the Agent to determine the level of Eligible
Inventory and ineligible Inventory), (b) the values shown on reports of
Inventory shall be at the lower of cost or market value determined in accordance
with the Borrower's and its Subsidiary Guarantors' first-in first-out
accounting, consistently applied and (c) no later than fifteen (15) calendar
days after the end of each month, or more frequently, if the Agent shall so
request, the Borrower shall submit to the Agent an inventory report reconciled
to the Borrowing Base Certificate for the end of such month, the Borrower's and
the Subsidiary Guarantors' perpetual inventory records and each of their general
ledgers, broken down into such detail and with such categories as the Agent
shall require (including, but not limited to, a report indicating the type,
location and amount of raw materials, work-in-process and finished goods, and
all other information deemed necessary by the Agent to determine the level of
Eligible Inventory and ineligible Inventory). Upon request of a Bank, the Agent
shall deliver to such Bank copies of each report and all other items delivered
pursuant to this Section 4.10.
4.11 OTHER COLLATERAL REPORTS. The Borrower shall furnish the Agent
with, on or before the fifteenth (15th) calendar day of each month from and
after the date of this Agreement, a report listing the Borrower's and each
Subsidiary Guarantor's Accounts and a period-end accounts receivable and loan
reconciliation, and such other reports regarding Accounts or other Collateral of
the Borrower or the Subsidiary Guarantors as the Agent from time to time
reasonably may request. The Borrowing Base Certificate and such other reports
shall be on forms requested or provided by the Agent and shall contain such
detailed information as is reasonably satisfactory to the Agent. Upon request of
a Bank, the Agent shall deliver to such Bank copies of each report and all other
items delivered pursuant to this Section 4.11.
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4.12 STATUS OF COLLATERAL. The Borrower agrees to advise the Agent
promptly, in such detail as the Agent shall reasonably require, of any change
relating to the type, quantity or quality of the Collateral, which could have a
Material Adverse Effect.
4.13 REINSTATEMENT. The provisions of Sections 4, 5 and 6 of this
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Borrower for liquidation or
reorganization, should the Borrower become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Borrower's assets or should any other Financial
Impairment occur, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
4.14 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL. Upon the
payment in full of all Obligations and the termination of the Commitments of
each of the Banks and all LC Exposure: (a) the security interests and licenses
granted to the Agent under this Agreement and under any other Loan Documents
shall terminate, (b) all rights to the Collateral shall revert to the Borrower
or the applicable Subsidiary Guarantor, as the case may be, (c) the Agent will,
at the Borrower's expense, execute and deliver to the Borrower such documents as
the Borrower may reasonably request to evidence the termination of such security
interests and the release of such Collateral, and (d) this Agreement and all of
the other Loan Documents with the Borrower will be terminated, and the Borrower
will have no further liabilities or obligations thereunder (except any
liabilities and/or obligations which under the terms of this Agreement or any
Loan Document survive termination of such agreements).
SECTION 5 PROCEEDS OF ACCOUNTS AND INVENTORY.
5.1 RECEIPT IN TRUST. All Collections or Remittances received directly
by the Borrower shall be deemed held by the Borrower in trust and as fiduciary
for the Agent for the benefit of the Banks. The Borrower immediately shall
deposit any such Collection or Remittance, in its original form, into the
Borrower Cash Collateral Account. Pending such deposit, the Borrower agrees that
it will not commingle any such Collection or Remittance with any of the
Borrower's other funds or property, but will hold it separate and apart
therefrom in trust and as fiduciary for the Agent until deposit is made into the
Borrower Cash Collateral Account.
5.2 CASH COLLATERAL ACCOUNTS. The Borrower has established the Borrower
Cash Collateral Account with KeyBank National Association. The Subsidiary
Guarantors have each established a Subsidiary Guarantor Cash Collateral Account
with KeyBank National Association. All Collections and Remittances of any kind
deposited in the Borrower Cash Collateral Account are the sole and exclusive
property of the Agent for the benefit of the Banks
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and the Letter of Credit Bank. The Borrower shall cause that all Collections and
Remittances of the Subsidiary Guarantors deposited into the Subsidiary Guarantor
Cash Collateral Accounts shall be swept, to the extent any Advances or other
payment Obligations are then outstanding, to the Borrower Cash Collateral
Account on a daily basis. All funds at any time in the Borrower Cash Collateral
Account or the Guarantor Subsidiary Cash Collateral Accounts shall be deemed to
be the property of the Agent for the benefit of the Banks and shall be subject
only to the signing authority designated from time to time by the Agent. Neither
the Borrower nor any Subsidiary Guarantor shall have any interest therein or
control over such funds. Nevertheless, to the extent funds in the Borrower Cash
Collateral Account are deemed to be the property of the Borrower, the Borrower
hereby grants to the Agent a security interest in all funds held in the Borrower
Cash Collateral Account, as security for the Obligations. No Cash Collateral
Account shall be subject to any deduction, set-off, banker's lien or any other
right in favor of any person or entity other than the Agent.
5.3 APPLICATION OF DEPOSITS TO LOAN ACCOUNT. Prior to the occurrence of
an Event of Default, deposits to the Borrower Cash Collateral Account in respect
of the Borrower shall be credited to the Borrower as follows: (i) FIRST, to the
payment of any fees, expenses or other Obligations due and payable by the
Borrower to the Agent hereunder or under any of the other Loan Documents; (ii)
SECOND, to the payment of any fees or expenses due and payable by the Borrower
to a Letter of Credit Bank hereunder or under any of the other Loan Documents;
(iii) THIRD, to the ratable payment of any fees, expenses or other Obligations
due and payable by the Borrower to the Banks hereunder or under any of the other
Loan Documents other than those Obligations specifically referred to in other
clauses of this Subsection; (iv) FOURTH, to the ratable payment of interest due
on the Advances made to the Borrower, (v) FIFTH, to late charges until paid in
full, (vi) SIXTH, to the outstanding principal amount of any Revolving Credit
Advances as follows: (A) first, to Revolving Credit Advances comprised of Agent
Special Advances, (B) second, to Revolving Credit Advances comprised of
Settlement Advances, and (C) third, to other Revolving Credit Advances in such
order as the Agent may choose in its sole discretion; PROVIDED, HOWEVER, that,
the Agent will use reasonable efforts to avoid applications that would cause
early prepayment of a LIBOR Rate Borrowing prior to expiration of its applicable
Interest Period; and (vii) then, to the extent of any excess not so credited,
such deposits shall be transferred to the Investment Account for use by the
Borrower. Upon the occurrence of an Event of Default which has not been waived
in writing in accordance with Section 14.1, all such deposits to the Borrower
Cash Collateral Account in respect of the Borrower shall be credited to the
Borrower as follows: (i) FIRST, to the payment of any fees, expenses or other
Obligations due and payable by the Borrower to the Agent hereunder or under any
of the other Loan Documents, including advances of Revolving Credit Advances by
the Agent pursuant to Section 2.4 and any other amounts advanced by the Agent on
behalf of the Banks; (ii) SECOND, to the payment of any fees, expenses or other
Obligations due and payable by the Borrower to the Letter of Credit Bank
hereunder or under any of the other Loan Documents; (iii) THIRD, to the ratable
payment of any fees, expenses or other Obligations due and payable by the
Borrower to the Banks hereunder or under any of the other Loan Documents other
than those Obligations specifically referred to in this Subsection; (iv) FOURTH,
to the ratable payment of interest due on the Advances made to the Borrower, (v)
FIFTH, to the outstanding principal amount of any other outstanding Obligations
of the Borrower (other than in respect of the aggregate undrawn amount of any
Letter of Credit outstanding for the account
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of the Borrower) in such order as the Agent may choose in its sole discretion;
and (vi) sixth, as cash collateral security against the aggregate undrawn amount
of any Letter of Credit outstanding for the account of the Borrower and any
other Obligations (whether then or thereafter outstanding) of the Borrower.
5.4 CREDITING OF COLLECTIONS AND REMITTANCES. For the purpose of
calculating in respect of the Borrower interest and determining the aggregate
Advances outstanding and resulting loan availability hereunder, all Collections
and Remittances shall be credited to the Borrower: (i) in the case of
Collections and Remittances received by wire transfer prior to 12:00 noon
(Cleveland, Ohio time), on the same Business Day as received, (ii) in the case
of Collections and Remittances received by wire transfer after 12:00 noon
(Cleveland, Ohio time), on the next succeeding Business Day after such receipt
and (iii) in the case of all other Collections and Remittances received, two
Business Days after the Business Day on which the Agent receives notice of the
deposit of the proceeds of such Collections and Remittances into the Borrower
Cash Collateral Account, and is in good funds with respect thereto prior to
12:00 noon (Cleveland, Ohio time). From time to time, upon advance written
notice to the Borrower, the Agent may adopt such additional or modified
regulations and procedures as it may deem reasonable and appropriate with
respect to the operation of the Borrower Cash Collateral Account and the
services to be provided by the Agent under this Agreement not inconsistent with
the terms of this Agreement.
5.5 COST OF COLLECTION. All reasonable costs of collection of the
Borrower's Accounts, including out-of-pocket expenses, administrative and
record-keeping costs, reasonable attorney's fees, and all service charges and
costs related to the establishment and maintenance of the Borrower Cash
Collateral Account, shall be the sole responsibility of the Borrower, whether
the same are incurred by the Agent or the Borrower, and the Agent, in its sole
discretion, may charge the same against the Borrower, and the same shall be
deemed part of the Obligations hereunder. The Borrower hereby indemnifies and
holds the Agent harmless from and against any loss or damage with respect to any
Collection or Remittance deposited in the Borrower Cash Collateral Account which
is dishonored or returned for any reason. If any Collection or Remittance
deposited in the Borrower Cash Collateral Account is dishonored or returned
unpaid for any reason, the Agent, in its sole discretion, may charge the amount
of such dishonored or returned Collection or Remittance directly against the
Borrower and/or any account maintained by the Borrower with the Agent and such
amount shall be deemed part of the Obligations hereunder. The Agent shall not be
liable for any loss or damage resulting from any error, omission, failure or
negligence on the part of the Agent under this Agreement, except losses or
damages resulting from the Agent's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction.
5.6 RETURN OF FUNDS. Upon the payment in full of all Obligations and
the termination of the aggregate Commitments and LC Exposure hereunder: (a) the
Agent's security interests and other rights in funds in the Cash Collateral
Accounts under Section 5.2 of this Agreement shall terminate, (b) all rights to
such funds shall revert to the Borrower, and (c) the Agent will, at the
Borrower's expense, take such steps as the Borrower may reasonably request to
evidence the termination of such security interests and to effect the return to
the Borrower of such funds.
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5.7 NOTICE TO ACCOUNT DEBTORS. The Borrower hereby authorizes the
Agent, now and at any time or times hereafter, in accordance with the powers
conferred upon the Agent pursuant to Section 5 or any other applicable provision
of this Agreement, to: (a) notify any or all Account Debtors that the Accounts
have been assigned to the Agent, for the ratable benefit of the Agent, the Banks
and the other holders of the Obligations, and that the Agent has a security
interest therein, and (b) upon the occurrence of an Event of Default (unless
waived in writing in accordance with Section 14.1), direct such Account Debtors
to make all payments due from them to the Borrower upon the Accounts directly to
the Agent or to a lockbox designated by the Agent; PROVIDED, HOWEVER, that the
Agent shall not exercise any of its rights under this sentence unless: (i) the
Borrower has failed to so notify or direct any such Account Debtor following a
request from the Agent to the Borrower for such notification or direction, or
(ii) the Agent reasonably believes that the Borrower has failed to so notify or
direct any such Account Debtor. The Agent shall promptly furnish the Borrower
with a copy of any such notice sent. Any such notice, in the Agent's sole
discretion, may be sent on the Borrower's stationery, in which event the
Borrower shall co-sign such notice with the Agent.
5.8 APPOINTMENT OF ATTORNEY-IN-FACT. The Borrower hereby irrevocably
appoints the Agent (and all persons designated by the Agent) as the Borrower's
true and lawful attorney (and agent-in-fact) to: (a) effectuate, in the
Borrower's name, the Borrower's obligations under this Agreement and (b) upon
the occurrence of an Event of Default (unless appropriately waived in writing in
accordance with Section 14.1), in the Borrower's or Agent's name: (i) demand
payment of the Accounts, (ii) enforce payment of the Accounts, by legal
proceedings or otherwise, (iii) exercise all of the Borrower's rights and
remedies with respect to the collection of the Accounts and any other
Collateral, (iv) settle, adjust, compromise, extend, or renew the Accounts, (v)
settle, adjust, or compromise any legal proceedings brought to collect the
Accounts, (vi) if permitted by applicable law, sell or assign the Accounts and
other Collateral upon such terms, for such amounts, and at such time or times as
the Agent deems advisable, (vii) discharge and release the Accounts and any
other Collateral, (viii) take control, in any manner, of any item of payment or
Proceeds relating to any Collateral, (ix) prepare, file, and sign the Borrower's
name on a proof of claim in bankruptcy or similar document against any Account
Debtor, (x) prepare, file, and sign the Borrower's name on any notice of Lien,
assignment, or satisfaction of Lien or similar document in connection with the
Accounts, (xi) do all acts and things reasonably necessary, in the Agent's good
faith discretion, to fulfill the Borrower's obligations under this Agreement,
(xii) endorse the name of the Borrower upon any of the items of payment or
Proceeds relating to any Collateral and deposit the same to the account of the
Agent on account of the Obligations, (xiii) endorse the name of the Borrower
upon any Chattel Paper, document, Instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of
lading, or similar document or agreement relating to the Accounts, Inventory and
any other Collateral, (xiv) use the Borrower's stationery and sign the name of
the Borrower to verifications of the Accounts and notices thereof to Account
Debtors, (xv) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, and any other Collateral to which the Borrower has access,
and (xvi) notify post office authorities to change the address for delivery of
the Borrower's mail to an address designated by the Agent, receive and open all
mail addressed to the Borrower, and, after removing all Collections and
Remittances and other Proceeds of Collateral, forward the mail to the Borrower.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to
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be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
SECTION 6 SPECIFIC REPRESENTATIONS, WARRANTIES AND COVENANTS
RELATING TO COLLATERAL.
6.1 REPRESENTATIONS AND WARRANTIES REGARDING ACCOUNTS. The Borrower
agrees and represents that each Account of the Borrower and each of its
Subsidiary Guarantors and each invoice representing any such Account will (a)
cover a bona fide sale or lease and delivery of merchandise usually dealt in by
the Borrower or such Subsidiary Guarantor, or the rendition by the Borrower or
such Subsidiary Guarantor of services to customers in the ordinary course of
business, (b) be for a liquidated amount maturing as stated in the schedule
thereof and in the duplicate invoice covering said sale, and (c) other than the
Agent's security interest therein, not be subject to any lien, or, except for
those asserted by the Account Debtor in the ordinary course of business, any
offset, deduction or counterclaim. None of the Borrower's or any of its
Subsidiary Guarantor's invoices shall be backdated, postdated or redated, and
neither the Borrower nor any of its Subsidiary Guarantors shall make sales on
extended dating or credit terms other than in accordance with past practices as
disclosed to the Agent in writing. The Borrower shall notify the Agent promptly
upon, but in no event later than three (3) Business Days after the Borrower's
learning thereof, in the event any Eligible Account in an amount in excess of
$100,000 falls within any of the exclusions set forth in clauses (b) through (v)
of the definition of "Eligible Accounts" and of the reasons therefore.
6.2 DISPUTES AND CLAIMS REGARDING ACCOUNTS. The Borrower shall, and
shall cause each of its Subsidiary Guarantors to, promptly settle or adjust all
disputes and claims at no expense to the Agent, but no discount, credit or
allowance (other than discounts, credits or allowances that do not exceed
$1,500,000 in the aggregate at any one time outstanding) or material adverse
extension, compromise or settlement shall be granted to any customer or Account
Debtor. No returns of merchandise outside the ordinary course of business (other
than returns that do not exceed $350,000 in the aggregate in any Fiscal Quarter)
shall be accepted by the Borrower or any of its Subsidiary Guarantors without
the Agent's consent which consent shall not be unreasonably withheld or delayed.
6.3 ACCOUNTS. Other than (a) the Guarantor Subsidiary Lockboxes and the
Cash Collateral Accounts and (b) those operating accounts disclosed on the
Supplemental Schedule (which the Borrower and the Subsidiary Guarantors shall
use solely for purposes other than for the collecting or depositing Collections
or Remittances) or which have otherwise been disclosed to the Agent in writing
from time to time after the Closing Date (such operating accounts being referred
to herein as the "Permitted Accounts"), neither the Borrower, nor any of its
Subsidiaries nor any other Person maintains a mailbox, Deposit Account or other
account for the purpose of collecting and depositing Collections or Remittances
or otherwise holding monies of the Borrower or the Subsidiary Guarantors.
6.4 COMPLIANCE WITH TERMS OF ACCOUNTS. The Borrower will perform and
comply, and will cause the Subsidiary Guarantors to perform and comply, (i) in
all material respects with all obligations in respect of Accounts and (ii) under
all other contracts and agreements to
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which it is a party or by which it is bound relating to the Collateral, where
failure to so comply would result in a Material Adverse Effect, unless the
validity thereof is being contested in good faith by appropriate proceedings and
such proceedings do not involve the material danger of the sale, forfeiture or
loss of the Collateral which is the subject of such proceedings or the priority
of the lien in favor of the Agent thereon.
6.5 NO WAIVERS, EXTENSIONS, AMENDMENTS. Other than in the ordinary
course of business and in accordance with its business practices prior to the
execution and delivery of this Agreement, Borrower will not, and will cause the
Subsidiary Guarantors not to, without the Agent's prior written consent, which
consent shall not be unreasonably withheld or delayed, grant any extension of
the time of payment of any of the Accounts, Chattel Paper or Instruments,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon.
6.6 LIEN PRIORITY. From and after the Closing Date, by reason of the
filing of financing statements, assignments of financing statements and
termination statements in all requisite governmental offices, this Agreement and
the other Loan Documents will create and constitute a valid and perfected first
priority security interest (except as permitted by this Agreement) in and Lien
on that portion of the Collateral which can be perfected by such filing, which
security interest will be enforceable against the Borrower, its Subsidiaries and
all other third parties as security for payment of all Obligations.
6.7 LOCATION OF COLLATERAL. All of the locations of the Borrower, its
Subsidiaries and of the Collateral are set forth in the Supplemental Schedule
attached hereto, except for consignee locations permitted under Section 4.3 of
this Agreement. Other than as set forth in the Supplemental Schedule attached
hereto and the consignee locations permitted under Section 4.3 of this
Agreement, neither the Borrower nor any of its Subsidiaries keeps any Collateral
owned by it on any property not owned in fee simple by the Borrower or such
Subsidiary, as the case may be.
6.8 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS. Neither the
Borrower nor any Subsidiary Guarantor will create, permit or suffer to exist,
and each of the Borrower and the Subsidiary Guarantors will defend the
Collateral against and take such other action as is necessary to remove, any
Lien, claim or right, in or to the Collateral, other than the Liens permitted by
Section 8.3(d) of this Agreement, and will defend the right, title and interest
of the Agent in and to any of the Borrower's or any of its Subsidiary's rights
to the Collateral and in and to the Proceeds and Products thereof against the
claims and demands of all persons whomsoever. In the event any Inventory of the
Borrower or any Subsidiary Guarantor is at any time located on any real property
not owned by the Borrower or such Subsidiary Guarantor and subject to the liens
of this Agreement and the other Loan Documents in favor of the Agent, the
Borrower will obtain and maintain in effect, and will cause its Subsidiary
Guarantors to obtain and maintain in effect, at all times while any such
Inventory is so located valid and effective lien waivers in form and substance
satisfactory to the Agent, whereby each owner, landlord and mortgagee having an
interest in such real property shall disclaim any interest in such Inventory and
shall agree to allow the Agent reasonable access to such real property in
connection with
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any enforcement of the security interest granted hereunder. The Borrower shall
not maintain, and shall not permit any Subsidiary Guarantor to maintain, any
Inventory at any consignee in an amount in excess of Fifty Thousand Dollars
($50,000) per location unless Borrower gives the Agent notice of the location
and amount of such consigned Inventory for each location at which the Inventory
exceeds Fifty Thousand Dollars ($50,000) within five (5) business days after the
Inventory is moved, delivered or taken to such location. The Borrower shall not,
and shall not permit any Subsidiary Guarantor to, store any Inventory with a
bailee, warehouseman or similar party without the Agent's prior written consent
and, if the Agent gives such consent and reasonably requires such action, the
Borrower will concurrently therewith cause any such bailee, warehouseman or
similar party to issue and deliver to the Agent, in form and substance
acceptable to the Agent, warehouse receipts therefor in the Agent's name.
6.9 MAINTENANCE OF INSURANCE. The Borrower will maintain with
financially sound and reputable companies, insurance policies (a) insuring the
Inventory of the Borrower and the Subsidiary Guarantors against loss by fire,
explosion, theft and such other casualties as are usually insured against by
companies engaged in the same or similar businesses, and (b) insuring the
Borrower and the Agent against liability for personal injury and property damage
relating to such Inventory, such policies to be in such form and in such amounts
and coverage as may be reasonably satisfactory to the Agent, with losses payable
to the Borrower and the Agent as their respective interests may appear. All
insurance with respect to such Inventory shall (i) contain a breach of warranty
clause in favor of the Agent, (ii) provide that no cancellation, reduction in
amount, change in coverage or expiration thereof shall be effective until at
least thirty (30) days after written notice to the Agent thereof, and (iii) be
reasonably satisfactory in all respects to the Agent.
6.10 LIMITATIONS ON DISPOSITIONS OF INVENTORY. The Borrower will not,
and will not permit the Subsidiary Guarantors to, sell, transfer, lease or
otherwise dispose of any of the Inventory, or attempt, offer or contract to do
so, except for dispositions of Inventory in the ordinary course of business and
dispositions of up to $750,000 of slow-moving or obsolete Inventory of the
Borrower and the Subsidiary Guarantors during any Fiscal Quarter, in the
aggregate.
SECTION 7 GENERAL REPRESENTATIONS AND WARRANTIES.
So long as the Obligations shall remain outstanding or the Banks shall
have any Commitment or LC Exposure hereunder, the Borrower represents and
warrants to the Agent and the Banks as follows:
7.1 EXISTENCE. The Borrower and the Subsidiary Guarantors are duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. The Borrower has no Subsidiaries other than as listed in the
Supplemental Schedule. The Borrower and its Subsidiaries are duly qualified or
licensed to transact business in the jurisdiction of its organization and in
each additional jurisdiction where such qualification or licensure is necessary,
except where failure to do so will not have a Material Adverse Effect.
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7.2 AUTHORIZATION. The execution, delivery, and performance of this
Agreement and the other Loan Documents to which the Borrower or any of the
Subsidiary Guarantors is a party: (a) are within the Borrower's or such
Subsidiary Guarantor's corporate powers, (b) have been duly authorized, and are
not in contravention of Law or the terms of the Borrower's or such Subsidiary
Guarantor's Certificate of Incorporation or By-Laws or, except as set forth on
the Supplemental Schedule, of any indenture or other document or instrument
evidencing borrowed money or any other agreement or undertaking to which the
Borrower or such Subsidiary Guarantor is a party or by which it or its property
is bound.
7.3 ENFORCEABILITY. This Agreement and the other Loan Documents to
which the Borrower or any of the Subsidiary Guarantors is a party constitute the
legal, valid and binding obligations of such Person, enforceable against such
Person in accordance with the terms thereof, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
7.4 LITIGATION; PROCEEDINGS. Except as set forth in the Supplemental
Schedule, as of the Closing Date there are no actions, suits, investigations or
proceedings, and no orders, writs, injunctions, judgments or decrees, now
pending, existing or, to the knowledge of the Borrower, threatened against the
Borrower or any of the Subsidiary Guarantors, affecting any property of the
Borrower or any of the Subsidiary Guarantors or with respect to this Agreement
or any Loan Document, whether at law, in equity or otherwise, before any court,
board, commission, agency or instrumentality of any federal, state, local or
foreign government or of any agency or subdivision thereof, or before any
arbitrator or panel of arbitrators. There is no action, suit, investigation,
proceeding, order, writ, injunction, or decree existing at any time on or after
the Closing Date that, when taken singly or with all other actions, suits,
investigations, proceedings, orders, writs, injunctions or decrees, could
reasonably be expected to result in a Material Adverse Effect or has otherwise
resulted, or could reasonably be expected to result, in liabilities or claims
against the Borrower, any Subsidiary Guarantor or the Combined Borrowing
Entities in an amount exceeding One Million Five Hundred Thousand Dollars
($1,500,000), UNLESS, any such amounts owing by Borrower or such Subsidiary
Guarantor resulting from such action, suit, investigation, proceeding, order,
writ, injunction, or decree shall be either (i) insured and the insurance
carrier shall have acknowledged coverage in an amount of the insurance or shall
have been ordered by a court of competent jurisdiction to pay such amounts owing
by the Borrower or such Subsidiary Guarantor resulting from such action, suit,
investigation, proceeding, order, writ, injunction, or decree, or (ii) subject
to the GEC Indemnity, but only to the extent that GEC has acknowledged liability
or has been ordered by a court of competent jurisdiction to pay such amount
owing by the Borrower or such Subsidiary Guarantor from such action, suit,
investigation, proceeding, order, writ, injunction, or decree.
7.5 TAXES. The Borrower and its Subsidiaries have filed all federal,
state and local tax returns which are required to be filed by the Borrower and
such Subsidiaries and, except to the extent permitted by Section 8.2(i) of this
Agreement, have paid all taxes and assessments due as shown on such returns,
including interest, penalties and fees.
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7.6 TITLE. The Borrower and the Subsidiary Guarantors have good title
to the Collateral. All such Collateral is free of all Liens other than those in
favor of the Agent and those otherwise disclosed in the Supplemental Schedule or
permitted by Section 8.3(d) of this Agreement.
7.7 CONSENTS; APPROVALS. Except as set forth on the Supplemental
Schedule, no action, consent or approval of, registration or filing with or any
other action by any governmental authority or other Person is or will be
required in connection with the transactions contemplated by this Agreement and
the other Loan Documents, except such as have been made or obtained and are in
full force and effect.
7.8 LAWFUL OPERATIONS. The operations of the Borrower and its
Subsidiaries are in full compliance with all requirements imposed by Law,
including without limitation, occupational safety and health laws and zoning
ordinances except to the extent any such noncompliance, when taken singly or
with all other such noncompliance, has not resulted, and could not reasonably be
expected to result in a Material Adverse Effect and has not otherwise resulted,
and could not reasonably be expected to result, in liabilities or claims against
the Borrower, any Subsidiary Guarantor or the Combined Borrowing Group in an
amount exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
7.9 ENVIRONMENTAL COMPLIANCE. Each parcel of real property in which the
Borrower or any of its Subsidiaries has a real property interest (whether as fee
owner, operator, lessor (directly or indirectly), lessee (directly or
indirectly), mortgagee or otherwise) (collectively, "Properties") is in
compliance with Environmental Laws except for any noncompliance, when taken
singly or with all other such noncompliance, has not resulted, and could not
reasonably be expected to result, in a Material Adverse Effect and has not
otherwise resulted, and could not reasonably be expected to result, in
liabilities or claims against the Borrower, any Subsidiary Guarantor or the
Combined Borrowing Entities in an amount exceeding One Million Five Hundred
Thousand Dollars ($1,500,000), EXCEPT to the extent any such amounts owing by
Borrower or such Subsidiary Guarantor resulting from such noncompliance are
either (i) insured and the insurance carrier shall have acknowledged coverage in
an amount of the insurance or shall have been ordered by a court of competent
jurisdiction to pay such amounts owing by the Borrower or such Subsidiary
Guarantor resulting from such noncompliance, or (ii) subject to the GEC
Indemnity, but only to the extent that GEC has acknowledged liability or has
been ordered by a court of competent jurisdiction to pay such amount owing by
the Borrower or such Subsidiary Guarantor from such noncompliance. With respect
to each of the Properties, (a) there is no pending or, to the knowledge of the
Borrower, threatened Environmental Claim against the Borrower or any of its
Subsidiaries or any other environmental condition with respect to any Property
which Environmental Claim or condition, when taken singly or with all other such
Environmental Claims or conditions, has resulted, and could reasonably be
expected to result, in a Material Adverse Effect or has otherwise resulted, and
could reasonably be expected to result, in liabilities or claims against the
Borrower, any Subsidiary Guarantor or the Combined Borrowing Entities in an
amount exceeding One Million Five Hundred Thousand Dollars ($1,500,000), EXCEPT
to the extent any such amounts owing by Borrower or such Subsidiary Guarantor
resulting from such Environmental Claims or conditions are either (X) insured
and the insurance carrier shall have
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acknowledged coverage in an amount of the insurance or shall have been ordered
by a court of competent jurisdiction to pay such amounts owing by the Borrower
or such Subsidiary Guarantor resulting from such Environmental Claims or
conditions, or (Y) subject to the GEC Indemnity, but only to the extent that GEC
has acknowledged liability or has been ordered by a court of competent
jurisdiction to pay such amount owing by the Borrower or such Subsidiary
Guarantor from such Environmental Claims or conditions, (b) the Borrower and its
Subsidiaries are in material compliance with all Environmental Permits, and (c)
except as set forth on the Supplemental Schedule, Hazardous Materials have not
been released or disposed of on any such Property or, to the best knowledge of
the Borrower, any property adjoining any such Property, except in compliance
with applicable Environmental Laws. Except as disclosed on the Supplemental
Schedule, no Property is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or
state list of sites requiring investigation or clean-up. Except as disclosed in
the Supplemental Schedule, there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, landfills, lagoons, surface
impoundments, disposal areas or disposal ponds, on or under any Property that
are in violation of any applicable Environmental Law. Except as disclosed on the
Supplemental Schedule, neither the Borrower nor any of its Subsidiaries has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for listing on
the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar federal or state list or which is the subject of any federal, state or
local enforcement actions or other investigations which may lead to claims
against the Borrower or its Subsidiaries for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA. Except as
disclosed in the Supplemental Schedule, there are no polychlorinated biphenyls
or friable asbestos present at any Property in violation of any applicable
Environmental Law. No condition exists at, on or under any Property, which, with
the passage of time, or the giving of notice or both, would give rise to
liability under any Environmental Law except for such a condition, when taken
singly or with all other such conditions, has not resulted, and could not
reasonably be expected to result, in a Material Adverse Effect and has not
otherwise resulted, and could not reasonably be expected to result, in
liabilities or claims against the Borrower, any Subsidiary Guarantor or the
Combined Borrowing Entities in an amount exceeding Seven Hundred Fifty Thousand
Dollars ($750,000). Except as disclosed in the Supplemental Schedule, no
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any Property. Except
as disclosed in the Supplemental Schedule, the Borrower is not aware of any
prior use of any Property by any Persons that constitutes a violation of any
Environmental Laws or has resulted in a release of Hazardous Materials into the
environment such as would give rise to a cleanup obligation or other
Environmental Claim. Except as disclosed in the Supplemental Schedule, the
Borrower is not aware of any event, condition or activity which may interfere
with or prevent continued compliance by the Borrower or its Subsidiaries with
all Environmental Laws. Except as disclosed in the Supplemental Schedule, there
is no civil, criminal or administrative action, suit, demand, claim, hearing,
notice of violation, proceeding, notice or demand letter pending as of the
Closing Date or, to the best knowledge of the Borrower, threatened involving any
of the Properties relating to violations of Environmental Laws. To the best
knowledge of the Borrower, except as disclosed in the Supplemental Schedule,
there is no pending investigation involving any of the Properties relating to
violations of Environmental Laws.
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7.10 ENVIRONMENTAL LAWS AND PERMITS. Without limiting the
representations made in Section 7.9 above, to the best knowledge of the
Borrower, except as disclosed in the Supplemental Schedule, there are no
circumstances with respect to any Property or the operations of any Borrower or
its Subsidiaries that could reasonably be anticipated: (i) to form the basis of
a Environmental Claim against the Borrower, its Subsidiaries or (ii) to cause
any Property owned, leased or funded by the Borrower or any of its Subsidiaries
to be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law.
7.11 ERISA. The Supplemental Schedule sets forth all of the Employee
Benefit Plans of the Borrower, its Subsidiaries and each ERISA Affiliate thereof
as of the Closing Date. No Accumulated Funding Deficiency exists in respect of
any Employee Benefit Plan of the Borrower, its Subsidiaries or any ERISA
Affiliate thereof. No Reportable Event has occurred in respect of any Employee
Benefit Plan which is continuing and which: (i) constitutes grounds either for
termination of the plan or for court appointment of a trustee for the
administration thereof or (ii) when taken singly or with all other such
Reportable Events, has resulted, or could reasonably be expected to result, in a
Material Adverse Effect and has otherwise resulted, or could reasonably be
expected to result, in liabilities or claims against the Borrower, any
Subsidiary Guarantor or the Combined Borrowing Entities in an amount exceeding
Seven Hundred Fifty Thousand Dollars ($750,000). No "prohibited transactions"
(as defined in Section 406 of ERISA or Section 4975 of the Code), have occurred
that could cause any Borrower or any of its Subsidiaries or any ERISA Affiliate
thereof to incur a material liability. Neither the Borrower, nor its
Subsidiaries nor any ERISA Affiliate thereof, has: (i) had an obligation to
contribute to any Multiemployer Plan except as disclosed in the Supplemental
Schedule or (ii) incurred or reasonably expects to incur any liability for the
withdrawal from such a Multiemployer Plan.
7.12 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES. The Supplemental
Schedule sets forth a list of all Material Business Agreements of the Borrower
and each of the Subsidiary Guarantors. As of the Closing Date, the Material
Business Agreements of the Borrower and the Subsidiary Guarantors are in full
force and effect and have not been revoked or otherwise modified since the
execution thereof. The Borrower and each of the Subsidiary Guarantors is in full
compliance with the material terms of the Material Business Agreements to which
it is a party. Neither the Borrower, nor any of its Subsidiaries, is subject to
any contract, agreement, corporate restriction which could reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries is a party to any labor dispute (other than grievance disputes
which could, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect or could reasonably be expected to result in
liabilities to the Borrower, any Subsidiary Guarantor or the Combined Borrowing
Entities in an amount exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
There are no material strikes, slow downs, walkouts or other concerted
interruptions of operations by employees of the Borrower or any Subsidiary
Guarantor, whether or not relating to any labor contracts.
7.13 FINANCIAL STATEMENTS. The audited consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries for the Fiscal
Year ending December
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31, 1997, and the related statements of income, shareholder's equity, and cash
flows, and, as applicable, changes in financial position or cash flows for such
Fiscal Years, and the notes to such financial statements, reported upon by Ernst
& Young LLP, certified public accountants: (a) have been prepared in accordance
with GAAP, applied on a consistent basis with the Borrower's financial
statements from prior Fiscal Years and (b) fairly present in all material
respects (subject to routine year-end audit adjustments in the case of the
unaudited financial statements) the financial condition of the Borrower and its
consolidated Subsidiaries as of the respective dates thereof (including a full
disclosure of liabilities, contingent or otherwise, if any, required to be
reported in accordance with GAAP) and the results of its operations for the
respective fiscal periods then ending. As of the Closing Date, neither the
Borrower nor any Subsidiary Guarantor has experienced a Material Adverse Effect
since the December 31, 1997 financial statements, nor has there been any change
in the Borrower's accounting procedures used therein. Except as set forth on the
Supplemental Schedule, the Borrower and its Subsidiaries did not as of December
31, 1997, and will not as of the Closing Date, have any material contingent
liabilities, material liabilities for taxes, unusual and material forward or
long-term commitments or material unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected in said audited
balance sheet.
7.14 INTELLECTUAL PROPERTY. The Borrower and each of its Subsidiary
Guarantors owns or has the legal and valid right to use all Intellectual
Property necessary for the operation of its business as presently conducted,
free from any Lien not permitted under Section 8.3(d) and free of any
restrictions material to the operation of its business as presently conducted
except as set forth in the Supplemental Schedule. Except as set forth in the
Supplemental Schedule or as otherwise disclosed to the Agent from time to time
in writing, neither the Borrower nor any of its Subsidiary Guarantors (a) has
any Intellectual Property, (b) licenses any Intellectual Property (whether as
licensor or licensee), or (c) is a party to any Material License Agreement with
respect to Intellectual Property which, in the case of each of clauses (a)-(c)
above, appears or is printed on or is necessary for the manufacture, advertising
for sale and sale of any Collateral.
7.15 INSURANCE. The insurance policies maintained by Borrower and/or
the Subsidiary Guarantors comply with the requirements of Section 6.9 of this
Agreement. The Supplemental Schedule sets forth a true and accurate description
of all insurance policies maintained by the Borrower or any Subsidiary
Guarantor.
7.16 VALUE; SOLVENCY. The Borrower has received fair consideration and
reasonably equivalent value for the obligations and liabilities it has incurred
to the Banks hereunder. The Borrower is Solvent and each of the Subsidiary
Guarantors is Solvent.
7.17 INVESTMENT COMPANY ACT STATUS. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or an "affiliated person" of, or a
"promoter" or "principal underwriter" for an "investment company" (as such terms
are defined in the Investment Company Act of 1940, as amended (15 U.S.C. Section
80(a)(1), et seq.).
7.18 REGULATION U/REGULATION X COMPLIANCE. The proceeds of Advances
made to the Borrower pursuant to this Agreement will be used only for the
purposes contemplated by
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Section 8.2(g) hereof. No part of the proceeds of Advances made to the Borrower
pursuant to this Agreement will be used, directly or indirectly, to purchase or
carry any "margin stock" or for a purpose which violates any law, rule, or
regulation including, without limitation, the provisions of Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, as amended.
Neither the Borrower nor any of its Subsidiaries owns any "margin stock", as
that term is defined in Regulation U and Regulation X of the Board of Governors
of the Federal Reserve System.
7.19 FULL DISCLOSURE. The financial statements referred to in Section
7.13, the warranties and representations and factual disclosures made by the
Borrower and the Subsidiary Guarantors in this Agreement and the other Loan
Documents, and all documents or statements filed with the Securities and
Exchange Commission since December 31, 1997, do not, taken as a whole, contain
any untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not materially misleading. The
Field Exam Materials and the statements contained therein are true and accurate
in all material respects and are not materially misleading in light of the
circumstances and purposes for which such information was provided. The Borrower
has provided all information requested by the Agent and the Banks, and all such
information is complete and accurate in all material respects.
SECTION 8 COVENANTS OF THE BORROWER.
So long as any of the Obligations shall remain outstanding or the Banks
shall have any Commitments or LC Exposure hereunder, the Borrower shall comply,
and, to the extent applicable to its Subsidiaries, will cause each of its
Subsidiaries to comply, with the following provisions unless the Banks shall
otherwise consent in writing:
8.1 REPORTING AND NOTICE COVENANTS.
(a) MONTHLY FINANCIAL STATEMENTS. The Borrower shall
furnish to the Agent and each Bank, as soon as practicable and in any
event within thirty (30) days after the end of each Fiscal Month of the
Borrower, an unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of that Fiscal Month and the related
statements of operations, retained earnings and cash flow for the year
to the end of that monthly period for such Fiscal Month.
(b) QUARTERLY FINANCIAL STATEMENTS. The Borrower shall
furnish to the Agent and each Bank, as soon as practicable and in any
event within forty-five (45) days after the end of each Fiscal Quarter
of the Borrower, commencing with the first Fiscal Quarter ending with
respect to which the Borrower has filed a Form 10-Q with the Securities
and Exchange Commission following effectiveness of the Exchange Offer
Registration Statement of the Borrower in respect of the Senior Note
Offering on Form S-4, an unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of that Fiscal Quarter and
the related statements of operations, retained earnings and cash flow
for the year to the end of that quarterly period for such Fiscal
Quarter, prepared on an unaudited comparative basis with the comparable
period during the prior
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year and in accordance with GAAP, all in reasonable detail and
certified, subject to normal year-end audit adjustments, by a
responsible officer of the Borrower.
(C) ANNUAL FINANCIAL STATEMENTS. The Borrower shall
furnish to the Agent and each of the Banks, (i) as soon as practicable
and in any event within ninety (90) days after the end of each Fiscal
Year of the Borrower, a complete copy of the annual audit report of the
Borrower and its Subsidiaries (including, without limitation, all
consolidated and consolidating financial statements of the Borrower and
notes thereto) for that Fiscal Year, all of which shall be (A) prepared
on a comparative basis with the prior year and in accordance with GAAP,
and (B) audited and certified (without qualification as to GAAP), by
independent public accountants of recognized national standing selected
by the Borrower and acceptable to the Agent and the Banks, and (ii) as
soon as practicable and in any event within one hundred twenty (120)
days after the end of each Fiscal Year of the Borrower, the
accountants' management report and any management letters relating to
the items described in clause (i) above.
(d) OFFICER'S CERTIFICATE. The Borrower shall furnish to
the Banks:
(i) concurrently with the financial statements
delivered in connection with Sections 8.1(b) and 8.1(c) above,
a certificate of a responsible officer of the Borrower, in his
or her capacity as a responsible officer, setting forth the
computations necessary to determine whether the Borrower is in
compliance with Section 8.4 of this Agreement and satisfaction
of the financial standards required in connection with the
determination of the Applicable Revolving Credit Margin and
certifying that: (A) those financial statements fairly present
in all material respects the financial condition and results
of operations of the Borrower subject (in the case of interim
financial statements) to routine year-end audit adjustments
and (B) no Potential Default or Event of Default then exists
or, if any Potential Default or Event of Default does exist, a
brief description of the Potential Default or Event of Default
and the Borrower's intentions in respect thereof, and
(ii) upon Agent's request, and in no event less
frequently than weekly, (i) a certificate reflecting the
calculation of the Borrower's Borrowing Base, substantially in
the form attached hereto as EXHIBIT H (each a "Borrowing Base
Certificate") and satisfactory in substance to the Agent, and
(ii) a written report, in form and substance satisfactory to
the Agent, as to the Inventory and Accounts of the Borrower
and the Subsidiary Guarantors, setting forth the type, amount,
value and location of the Borrower's and each Subsidiary
Guarantor's Inventory and Accounts as at the end of the last
calendar week.
(e) ANNUAL BUSINESS PLAN. No later than one week after
approved by the Borrower's board of directors, but in any event prior
to each of the Borrower's Fiscal Year ends, the Borrower shall provide
the Agent and the Banks with each Subsidiary Guarantor's annual
business plan on a monthly basis, in form and substance reasonably
satisfactory to the Agent and the Banks and containing, at a minimum,
each Subsidiary
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Guarantor's budget, operating profit and cash flow projections for the
following Fiscal Year.
(f) INTERCOMPANY LOANS. Within fifteen (15) days after the
end of each month, the Borrower shall furnish to the Agent a list of
all outstanding balances of each Subsidiary Guarantor's Intercompany
Loan as of the end of such month, together with a list of all debits
and credits with respect thereto, in form and substance acceptable to
the Agent.
(g) OTHER INFORMATION. The Borrower shall furnish to the
Agent, promptly upon the Agent's written request, such other
information about the financial condition, properties and operations of
the Borrower, its Subsidiaries and each of their Employee Benefit Plans
as the Agent or any Bank may from time to time reasonably request.
(h) NOTICES. The Borrower will cause its chief financial
officer, or in his absence another officer designated by the chief
financial officer, to give the Agent and each Bank prompt written
notice whenever (and in any event within ten (10) Business Days after):
(i) the Borrower or any of its Subsidiaries receives notice from any
court, agency or other governmental authority of any alleged
non-compliance with any Law or order which, taken singly or together
with all other alleged non-compliance with Law, could reasonably be
expected to have or result in, if such noncompliance is found to exist,
a Material Adverse Effect or could reasonably be expected to result in
liabilities to the Borrower, any Subsidiary Guarantor or the Combined
Borrowing Entities in an amount exceeding Seven Hundred Fifty Thousand
Dollars ($750,000), (ii) the Internal Revenue Service or any other
federal, state or local taxing authority shall allege any default by
the Borrower or any of its Subsidiaries in the payment of any tax
material in amount or shall threaten or make any assessment in respect
thereof, (iii) any litigation or proceeding shall be brought against
the Borrower or any of its Subsidiaries before any court or
administrative agency which, taken singly or together with other
litigation or proceedings, could, if successful, reasonably be expected
to have or result in a Material Adverse Effect or could reasonably be
expected to result in liabilities to the Borrower, any Subsidiary
Guarantor or the Combined Borrowing Entities in an amount exceeding
Seven Hundred Fifty Thousand Dollars ($750,000), or (iv) any material
adverse change or development in connection with any such litigation
proceeding, or (v) such officer reasonably believes that any Potential
Default or Event of Default has occurred or that any other
representation or warranty made herein shall for any reason have ceased
to be true and complete in any material respect.
(i) NOTICE OF DEFAULT UNDER ERISA. If the Borrower shall
receive notice from any ERISA Regulator or otherwise have actual
knowledge that a Default under ERISA exists with respect to any
Employee Benefit Plan, the Borrower shall notify the Agent and each
Bank of the occurrence of such Default under ERISA, within ten (10)
Business Days after receiving such notice or obtaining such knowledge
(the disclosures contained in the Supplemental Schedule being such
notice of each Default under ERISA disclosed therein to the extent of
the disclosure therein) and shall: (i) so long as the Default under
ERISA has not been corrected to the satisfaction of, or waived in
writing
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by the party giving notice, the Borrower shall thereafter treat as a
current liability (if not otherwise so treated) all liability of
Borrower or its Subsidiaries that would arise by reason of the
termination of or withdrawal from such Employee Benefit Plan if such
plan was then terminated, and (ii) within forty-five (45) days of the
receipt of such notice or obtaining such knowledge, furnish to the
Agent and each Bank a current consolidated balance sheet of Borrower
with the amount of the current liability referred to above.
(j) ENVIRONMENTAL REPORTING. The Borrower shall promptly
deliver to the Agent and each Bank, and in any event within ten (10)
Business Days after receipt or transmittal by the Borrower or any of
its Subsidiaries, as the case may be, copies of all material
communications with any government or governmental agency relating to
Environmental Laws and all material communications with any other
Person relating to Environmental Claims brought against the Borrower or
its Subsidiaries which could reasonably be expected to result in a
Material Adverse Effect.
(k) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY. The Borrower
shall (i) once in each calendar year beginning in 1998, request a
current statement of withdrawal liability from any Multiemployer Plan
to which the Borrower or any ERISA Affiliate is or has been obligated
to contribute during such year and (ii) within fifteen (15) days after
the Borrower receives the such current statement, transmit a copy of
such statement to the Agent and each Bank.
8.2 AFFIRMATIVE COVENANTS.
(a) CORPORATE EXISTENCE. The Borrower shall, and shall
cause each of the Subsidiary Guarantors to, at all times maintain its
corporate existence, rights and franchises, except as permitted under
Section 8.3(a), and maintain its good standing in the jurisdiction of
its incorporation. The Borrower shall, and shall cause each of its
Subsidiaries to, qualify as a foreign corporation in each jurisdiction
where failure to qualify could reasonably be expected to result in a
Material Adverse Effect.
(b) FINANCIAL RECORDS. The Borrower shall maintain at all
times, true and complete financial records in accordance with GAAP,
consistently applied, and, without limiting the generality of the
foregoing, make appropriate accruals to reserves for estimated and
contingent losses and liabilities as required under GAAP.
(c) VISITATION. The Borrower shall upon reasonable prior
written or oral notice from the Agent or any Bank permit, and shall
cause each of its Subsidiary Guarantors to permit, the Agent or such
Bank, as the case may be, during normal business hours in the presence
of an officer of the Borrower: (i) to examine, with the guidance and
supervision of the Borrower, the Borrower's or any of the Borrower's
Subsidiary's financial records and to make copies of and extracts from
such records and (ii) to consult with the Borrower's and its Subsidiary
Guarantors' officers, directors, accountants, actuaries, trustees and
plan administrators, as the case may be, in respect of
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the Borrower's and such Subsidiary Guarantor's financial condition,
each of which parties is hereby authorized by the Borrower to make such
information available to the Agent or such Bank, as the case may be, to
the same extent that it would to the Borrower.
(d) COMPLIANCE WITH LAWS. The Borrower will comply, and
will cause each of its Subsidiaries to comply, in all respects with all
applicable provisions of all Laws (whether statutory, administrative,
judicial or other and whether federal, state or local and excluding
Environmental Laws to the extent addressed in Section 8.2(e) of this
Agreement) and every lawful governmental order; PROVIDED, HOWEVER, that
any alleged noncompliance shall not be deemed to be a violation of this
Section 8.2(d) so long as: (i) such noncompliance by the Borrower or
such Subsidiaries, taken singly or in the aggregate with all other
instances of noncompliance, has not resulted and could not reasonably
be expected to result in (A) a Material Adverse Effect, or (B)
liabilities or claims against the Borrower, any Subsidiary Guarantor or
the Combined Borrowing Entities in an amount exceeding Seven Hundred
Fifty Thousand Dollars ($750,000), and (ii) either (A) appropriate
corrective measures are commenced within thirty (30) days after the
non-compliance becomes apparent or is alleged, and thereafter are being
diligently pursued to the satisfaction of the court, agency or other
governmental authority in question, or (B) the alleged non-compliance
is contested in good faith by timely and appropriate proceedings
effective to stay, during the pendency of such proceedings, the
enforcement thereof, and the Borrower or such Subsidiary has
established appropriate reserves and taken such other appropriate
measures as may be required under GAAP.
(e) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will
use and operate its facilities and properties, and cause each of its
Subsidiaries to use and operate its respective facilities and
properties, in such a manner that no obligation shall arise under any
Environmental Law, including a clean-up obligation, which when taken
singly or with all other such obligations, has resulted or could
reasonably be expected to result in a Material Adverse Effect or has
otherwise resulted or could reasonably be expected to result in
liabilities or claims against the Borrower, any Subsidiary Guarantor or
the Combined Borrowing Entities in an amount exceeding Seven Hundred
Fifty Thousand Dollars ($750,000); PROVIDED, HOWEVER, that if any
Environmental Claim (even if such claim will not have a Material
Adverse Effect or exceed the liability limitations set forth above) is
made or any such obligation (even if such obligation would not have a
Material Adverse Effect or exceed the liability limitations set forth
above) arises, each of the Borrower and its Subsidiaries shall, at its
own cost and expense, timely satisfy such claim or obligation, provided
that no such claim or obligation need be satisfied if it is being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if appropriate reserves or other
appropriate provision, if any, as shall be required by GAAP have been
made. The Borrower will keep, and will cause each of its Subsidiaries
to keep, all necessary Environmental Permits in effect and remain in
material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws. The
Borrower shall not suffer to exist, and shall not permit any of its
Subsidiaries to suffer to exist, an environmental
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condition which, when taken singly or with all other such conditions,
has resulted or could reasonably be expected to result in a Material
Adverse Effect or has otherwise resulted or could reasonably be
expected to result in liabilities or claims against the Borrower, any
Subsidiary Guarantor or the Combined Borrowing Entities in an amount
exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
(f) PROPERTIES. The Borrower shall maintain, and shall
cause each of the Subsidiary Guarantors to maintain, all assets
necessary to its continuing operations in good working order and
condition, ordinary wear and tear excepted. The Borrower shall refrain,
and shall cause each of the Subsidiary Guarantors to refrain, from
wasting or destroying any such necessary assets or any part thereof.
(g) USE OF PROCEEDS; INTERCOMPANY LOANS. The Borrower
shall use the proceeds of Advances solely: (i) to fund payments of
interest due under the Senior Notes, and (ii) to make Intercompany
Loans to the Subsidiary Guarantors which shall be used by the
Subsidiary Guarantors for the purpose of (A) funding Permitted
Acquisitions, subject to the limitations on Permitted Acquisitions set
forth herein, and (B) supporting the working capital requirements of
such Subsidiary Guarantors. Each Intercompany Loan shall be evidenced
by an Intercompany Note and shall be secured pursuant to an
Intercompany Security Agreement. The Borrower shall establish and
maintain such books and records relating to Intercompany Loans as are
necessary to enable the Agent to trace advances and repayments of
principal of Intercompany Loans.
(h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS. The
Borrower shall perform and observe, and shall cause each of the
Subsidiary Guarantors to perform and observe, all the material terms
and provisions of each material contract to be performed or observed by
it, including, without limitation, all Material License Agreements and
Material Business Agreements to which they are a party. The Borrower
and each Subsidiary Guarantor shall maintain each such material
contract to which it is a party in full force and effect, and enforce,
to the extent that the Borrower or such Subsidiary Guarantor, in its
reasonable judgment, determines to be appropriate, each such material
contract in accordance with its terms.
(i) TAXES. The Borrower shall pay in full, and shall cause
each of its Subsidiaries to pay in full, prior in each case to the date
when penalties for the nonpayment thereof would attach, all taxes,
assessments and governmental charges and levies for which it may be or
become subject and all lawful claims which, if unpaid, might become a
Lien upon its property; PROVIDED, HOWEVER, that no item need be paid so
long as and to the extent that (i) it is contested in good faith and by
timely and appropriate proceedings effective, during the pendency of
such proceedings, to stay the enforcement of such taxes, assessments
and governmental charges and levies, and to prevent the creation of any
Lien, and (ii) appropriate reserves, as required by GAAP, are made on
the books of the Borrower and its Subsidiaries.
(j) INSURANCE. The Borrower shall, on the Closing Date and
within five (5) Business Days of the request by the Agent thereafter,
provide evidence satisfactory to
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the Agent that the Borrower and each of the Subsidiary Guarantors has
adequate personal and real property, casualty, liability, business
interruption and product liability insurance, with the Agent listed as
loss payee and additional insured (as applicable).
(k) LICENSE TO THIRD PARTIES AND SUBSIDIARIES. Except as
disclosed in the Supplemental Schedule, neither the Borrower nor any
Subsidiary Guarantor has any existing license agreements as licensor
with respect to its Intellectual Property that do not provide, and
neither the Borrower nor any such Subsidiary Guarantor will execute any
license agreement as licensor with any Person (including without
limitation any Subsidiary of the Borrower or such Subsidiary Guarantor)
with respect to any of its Intellectual Property that does not provide,
that (i) upon an Event of Default and the acceleration of the
Obligations, such license agreement shall, upon the written request of
the Agent, terminate, and (ii) such agreement may only be amended with
the express written consent of the Agent.
(l) YEAR 2000 COMPLIANCE. On or before July 31, 1999, all
of the Borrower's and each of the Subsidiary Guarantor's computer
hardware and software shall provide, in all material respects, the
following functions: (1) consistently handle date information before,
during and after January 1, 2000, including, but not limited to,
accepting date input, providing date output and performing calculations
on dates or portions of dates; (2) function accurately in accordance
with the specifications of such computer hardware or software and
without interruption before, during and after January 1, 2000, without
any change in operations associated with the advent of the new century;
(3) respond to two-digit date input in a way that resolves any
ambiguity as to century in a disclosed, defined and predetermined
manner; and (4) store and provide output of date information in ways
that are unambiguous as to century.
(m) REFINANCING. The Borrower, the Agent, the Banks and
the Letter of Credit Bank agree to use best efforts to refinance the
Obligations among the same parties, on terms acceptable to each such
party and that provide for the Subsidiary Guarantors to become
borrowing entities, by no later than April 30, 1998; PROVIDED, HOWEVER,
that so long as each party has used its best efforts to the failure of
the parties to reach an agreement in respect of such refinancing, the
failure to effect such a refinancing shall not be deemed a violation of
this Section 8.2(m).
8.3 NEGATIVE COVENANTS.
(a) EQUITY TRANSACTIONS; PERMITTED ACQUISITIONS. The
Borrower shall not, and shall not permit any of its Subsidiary
Guarantors to, without the prior written consent of the Required Banks,
which shall not be unreasonably withheld, (i) merge or consolidate with
or into, or enter into any agreement to merge or consolidate with or
into, any other Person or otherwise be a party to any merger or
consolidation; (ii) purchase all or substantially all of the assets and
business of another Person; or (iii) except as permitted under Section
8.3(d), lease as lessor, sell, sell-leaseback, license or otherwise
transfer (whether in one transaction or a series of transactions, but
excluding transactions involving sales or leases by ▇▇▇▇▇▇ of PC+
Products in the
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ordinary course) any of its assets (whether now owned or hereafter
acquired); PROVIDED, HOWEVER, that (A) the Borrower and the Subsidiary
Guarantors may sell or otherwise dispose of (I) Inventory in the
ordinary course of business, (II) to the extent permitted under Section
6.10, Inventory that is slow-moving or obsolete, and (III) Equipment
that is no longer used or useful in the Borrower's or such Subsidiary
Guarantor's business or that is obsolete, PROVIDED, that the Net
Proceeds of any such sales of Inventory or Equipment shall be applied
first to the Obligations in accordance with Section 2.13(c), and (B)
subject to the requirements contained in the definition of Permitted
Acquisition, the Borrower and the Subsidiary Guarantors may from time
to time after the Closing Date effect Permitted Acquisitions.
(b) CREDIT EXTENSIONS. The Borrower shall not, and shall
not permit any of the Subsidiary Guarantors to, (i) make, out of the
proceeds of Advances, prepayments or advances to others (except to the
Agent for the benefit of the Banks in accordance with this Agreement),
except the Borrower and the Subsidiary Guarantors may endorse checks,
drafts, and similar instruments for deposit or collection in the
ordinary course of business, (ii) loan, out of the proceeds of
Advances, any money to any other Person, except for: (A) loans to
non-shareholder employees in the ordinary course of business, the
aggregate outstanding amount of which shall not at any time exceed Two
Hundred Fifty Thousand Dollars ($250,000) at any one time outstanding,
(B) Intercompany Loans from the Borrower to the Subsidiary Guarantors,
and (C) intercompany loans from a Subsidiary Guarantor to the Borrower
pursuant to Section 6(c)(ii) of the applicable Subsidiary Guarantor's
Security Agreement in favor of the Agent, or (iii) except as permitted
under Section 8.3(c), Guaranty or assume any obligation of any other
Person except as a Subsidiary Guarantor of the Obligations or as a
Guarantor of the Senior Notes.
(c) INDEBTEDNESS. The Borrower shall not, and shall not
permit any of its Subsidiary Guarantors to, create, assume, incur,
suffer to exist or have outstanding at any time any Indebtedness or
other debt of any kind, EXCEPT that this Section 8.3(c) shall not
prohibit: (i) the Obligations and the Guaranty by the Subsidiary
Guarantors thereof, (ii) ordinary course trade payables (including
payables of ▇▇▇▇▇▇ in connection with the PC+ Products, (iii) the
Indebtedness on the Supplemental Schedule (which Indebtedness shall not
be renewed or increased), (iv) Indebtedness secured by a Lien permitted
by Section 8.3(d) of this Agreement, (v) at all times prior to May 5,
1998, that certain Indenture, dated as of February 4, 1987, between
▇▇▇▇▇▇ and Security Pacific National Bank, or any successor thereto,
(vi) any Indebtedness which results from a Credit Extension permitted
in Section 8.3(b) of this Agreement, (vii) the Senior Notes and the
Guaranty by the Subsidiary Guarantors thereof, (viii) the incurrence by
the Company or any of its Subsidiary Guarantors of Hedging Obligations,
(ix) the incurrence by the Company or any of its U.S. domestic
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding not
to exceed $10,000,000, or (x) the guarantee by the Borrower or any
Subsidiary Guarantor of Indebtedness of the Borrower or a Subsidiary of
the Company that was permitted to be incurred by another provision of
this Agreement. Notwithstanding the foregoing, the Borrower may incur
Indebtedness if the Borrower's
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Consolidated Fixed Charge Coverage Ratio for the Borrower's most
recently ended four full Fiscal Quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had
been incurred.
(d) LIENS; LEASES. The Borrower shall not, and shall not
permit any of the Subsidiary Guarantors to, (i) acquire or hold any
property subject to any Lien, (ii) sell or otherwise transfer any
Accounts, whether with or without recourse, or (iii) suffer or permit
any property now owned or hereafter acquired by it to be or become
encumbered by a Lien; PROVIDED, HOWEVER, that this Subsection shall not
prohibit: (A) any lien for a tax, assessment or government charge or
levy for taxes, assessments or charges not yet due and payable, (B) any
lien or deposit securing only workers' compensation, unemployment
insurance or similar obligations, (C) any mechanic's, carrier's,
landlord's or similar common law or statutory lien incurred in the
ordinary course of business which has not been docketed as a judgment,
(D) zoning or deed restrictions, public utility easements, rights or
way, minor title irregularities and similar matters relating to real
property of the Borrower or the Subsidiary Guarantors having, in all
such cases, no adverse affect as a practical matter on the ownership or
use of any of the property in question, (E) any Lien securing or given
in lieu of surety, stay, appeal or performance bonds, or securing
performance of contracts, bids, statutory obligations, surety and
appeal bonds (other than contracts for the payment of Indebtedness for
borrowed money), or deposits required by Law or by any court order,
decree, judgment or rule or as a condition to the transaction of
business or the exercise of any right, privilege or license, (F) any
Lien in favor of the Agent created under the Loan Documents or any
existing Lien fully disclosed in the Supplemental Schedule, (G) any
Lien arising in connection with the incurrence by the Company or a
Subsidiary Guarantor of Indebtedness represented by Capital Lease
Obligations, sale and leaseback transactions, mortgage financings,
purchase money obligations, capital expenditures or similar financing
transactions, in each case incurred for the purpose of financing all or
any part of the purchase price or cost of construction or improvement
of property, plant or Equipment used in the business of the Borrower or
such Guarantor Subsidiary; provided, however, that: (x) in each case,
the Lien is confined to the property in question, (y) in each case, the
Indebtedness secured thereby does not exceed the total cost or purchase
thereof, and (z) the aggregate outstanding principal amount (or
accreted value, as applicable) of Indebtedness of the Borrower and all
of its Subsidiaries secured by such Liens does not at any time exceed
$10,000,000; (H) any Lien which is being contested by Borrower, the
aggregate amount of such contested liens shall not at any time exceed
Two Hundred Fifty Thousand Dollars ($250,000), or (I) liens securing
Intercompany Loans in favor of the Borrower under the Intercompany
Security Agreements.
(e) INVESTMENTS. Other than as disclosed in the
Supplemental Schedule, the Borrower shall not, and shall not permit any
of the Subsidiary Guarantors to, (i) other than in connection with a
Permitted Acquisition, create any Subsidiary after the Closing Date,
(ii) make or hold any investment in any common stocks, bonds or
securities of any kind or any further capital contribution to any
Person other than (x) the common
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stock of its Subsidiaries existing on the Closing Date, together with
the common stock of Subsidiaries created in connection with a Permitted
Acquisition, and such capital contributions as are therein outstanding
as of the Closing Date and as are otherwise permitted under the Senior
Note Indenture, (y) notes or securities issued by a customer of the
Borrower or its Subsidiary Guarantors in connection with a proceeding
in respect of the Financial Impairment of such customer and (z) Cash
Equivalents, (iii) be or become a party to any joint venture or other
partnership, (iv) make or keep outstanding any advance or loan (except
as permitted under Sections 8.3(b) or 8.3(c)), or (v) be or become a
Guarantor of any kind (other than a Subsidiary Guarantor of the
Obligations or a Guarantor of the Senior Notes).
(f) DIVIDENDS; MANAGEMENT FEE. Other than in a writing
made expressly subject to the Agent's written consent under this
Agreement, neither the Borrower nor any Subsidiary Guarantor shall make
or commit itself to make any Distribution (other than stock dividends)
to its shareholders at any time or pay or commit itself to pay any
management fee to any Affiliate of the Borrower at any time; PROVIDED,
HOWEVER, that so long as no Potential Default has occurred and none
would thereupon occur, (i) the Borrower may pay to NESCO, Inc. a
monthly management fee in an amount not to exceed, together with all
other such payments by the Borrower in any Fiscal Year, in the
aggregate five percent (5%) of the Borrower's Consolidated EBITDA
during any Fiscal Year, (ii) to support the Borrower's payment of any
such management fee, each Subsidiary Guarantor may pay to the Borrower,
in accordance with a management agreement among the Borrower and the
Subsidiary Guarantors, an amount, on a monthly basis, that does not,
together with all other such payments by such Subsidiary Guarantor in
any Fiscal Year, exceed such Subsidiary Guarantor's Consolidated EBITDA
for such Fiscal Year, (iii) payments required to be made by the
Borrower and the Subsidiary Guarantors pursuant to a certain Tax
Payment Agreement, dated as of the date hereof, among, INTER ALIA the
Borrower, the Subsidiary Guarantors and the Parent Company, and (iv)
each Subsidiary Guarantors may, on a weekly basis, pay an amount to the
Borrower to support the Borrower's interest payments under the Senior
Notes in an amount not in excess 1/52 of such Subsidiary Guarantor's
ratable portion (based on projected Consolidated EBITDA for the Fiscal
Year in which such payment occurs) of the interest due under the Senior
Notes for the Fiscal Year in which such payment occurs.
(g) CHANGE IN NATURE OF BUSINESS. The Borrower shall not,
and shall not permit any of its Subsidiary Guarantors to, make any
material change in the nature of its business as carried on at the date
hereof.
(h) CHARTER AMENDMENTS. The Borrower shall not, and shall
not permit any of its Subsidiary Guarantors to, amend its Articles of
Incorporation or By-Laws or the Certificate of Incorporation or By-Laws
if such amendment would conflict with this Agreement or any other Loan
Document or cause a Potential Default under this Agreement.
(i) ACCOUNTING CHANGES. Neither the Borrower nor the
Subsidiary Guarantors shall make or permit any material change in
accounting policies or reporting
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practices, except as required by law or as required or permitted by
GAAP applicable to the Borrower.
(j) COMPLIANCE WITH ERISA. The Borrower shall not, and
shall not permit any ERISA Affiliate to: (i) engage in any transaction
in connection with which the Borrower or any ERISA Affiliate could
reasonably be expected to be subject to either a civil penalty assessed
pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of
the Code, terminate or withdraw from any Employee Benefit Plan (other
than a Multiemployer Plan) in a manner, or take any other action with
respect to any such Employee Benefit Plan (including, without
limitation, a substantial cessation of business operations or an
amendment of an Employee Benefit Plan within the meaning of section
4041(e) of ERISA), which could reasonably be expected to result in any
liability of the Borrower or any ERISA Affiliate to the PBGC, to the
Department of Labor or to a trustee appointed under section 4042(b) or
(c) of ERISA, incur any liability to the PBGC on account of a
withdrawal from or a termination of an Employee Benefit Plan under
section 4063 or 4064 of ERISA, incur any liability for post-retirement
benefits under any and all welfare benefit plans (as defined in section
3(1) of ERISA) other than as required by applicable statute, fail to
make full payment when due of all amounts which, under the provisions
of any Employee Benefit Plan or applicable Law, the Borrower or any
ERISA Affiliate is required to pay as contributions thereto, or permit
to exist any Accumulated Funding Deficiency, whether or not waived,
with respect to any Employee Benefit Plan (other than a Multiemployer
Plan); PROVIDED, HOWEVER, that such engagement, termination,
withdrawal, action, incurrence, failure or permitting shall not be
deemed to have violated this clause (i) UNLESS any such engagement,
termination, withdrawal, action, incurrence, failure or permitting (A)
has, taken singly or together with all such engagements, terminations,
withdrawals, actions, incurrences, failures or permittings, resulted or
could reasonably be expected to result in a Material Adverse Effect or
(B) has otherwise resulted or could reasonably be expected to result in
liabilities or claims against the Borrower, any Subsidiary Guarantor or
the Combined Borrowing Entities in an amount exceeding Seven Hundred
Fifty Thousand Dollars ($750,000); (ii) at any time permit the
termination of any defined benefit pension plan intended to be
qualified under section 401(a) and 501(a) of the Code; PROVIDED,
HOWEVER, that such termination shall not be deemed to have violated
this clause (ii) UNLESS (A) the value of any benefit liability (as
defined in section 4001(a)(16) of ERISA) upon the termination date of
any such terminated defined benefit pension plans of the Borrower, its
Subsidiaries and their ERISA Affiliates exceeds the then current value
(as defined in section 3 of ERISA) of all assets in such terminated
defined benefit pension plans by an amount in excess of Seven Hundred
Fifty Thousand Dollars ($750,000), or (B) the payment of such amount
has resulted or could reasonably be expected to result in a Material
Adverse Effect or has resulted or could reasonably be expected to
result in liabilities or claims against the Borrower, any Subsidiary
Guarantor or the Combined Borrowing Entities in an amount exceeding
Seven Hundred Fifty Thousand Dollars ($750,000); or (iii) if the
Borrower or any ERISA Affiliate becomes obligated under a Multiemployer
Plan (except with respect to the potential liabilities now existing as
disclosed in the Supplemental Schedule), effect a complete or partial
withdrawal such that the Borrower, its Subsidiaries or their ERISA
Affiliates incur
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Withdrawal Liability under Title IV of ERISA with respect to
Multiemployer Plans or otherwise have liability under Title IV of
ERISA; PROVIDED, HOWEVER, that the incurrence of such Withdrawal
Liability or other liability under Title IV of ERISA shall not be
deemed to be a violation of this clause (iii) UNLESS (A) the payment by
the Borrower of such Withdrawal Liability or other liability has
resulted or could reasonably be expected to result in a Material
Adverse Effect or (B) has otherwise resulted or could reasonably be
expected to result in liabilities or claims against the Borrower, any
Subsidiary Guarantor or the Combined Borrowing Entities in an amount
exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
(K) ADDITIONAL BANK ACCOUNTS; EXCESS CASH. The Borrower
shall not, and shall not permit the Subsidiary Guarantors to, maintain
or otherwise have any checking, savings, or other account at any bank
or other financial institution, or any other account where money is or
may be deposited or maintained with any Person, other than the Cash
Collateral Accounts, the Subsidiary Guarantor Lockboxes, and the
Permitted Accounts.
(L) REGULATION U COMPLIANCE. Neither the Borrower nor any
Subsidiary Guarantor shall use any portion of the proceeds of any
Advance for the purpose of purchasing or carrying any Margin Stock (as
defined by Regulation U of the Board of Governors of the Federal
Reserve System) or for any other purpose in violation of any
requirement of Law or of the terms and conditions of this Agreement.
(M) ARM'S-LENGTH TRANSACTIONS. The Borrower will not, and
will not permit any of its Subsidiary Guarantors to, enter into or
permit to exist any transaction (including, without limitation, any
transaction involving the investment, purchase, sale, lease, transfer
or exchange of any property or the rendering of any service) with any
Affiliate of the Borrower except in the ordinary course of the business
of the Borrower and such Subsidiary Guarantor and upon fair and
reasonable terms not less favorable to the Borrower or such Subsidiary
Guarantor than would be usual and customary in transactions with
persons who are not such Affiliates; PROVIDED, HOWEVER, that so long as
no Potential Default has occurred and none would thereupon occur, (i)
the Borrower may pay to the Parent Company and/or to its Affiliates an
annual management fee in an amount not to exceed in the aggregate five
percent (5%) of the Borrower's Consolidated EBITDA during any Fiscal
Year, (ii) to support the Borrower's payment of any such annual
management fee, each Subsidiary Guarantor may pay to the Borrower an
amount not in excess of such Subsidiary Guarantor's Consolidated EBITDA
for such Fiscal Year, (iii) the Borrower and the Subsidiary Guarantors
may enter into employment agreements in the ordinary course of business
and consistent with the past practices of the Borrower and the
Subsidiary Guarantors, (iv) the Borrower and the Subsidiary Guarantors
may pay reasonable and customary fees to members of their respective
boards of directors.
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8.4 FINANCIAL COVENANTS.
(a) MINIMUM CONSOLIDATED EBITDA. The Borrower shall not
permit (i) the Consolidated EBITDA of ▇▇▇▇▇▇ as at the end of any
Cumulative Four Fiscal Quarter Period ending after the Closing Date to
be less than $5,500,000, and (ii) the Consolidated EBITDA of A.B. Dick
as at the end of any Cumulative Four Fiscal Quarter Period ending after
the Closing Date to be less than $10,250,000
(b) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower
shall not at any time permit (i) the Consolidated Fixed Charge Coverage
Ratio of the Borrower as at the end of any Cumulative Four Fiscal
Quarter Period of the Borrower to be less than 1.20 to 1.0, (ii) the
Consolidated Fixed Charge Coverage Ratio of ▇▇▇▇▇▇ as at the end of any
Cumulative Four Fiscal Quarter Period of the Borrower to be less than
1.20 to 1.0, and (iii) the Consolidated Fixed Charge Coverage Ratio of
A.B. Dick as at the end of any Cumulative Four Fiscal Quarter Period of
the Borrower to be less than 1.20 to 1.0
SECTION 9 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
9.1 PAYMENT. (a) Failure by the Borrower to make payment of principal
or interest on the Notes when due, or (b) failure by the Borrower or any
Subsidiary to pay any other Obligation when required to be paid hereunder or
under any Guaranty Agreement or Security Agreement, to the extent such failure
is not remedied within three (3) Business Days after such required date of
payment hereunder or thereunder, or (c) failure by the Borrower or any
Subsidiary Guarantor to remit Collections or deposit Remittances as required by
the terms of this Agreement or any other Loan Document; or
9.2 REPRESENTATIONS AND WARRANTIES. Any warranty or representation made
or deemed made by the Borrower in respect of the Borrower, any Subsidiary of the
Borrower or any Guarantor in this Agreement, in any Loan Document or any
certificate, document or financial or other written statement furnished at any
time in compliance with or in reference to this Agreement shall prove to have
been false or inaccurate in any material respect when made or deemed made; or
9.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE
COVENANTS. Failure by the Borrower (in respect of the Borrower, any Subsidiary
of the Borrower or any Guarantor): (a) to perform, keep, or observe any term,
provision, condition or covenant contained in Section 8.1(h) and 8.1(g) of this
Agreement which is required to be performed, kept, or observed by the Borrower
(in respect of the Borrower, any Subsidiary of the Borrower or any such
Guarantor) and such failure shall continue without remedy for a period of ten
(10) Business Days, or (b) to perform, keep or observe any other term,
provision, condition or covenant contained in this Agreement (other than those
provisions, terms or conditions referenced in Sections 9.1, 9.2, 9.4 and of this
Agreement) that is required to be kept or observed by the Borrower (in respect
of the Borrower, any Subsidiary of the Borrower or
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any such Guarantor) and such failure shall continue without remedy for a period
of ten (10) Business Days; or
9.4 VIOLATION OF NEGATIVE COVENANTS AND FINANCIAL COVENANTS. Failure by
the Borrower (in respect of the Borrower, any Subsidiary of the Borrower or any
Guarantor) to perform, keep, or observe any other term, provision, condition or
covenant contained in Section 8.1(a) through 8.1(e) or 8.2(e) 8.2(g), 8.3 or 8.4
of this Agreement which is required to be performed, kept, or observed by the
Borrower (in respect of the Borrower, any Subsidiary of the Borrower or any such
Guarantor); or
9.5 OTHER LOAN DOCUMENTS. Failure by the Borrower, any Subsidiary of
the Borrower or any Guarantor to perform, keep, or observe any other term,
provision, condition or covenant contained in this Agreement, any of the other
Loan Documents which is required to be performed, kept, or observed by the
Borrower, any Subsidiary of the Borrower or any such Guarantor (other than those
provisions, terms or conditions referenced in Sections 9.1 through 9.4 of this
Agreement) and such failure shall continue without remedy for a period of ten
(10) Business Days; or
9.6 CROSS-DEFAULT. Default by the Borrower or any Subsidiary Guarantor
in respect of: (i) any Indebtedness in excess of Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate where such default could permit the holder
of such other Indebtedness to accelerate such Indebtedness or any portion
thereof to the extent such default has not been waived and (ii) any Material
Business Agreement or Material License Agreement; or
9.7 FALSE OR MISLEADING REPORTS. The making or delivering to the Agent
or the Banks by the Borrower or any Subsidiary of the Borrower, or any of their
respective officers, employees, or agents, of any written statement, report,
financial statement, or certificate which is not true and correct in any
material respect when made; or
9.8 DESTRUCTION OF COLLATERAL. Each of: (a) the loss, theft, damage or
destruction of any portion of the Collateral having an aggregate value in excess
of Two Hundred Fifty Thousand Dollars ($250,000), to the extent not adequately
covered by insurance in an amount equal to at least its replacement value (as
required by this Agreement); or
9.9 MATERIAL ADVERSE EFFECT. The occurrence of any Material Adverse
Effect; or
9.10 TERMINATION OF EXISTENCE. The dissolution or termination of
existence of the Borrower or any Guarantor of the Obligations; or
9.11 CONTROL. The occurrence of any Change in Control; or
9.12 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT;
SECURITY. If: (a) any material covenant, material agreement or any Obligation of
the Borrower, any Subsidiary of the Borrower or any Guarantor contained in or
evidenced by this Agreement or any of the other Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms, or (b) the Borrower, any Subsidiary of the
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Borrower or any Guarantor shall deny or disaffirm its obligations under this
Agreement or any of the other Loan Documents or any of the Liens granted in
connection therewith, or (c) any Liens in favor of the Agent or the Banks
granted in this Agreement or any of the other Loan Documents shall be determined
to be void, voidable or invalid, or are subordinated or not otherwise given the
priority contemplated by this Agreement, or (d) any perfected Liens granted in
favor of the Agent or the Banks shall be determined to be unperfected except in
the normal course of the business of the Borrower as expressly contemplated and
permitted by this Agreement and the other Loan Documents, or (e) any Guarantor
of the Obligations of the Borrower shall revoke or default under such
Guarantor's Guaranty; or
9.13 ERISA. If: (a) the Borrower, its Subsidiaries or any of their
ERISA Affiliates or any other Person institutes any steps to terminate an
Employee Benefit Plan of the Borrower, such Subsidiaries or such ERISA
Affiliates and, as a result of such termination, the Borrower, such Subsidiary
or ERISA Affiliate is or could reasonably be expected to be required to make a
contribution to such Employee Benefit Plan the payment of which (i) when taken
together with all like terminations suffered by the Borrower or such Subsidiary
Guarantor, either has resulted or could reasonably be expected to result in a
Material Adverse Effect or (ii) has resulted or could reasonably be expected to
result in liabilities or claims against the Borrower, any Subsidiary Guarantor
or the Combined Borrowing Entities in an amount exceeding Seven Hundred Fifty
Thousand Dollars ($750,000), or (b) the Borrower, such Subsidiary or ERISA
Affiliate fails to make a contribution to any Employee Benefit Plan which
failure would be sufficient to give rise to a Lien under Section 302(f) of
ERISA; or
9.14 JUDGMENTS. Any money judgment, writ or warrant of attachment or
similar process involving an amount in excess of Seven Hundred Fifty Thousand
Dollars ($750,000), individually or in the aggregate, when taken together with
all such judgments, writs, warrants or similar process shall be issued or levied
against the Borrower or any of its Subsidiaries or against any of the Borrower's
or its Subsidiaries' assets and is not released, discharged, vacated, fully
bonded or stayed within thirty (30) days after such judgment, writ or warrant of
attachment or similar proceeding is entered, UNLESS such judgment, writ or
warrant of attachment or other similar proceeding shall (a) have been reserved
on the books of the Borrower or such Subsidiary, as applicable, as required by
GAAP, on the date thereof and such judgment does not exceed Seven Hundred Fifty
Thousand Dollars ($750,000) or (b) be insured and the insurance carrier shall
have acknowledged coverage in the amount of the insurance without any
reservation of rights or shall have been ordered by a court of competent
jurisdiction to pay such judgment; or
9.15 FORFEITURE PROCEEDINGS. An adjudication against the Borrower or a
Subsidiary Guarantor of the Borrower in any criminal proceedings requiring the
Borrower's or such Subsidiary Guarantor's forfeiture of any asset or assets
having, either individually or in the aggregate, a value in excess of Fifty
Thousand Dollars ($50,000); or
9.16 FINANCIAL IMPAIRMENT. The Financial Impairment of the Borrower or
any Subsidiary Guarantor of the Obligations, excluding, for purposes of this
Section 9.16, clause (h) of the definition of "Financial Impairment."
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SECTION 10 REMEDIES.
10.1 OPTIONAL DEFAULTS. Upon the occurrence of an Event of Default
described above in Sections 9.1 through 9.15 above, the Agent shall at the
request of, or may with the consent of, the Required Banks, have the right to:
(a) declare all of the Obligations due or to become due from the Borrower to the
Agent and the Banks, whether under this Agreement, the Notes or otherwise, at
the option of the Banks, immediately due and payable, anything in the Notes or
other evidence of the Obligations or in any of the other Loan Documents to the
contrary notwithstanding, (b) terminate each Bank's Commitments whereupon no
Bank shall have any further obligation to make any Advance hereunder, (c)
terminate each Bank's obligation to participate in the Letter of Credit
Commitment and (d) terminate the Letter of Credit Bank's obligations to issue
Letters of Credit.
10.2 AUTOMATIC DEFAULTS. If any Event of Default referred to in Section
9.16 above shall occur, (a) each Bank's Commitments shall automatically and
immediately terminate (if not already expired or terminated by the Borrower or
terminated pursuant to this Section 10) whereupon no Bank shall have any
obligation thereafter to make any Advance hereunder, (b) the Letter of Credit
Bank's obligation to issue Letters of Credit shall immediately terminate and (c)
all of the Obligations and all other Indebtedness, if any, then owing to the
Banks (other than Indebtedness, if any, already due and payable) shall thereupon
become and thereafter be immediately due and payable in full, all without any
presentment, demand or notice of any kind, which are hereby waived by the
Borrower.
10.3 GENERAL RIGHTS AND REMEDIES OF AGENT AND THE BANKS. With respect
to the Collateral, the Agent shall have all of the rights and remedies of a
secured party under the UCC or under other applicable Law. The Agent and the
Banks shall have all other legal and equitable rights to which the Agent and the
Banks may be entitled, all of which rights and remedies shall be cumulative, and
none of which shall be exclusive, to the extent permitted by law, in addition to
any other rights or remedies contained in this Agreement or in any of the other
Loan Documents. Each Bank hereby expressly agrees that, unless requested by the
Agent, upon the concurrence of the Required Banks, such Bank will not take or
cause to be taken, in respect of the Advances or the other Obligations or the
Collateral, any action or remedy that is independent from the actions or
remedies taken or to be taken by the Agent, except for any actions taken by any
Bank in connection with any Event of Default described in Section 9.16 of this
Agreement.
10.4 ADDITIONAL REMEDIES. Upon the occurrence of an Event of Default
which has not been waived in writing by the Required Banks, to the extent
permitted by applicable law and in addition to any other right or remedy
provided for in this Agreement, the Agent may, after declaring the Obligations
to be immediately due and payable upon direction of the Required Banks pursuant
to Section 10.1, and shall, upon the direction of the Required Banks, exercise
the following rights and remedies:
(a) POSSESSION OF COLLATERAL. The Agent shall have the
right to take immediate possession of the Collateral and all Proceeds
relating to such Collateral and: (i) require the Borrower, at the
Borrower's expense, to assemble the Collateral and
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make it available to the Agent at such manufacturing facilities of the
Borrower and/or the Subsidiary Guarantors as the Agent shall designate
or (ii) enter any of the premises of the Borrower or wherever any
Collateral shall be located and to keep and store the same on such
premises until sold. If the premises on which the Collateral is located
is owned or leased by the Borrower, then the Borrower shall not charge
the Agent for storage of such Collateral on such premises.
(b) FORECLOSURE OF LIENS. The Agent shall have the right
to foreclose the Liens created under this Agreement and each of the
other Loan Documents or under any other agreement relating to the
Collateral.
(c) DISPOSITION OF COLLATERAL. The Agent shall have the
right to sell or to otherwise dispose of all or any Collateral in its
then condition, or after any further manufacturing or processing
thereof, at public or private sale or sales, wholesale dispositions, or
sales pursuant to one or more contracts, with such notice as may be
required by law, in lots or in bulk, for cash or on credit, all as the
Bank, in its discretion, may deem advisable. The Borrower acknowledges
and covenants that ten (10) days written notice to the Borrower of any
public or private sale or other disposition of Collateral shall be
reasonable notice thereof, and such sale shall be at the Borrower's
premises or at such other locations where the Collateral then is
located, or as otherwise determined by the Bank. The Agent shall have
the right to conduct such sales on the Borrower's premises, without
charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law without further requirement of notice to
the Borrower. Each Bank shall have the right to bid or credit bid any
such sale on its own behalf.
(d) APPLICATION OF COLLATERAL. The Agent, with or without
proceeding with sale or foreclosure or demanding payment of the
Obligations, shall have the right, without notice, at any time, to
appropriate and apply to any Obligations any and all Collateral in the
possession of the Agent or the Banks.
10.5 TERMINATION; EFFECT ON BORROWER OBLIGATIONS. Any termination by
the Agent and/or any Bank pursuant to this Section 10 of its performance shall
not absolve, release, or otherwise affect the liability of the Borrower in
respect of transactions prior to such termination or affect any of the Liens,
rights, powers, and remedies of the Agent or such Bank, which such Liens,
rights, powers and remedies shall, in all events, continue until all Obligations
of the Borrower to the Agent and the Banks are satisfied.
10.6 SET-OFF. Notwithstanding any other provision of this Agreement,
the Agent and each Bank shall have such rights of set-off as are provided under
applicable Law.
10.7 AUTHORITY TO EXECUTE TRANSFERS. Without limitation of any
authorization granted to the Agent hereunder, the Borrower also hereby
authorizes the Agent, upon the occurrence of an Event of Default that has not
been waived in writing by the Required Banks, to execute, in connection with the
exercise by the Agent of its remedies hereunder, any
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endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
10.8 LIMITED LICENSE TO LIQUIDATE. The Borrower hereby grants to the
Agent for the benefit of the Banks: (a) a non-exclusive, royalty-free license or
other right to use, without charge, all of the Borrower's Intellectual Property
(including all rights of use of any name or trade secret) as it pertains to the
Collateral, in manufacturing, advertising for sale and selling any Collateral;
PROVIDED, HOWEVER, that such license and right to use shall be exercisable by
the Agent for the benefit of the Banks only upon request by the Agent after the
occurrence of an Event of Default which has not been waived in writing by the
Required Banks, and (b) to the extent permitted thereunder, all of the
Borrower's rights under all licenses and all franchise agreements which shall
inure to the Agent for the benefit of the Banks without charge but only upon
request by the Agent after the occurrence of an Event of Default which has not
been waived in writing by the Required Banks.
10.9 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT. Upon the
occurrence of an Event of Default (unless waived in writing by the Banks
pursuant to this Section 14.1), to the extent that any Letters of Credit have
been issued which then are outstanding, the Agent, for the benefit of the Letter
of Credit Bank and the Banks, may, and upon the direction of the Required Banks
shall (whether in addition to taking any of the actions described in this
Section 10 or otherwise), make demand upon Borrower to, and forthwith upon such
demand the Borrower will, pay to the Agent in same day funds, for deposit in a
special cash collateral account (the "Letter of Credit Collateral Account"), to
secure the obligations of the Borrower in respect of any outstanding Letters of
Credit, to be maintained at such office of the Agent as Agent shall direct, an
amount equal to the maximum amount available to be drawn under the Letters of
Credit. In the event that the Borrower shall not deposit such funds upon demand
by the Agent, the Agent may, in its sole discretion, deposit collections
received pursuant to Section 5 of this Agreement, or any other funds of the
Borrower in the possession of the Agent, to the Letter of Credit Collateral
Account until the amount deposited in such account equals the maximum amount
available to be drawn under the Letters of Credit. The Letter of Credit
Collateral Account shall be in the name of Agent (as a cash collateral account),
but under the sole dominion and control of the Agent and subject to the terms of
this Agreement.
10.10 LETTER OF CREDIT COLLATERAL ACCOUNT.
(a) APPLICATION. The Agent may, at any time or from time
to time after funds are deposited in the Letter of Credit Collateral
Account, apply funds then held in the Letter of Credit Collateral
Account to the payment of any amounts, in such order as the Agent may
elect or shall be directed by the Banks, as shall have become or shall
become due and payable by the Borrower to the Letter of Credit Bank
under this Agreement or any Reimbursement Agreement first, in respect
of the Letters of Credit and second, after the occurrence and during
the continuance of any Event of Default, in respect of all other
amounts constituting Obligations.
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(b) NO BORROWER OR THIRD PARTY CLAIMS. Neither the
Borrower nor any Person claiming on behalf of or through Borrower shall
have any right to withdraw any of the funds held in the Letter of
Credit Collateral Account.
(c) NO LIENS OR TRANSFERS OF ACCOUNT. The Borrower agrees
that it will not: (i) sell or otherwise dispose of any interest in the
Letter of Credit Collateral Account or any funds held therein, or (ii)
create or permit to exist any lien, security interest or other charge
or encumbrances upon or with respect to the Letter of Credit Collateral
Account or any funds held therein, except as provided in or
contemplated by this Agreement.
(d) REASONABLE CARE. The Agent shall exercise reasonable
care in the custody and preservation of any funds held in the Letter of
Credit Collateral Account and shall be deemed to have exercised such
care if such funds are accorded treatment substantially equivalent to
that which the Agent accords its own property, it being understood that
the Agent shall not have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such
funds.
10.11 EQUALIZATION. Each Bank agrees with the other Banks that if at
any time it shall obtain any Advantage over the other Banks or any thereof in
respect of the Advances it will purchase from such other Bank or Banks, for cash
and at par, such additional participation in the Advances owing to the other or
others as shall be necessary to nullify the Advantage. If any such Advantage
resulting in the purchase of an additional participation as aforesaid shall be
recovered in whole or in part from the Bank receiving the Advantage, each such
purchase shall be rescinded, and the purchase price restored (with interest and
other charges if and to the extent actually incurred by the Bank receiving the
Advantage) ratably to the extent of the recovery. During the existence of any
Potential Default, any payment (whether made voluntarily or involuntarily, by
offset of any deposit or other indebtedness or otherwise) of any Indebtedness
owing by the Borrower to any Bank shall be applied to the Obligations owing to
that Bank until the same shall have been paid in full before any thereof shall
be applied to other Indebtedness owing to that Bank.
10.12 REMEDIES CUMULATIVE. The above-stated remedies are not intended
to be exhaustive and the full or partial exercise of any of such remedies shall
not preclude the full or partial exercise of any other remedy by the Agent under
this Agreement, under any Loan Document, or at equity or under law.
SECTION 11 THE AGENT.
11.1 THE AGENT. Each Bank irrevocably appoints the Agent to act as
agent under this Agreement and the other Loan Documents for the benefit of such
Bank, with full authority to take such actions, and to exercise such powers, on
behalf of the Banks in respect of this Agreement and the other Loan Documents as
are herein and therein respectively delegated to the Agent or as are reasonably
incidental to those delegated powers. The Agent in such capacity shall be deemed
to be an independent contractor of the Banks. Each Bank and the Letter of Credit
Bank hereby expressly agrees that, unless requested by the Agent upon the
concurrence of the Required Banks, none of the Banks or the Letter of Credit
Bank will take or
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cause to be taken, in respect of the Advances or the other Obligations or the
Collateral, any action or remedy that is independent from the actions or
remedies taken or to be taken by the Agent, except for any actions taken by any
Bank or the Letter of Credit Bank in connection with any Event of Default
described in Section 9.16.
11.2 NATURE OF APPOINTMENT. The Agent shall have no fiduciary
relationship with any Bank by reason of this Agreement and the other Loan
Documents. The Agent shall not have any duty or responsibility whatsoever to any
Bank except those expressly set forth in this Agreement and the other Loan
Documents. Without limiting the generality of the foregoing, each Bank
acknowledges that the Agent is acting as such solely as a convenience to the
Banks and not as a manager of the commitments or the Obligations evidenced by
the Notes. This Section 11 does not confer any rights upon the Borrower or
anyone else (except the Banks), whether as a third party beneficiary or
otherwise.
11.3 AGENT AS A BANK; OTHER TRANSACTIONS. The Agent's rights as a Bank
under this Agreement and the other Loan Documents shall not be affected by its
serving as the Agent. The Agent and its Affiliates may generally transact any
banking, financial, trust, advisory or other business with the Borrower
(including, without limitation, the acceptance of deposits, the extension of
credit and the acceptance of fiduciary appointments) without notice to the
Banks, without accounting to the Banks, and without prejudice to the Agent's
rights as a Bank under this Agreement and the other Loan Documents except as may
be expressly required under this Agreement.
11.4 INSTRUCTIONS FROM BANKS. The Agent shall not be required to
exercise any discretion or take any action as to matters not expressly provided
for by this Agreement and the other Loan Documents (including, without
limitation, collection and enforcement actions in respect of any Obligations
under the Notes or this Agreement and any collateral therefor) EXCEPT that the
Agent shall take such action (or omit to take such action) other than actions
referred to in Section 12.1 of this Agreement, as may be reasonably requested of
it in writing by the Required Banks with instructions and which actions and
omissions shall be binding upon all of the Banks; PROVIDED, HOWEVER, that the
Agent shall not be required to act (or omit any act) if, in its judgment, any
such action or omission might expose the Agent to personal liability or might be
contrary to this Agreement, any Loan Document or any applicable Law.
11.5 BANK'S DILIGENCE. Each Bank: (a) represents and warrants that it
has made its decision to enter into this Agreement and the other Loan Documents
and (b) agrees that it will make its own decision as to taking or not taking
future actions in respect of this Agreement and the other Loan Documents; in
each case without reliance on the Agent or any other Bank and on the basis of
its independent credit analysis and its independent examination of and inquiry
into such documents and other matters as it deems relevant and material.
11.6 NO IMPLIED REPRESENTATIONS. The Agent shall not be liable for any
representation, warranty, agreement or obligation of any kind of any other party
to this Agreement or anyone else, whether made or implied by the Borrower in
this Agreement or in any Loan Document or by a Bank in any notice or other
communication or by anyone else or otherwise.
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11.7 SUB-AGENTS. The Agent may employ agents and shall not be liable
(except as to money or property received by it or its agents) for any negligence
or wilful misconduct of any such agent selected by it with reasonable care.
11.8 AGENT'S DILIGENCE. The Agent shall not be required: (a) to keep
itself informed as to anyone's compliance with any provision of this Agreement
or any Loan Document, (b) to make any inquiry into the properties, financial
condition or operation of the Borrower or any other matter relating to this
Agreement or any Loan Document, (c) to report to any Bank any information (other
than which this Agreement or any Loan Document expressly requires to be so
reported) that the Agent or any of its Affiliates may have or acquire in respect
of the properties, business or financial condition of the Borrower or any other
matter relating to this Agreement or any Loan Document or (d) to inquire into
the validity, effectiveness or genuineness of this Agreement or any Loan
Document.
11.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
of any Potential Default or Event of Default unless and until it shall have
received a written notice describing it and citing the relevant provision of
this Agreement or any Loan Document. The Agent shall give each Bank reasonably
prompt notice of any such written notice except, of course, to any Bank that
shall have given the written notice.
11.10 AGENT'S LIABILITY. Neither the Agent nor any of its directors,
officers, employees, attorneys, and other agents shall be liable to any Bank for
any action or omission on their respective parts except for gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Agent: (a) may treat the payee of any Note as the holder thereof until the Agent
receives a fully executed copy of any assignment with respect thereto, signed by
such payee and in form satisfactory to the Agent; (b) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice or such counsel, accountants or experts which
have been selected by the Agent with reasonable care; (c) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document, including, without limitation, the truth
of the statements made in any certificate delivered by the Borrower under
Sections 2, 3, or 5 of this Agreement or in any Credit Request, Rate
Continuation/Conversion Request, Reimbursement Agreement or any other similar
notice or delivery, the Agent being entitled for the purposes of determining
fulfillment of the conditions set forth therein to rely conclusively upon such
certificates; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement, the Notes or any other Loan Document or to inspect the property
(including the books and records) of the Borrower; (e) shall not be responsible
to any Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, or collateral covered by
any agreement or any other Loan Document and (f) shall incur no liability under
or in respect of this Agreement, the Notes or any other Loan Document by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telegram, telecopy, cable or telex) believed by it in good faith to be
genuine and correct and signed or sent by the proper party or parties.
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Neither the Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrower on account of
the failure of or delay in performance or breach by any Bank of any of its
obligations hereunder or to any Bank on account of the failure of or delay in
performance or breach by any other Bank or the Borrower of any of their
respective obligations hereunder or under any Loan Document or in connection
herewith or therewith. The Banks each hereby acknowledge that the Agent shall be
under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement, the Notes or any other Loan
Document unless it shall be requested in writing to do so by the Required Banks.
11.11 AGENT'S INDEMNITY. The Banks shall indemnify the Agent, in its
capacity as Agent (to the extent the Agent is not reimbursed by the Borrower),
from and against: (a) any loss or liability (other than any caused by the
Agent's gross negligence or willful misconduct) incurred by the Agent as such in
respect of this Agreement, the Notes or any Loan Document (as the Agent) and (b)
any out-of-pocket expenses incurred in defending itself or otherwise related to
this Agreement, the Notes or any Loan Document (other than any caused by the
Agent's gross negligence or willful misconduct) including, without limitation,
reasonable fees and disbursements of legal counsel of its own selection
(including, without limitation, the reasonable interdepartmental charges of its
salaried attorneys) in the defense of any claim against it or in the prosecution
of its rights and remedies as the Agent (other than the loss, liability or costs
incurred by the Agent in the defense of any claim against it by the Banks
arising in connection with its actions in its capacity as Agent); PROVIDED,
HOWEVER, that each Bank shall be liable for only its Ratable Portion of the
whole loss or liability.
11.12 RESIGNATION OR REMOVAL OF AGENT. The Agent may resign as Agent
effective ten (10) Business Days after giving notice thereof to the Banks for
any reason, and the Agent may be removed at the unanimous election of all of the
Banks (other than the Bank that is also the Agent) for any reason. If the Agent
shall resign or be removed as Agent under this Agreement, the Required Banks
shall appoint from among the Banks (other than the Bank that has resigned or was
removed) a successor agent for the Banks, which successor agent shall be
reasonably acceptable to the Borrower. If, however, in the case of resignation
by the Agent, no successor agent shall have been appointed by the time such
resignation becomes effective, then the retiring Agent may, on behalf of the
Banks, appoint a successor agent from among the remaining Banks. Upon
appointment (whether effected by the Required Banks or the retiring Agent on
behalf of the Banks), the successor agent shall succeed to the rights, powers
and duties of the Agent, and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement or any holder
of the Notes. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of Section 11.11 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 12 TRANSFERS AND ASSIGNMENTS.
12.1 TRANSFER OF COMMITMENTS. Each Bank shall have the right at any
time or times to transfer to another financial institution that is an Eligible
Assignee, without recourse,
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all, or if less than all, any constant ratable percentage of all, of such Bank's
rights and obligations under this Agreement and the other Loan Documents,
including without limitation such Bank's Commitments, any Advance made by such
Bank, any Note executed in favor of such Bank, any participations in Letters of
Credit and any participations, if any, purchased by the Bank pursuant to Section
10.11 of this Agreement; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) PRIOR CONSENT. Transfers (including transfers by any
Bank to any Affiliate of such Bank) to any Eligible Assignee may be
consummated pursuant to this Section 12: (i) with the prior written
consent of the Borrower and the Agent, which consents shall not be
unreasonably withheld. Notwithstanding anything to the contrary, any
Bank may at any time assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank, and no such
assignment shall release such assigning Bank from its obligations
hereunder.
(b) AGREEMENT; TRANSFER FEE. The transferor: (i) shall
remit to the Agent an administrative fee of Four Thousand Five Hundred
Dollars ($4,500) and (ii) shall cause the transferee to execute and
deliver to the Borrower, the Agent and each Bank (A) an Assignment
Agreement, substantially in the form of EXHIBIT K attached hereto, and
otherwise in form and substance satisfactory to the Agent and its
counsel (an "Assignment Agreement"), together with the consents and
releases referenced therein and (B) such additional amendments,
assurances and other writings as the Agent may reasonably require to
effect such transfer.
(c) NOTES. The Borrower shall execute and deliver: (i) to
the Agent, the transferor and the transferee, any consent or release
(of all or a portion of the obligations of the transferor) to be
delivered in connection with the Assignment Agreement, (ii) if a Bank's
entire interest in its Commitments and in all of its Advances have been
transferred, to the transferee appropriate Notes against return of the
Notes (each marked "replaced") held by the transferor and (iii) if only
a portion of a Bank's interest in its Commitments and Advances has been
transferred, new Notes to each of the transferor and the transferee
against return of the original such Notes of the transferor (each
marked "replaced") held by the transferor.
(d) PARTIES. Upon satisfaction of the requirements of this
Section 12.1, including the payment of the fee and the delivery of the
documents set forth in Section 12.1(b) above, (i) the transferee shall
become and thereafter be deemed to be a "Bank" for the purposes of
this Agreement and (ii) the transferor (A) shall continue to be a
"Bank" for the purposes of this Agreement only if and to the extent
that the transfer shall not have been a transfer of its entire
interest in its Commitments and Advances, (B) shall cease to be and
thereafter shall no longer be deemed to be a "Bank" in the case of any
transfer of its entire interest in its Commitments and Advances and
(C) the signature pages hereto and Annex I hereto shall be
automatically amended, without further action, to reflect the result of
any such transfer.
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12.2 SALE OF PARTICIPATIONS. Each Bank shall have the right at any time
or times to sell one or more participations or subparticipations to a financial
institution which is an Eligible Assignee in all or, if less than all, any part
of such Bank's Commitments, any Advance made by such Bank, any Note executed in
favor of such Bank, any participation by such Bank in a Letter of Credit and any
participations, if any, purchased by such Bank pursuant to Section 10.11 of this
Agreement or this Section 12; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) BENEFITS OF PARTICIPANT. The provisions of Section 13
of this Agreement shall inure to the benefit of each purchaser of a
participation or subparticipation (provided that each such participant
shall look solely to the seller of its participation for those benefits
and the Borrower's liabilities, if any, under any of those sections
shall not be increased as a result of the sale of any such
participation) and Agent shall continue to distribute payments pursuant
to this Agreement as if no participation has been sold.
(b) RIGHTS RESERVED. In the event any Bank shall sell any
participation or subparticipation, that Bank shall, as between itself
and the purchaser, retain all of its rights (including, without
limitation, rights to enforce against the Borrower this Agreement and
the other Loan Documents) and duties pursuant to this Agreement and the
other Loan Documents, including, without limitation, that Bank's right
to approve any waiver, consent or amendment pursuant to Section 14.1 of
this Agreement, EXCEPT if and to the extent that any such waiver,
consent or amendment would (A) reduce any fee or commission allocated
to the participation or subparticipation, as the case may be, (B)
reduce the amount of any principal payment on any Advance allocated to
the participation or subparticipation, as the case may be, or reduce
the principal amount of any Advance so allocated or the rate of
interest payable thereon, or (C) extend the time for payment of any
amount allocated to the participation or subparticipation, as the case
may be.
(c) NO DELEGATION. No participation or subparticipation
shall operate as a delegation of any duty of the seller thereof. Under
no circumstance shall any participation or subparticipation be deemed a
novation in respect of all or any part of the seller's obligations
pursuant to this Agreement.
12.3 CONFIDENTIALITY. The Agent, the Letter of Credit Bank and each
Bank hereby: (a) acknowledge that the Borrower and its Subsidiaries have trade
secrets and financial, environmental and other data and information the
confidentiality of which is important to their businesses and (b) agree to use
all reasonable efforts to keep confidential any such trade secret, data or
information conveyed to them and appropriately designated in writing by the
Borrower or any of its Subsidiaries as being confidential information, EXCEPT
that this Section shall not be binding on the Agent, the Letter of Credit Bank
and Banks after the expiration of four years after the termination of this
Agreement and shall not preclude the Agent, the Letter of Credit Bank or any
Bank from furnishing any such confidential information: (i) subject to the
Borrower's receipt of prior notice from the Agent, the Letter of Credit Bank or
such Bank, as the case may be, if permitted under applicable law and such legal
proceedings, to the extent which may be required by subpoena or similar order of
any court of competent jurisdiction,
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(ii) to the extent such information is required to be disclosed to any
regulatory or administrative governmental agency or commission having any
regulatory authority over the Agent, the Letter of Credit Bank or such Bank or
its securities, (iii) to any other party to this Agreement, (iv) to any
Affiliate of the Agent, the Letter of Credit Bank or such Bank, so long as such
Affiliate agrees to be bound in by the provisions of this Section 12.3, (v) to
any actual or prospective transferee, participant or subparticipant of all or
part of a Bank's rights arising out of or in connection with this Agreement and
the other Loan Documents (or any of them), so long as such prospective
transferee, participant or subparticipant to whom disclosure is made agrees in
writing to be bound by the provisions of this Section 12.3 (a copy of which
writing shall be delivered promptly to the Borrower), (vi) to anyone if it shall
have been already publicly disclosed (other than by the Agent, the Letter of
Credit Bank or such Bank, as the case may be, in contravention of this Section
12.3) prior to the time of such disclosure, (vii) to the extent reasonably
required in connection with the exercise of any right or remedy under this
Agreement or any other Loan Document, (viii) to the Agent's, the Letter of
Credit Bank's or such Bank's legal counsel, auditors, professional advisors and
consultants, and accountants and (ix) to the extent reasonably required in
connection with any legal proceedings instituted by or against the Agent, the
Letter of Credit Bank or any Bank in its respective capacities as the Agent,
Letter of Credit Bank or a Bank under this Agreement; PROVIDED, HOWEVER that for
any disclosure pursuant to clauses (i), (ii), (vii) or (ix) hereof, the Agent,
the Letter of Credit Bank or the disclosing Bank, as the case may be, shall use
reasonable efforts to disclose only that portion of the confidential information
as it is legally required, in the opinion of counsel, to disclose. Each of the
Agent, the Letter of Credit Bank and the Banks agrees that it will promptly upon
Borrower's request after the termination of this Agreement return to the
Borrower any information in its possession which the Borrower has designated as
"confidential." The Borrower agrees: (x) to disclose information relating to the
Borrower or any Subsidiary Guarantor deemed by the Borrower to be confidential
information only in response to a written request from the Agent for itself or
on behalf of a Bank and only to the extent an appropriate written designation of
such confidentiality is delivered to the Agent prior to the time of disclosure
of such information to the Agent, (y) to designate information as "confidential"
only to the extent it reasonably believes such information is confidential and
(z) that the obligation of the Agent, the Letter of Credit Bank and the Banks
pursuant to this Section 12.3 is not binding with respect to information
disclosed to the Agent, a Letter of Credit Bank or any Bank without request
therefor or without requirement therefor under this Agreement or the other Loan
Documents, unless the Borrower has given written notice to the Agent of the
Borrower's designation of such information as being "confidential" information
prior to the time of such disclosure to the Agent or such Letter of Credit Bank
or Bank.
SECTION 13 INDEMNITIES.
13.1 INCREASED COSTS. If after the date of this Agreement (a) the
introduction of or any change in or in the interpretation of any Law or
regulation or (b) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of Law)
shall increase the cost to any Bank (other than any increase in the cost of such
Bank's overhead) of agreeing to make or making, funding or maintaining Revolving
Credit Advances, then the Borrower shall from time to time, upon demand by such
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Bank (with a copy of such demand to the Agent), pay to the Agent for the account
of such Bank additional amounts sufficient to indemnify such Bank for such
increased cost.
13.2 RISK-BASED CAPITAL. If any Bank determines that: (a) compliance
with any Law or regulation or any interpretation thereof or (b) compliance with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of Law) affects or would affect the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank and that the amount of such capital required to be so
maintained is increased by or based upon the existence of such Bank's
Commitments to lend hereunder and other commitments of this type, then, upon
demand by such Bank (with a copy of such demand to the Agent), the Borrower
shall immediately pay to the Agent for the account of such Bank, from time to
time as specified by such Bank, additional amounts sufficient to indemnify such
Bank or such corporation, to the extent that such Bank reasonably determines
such increase in capital to be allocable to the existence of such Bank's
Commitments to lend hereunder.
13.3 TAXES.
(a) TAXES; WITHHOLDING. Any and all payments by the
Borrower hereunder, under the Notes or the other Loan Documents shall
be made, in accordance with the provisions of Section 2, free and clear
of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, EXCLUDING, in the case of each Bank,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Bank is organized or is doing
business, or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by Law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Bank or the Agent: (i)
the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 13.3) such Bank receives an
amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law. All
such Taxes shall be paid by the Borrower prior to the date on which
penalties attach thereto or interest accrues thereon; PROVIDED,
HOWEVER, that, if any such penalties or interest become due, the
Borrower shall make prompt payment thereof to the appropriate
governmental authority. The Borrower shall indemnify each Bank for the
full amount of such Taxes (including any Taxes on amounts payable under
this Section 13.3(a) paid by the Bank and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.
Any indemnification payment shall be made within thirty (30) days from
the date the Bank makes written demand therefor.
(b) STAMP TAXES. The Borrower agrees to pay, and will
indemnify each Bank and the Agent for, any present or future stamp or
documentary taxes or any other
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excise or property taxes, charges or similar levies which arise from
any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) OTHER TAXES. Except as specifically limited by Section
13.3(a), the Borrower will indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 13.3) paid by such Bank or the Agent (as the case
may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted. Any indemnification
payment shall be made within 30 days from the date such Bank or the
Agent (as the case may be) makes written demand therefor.
(d) REQUEST FOR REFUND. At the reasonable request of the
Borrower, a Bank or the Agent shall apply at the Borrower's expense for
a refund in respect of Taxes or Other Taxes previously paid by the
Borrower pursuant to this Section 13.3 if in the opinion of such Bank
or the Agent there is a reasonable basis for such refund.
Notwithstanding the foregoing, none of the Banks or the Agent shall be
obligated to pursue such refund if, in its sole good faith judgment,
such action would be disadvantageous to it. If any Bank subsequently
receives from a taxing authority a refund of any Tax previously paid by
the Borrower and for which the Borrower has indemnified the Bank
pursuant to this Section 13.3, such Bank shall within thirty (30) days
after receipt of such refund, and to the extent permitted by applicable
law, pay to the Borrower the net amount of any such recovery after
deducting taxes and expenses attributable thereto.
(e) EXEMPTION CERTIFICATE. Not later than: (a) the Closing
Date, (b) in the case of any bank or financial institution that becomes
a Bank after the Closing Date, the date of the instrument of assignment
pursuant to which such bank or financial institution became a Bank, (c)
annually on each Anniversary Date thereafter or (d) such other times as
the Agent or the Borrower may reasonably request: (i) each Bank
organized under the laws of a jurisdiction outside the United States
shall provide the Agent and the Borrower with duly completed copies of
Form 1001 or Form 4224 or any successor form prescribed by the Internal
Revenue Service of the United States certifying that such Bank is
exempt from United States withholding taxes with respect to all
payments to be made to such Bank hereunder or other document
satisfactory to the Borrower and the Agent indicating that all payments
to be made to such Bank hereunder are not subject to such taxes and
(ii) each other Bank shall provide the Agent and the Borrower with a
written statement which certifies that such Bank is not a non-resident
alien or foreign corporation and which otherwise satisfies Treasury
Regulation Section 1.1441-5(b) or any successor regulation under the
Internal Revenue Code (each such certificate or statement, an
"Exemption Certificate"). Unless the Agent and the Borrower have
received an Exemption Certificate from such Bank, the Borrower, or the
Agent if the Borrower has not withheld, may withhold taxes from such
payments at the applicable
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statutory rate (subject, in the case of the Borrower to the
requirements of Section 13.3(a) above); PROVIDED, HOWEVER, that if the
Borrower has withheld the Borrower shall so notify the Agent. If the
Borrower is required to pay additional amounts to any Bank pursuant to
this Section 13.3, such Bank shall use reasonable efforts to designate
a different Lending Office if such designation will thereafter avoid
the need for any additional payments under this Section 13.3 and will
not, in the sole judgment of such Bank, be otherwise disadvantageous to
such Bank. A Bank which ceases to be exempt from United States
withholding taxes shall notify the Agent and the Borrower promptly
thereof.
(f) FURNISHING OF CERTIFICATE. Within 30 days after the
date of any payment of Taxes, the Borrower will furnish to the Agent,
at its address referred to in Section 14.13 of this Agreement, the
original or a certified copy of a receipt evidencing payment thereof.
If Taxes ever become payable in respect of any payment hereunder or
under the Notes made during a Fiscal Quarter, thereafter the Borrower
will furnish to the Agent, within thirty (30) days after the end of
such Fiscal Quarter, at such address, a certificate from the Borrower
stating that any payments made during such Fiscal Quarter are exempt
from or not subject to Taxes.
(g) SURVIVAL OF PROVISION. Without prejudice to the
survival of any other agreement of the Borrower hereunder, the
agreements and liabilities of the Borrower contained in this Section
13.3 shall survive the payment in full of the Obligations.
13.4 LOSSES. If any payment of principal of, or Rate Conversion or Rate
Continuation of, any LIBOR Rate Advance is not paid when due or is made on a day
other than on the last day of an Interest Period relating to such Advance, as a
result of a payment or Rate Conversion or Rate Continuation pursuant to the
provisions of Section 2.7 of this Agreement or acceleration of the maturity of
the Revolving Credit Notes pursuant to Section 10 of this Agreement or for any
other reason (other than by reason of a mandatory prepayment under Section
2.6(e)), the Borrower shall, upon demand by any Bank (with a copy of such demand
to the Agent), pay to the Agent for the account of such Bank any amounts
required to compensate such Bank for any additional losses, costs or expenses
which it may reasonably incur as a result of such payment or Rate Conversion or
Rate Continuation, including, without limitation, any loss, cost or expense
(other than any expenses directly attributable to loan origination efforts)
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund or maintain such Advance.
13.5 INDEMNIFICATION FOR REQUESTS. Whenever the Borrower: (a) shall
revoke any Credit Request, any Rate Conversion/Continuation Request involving
any LIBOR Rate Advance, (b) shall for any other reason fail to borrow pursuant
to any such Rate Conversion/Continuation Request or otherwise comply therewith,
(c) shall fail to fulfill, on or before the date specified in any such request,
the applicable conditions set forth in Section 3 of this Agreement or (d) shall
fail to honor any prepayment notice with respect to LIBOR Rate Advances, then,
in each case on any Bank's demand, the Borrower shall indemnify each Bank and
the Agent against any loss, cost or expense incurred by such Bank or the Agent
as a result of any such failure by the Borrower, including, without limitation,
any loss, cost or expense
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incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank or the Agent to fund the LIBOR Rate Advance to be made by
such Bank or the Agent in connection with such request when such LIBOR Rate
Advance, as a result of such failure by the Borrower, is not made on such date.
13.6 GENERAL INDEMNITY. The Borrower shall indemnify and hold harmless
the Agent and each Bank, and the respective directors, officers, employees and
Affiliates thereof, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever including, without limitation,
reasonable fees and disbursements of counsel and settlements costs, which may be
imposed on, incurred by, or asserted against the Agent, any Bank or the
respective directors, officers, employees and Affiliates thereof in any in
connection with any investigative, administrative or judicial proceeding
(whether the Agent or such Bank is or is not designated as a party thereto)
relating to or arising out of this Agreement or any other Loan Document, the
transactions contemplated thereby, or any actual or proposed use of proceeds
hereunder or thereunder, except that neither the Agent nor any Bank nor any such
directors, officers, employees and Affiliates thereof shall have the right to be
indemnified hereunder for its own negligence or willful misconduct as determined
by a court of competent jurisdiction.
13.7 CERTIFICATE FOR INDEMNIFICATION. Each demand by Agent or a Bank
for payment pursuant to this Section 13 shall be accompanied by a certificate
setting forth the reason for the payment, the amount to be paid, and the
computations and assumptions in determining the amount, which certificate shall
be presumed to be correct. In determining the amount of any such payment
thereunder, each Bank may use reasonable averaging and attribution methods.
13.8 DUTY TO MITIGATE; STANDARD TREATMENT. Each Bank seeking payment
pursuant to this Section 13 shall use reasonable efforts and take all reasonable
actions to avoid the cause of the payment and to minimize the amount thereof.
Each Bank agrees that it will not seek compensation or reimbursement provided
for in this Section 13 unless such Bank as a matter of policy intends generally
to seek comparable compensation or reimbursement from other borrowers similarly
situated and similarly documented financial accommodations.
SECTION 14 GENERAL.
This Agreement and the other Loan Documents shall be governed
by the following provisions:
14.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or the Notes or any Loan Document, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Banks (or, if unanimous consent of all
Banks is required as hereinafter provided, all of the Banks), the Agent, the
Borrower, and, only with respect to amendments and waivers of, or consents
regarding, provisions of this Agreement directly affecting the rights of the
Letter of Credit Bank, the Letter of Credit Bank, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Unanimous consent of all Banks shall be
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required with respect to (a) the extension of maturity of any Note, or the
extension of the payment date for interest, principal and/or fees thereunder, or
(b) any reduction in the rate of interest on the Notes, or in any amount of
principal or interest due on any Note, or in the manner of pro rata application
of any payments made by the Borrower to the Banks hereunder, or (c) any change
in any percentage voting requirement in this Agreement, or (d) any change in the
dollar amount or percentage of the Banks' Commitments or any Bank's Commitment,
or (e) any change in the amount of, or extension of the payment date for, any
fees payable under Section 2.9 of this Agreement, or (f) any change in the
definitions "Collateral" or "Required Banks" under this Agreement, or (g)
subject to the Agent's exercise of its Permitted Discretion pursuant to Section
2.2, any change in the definitions of "Eligible Inventory" or "Eligible
Accounts" under this Agreement, or (h) any change in any provision of this
Agreement which requires all of the Banks to take any action under such
provision, or (i) any increase in the percentages stated as advance rates in the
definition of "Borrowing Base", or (j) any change in Section 11, 12.1, 12.2 or
this Section 14.1 itself. Notice of amendments or consents ratified by the Banks
hereunder shall immediately be forwarded by the Borrower to all Banks. Each Bank
or other holder of a Note shall be bound by any amendment, waiver or consent
obtained as authorized by this Section 14.1, regardless of its failure to agree
thereto.
14.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT. In addition to the
provisions of Sections 4.6 and 5.8 of this Agreement, the Borrower hereby
irrevocably constitutes and appoints the Agent and any officer or agent thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Borrower and
in the name of the Borrower or in its own name, from time to time following the
occurrence of an Event of Default (unless waived in writing by the Required
Banks pursuant to this Agreement), in the Agent's reasonable discretion, for the
purpose of carrying out the terms of this Agreement, without notice (except as
specifically provided herein) to or assent by the Borrower, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement,
including, without limiting the generality of the foregoing, the power and
right, on behalf of the Borrower, to do the following, upon notice to the
Borrower: (a) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral, to effect
any repairs or any insurance, called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs thereof, and
otherwise to itself perform or comply with, or otherwise cause performance or
compliance with, any of the covenants or other agreements of the Borrower
contained in this Agreement which the Borrower has failed to perform or with
which the Borrower has not complied; (b) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (c) to defend any suit, action or
proceeding brought against the Borrower with respect to any Collateral; (d) to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Agent may
deem appropriate; and (e) to generally sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Agent were the absolute owner thereof for all
purposes; and to do, at the Agent's option and the Borrower's expense, at any
time, or from time to time, all acts and things which the Agent deems necessary
to protect, preserve or realize upon the Collateral and the Agent's security
interest therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Borrower
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might do. The Borrower hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(a) AGENT NOT LIABLE. The powers conferred on the Agent
hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to
the Borrower for any act or failure to act, except for its own gross
negligence or willful misconduct.
(b) PERFORMANCE BY AGENT OF THE BORROWER'S OBLIGATIONS. If
the Borrower fails to perform or comply with any of its agreements
contained herein and the Agent shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the
expenses of the Agent incurred in connection with such performance or
compliance, together with interest thereon at the highest rate of
interest that would from time to time apply to any Type of Borrowing
under Section 2.11, shall be payable by the Borrower to the Agent on
demand and upon the expiration of five (5) calendar days after such
demand the Borrower shall be deemed to have delivered a Deemed Credit
Request in the relevant amounts. The Agent will notify the Borrower as
soon as it is practicable of any action taken by it of the nature
referred to herein.
14.3 CUMULATIVE PROVISIONS. Each right, power or privilege specified or
referred to in this Agreement is in addition to and not in limitation of any
other rights, powers and privileges that the Agent and the Banks may otherwise
have or acquire by operation of Law, by other contract or otherwise.
14.4 BINDING EFFECT. This Agreement shall become effective when it
shall have been executed by the Borrower and shall be binding upon and inure to
the benefit of the Borrower, the Agent, the Banks and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Agent and the Banks.
14.5 COSTS AND EXPENSES. The Borrower agrees to pay on demand all
reasonable costs and expenses of: (a) the Agent (including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Agent) in
connection with (i) the preparation, execution, delivery, administration,
modification, amendment and waiver of this Agreement or the other Loan
Documents, and (ii) the arrangement on or after the Closing Date of a syndicate
of lenders to purchase a portion of the Commitments, and (b) the Agent, the
Letter of Credit Bank and the Banks (including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent, the Letter
of Credit Bank and the Banks) in connection with the enforcement of, the
exercise of remedies under, or the preservation of rights and remedies under
this Agreement or any of the other Loan Documents (including any collection,
bankruptcy or other enforcement proceedings arising with respect to the
Borrower, this Agreement, or any Event of Default under this Agreement).
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14.6 SURVIVAL OF PROVISIONS. All representations and warranties made in
or pursuant to this Agreement shall survive the execution and delivery of this
Agreement and of the Notes. The provisions of Sections 12.3 and 13 of this
Agreement shall survive the payment of the Obligations and any other
Indebtedness owed by the Borrower hereunder and the termination of this
Agreement (whether by acceleration or otherwise).
14.7 IMMEDIATE U.S. FUNDS. Unless specifically designated otherwise,
any reference to money is a reference to lawful money of the United States
which, if in the form of credits, shall be in immediately available funds.
14.8 CAPTIONS. The several captions to different Sections and the
respective subsections thereof are inserted for convenience only and shall be
ignored in interpreting the provisions of this Agreement.
14.9 SHARING OF INFORMATION. Subject to the provisions of Section 12.3,
each Bank shall have the right to furnish to its Affiliates, its accountants,
its employees, its officers, its directors, its legal counsel, potential
participants, and to any governmental agency having jurisdiction over such Bank,
information concerning the business, financial condition, and property of the
Borrower, the amount of the Advances of the Borrower hereunder, and the terms,
conditions and other provisions applicable to the respective parts thereof.
14.10 INTEREST RATE LIMITATION. Notwithstanding anything herein to the
contrary, if at any time the applicable interest rate, together with all fees
and charges that are treated as interest under applicable law as provided for
herein or in any other document executed in connection herewith, or otherwise
contracted for, charged, taken, received or reserved by the Bank, shall exceed
the maximum lawful rate that may be contracted for, charged, taken, received or
reserved by the Bank in accordance with applicable law (the "Maximum Lawful
Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate
of the rate of interest and all such charges payable, contracted for, charged,
taken, received or reserved in respect of the Advances of the Banks to the
Borrower shall be equal to the Maximum Lawful Rate; PROVIDED, that, if any time
thereafter the applicable interest rate, together with all fees and charges that
are treated as interest under applicable law as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, taken, received or reserved by the Banks shall be less than the Maximum
Lawful Rate, the Borrower shall continue to pay such interest and fees hereunder
at the Maximum Lawful Rate until such time as the total interest received by the
Agent for the benefit of the Banks, is equal to the total interest and fees that
would have been received had the interest rate payable hereunder been (but for
the operation of this Section 14.10) the interest rate payable since the Closing
Date as otherwise provided in this Agreement. Thereafter, interest payable
hereunder shall be paid at the rate(s) of interest and the charges provided in
Sections 2.10 of this Agreement, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, and at that time this Section 14.10 shall again
apply. In no event shall the total interest, together with all fees and charges
that are treated like interest, received by any Bank pursuant to the terms
hereof exceed the amount which such Bank could lawfully have received had the
interest and such fees and charges due hereunder been calculated for the full
term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at the daily rate
equal to the Maximum Lawful Rate divided by the number of days in
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the year in which such calculation is made. If, notwithstanding the provisions
of this Section 14.10, a court of competent jurisdiction shall finally determine
that a Bank has received interest, or fees and charges that are treated like
interest, hereunder in excess of the Maximum Lawful Rate, the Agent shall, to
the extent permitted by applicable Law, promptly apply such excess to the
principal amounts owing to such Bank and thereafter shall refund any excess to
the Borrower or as a court of competent jurisdiction may otherwise order.
14.11 LIMITATION OF LIABILITY. To the extent permitted by applicable
law, no claim may be made by the Borrower, the Agent, the Letter of Credit Bank,
any Bank or any other Person against the Agent, the Letter of Credit Bank or any
Bank or the Affiliates, directors, officers, employees, agents, attorneys and
consultants of any of them for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith; and
the Agent, the Letter of Credit Bank, the Borrower and the Banks hereby waive,
release and agree not to ▇▇▇ upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
14.12 ILLEGALITY. If any provision in this Agreement or any other Loan
Document shall for any reason be or become illegal, void or unenforceable, that
illegality, voidness or unenforceability shall not affect any other provision.
14.13 NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing and shall be given solely: (a) by
hand delivery or by overnight courier delivery service, with all charges paid,
(b) by facsimile transmission, if confirmed same day in writing by first class
mail mailed, or (c) by registered or certified mail, postage prepaid and
addressed to the parties. For the purposes of this Agreement, such notices shall
be deemed to be given and received: (i) if by hand or by overnight courier
service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of
machine-generated confirmation of such transmission (and provided the
above-stated written confirmation is sent) or (iii) if by registered or
certified mail, upon the first to occur of actual receipt or the expiration of
48 hours after deposit with the U.S. Postal Service; PROVIDED, HOWEVER, that
notices from the Borrower to Agent or the Banks pursuant to any of the
provisions hereof, including without limitation Sections 2 and 8.1 of this
Agreement, shall not be effective until actually received by the Agent or the
Banks, as the case may be. Notices or other communications hereunder shall be
addressed, if to the Borrower, at the address specified on the signature pages
of this Agreement; if to the Agent, at the address of the Agent specified on the
signature pages of this Agreement; if to a Bank, at the address of such Bank
specified on the signature pages of this Agreement; and, if to the Letter of
Credit Bank, at the address of the Letter of Credit Bank specified on the
signature pages of this Agreement.
14.14 GOVERNING LAW. This Agreement and the other Loan Documents and
the respective rights and obligations of the parties hereto shall be governed by
and construed in accordance with the internal laws of the State of Ohio (without
giving effect to the conflict of laws rules thereof).
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14.15 ENTIRE AGREEMENT. This Agreement and the other Loan Documents
referred to in or otherwise contemplated by this Agreement set forth the entire
agreement of the parties as to the transactions contemplated by this Agreement.
14.16 JURY TRIAL WAIVER. EACH OF THE BORROWER, THE AGENT, THE LETTER OF
CREDIT BANK AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
THE BORROWER, THE AGENT, THE LETTER OF CREDIT BANK AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
14.17 JURISDICTION; VENUE; INCONVENIENT FORUM.
(a) JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED
STATED OF AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM
ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY
MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT,
THE NOTES OR ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION.
(b) VENUE; INCONVENIENT FORUM. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY
LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO
STATE OR FEDERAL COURT SITTING IN OHIO. EACH OF THE PARTIES HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
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COURT. THE BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE
INFORMED AND FREELY MADE.
14.18 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so Executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized, as of
the date first above written.
PARAGON CORPORATE HOLDINGS INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Chief Financial Officer
Address for notices:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Paragon Corporate Holdings Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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KEY CORPORATE CAPITAL INC., as Agent
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Senior Vice President
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Manager
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Payment Office:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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BANKS
KEY CORPORATE CAPITAL INC., as a Bank
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
Address for Notices:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Manager
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Lending Office:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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LETTER OF CREDIT BANK
---------------------
KEY CORPORATE CAPITAL INC., as Letter
of Credit Bank
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Senior Vice President
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Manager
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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Annex I
CREDIT AND SECURITY AGREEMENT, DATED AS OF APRIL 1, 1998,
AMONG PARAGON CORPORATE HOLDINGS INC., THE AGENT, THE LETTER OF CREDIT BANK
AND THE BANKS
COMMITMENTS AND PERCENTAGES OF THE BANKS
===============================================================================
Ratable
Revolving Credit Portion
Name of Bank Commitment (percent)
------------ ----------
===============================================================================
Key Corporate Capital
Inc. $32,000,000 100%
-------------------------------------------------------------------------------
===============================================================================
Total Commitment $32,000,000 100%
----------------
===============================================================================
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ANNEX II
TO
CREDIT AND SECURITY AGREEMENT
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"A.B. DICK" means A.B. Dick Company, a Delaware corporation
and a wholly-owned Subsidiary of the Borrower.
"A.B. DICK ACCUMULATED DEPRECIATION INVENTORY" means Inventory
of A.B. Dick that is the subject of an excess inventory reserve,
obsolete inventory reserve or accumulated depreciation reserve.
"A.B. DICK ELIGIBLE ACCOUNTS" means Eligible Accounts of A.B.
Dick.
"A.B. DICK ELIGIBLE INVENTORY" means Eligible Inventory owned
by A.B. Dick.
"A.B. DICK GUARANTY AGREEMENT" means that certain Subsidiary
Guaranty, dated as of the date hereof, executed by A.B. Dick in favor
of the Agent for the benefit of the Banks and the Letter of Credit
Bank, substantially in the form of EXHIBIT E hereto.
"A.B. DICK INTERCOMPANY LOANS" means the loans from the
Borrower to A.B. Dick using the proceeds of the Advances hereunder.
"ACCOUNTS" means "accounts" (as defined in the UCC) including,
without limitation, all present and future rights to payment for goods
sold or leased or for services rendered, which are not evidenced by
Instruments or Chattel Paper, and whether or not they have been earned
by performance.
"ACCOUNT CREDITOR" means any Person to whom an Account Debtor
is or becomes obligated under, with respect to, or on account of an
Account.
"ACCOUNT DEBTOR" means any Person who is or becomes obligated
to an Account Creditor under, with respect to, or on account of an
Account.
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed
thereto in section 302(a)(2) of ERISA.
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"ACQUISITION" means any transaction or series of transactions
pursuant to or as a result of which a Subsidiary Guarantor merges or
consolidates with or otherwise acquires any Person or all or a
substantial portion of the ownership interests or assets or properties
of any Person or of a going concern business (as defined in accordance
with GAAP).
"ACQUISITION CONSIDERATION" means, with respect to any
Acquisition, the aggregate consideration (whether in cash or stock or
other securities) and transaction costs payable in connection
therewith, including customary indemnities and holdbacks and any debt
owed to the seller.
"ADVANCE" means a Revolving Credit Advance.
"ADVANTAGE" means any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other Indebtedness or
otherwise) received by a Bank in respect of the Obligations if the
payment results in any other Bank's having more than its Ratable
Portion of the Obligations in question.
"AFFILIATE" means, with respect to a specified Person, any
other Person: (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with such specified Person, (b) which beneficially owns or
holds with power to vote five percent (5%) or more of any class of the
voting stock of such specified Person, (c) five percent (5%) or more of
the voting stock of which other Person is beneficially owned or held by
such specified Person, or (d) who is an executive officer or director
of such specified Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means Key Corporate Capital Inc., a Michigan
corporation, in its capacity as agent for the Banks.
"AGENT SPECIAL ADVANCES" has the meaning specified in Section
2.4(d).
"AGREEMENT" means this Credit and Security Agreement and each
amendment, supplement or modification, if any, to this Credit and
Security Agreement.
"ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the higher of: (a) the rate of interest which is established
from time to time by KCCI at its principal office in Cleveland, Ohio as
its "prime rate" or "base rate" in effect, such rate to be adjusted
automatically, without notice, as of the opening of business on the
effective date of any change in such rate (it being agreed that: (i)
such rate is not necessarily the lowest rate of interest then available
from KCCI on fluctuating rate loans and (ii) such rate may be
established by KCCI by public announcement or
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otherwise) and (b) the Federal Funds Rate in effect on such day plus
one half of one percent (1/2 of 1%) per annum.
"ALTERNATE BASE RATE ADVANCE" means an Advance which bears
interest as provided in Section 2.10(a)(i) of this Agreement.
"ALTERNATE BASE RATE BORROWING" means a Borrowing consisting
of Alternate Base Rate Advances.
"APPLICABLE REVOLVING CREDIT MARGIN" means (i) from the
Closing Date until July 1, 1998, 2.75% per annum with respect to LIBOR
Rate Advances and 0.75% per annum with respect to Alternate Base Rate
Advances, and (ii) with respect to any Margin Adjustment Date after the
Closing Date, the percentage applicable to a LIBOR Rate Advance
corresponding to the Consolidated Fixed Charge Coverage Ratio of the
Borrower set forth below (determined on the basis of the Consolidated
Fixed Charge Coverage Ratio for the Cumulative Four Fiscal Quarter
Period ending on the Determination Date applicable to such Margin
Adjustment Date and calculated in accordance with Section 2.10(b) of
this Agreement):
================================================================================
Consolidated Alternate
Fixed Charge LIBOR Rate Base Rate
Coverage Ratio Advance Advance
================================================================================
* = 1.2 to 1.0 but 3.00% 1.00%
** 1.4 to 1.0
--------------------------------------------------------------------------------
* = 1.4 to 1.0 but 2.75% 0.75%
** 1.6 to 1.0
--------------------------------------------------------------------------------
* = 1.6 to 1.0 but 2.50% 0.50%
** 1.8 to 1.0
--------------------------------------------------------------------------------
* = 1.8 to 1.0 2.25% 0.25%
================================================================================
* Greater than or equal to
** Less than
"ASSIGNMENT AGREEMENT" has the meaning specified in Section
12.1(b).
"AVERAGE COMMITMENTS" means, as at any date of determination,
an amount equal to the average amount for the twelve (12) months (or
such shorter period as shall commence with the Closing Date) ending
prior to such date of determination of the aggregate Revolving Credit
Commitments of the Banks.
"BANKS" means the financial institutions listed on the
signature pages hereof as "Banks" and the successors thereto and
assignees thereof.
"BORROWER" means Paragon Corporate Holdings Inc., a Delaware
corporation.
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"BORROWER CASH COLLATERAL ACCOUNT" means that certain
commercial deposit account, Account No. _____________ at KeyBank
National Association, Cleveland, Ohio, in the name of the Agent for the
benefit of the Banks, designated as the "Paragon Corporate Holdings
Inc. Cash Collateral Account for the benefit of Key Corporate Capital
Inc., as Agent for the benefit of the Banks" which shall be: (a)
maintained by the Borrower with KeyBank National Association pursuant
to the Restricted Account Agreement, without liability by the Agent or
KeyBank National Association to pay interest thereon, and (b) from
which account the Agent shall have the irrevocable and exclusive right
to withdraw funds until all of the Obligations are paid, performed,
satisfied and enforced in full.
"BORROWING" means a group of Advances of a single Type made by
the Banks on a single date and as to which a single Interest Period is
in effect (I.E., any group of Advances made by the Banks of a different
Type, or having a different Interest Period (regardless of whether such
Interest Period commences on the same date as another Interest Period),
or made on a different date shall be considered to comprise a different
Borrowing).
"BORROWING BASE" means, at any date of determination, an
amount not in excess of the difference of the following:
(a) the sum of:
(i) eighty-five percent (85%) of the amount due
and owing on the ▇▇▇▇▇▇ Eligible Accounts;
PLUS
(ii) eighty percent (80%) of the amount due and
owing on the A.B. Dick Eligible Accounts;
PLUS
(iii) the lesser of:
(x) Six Million Four Hundred Thousand
Dollars ($6,400,000) or
(y) sixty percent (60%) of the cost or
market value (whichever is lower) of the
▇▇▇▇▇▇ Eligible Inventory; PLUS
(iv) the lesser of:
(x) Nine Million Six Hundred Thousand
Dollars ($9,600,000) or
(y) sixty percent (60%) of the cost or
market value (whichever is lower) of the
A.B. Dick Eligible Inventory; PLUS
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(v) ten percent (10%) of the cost or market
value (whichever is lower) of the A.B. Dick
Accumulated Depreciation Inventory; MINUS
(b) the Reserve Amount.
"BORROWING BASE CERTIFICATE" has the meaning specified in
Section 8.1Z(d)(ii) of this Agreement.
"BUSINESS DAY" means: (i) a day of the year on which banks are
not required or authorized to close in Cleveland, Ohio and (ii) if the
applicable Business Day relates to LIBOR Rate Advances, a day of the
year which is a Business Day described in clause (i) above and which is
also a day on which dealings in Dollar deposits are carried on in the
London interbank market and banks are open for business in London.
"CAPITAL EXPENDITURES" means any and all amounts invested,
expended or incurred (including Indebtedness under Capitalized Leases)
by a Person in respect of the purchase, acquisition, improvement,
renovation or expansion of any land and depreciable or amortizable
property of such Person (including, without limitation, expenditures
required to be capitalized in accordance with GAAP), each as determined
on a consolidated basis in accordance with GAAP.
"CAPITALIZED LEASES" means, in respect of any Person, any
lease of property imposing obligations on such Person, as lessee of
such property, which are required in accordance with GAAP to be
capitalized on a balance sheet of such Person.
"CASH COLLATERAL ACCOUNTS" means the Borrower Cash Collateral
Account and each of the Subsidiary Guarantor Cash Collateral Accounts.
"CASH EQUIVALENTS" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the
date of acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case, with any Bank or
with any domestic commercial bank having capital and surplus in excess
of $500 million and a ▇▇▇▇▇▇▇▇ Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper
having the highest rating obtainable from ▇▇▇▇▇'▇ Investors Service,
Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (vi) money market funds at
least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i) through (v) above. Notwithstanding the
foregoing, up to 40% of the Cash Equivalents
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of the kinds described in clauses (ii), (iii) and (v) above at any one
time held by the Borrower or any Subsidiary Guarantor may be invested
in securities, certificates of deposit, eurodollar time deposits,
bankers' acceptances and commercial paper having maturities of not more
than one year after the date of acquisition.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 ET
SEQ.
"CHANGE IN CONTROL" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation) in one or a
series of related transactions, of all or substantially all of the
assets of the Borrower and its Subsidiaries taken as a whole to any
"person" (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934) other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or his Related
Parties, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Borrower, (iii) the consummation of the first
transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined
above) becomes the "beneficial owner" (as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934), directly or
indirectly, of more of the voting stock of the Borrower (measured by
voting power rather than number of shares) than is at the time
"beneficially owned" (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and his Related
Parties in the aggregate, (iv) the first day on which a majority of the
members of the Board of Directors of the Borrower are not Continuing
Directors or (v) the failure of the Borrower to "beneficially own" (as
defined above) one hundred percent (100%) of the voting stock of any
Subsidiary Guarantor.
"CHATTEL PAPER" means "chattel paper" as defined in the UCC.
"CLOSING DATE" means the date and the time as of which the
initial Revolving Credit Borrowing is advanced under this Agreement.
"COLLATERAL" means (i) all assets of the Borrower in which a
security interest or Lien is granted to the Agent for the benefit of
the Banks and the Letter of Credit Bank pursuant to Section 4.1 hereof
and (ii) all other property of the Borrower or the Subsidiary
Guarantors that is subject to any Lien in favor of the Agent for the
benefit of the Banks and the Letter of Credit Bank from time to time
which secures the repayment of the Obligations.
"COLLECTIONS" means all payments to the Borrower from Account
Debtors in respect of Accounts.
"COMBINED BORROWING ENTITIES" means, collectively, the
Borrower and each of the Subsidiary Guarantors.
"COMMITMENTS" means, with respect to any Bank, such Bank's
Revolving Credit Commitment and Letter of Credit Commitment.
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"CONSOLIDATED CAPITAL EXPENDITURES" means, with respect to any
Person and for any period, all Capital Expenditures of such Person and
its Subsidiaries during such period, as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED EBITDA" means, with respect to any Person and
for any cumulative fiscal period, the Consolidated Net Income of such
Person and its Subsidiaries for such period PLUS Consolidated Interest
Expense of such Person and its Subsidiaries for such period PLUS
federal, state and local taxes of such Person and its Subsidiaries for
such period PLUS depreciation of such Person and its Subsidiaries for
such period PLUS amortization of such Person and its Subsidiaries for
such period, each as determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, for any
Cumulative Four Quarter Fiscal Period, the ratio of: (a) the sum of (i)
the Consolidated EBITDA LESS (ii) the Consolidated Capital Expenditures
to (b) the sum of (i) Consolidated Interest Expense PLUS, (ii) the
scheduled principal payments in respect of Consolidated Senior Debt and
Consolidated Subordinated Debt as at the Fiscal Quarter ending
immediately prior to the Cumulative Four Quarter Fiscal Period in
question, PLUS (iv) cash Distributions made by such Person to its
shareholders.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
Person and for any period, the net amount of interest expense of such
Person and its Subsidiaries for such period on the aggregate principal
amount of the Indebtedness of such Person and its Subsidiaries plus any
capitalized interest of such Person or its Subsidiaries which accrued
during such period, each as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person
and for any period, net income (or loss) of such Person and its
Subsidiaries for such period (after taxes and extraordinary items but
without giving effect to any gain from re-appraisal or write-up of
assets after January 31, 1996), as determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED SENIOR DEBT" means, with respect to any Person
and as at any date of determination, all Indebtedness for borrowed
money of such Person and its Subsidiaries outstanding at such date
including, without limitation, all Capitalized Leases and all then
outstanding Obligations owing to the Banks under this Agreement, each
as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED SUBORDINATED DEBT" means, with respect to any
Person and as at any date of determination, all Indebtedness for
borrowed money constituting Subordinated Indebtedness of such Person
and its Subsidiaries outstanding as of such date, as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED UNFUNDED CAPITAL EXPENDITURES" means, with
respect to any Person and for any period, all Capital Expenditures of
such Person and its Subsidiaries
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during such period (other than those funded by purchase money
Indebtedness or Indebtedness for borrowed money other than under the
Revolving Credit Commitment), as determined on a consolidated basis in
accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of the Borrower who (i) was a
member of such Board of Directors on the Closing Date or (ii) was
nominated for election or elected to such Board of Directors with the
approval of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or a majority of the Continuing Directors
who were members of such Board of Directors at the time of such
nomination or election.
"CONTRACT RECEIVABLES" means Accounts of ▇▇▇▇▇▇ with respect
to Account Debtors who have been granted extended payment terms by
▇▇▇▇▇▇ and as to which the Agent has agreed from time to time.
"CONTROL ACCOUNT" has the meaning set forth in Section 2.1(d)
of this Agreement.
"CREDIT EVENT" means: (a) the incurrence of the obligation of:
(i) each Bank to make or participate in a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing, (ii) the Letter of
Credit Bank to issue any Letter of Credit, or (iii) any Bank to
participate in the risk of any Letter of Credit, (b) the making of a
Revolving Credit Advance by any Bank, (c) the issuance of any Letter of
Credit by the Letter of Credit Bank and the participation by the Banks
in the risk thereof, (d) the delivery by the Borrower of (x) a Credit
Request requesting a Revolving Credit Borrowing or a Letter of Credit
or (y) a Rate Conversion/Continuation Request requesting the conversion
or continuation of a LIBOR Borrowing, (e) a Rate Conversion or Rate
Continuation, or (f) the receipt or acceptance by or on behalf of the
Borrower of proceeds of any Revolving Credit Borrowing.
"CREDIT REQUEST" has the meaning specified in Section 2.3(a)
of this Agreement.
"CUMULATIVE FOUR QUARTER FISCAL PERIOD" means a period
consisting of four consecutive Fiscal Quarters, whether or not in the
same Fiscal Year of the Borrower.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Industries, Inc., a Delaware
corporation.
"▇▇▇▇▇▇ ELIGIBLE ACCOUNTS" means Eligible Accounts of ▇▇▇▇▇▇.
"▇▇▇▇▇▇ ELIGIBLE INVENTORY" means Eligible Inventory owned by
▇▇▇▇▇▇.
"▇▇▇▇▇▇ GUARANTY AGREEMENT" means that certain Subsidiary
Guaranty, dated as of the date hereof, executed by ▇▇▇▇▇▇ in favor of
the Agent for the benefit of the Banks and the Letter of Credit Bank,
substantially in the form of EXHIBIT E hereto.
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"▇▇▇▇▇▇ INTERCOMPANY LOANS" means loans from the Borrower to
▇▇▇▇▇▇ using the proceeds of Advances hereunder.
"DEEMED CREDIT REQUEST" has the meaning specified in Section
2.3(b) of this Agreement.
"DEFAULT UNDER ERISA" means: (a) the occurrence or existence
of a material Accumulated Funding Deficiency in respect of any Employee
Benefit Plan within the scope of Section 302(a) of ERISA, or (b) any
failure by Borrower or any Subsidiary to make a full and timely payment
of premiums required by Section 4001 of ERISA in respect of any
Employee Benefit Plan, or (c) the occurrence or existence of any
material liability under Section 4062, 4063, 4064, 4069, 4201, 4217 or
4243 of ERISA in respect of any Employee Benefit Plan, or (d) the
occurrence or existence of any material breach of any other law or
regulation in respect of any such Employee Benefit Plan, or (e) the
institution or existence of any action for the forcible termination of
any such Employee Benefit Plan which is within the scope of Section
4001(a)(3) or (15) of ERISA.
"DEPOSIT ACCOUNT" means (a) any deposit account and (b) any
demand, time, savings, passbook, or a similar account, in either case
maintained with any Person by the Borrower or any of its Affiliates,
other than an account evidenced by a certificate of deposit.
"DISTRIBUTION" means, in respect of a Person, a payment made,
liability incurred or other consideration given by such Person for the
purchase, acquisition, redemption or retirement of any capital stock
(whether added to treasury or otherwise) of such Person or as a
dividend, return of capital or other distribution in respect of the
capital stock of such Person (other than any stock dividend or stock
split payable solely in capital stock of such Person).
"DOLLARS" and the sign "$" each means lawful money of the
United States.
"ELIGIBLE ACCOUNTS" means, with respect to any Person, only
such Accounts of such Person as the Agent, in its reasonable
discretion, shall from time to time consider to be Eligible Accounts
and, by way of example and not limitation, excluding Accounts which:
(a) either: (i) remain unpaid more than ninety (90)
days after the original invoice date or (ii) have an original
due date greater than ninety (90) days after the original date
of invoice, PROVIDED, HOWEVER, that, in respect of ▇▇▇▇▇▇,
Contract Receivables shall be deemed to be Eligible Accounts
in an amount not to exceed, in the aggregate, Two Hundred
Fifty Thousand Dollars ($250,000);
(b) have arisen from services performed by the
Account Creditor to or for the Account Debtor outside the
ordinary course of business;
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(c) have arisen from the sale by the Account Creditor
of goods where such goods have not been shipped or delivered
to the Account Debtor;
(d) have arisen from transactions which are not
complete, are not bona fide, or require further acts on the
part of the Account Creditor to make such Account payable by
the Account Debtor;
(e) have arisen in connection with sales of goods
which were shipped or delivered to the Account Debtor on other
than an absolute sale basis, such as shipments or deliveries
made on consignment, a sale or return basis, a guaranteed sale
basis, a ▇▇▇▇ and hold basis, or on the basis of any similar
understanding;
(f) have arisen in connection with sales of goods
which were, at the time of sale thereof, subject to any Lien,
except the security interest in favor of the Agent created by
the Loan Documents;
(g) are subject to any provision prohibiting
assignment or requiring notice of or consent to such
assignment;
(h) are subject to any Lien other than the Lien in
favor of the Agent;
(i) are Accounts with respect to which the Account
Debtor is currently asserting setoff, counterclaim, defense,
allowance, dispute, or adjustment rights, or are Accounts that
have arisen in connection with the sale of goods which have
been returned, rejected, repossessed, lost or damaged;
(j) are owed from an Account Debtor about which the
Account Creditor has received notice that such Account Debtor
is the subject of Financial Impairment or has suspended normal
business operations, dissolved, liquidated or terminated its
existence;
(k) are owed by any Account Debtor located in New
Jersey or Minnesota unless the Account Creditor has filed all
legally required Notice of Business Activities Reports with
the New Jersey Department of Taxation or the Minnesota
Department of Revenue, respectively;
(l) are Accounts with respect to which the Account
Debtor is located in any jurisdiction which requires that the
Account Creditor, in order to ▇▇▇ any Person in such
jurisdiction's courts, either (i) qualify to do business in
such jurisdiction or (ii) file a report with the taxation
division of such jurisdiction for the then current year,
unless the Account Creditor has fulfilled such requirements to
the extent applicable for the then current year;
(m) are evidenced by Chattel Paper or any Instrument
of any kind (including, without limitation, any promissory
notes);
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(n) are Accounts with respect to which any of the
representations, warranties, covenants and agreements
contained in this Agreement or any of the other Loan Documents
are not or have ceased to be complete and correct or have been
breached;
(o) are Accounts with respect to which the Account
Debtor is also a supplier or creditor of the Account Creditor,
except to the extent that the aggregate amount owed to the
Account Creditor by such Account Debtor exceeds the aggregate
amount owed to such Account Debtor by the Account Creditor;
(p) are Accounts with respect to which the Agent does
not have a first priority, perfected security interest;
(q) represent a progress billing or have had the time
for payment extended by the Account Creditor without the
consent of the Agent (for the purposes hereof, "progress
billing" means any invoice for goods sold or leased or
services rendered under a contract or agreement pursuant to
which the Account Debtor's obligation to pay such invoice is
conditioned upon the Account Creditor's completion of any
further performance under the contract or agreement);
(r) are owed by a Person that is not a citizen of or
organized under the laws of the United States or any State or
are owed by any Person located outside of the United States
unless (i) such Accounts are owed by an Account Debtor located
in Canada and the Agent has a first priority lien perfected to
its satisfaction in such Accounts, or (ii) payment of such
Accounts is guaranteed by a letter of credit in form and
substance and issued by a financial institution satisfactory
to the Agent, in its sole discretion, and which has been
transferred or assigned to the Agent as security for the
Obligations.
(s) are owed any government or any department,
agency, or instrumentality thereof;
(t) are owed by any State or any department, agency,
or instrumentality thereof unless the Account Creditor has
complied with any applicable statutory or regulatory
requirements thereof in respect of the Agent's security
interest therein as granted hereunder;
(u) are owed by an Affiliate of the Account Creditor;
(v) are owed by an Account Debtor with respect to
which more than fifty percent (50%) of the balances then
outstanding on Accounts owed by such Account Debtor and its
Affiliates to the Account Creditor has remained unpaid for
more than ninety (90) days from the dates of their original
due dates, as applicable; or
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(w) are, in the Agent's reasonable credit judgment,
Accounts of an Account Debtor which is deemed to be an
unacceptable credit risk or Accounts which are otherwise
deemed unacceptable. The Agent shall use reasonable efforts to
notify the Borrower of any such determination under this
clause (v), but shall not be liable for any damages arising
out of any failure to so notify the Borrower.
"ELIGIBLE ASSIGNEE" means (i) a Bank or any Affiliate thereof;
(ii) a commercial bank having total assets in excess of $1,000,000,000;
(iii) a finance company, insurance company, other financial institution
or fund, reasonably acceptable to the Agent and approved by the
Borrower, which is regularly engaged in making, purchasing or investing
in loans; (iv) a savings and loan association or savings bank organized
under the laws of the United States or any state thereof having total
assets in excess of $1,000,000,000; or (v) a finance company, insurance
company, bank, other financial institution or fund reasonably
acceptable to the Agent and the Borrower.
"ELIGIBLE INVENTORY" means, with respect to any Person, only
such Inventory of such Person, valued at the lower of cost (on a first
in, first out basis) or market, as the Agent, in its reasonable
discretion, shall from time to time consider to be Eligible Inventory
and, by way of example and not limitation, excluding Inventory which:
(a) consists of obsolete, damaged, defective,
unmerchantable, spoiled, outdated or unsalable items;
(b) consists of goods not held for sale, such as work
in process, any labels, any maintenance items, any supplies
and packaging, and any Inventory used in connection with
research and development; PROVIDED, that (i) raw materials
shall be considered goods not held for sale under this clause
(b) and (ii) work in process consisting of replacement parts
of A.B. Dick shall not be considered goods not held for sale
under this clause (b);
(c) is "R3500 Inventory" of A.B. Dick or is subject
to a Lien other than in favor of the Agent;
(d) is not subject to a first priority, perfected
security interest in favor of the Agent;
(e) is located at a location not owned by the Person
owning such Inventory and for which such Person has not
delivered to the Agent an appropriate landlord or
warehouseman's waiver, in form and substance satisfactory to
the Agent;
(f) is in the possession of a bailee or other third
Person including Inventory held by a third party for
processing or Inventory purchased by but not yet delivered to
such Person and for which such Person has not delivered to
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the Agent an appropriate bailee's waiver, in form and
substance satisfactory to the Agent;
(g) is held by such Person on consignment or
Inventory held by or placed into the possession of a third
Person for sale or display by that third Person;
(h) is located outside of the United States;
(i) is manufactured, produced or purchased pursuant
to any contract with the United States government, any agency
or instrumentality thereof or prime contractor thereof, which
contract provides for progress or advance payments to the
extent such Inventory is identified to such contract; or
(j) is, in the Agent's reasonable credit judgment,
Inventory which is otherwise deemed ineligible.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as
defined in Section 3(3) of ERISA of the Borrower or any of its ERISA
Affiliates or any "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA or any "pension plan" as defined in Section 3(2) of ERISA or
any "welfare plan" as defined in Section 3(1) of ERISA.
"ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
complaints, liens, notices of non-compliance, requests for information,
investigations, proceedings, consent orders or consent agreements
relating in any way to any Environmental Law or any Environmental
Permit, instituted by any Person, including, without limitation, (a) by
governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law or (b) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health or the environment.
"ENVIRONMENTAL LAWS" means any federal, state or local law,
regulation, ordinance, or order pertaining to the protection of the
environment and the health and safety of the public, including (but not
limited to) CERCLA, RCRA, the Hazardous Materials Transportation Act,
49 USC Section 1801 et seq., the Federal Water Pollution Control Act
(33 USC Section 1251 et seq.), the Toxic Substances Control Act (15 USC
Section 2601 et seq.) and the Occupational Safety and Health Act (29
USC Section 651 et seq.), and all similar state, regional or local
laws, treaties, regulations, statutes or ordinances, common law, civil
laws, or any case precedents, rulings, requirements, directives or
requests having the force of law of any foreign or domestic
governmental authority, agency or tribunal, and all foreign equivalents
thereof, as the same have been or hereafter may be amended, and any and
all analogous future laws, treaties, regulations, statutes or
ordinances, common law, civil laws, or any case precedents, rulings,
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requirements, directives or requests having the force of law of any
foreign or domestic governmental authority, agency or tribunal and the
regulations promulgated pursuant thereto, which governs: (a) the
existence, cleanup and/or remedy of contamination on property; (b) the
emission or discharge of Hazardous Materials into the environment; (c)
the control of hazardous wastes; (d) the use, generation, transport,
treatment, storage, disposal, removal or recovery of Hazardous
Materials; or (e) the maintenance and development of wetlands.
"ENVIRONMENTAL PERMITS" means all permits, approvals,
certificates, notifications, identification numbers, licenses and other
authorizations required under any applicable Environmental Laws or
necessary for the conduct of business.
"ENVIRONMENTAL REMEDIATION" means any curative measure taken
in respect of any non-compliance with, or otherwise related to, any
Environmental Law.
"EQUIPMENT" means "equipment" (as defined in the UCC) and
fixtures (as defined in the UCC) including, without limitation, all
machinery, equipment, furniture, furnishings, fixtures, and packaging
production equipment, parts, material handling equipment, supplies, and
motor vehicles (titled and untitled) of every kind and description, now
or hereafter owned by the Borrower, or in which the Borrower may have
or may hereafter acquire any interest, wheresoever located.
"ERISA" means the Employee Retirement Income Security Act of
1974 (Public Law 93-406), as amended, and in the event of any amendment
affecting any section thereof referred to in this Agreement, that
reference shall be a reference to that section as amended,
supplemented, replaced or otherwise modified.
"ERISA AFFILIATE" of any Person means any other Person that
for purposes of Title IV of ERISA is a member of such Person's
controlled group, or under common control with such Person, within the
meaning of Section 414 of the Internal Revenue Code of 1986, as amended
from time to time.
"ERISA REGULATOR" means any governmental agency (such as the
Department of Labor, the Internal Revenue Service and the Pension
Benefit Guaranty Corporation) having any regulatory authority over any
Employee Benefit Plan.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest
Period in respect of any LIBOR Rate Advance, as of any date of
determination, the aggregate of the then stated maximum reserve
percentages (including any marginal, special, emergency or supplemental
reserves), expressed as a decimal, applicable to such Interest Period
(if more than one such percentage is applicable, the daily average of
such percentages for those days in such Interest Period during which
any such percentages shall be so
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applicable) by the Board of Governors of the Federal Reserve System,
any successor thereto, or any other banking authority, domestic or
foreign, to which the Agent or any Bank may be subject in respect to
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Federal Reserve Board) or in
respect of any other category of liabilities including deposits by
reference to which the interest rate on LIBOR Rate Advances is
determined or any category of extension of credit or other assets that
include the LIBOR Rate Advances. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under
Regulation D of the Federal Reserve Board and the LIBOR Rate Advances
shall be deemed to constitute Eurocurrency Liabilities subject to such
reserve requirements without benefit of credits for proration,
exceptions or offsets which may be available from time to time to any
Bank under said Regulation D.
"EVENT OF DEFAULT" has the meaning specified in Section 9 of
this Agreement.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest one hundredth of one
percent (1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Cleveland on the Business Day
next succeeding such day, PROVIDED that: (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such a rate on such transactions on the
immediately preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for
any Business Day, the Federal Funds Rate for such Business Day shall be
the average of quotations for such day on such transactions received by
the Agent from three Federal funds brokers of recognized standing
selected by the Agent.
"FIELD EXAM MATERIALS" means the following materials delivered
to the Agent prior to the Closing Date and from time to time thereafter
under this Agreement: accounts receivable reconciliation report, daily
service and non-service ▇▇▇▇▇▇▇▇ report, accounts payable agings,
past-due reports, credit memo analysis documents, shipping
documentation, invoices, purchase orders, gross margin reports,
inventory turn analysis reports, inventory summary reports,
availability calculations, inventory-by-location reports, reserve
analysis and unit placement report (slow moving report).
"FINANCIAL IMPAIRMENT" means, in respect of a Person, the
distressed economic condition of such Person manifested by any one or
more of the following events:
(a) the discontinuation of the business of the
Person;
(b) the adjudication of the Person as a debtor or
having an order for relief under Title 11 of the United States
Code entered against the Person;
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(c) the Person ceases or is unable or admits in
writing its inability, to make timely payment upon the
Person's debts, obligations, or liabilities as they mature or
come due;
(d) assignment by the Person for the benefit of
creditors;
(e) voluntary institution by the Person or consent
granted by the Person to the involuntary institution (whether
by petition, complaint, application, default, answer
(including, without limitation, an answer or any other
permissible or required responsive pleading admitting: (i) the
jurisdiction of the forum or (ii) any material allegations of
the petition, complaint, application, or other writing to
which such answer serves as a responsive pleading thereto), or
otherwise) of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation,
receivership, trusteeship, or similar proceeding pursuant to
or purporting to be pursuant to any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt,
dissolution, liquidation, receivership, trusteeship, or
similar law of any jurisdiction;
(f) voluntary application by the Person for or
consent granted by the Person to the involuntary appointment
of any receiver, trustee, or similar officer (i) for the
Person or (ii) of or for all or any substantial part of the
Person's property;
(g) the commencement or filing against a Person,
without such Person's application, approval or consent, of an
involuntary proceeding or an involuntary petition seeking: (a)
liquidation, reorganization or other relief in respect of such
Person, its debts or all or a substantial part of its assets
under any Federal, state or foreign bankruptcy, insolvency,
receivership, or similar law now or hereafter in effect or (b)
the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for such Person
or for a substantial part of its assets, and, in any such
case, either (i) such proceeding or petition shall continue
undismissed for sixty (60) days or (ii) an order or decree
approving or ordering any of the foregoing shall be entered;
or
(h) any judgment, writ, warrant of attachment,
execution, or similar process is issued or levied involving an
amount which is deemed by the Agent to be material, against
any Person or against such Person's assets and such judgment,
writ, warrant of attachment, execution, or similar process is
not released, vacated, or fully bonded within thirty (30) days
after it is issued, levied or rendered.
"FISCAL MONTH" means any of the twelve consecutive monthly
fiscal accounting periods collectively forming a Fiscal Year of the
Borrower.
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"FISCAL QUARTER" means any of the four consecutive three-month
fiscal accounting periods collectively forming a Fiscal Year of the
Borrower and ending on March 31, June 30, September 30 and December 31
of each calendar year.
"FISCAL YEAR" means the Borrower's regular annual accounting
period for federal income tax purposes ending on December 31 of each
calendar year.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board or in such other statements by
such other entity as may be in general use by significant segments of
the accounting profession and which have been applied in the
preparation of the financial statements referred to in Section 1.3 of
this Agreement and otherwise consistently applied.
"GEC" means General Electric Company, Ltd.
"GEC INDEMNITY" means the indemnification obligations of GEC
to the Borrower or any Subsidiary Guarantor under a certain Purchase
Agreement between the Borrower and GEC, dated January 17, 1997.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) of the Borrower including, without limitation, all
present and future choses in action, causes of action and all other
intangible personal property of the Borrower of every kind and nature
(other than Accounts), now or hereafter arising, all corporate or other
business records; inventions, designs, blueprints, patents and patent
applications, trademarks and trademark applications, trade names, trade
secrets, goodwill, registrations, copyrights, licenses, franchises,
customer lists, tax refunds, tax refund claims, rights and claims
against carriers and shippers, and rights to indemnification.
"GUARANTOR" means a Person who pledges his credit or property
in any manner for the payment or other performance of Indebtedness,
agreements or other obligation of another Person including, without
limitation, any guarantor (whether of collection or payment), any
obligor in respect of a standby letter of credit or surety bond issued
for the account of another Person, any surety, any co-maker, any
endorser, and any Person who agrees conditionally or otherwise to make
any loan, purchase or investment in order thereby to enable another
Person to prevent or correct a default of any kind.
"GUARANTY" means the obligation of a Guarantor.
"GUARANTY AGREEMENT" means, collectively, the A.B. Dick
Guaranty Agreement, the ▇▇▇▇▇▇ Guaranty Agreement, and the agreements
of any Guarantor(s) of the Obligations incurred after the Closing Date.
"HAZARDOUS MATERIAL" means and includes: (a) any asbestos or
other material composed of or containing asbestos which is, or may
become, even if properly
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managed, friable, (b) petroleum and any petroleum product, including
crude oil or any fraction thereof, and natural gas or synthetic natural
gas liquids or mixtures thereof, (c) any hazardous, toxic or dangerous
waste, substance or material defined as such in (or for purposes of)
CERCLA or RCRA, any so-called "Superfund" or "Superlien" law, or any
other applicable Environmental Laws, and (d) any other substance whose
generation, handling, transportation, treatment or disposal is
regulated pursuant to any Environmental Laws.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, (ii)
other agreements or arrangements designed to protect such Person
against fluctuations in interest rates and (iii) agreements entered
into for the purpose of fixing or hedging the risks associated with
fluctuations in foreign exchange rates.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (a) indebtedness for borrowed money, (b) obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations of such Person for the deferred purchase
price of property or services (other than accrued liabilities incurred
in the ordinary course of business), (d) obligations of such Person as
lessee under Capitalized Leases, (e) all obligations of such Person as
an account party in respect of letters of credit or banker's
acceptances, (f) liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA, (g)
obligations of a third party secured by any Lien on the properties or
assets of such Person, (h) obligations of such Person in respect of
currency or interest rate swap or interest rate cap or comparable
transactions, (i) obligations secured by any Lien on the properties or
assets of such Person and (j) obligations under any direct or indirect
Guaranty in respect of indebtedness or obligations of a third party of
the kinds referred to in clauses (a) through (i) above.
"INSTRUMENTS" means "instruments" as defined by the UCC.
"INTELLECTUAL PROPERTY" means all inventions, designs,
patents, and applications therefor, trademarks, service marks, trade
names, and registrations and applications therefor, copyrights, any
registrations therefor, and any licenses thereof, whether now owned or
existing or hereafter arising or acquired.
"INTERCOMPANY LOANS" means loans from the Borrower to a
Subsidiary Guarantor using the proceeds of Advances hereunder and
includes, as of the Closing Date, A.B. Dick Intercompany Loans and
▇▇▇▇▇▇ Intercompany Loans. All funds downstreamed by the Borrower to a
Subsidiary Guarantor using the proceeds of Advances hereunder are
deemed to be Intercompany Loans.
"INTERCOMPANY NOTE" means, in respect of any Intercompany
Loan, the promissory note evidencing such Intercompany Loan,
substantially in the form of EXHIBIT L-1.
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"INTERCOMPANY SECURITY AGREEMENT" means, in respect of any
Intercompany Loan, the security agreement securing such Intercompany
Loan, substantially in the form of EXHIBIT L-2.
"INTEREST PERIOD" means, for each LIBOR Rate Advance
comprising a Borrowing, the period commencing on the date of such LIBOR
Rate Advance or the date of the Rate Conversion or Rate Continuation of
any Advances into such LIBOR Rate Advance and ending on the numerically
corresponding day of the period selected by the Borrower pursuant to
the provisions hereof and each subsequent period commencing on the last
day of the immediately preceding Interest Period in respect of such
LIBOR Rate Advance and ending on the last day of the period selected by
the Borrower pursuant to the provisions hereof; PROVIDED, HOWEVER, that
the duration of each such Interest Period shall be one, two, three or
six months, in each case as the Borrower may select by delivery to the
Agent of a Credit Request therefor in accordance with Section 2.3(a) of
this Agreement and; PROVIDED, FURTHER, that:
(i) the Interest Period for each LIBOR Rate
Advance comprising part of the same
Borrowing shall be of the same duration;
(ii) whenever the last day of any Interest Period
would otherwise occur on a day other than a
Business Day, the last day of such Interest
Period shall be extended to occur on the
next succeeding Business Day; PROVIDED,
HOWEVER, that, if such extension would cause
the last day of such Interest Period to
occur in the next following calendar month,
the last day of such Interest Period shall
occur on the immediately preceding Business
Day;
(iii) if the Interest Period commences on a
Business Day for which there is no numerical
equivalent in the calendar month in which
the Interest Period is to end, such Interest
Period shall end on the last Business Day of
that calendar month; and
(iv) with respect to LIBOR Rate Advances
comprising any Revolving Credit Borrowing,
no Interest Period may end on a date later
than the Revolving Credit Termination Date.
"INVENTORY" means all "inventory" (as defined in the UCC) now
owned or hereafter acquired by the Borrower including, without
limitation, all goods, merchandise, work-in-process, raw materials,
finished goods, and inventory held for lease to other Persons, all
other materials, supplies, and tangible personal property of any kind,
nature, or description held for sale or lease or for display or
demonstration, or furnished or to be furnished under contracts of
service, or which are or which might be used or consumed in connection
with the manufacturing, packing, shipping, advertising, selling,
leasing, or furnishing of such goods, merchandise, or other personal
property, all documents of title or other documents pertaining thereto,
and all proceeds of the foregoing.
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"INVESTMENT ACCOUNT" means Account No. _____________ at
KeyBank National Association, Cleveland, Ohio, or such other account(s)
as the Borrower shall from time to time designate to the Agent in
writing.
"INVESTMENT PROPERTY" means all "Investment Property" (as
defined in the UCC from and after January 1, 1998) now or hereafter
acquired by the Borrower.
"KCCI" means Key Corporate Capital Inc., a Michigan
corporation.
"LAW" means any law, treaty, regulation, statute or ordinance,
common law, civil law, or any case precedent, ruling, requirement,
directive or request having the force of law of any foreign or domestic
governmental authority, agency or tribunal.
"LC EXPOSURE" means, with respect to any Bank, at any time of
determination, such Bank's Ratable Portion of the sum of: (a) the
aggregate undrawn amount of all Letters of Credit outstanding at such
time, PLUS (b) the aggregate amount that has been drawn under such
Letters of Credit for which the Letter of Credit Bank or the Banks, as
the case may be, have not at such time been reimbursed by the Borrower.
"LENDING OFFICE" means, with respect to any Bank, the office
of such Bank specified as its "Lending Office" under its name on the
signature pages hereto, or such other office of such Bank as such Bank
may from time to time specify in writing to the Borrower and the Agent
as the office at which Advances are to be made and maintained.
"LETTER OF CREDIT" means each Trade Letter of Credit or
Standby Letter of Credit.
"LETTER OF CREDIT BANK" means Key Corporate Capital Inc., a
Michigan corporation and its successors and assigns.
"LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning set
forth in Section 10.9.
"LETTER OF CREDIT COMMITMENT" means the commitment of the
Letter of Credit Bank to issue Letters of Credit for the account of the
Borrower in an undrawn face amount of up to Three Million Dollars
($3,000,000).
"LIBOR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.10(a)(ii) of this Agreement.
"LIBOR RATE BORROWING" means a Borrowing consisting of LIBOR
Rate Advances.
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the
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lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
"LOAN ACCOUNT" has the meaning set forth in Section 2.1(c).
"LOAN DOCUMENTS" means this Agreement, any note, mortgage,
security agreement, or other lien instrument, reimbursement agreement,
financial statement, audit report, environmental audit, notice, request
of advance, interest rate swap or hedge agreement, cash management
agreement, officer's certificate or other writing of any kind which is
now or hereafter required to be delivered by or on behalf of the
Borrower to the Agent, the Letter of Credit Bank or the Banks (or any
of their respective Affiliates) in connection with this Agreement,
including, without limitation, the Revolving Credit Notes and the other
writings referred to in Sections 2 and 3 of this Agreement.
"LONDON INTERBANK OFFERED RATE" means, for any Interest Period
with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards,
if necessary, to the nearest one sixteenth of one percent (1/16th of
1%) of: (x) the per annum rate of interest, determined by the Agent in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) as of approximately 11:00 a.m.
(London time) two Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Rate Advance, appearing on Page 3750 of
the Telerate Service (or any successor or substitute page of such
Service, or any successor to or substitute for such Service providing
rate quotations comparable to those currently provided on such page of
such Service, as determined by the Agent from time to time for purposes
of providing quotations of interest rates applicable to Dollar deposits
in the London interbank market) as the rate in the London interbank
market for Dollar deposits in immediately available funds with a
maturity comparable to such Interest Period DIVIDED BY (y) a number
equal to 1.00 MINUS the Eurocurrency Reserve Percentage. In the event
that such rate quotation is not available for any reason, then the rate
(for purposes of clause (x) hereof) shall be the rate, determined by
the Agent as of approximately 11:00 a.m. (London time) two Business
Days prior to the beginning of such Interest Period pertaining to such
LIBOR Rate Advance, to be the average (rounded upwards, if necessary,
to the nearest one sixteenth of one percent (1/16th of 1%) of the per
annum rates at which Dollar deposits in immediately available funds in
an amount comparable to KCCI's Ratable Portion of such LIBOR Borrowing
and with a maturity comparable to such Interest Period are offered to
the prime banks by leading banks in the London interbank market. The
London Interbank Offered Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurocurrency Reserve
Percentage.
"LONG-TERM DEBT" means long-term debt of the Borrower and its
Subsidiaries, as determined on a consolidated basis in accordance with
GAAP.
"MARGIN ADJUSTMENT DATE" has the meaning specified in Section
2.10(b) of this Agreement.
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"MATERIAL ADVERSE EFFECT" means a material adverse effect on:
(a) the business, properties, operations or condition (financial or
otherwise) of the Borrower or any Subsidiary Guarantor, (b) a material
portion of the Collateral, (c) the Borrower's ability to repay the
Obligations, (d) the Agent's security interest and lien or the priority
thereof, or (e) the legality, validity or enforceability of this
Agreement, the other Loan Documents or any Lien created hereby or
thereby.
"MATERIAL BUSINESS AGREEMENT" means each agreement of the
Borrower (not including Material License Agreements) set forth on the
Supplemental Schedule as being an agreement the termination of which
could reasonably be expected to result in liabilities or losses in
excess of $300,000.
"MATERIAL LICENSE AGREEMENT" means each license agreement of
the Borrower in respect of Third Party Intellectual Property set forth
on the Supplemental Schedule as being a license agreement the
termination of which could reasonably be expected to result in
liabilities or losses in excess of $300,000.
"MAXIMUM LAWFUL RATE" has the meaning specified in Section
14.10.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is
a "multiemployer plan" as such term is defined in section 4001(a)(3) of
ERISA.
"NET PROCEEDS" means (i) the cash proceeds (including cash
proceeds subsequently received in respect of non-cash consideration
initially received) from any sale, transfer or other disposition (other
than (A) any sale of inventory in the ordinary course, (B) the sale of
up to $250,000 of Equipment that is obsolete or otherwise no longer
used or useful during any Fiscal Year and (C) proceeds from the sale of
assets of A.B. Dick resulting from the relocation of A.B. Dick's
offices and manufacturing facilities during 1998) of any asset of the
Borrower or any of its Subsidiaries to any Person (other than the
Borrower or any other Subsidiary of the Borrower) net of selling
expenses, including any reasonable broker's fees or commissions, costs
of discontinuing operations associated with such assets and sales,
transfer and similar taxes and (ii) the cash proceeds from the issuance
and/or sale of equity or debt securities of the Borrower or any of its
Subsidiaries pursuant to any public offering or issuance or sale of any
equity securities of the Borrower or any of its Subsidiaries pursuant
to any private placement (other than the Senior Note Offering), net of
transaction costs.
"NOTES" means, collectively, each of the Revolving Credit
Notes executed and delivered by the Borrower to the Banks under this
Agreement.
"OBLIGATIONS" means the present and future obligations of the
Borrower and/or its Subsidiaries to the Banks under this Agreement or
any Loan Document including, without limitation, the outstanding
principal and accrued interest in respect of any Revolving Credit
Advances and LC Exposure (including interest accruing after a petition
for relief under the federal bankruptcy laws has been filed), the
reimbursement
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obligation in respect of the LC Exposure, all fees owing to the Letter
of Credit Bank, the Banks or the Agent under this Agreement and the
other Loan Documents, any amounts owing under any Reimbursement
Agreement, the amounts owing by the Borrower and/or its Subsidiaries
under any interest rate cap or hedge agreement, the reimbursement
obligations of the Borrower under Letters of Credit, the Related
Expenses, and any expenses, taxes, Other Taxes, compensation,
indemnification obligations or other amounts owing by the Borrower to
the Agent, the Letter of Credit Bank or any Bank under this Agreement,
the Notes or any Loan Document.
"OPERATING ACCOUNT" means account no._________________,
maintained by and in the name of the Borrower with KeyBank National
Association for the purposes of disbursing the proceeds of Revolving
Credit Advances, which account shall in no case be a payroll account.
"OTHER TAXES" has the meaning specified in Section 13.3(b) of
this Agreement.
"PARENT COMPANY" means NES Group, Inc., a Delaware
corporation.
"PAYMENT OFFICE" means such office of the Agent specified as
its "payment office" under its name on the signature pages hereto, or
such other office as the Agent may from time to time specify in writing
to the Borrower and the Banks as the office to which payments are to be
made by the Borrower or the Banks, as the case may be.
"PBGC" means the Pension Benefit Guaranty Corporation or any
other governmental authority succeeding to any of its functions.
"PC+ PRODUCTS" means all products and services sold or leased
by ▇▇▇▇▇▇ in connection with the PC+ product.
"PERMITTED ACCOUNT" has the meaning set forth in Section 6.3.
"PERMITTED ACQUISITION" means:
(i) with respect to any Acquisition which will be funded, in
whole or in part, with Advances or proceeds of Advances, an Acquisition
by a Subsidiary Guarantor (or a Subsidiary of such a Subsidiary
Guarantor organized for the purpose of effecting such Acquisition) with
respect to which all of the conditions set forth below shall have been
satisfied in full:
(a) the primary business activity of the Acquisition
target is the same or substantially similar to the business
activities of the acquiring Person;
(b)(i) Neither the Borrower nor any of its
Subsidiaries shall have assumed or agreed to remain liable
with respect to any Indebtedness (including any material tax
or ERISA liability) of the Acquisition target, except (A) to
the extent permitted under Section 8.3(c) and (B) obligations
of the Acquisition
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target incurred in the ordinary course of business and
necessary or desirable to the continued operation of the
underlying properties, and (ii) any other such liabilities or
obligations not permitted to be assumed or otherwise supported
by the Borrower or its Subsidiaries hereunder shall be paid in
full or released as to the assets being so acquired on or
before the consummation of such Acquisition;
(c) no Event of Default or Potential Default exists
immediately prior to such Acquisition or would occur
immediately after giving effect thereto;
(d) the Agent and the Banks are satisfied that, after
giving effect to the proposed Acquisition, the Borrower and
each of its Subsidiary Guarantors shall be in compliance with
the provisions of Section 8.4, determined on a pro forma basis
giving effect to the proposed Acquisition; and
(e) if such Acquisition has Acquisition Consideration
exceeding $20,000,000, such Acquisition shall have been
approved in writing by the Required Banks, in their reasonable
discretion; and
(ii) with respect to any Acquisition funded other than as
described in clause (a) above, an Acquisition of the Borrower or a
Subsidiary Guarantor that is permitted by the Senior Note Documents, so
long as no Event of Default or Potential Default exists immediately
prior to such Acquisition or would occur immediately after giving
effect thereto.
"PERMITTED DISCRETION" means the good faith judgment or good
faith exercise of discretion by the Agent to the extent based upon any
factor or circumstance which the Agent believes in good faith (the
burden of establishing lack of good faith being on the Borrower): (a)
will or could reasonably be expected to adversely affect the value of
any Collateral (ordinary wear and tear excepted), the enforceability or
priority of the Agent's Liens thereon in favor of the Banks or the
amount which the Agent and the Banks would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in
the liquidation of such Collateral; (b) suggests that any collateral
report or financial information delivered to the Agent by any Person on
behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (c) could reasonably be expected to increase
materially the likelihood of a bankruptcy, reorganization or other
insolvency proceeding involving the Borrower or to which any of the
Collateral is subject; or (d) creates or could reasonably be expected
to create a Potential Default or Event of Default. In exercising such
judgment, the Agent may consider in good faith such factors or
circumstances already included in or tested by the definition of
Eligible Accounts or Eligible Inventory, as well as any of the
following: (i) the financial and business condition of the Borrower,
(ii) changes in collection history and dilution with respect to the
Accounts, (iii) material changes in demand for, and changes in pricing
of, Inventory, (iv) changes in any concentration of risk with respect
to Accounts or Inventory, (v) any other factors or circumstances that
will or could reasonably be expected to have a Material Adverse Effect,
(vi) history of
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charge-backs or other credit adjustments, and (vii) any other factors
that change or could reasonably be expected to materially change the
credit risk of lending to any of the Borrowers on the security of the
Accounts or the Inventory.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"POTENTIAL DEFAULT" means an event, condition or thing which
with the lapse of any applicable grace period or with the giving of
notice or both would constitute, an Event of Default referred to in
Section 9 of this Agreement and which has not been appropriately waived
in writing in accordance with this Agreement or fully corrected, prior
to becoming an actual Event of Default.
"PROCEEDS" means all "proceeds" (as defined in the UCC) of any
and all of the Collateral made or due and payable to the Borrower from
time to time including, without limitation, all proceeds in connection
with any requisition, confiscation, condemnation, seizure or forfeiture
of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any Person acting under color of
governmental authority) and, to the extent not otherwise included, all
payments under insurance (whether or not the Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the Collateral.
"PRODUCTS" means property directly or indirectly resulting
from any manufacturing, processing, assembling or commingling of any
Inventory.
"PROPERTIES" has the meaning specified in Section 7.9 of this
Agreement.
"RATABLE PORTION" means, in respect of any Bank, the quotient
(expressed as a percentage) obtained at any time by dividing: (x) such
Bank's Revolving Credit Commitment at such time BY (y) the aggregate
amount of the Revolving Credit Commitments of all of the Banks;
PROVIDED, HOWEVER, that if all of the Revolving Credit Commitments are
terminated pursuant to the terms hereof, then, Ratable Portion means
the quotient (expressed as a percentage) obtained by dividing (x) the
aggregate amount of such Bank's Advances by (y) the aggregate amount of
Advances of all of the Banks outstanding at such time.
"RATE CONTINUATION" means a continuation of LIBOR Rate
Advances having a particular Interest Period as LIBOR Rate Advances
having an Interest Period of the same duration pursuant to Section 2.7
of this Agreement.
"RATE CONVERSION" means a conversion pursuant to Section 2.7
of this Agreement of Advances of one Type into Advances of another Type
and, with respect
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to LIBOR Rate Advances, from one permissible Interest Period to another
permissible Interest Period.
"RATE CONVERSION/CONTINUATION REQUEST" has the meaning
specified in Section 2.7 of this Agreement.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ.
"REGULATORY CHANGE" means, as to any Bank, any change in
United States federal, state or foreign Laws or regulations or the
adoption or making of any interpretations, directives or requests of or
under any United States federal, state or foreign Laws or regulations
(whether or not having the force of Law) by any court or governmental
authority charged with the interpretation or administration thereof.
"REIMBURSEMENT AGREEMENT" has the meaning set forth in Section
2.8(b) of this Agreement.
"RELATED PARTY" means, with respect to any Person, (A) any 80%
(or more) owned Subsidiary, or spouse or immediate family member (in
the case of an individual) of such Person; or (B) any trust,
corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or other Persons beneficially holding an
80% or more controlling interest of which consist of such Person and/or
such other Persons referred to in the immediately preceding clause (A);
or (C) the estate of such Person until such estate is distributed
pursuant to his will or applicable state law.
"REMITTANCES" means, in respect of any Person, all payments of
every kind (other than Collections in respect of Accounts) to such
Person, including, without limitation, payments on Indebtedness owing
to such Person (including Intercompany Loans), cash payments in respect
of Inventory sales, payments in respect of other dispositions of
Collateral (other than Inventory in the ordinary course of business)
and real property of such Person, insurance proceeds, condemnation
awards and tax refunds.
"REPORTABLE EVENT" means any of the events set forth in
Section 4043 of ERISA excluding those events for which the requirement
of notice has been waived by the PBGC.
"REQUIRED BANKS" means, at any time, Banks having at least
sixty percent (60%) of the aggregate amount of the Revolving Credit
Commitments of all of the Banks at such time; PROVIDED, HOWEVER, that
if all of the Revolving Credit Commitments are terminated pursuant to
the terms hereof, then, Required Banks means Banks having at least
sixty percent (60%) of the aggregate amount of Advances of all of the
Banks outstanding at such time.
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"RESERVE AMOUNT" means an amount determined by the Agent, in
its Permitted Discretion, as a reserve against Collateral values and
potential or anticipated obligations of the Borrower but without
duplication of amounts already reserved against the value of Collateral
under the definitions of "Eligible Inventory" or "Eligible Accounts."
Without limiting the generality of the foregoing, the Reserve Amount
shall include: (a) tax liabilities and other obligations owing to
governmental entities, (b) litigation liabilities, (c) amounts that are
required to be expended in order for Borrower and each of Borrower's
operations and property to comply with Environmental Laws or in order
to correct any violation by Borrower or each of Borrower's operations
or property of Environmental Laws, (d) the anticipated costs and
expenses relating to the liquidation of Collateral, (e) unpaid sales
taxes, (f) liabilities and other obligations owing by Borrower to any
lessor of real property leased by Borrower or to any warehouseman, and
(g) reserves for any claims asserted or likely to be asserted (in
Agent's sole determination) that have resulted or would result in Liens
on the Collateral.
"RESTRICTED ACCOUNT AGREEMENT" means that certain _________
Agreement, dated as of April 1, 1998, between the Borrower, the Agent
and KeyBank National Association.
"REVOLVING CREDIT ADVANCE" means an Advance made by a Bank to
the Borrower pursuant to Section 2.1 of this Agreement (whether an
Advance made by a Bank pursuant to a Credit Request or an Advance made
by a Bank by reason of a Deemed Credit Request), including Settlement
Advances and Agent Special Advances;
"REVOLVING CREDIT BORROWING" means a Borrowing consisting of
Revolving Credit Advances.
"REVOLVING CREDIT COMMITMENT" means, in respect of any Bank,
the commitment of such Bank to advance Revolving Credit Advances up to
the amount set forth in Annex I.
"REVOLVING CREDIT NOTE" means a promissory note of the
Borrower payable to the order of a Bank, in substantially the form of
EXHIBIT A-1 hereto, and in the original principal amount of such Bank's
Revolving Credit Commitment, evidencing the aggregate indebtedness of
the Borrower to such Bank resulting from the Revolving Credit Advances
made by such Bank.
"REVOLVING CREDIT TERMINATION DATE" means April 1, 2003, or
earlier if terminated pursuant to the terms of this Agreement.
"SENIOR NOTES" means the 9-5/8% Series A Senior Notes due 2008
issued by the Borrower in an aggregate principal amount of up to
$150,000,000 in connection with the Senior Note Offering.
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"SENIOR NOTE INDENTURE" means that certain Senior Note
Indenture between the Borrower and Norwest Bank Minnesota, National
Association, as Trustee, dated April 1, 1998.
"SENIOR NOTE OFFERING" means the offering by the Borrower of
its Senior Notes pursuant to the Senior Note Indenture.
"SENIOR NOTE OFFERING DOCUMENTS" means each agreement,
instrument, report, statement or other document or writing executed or
delivered in connection with the consummation of the Senior Note
Offering.
"SETTLEMENT" has the meaning set forth in Section 2.4(e) of
this Agreement.
"SETTLEMENT DATE" has the meaning set forth in Section
2.4(e)(i) of this Agreement.
"SETTLEMENT ADVANCE" has the meaning set forth in Section
2.4(e) of this Agreement.
"SOLVENT" means, with respect to any Person, as of any date of
determination, that: (a) the fair value of the property of the Person
as of such date is greater than the total amount of the liabilities
(including contingent liabilities computed at the amount that, in light
of all the facts and circumstances existing as of such date, represents
the amount that can reasonably be expected to become an actual or
matured liability) of the Person, (b) the present fair salable value of
the assets of the Person as of such date is not less than the amount
that will be required to pay the probable liabilities of the Person on
its debts as they become absolute and matured, (c) the Person is able
to pay all liabilities of the Person as those liabilities mature, and
(d) the Person does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in
which it is about to engage. The determination of whether a Person is
Solvent shall take into account all such Person's Properties and
liabilities regardless of whether, or the amount at which, any such
Property or liability is included on a balance sheet of such Person
prepared in accordance with GAAP, including Properties such as
contingent contribution or subrogation rights, business prospects,
distribution channels and goodwill. The determination of the sum of a
Person's Properties at a fair valuation or the present fair saleable
value of a Person's Properties shall be made on a going concern basis
unless, at the time of such determination, the liquidation of the
business in which such Properties are used or useful is in process or
is demonstrably imminent. In computing the amount of contingent or
unrealized Properties or contingent or unliquidated liabilities at any
time, such Properties and liabilities will be computed at the amounts
which, in light of all the facts and circumstances existing at such
time, represent the amount that reasonably can be expected to become
realized Properties or matured liabilities, as the case may be. In
computing the amount that would be required to pay a Person's probable
liability on its existing debts as they become absolute and matured,
reasonable valuation techniques, including a present value analysis,
shall be applied using such rates over such periods as are appropriate
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under the circumstances, and it is understood that, in appropriate
circumstances, the present value of contingent liabilities may be zero.
"STANDBY LETTER OF CREDIT" means any letter of credit issued
by the Letter of Credit Bank from time to time at the request of the
Borrower pursuant to the terms of this Agreement that is not a Trade
Letter of Credit.
"SUBORDINATED INDEBTEDNESS" means, with respect to a specified
Person, any and all Indebtedness owing by such specified Person to any
other Person, now or hereafter existing, that is expressly subordinated
and made junior to the payment and performance in full of the
Obligations and which subordination is evidenced by a written agreement
in form and substance satisfactory to the Agent and the Banks.
"SUBSIDIARY" means, in respect of a corporate Person at any
time, a corporation or other business entity the shares constituting a
majority of the outstanding capital stock (or other form of ownership)
or constituting a majority of the voting power in any election of
directors (or shares constituting both majorities) of which are (or
upon the exercise of any outstanding warrants, options or other rights
would be) owned directly or indirectly at such time by such Person or
another subsidiary of such Person or any combination of the foregoing.
"SUBSIDIARY GUARANTOR" means any Subsidiary that is also a
Guarantor of the Borrower's Obligations under this Agreement, and
includes, as of the Closing Date, ▇▇▇▇▇▇ and ▇.▇. ▇▇▇▇.
"SUBSIDIARY GUARANTOR BLOCKED ACCOUNT" means the blocked
account established by each Subsidiary Guarantor with KeyBank National
Association pursuant to the security agreement executed by such
Subsidiary Guarantor in favor of the Agent.
"SUBSIDIARY GUARANTOR CASH COLLATERAL ACCOUNT" means the cash
collateral account established by each Subsidiary Guarantor with
KeyBank National Association pursuant to the security agreement
executed by such Subsidiary Guarantor in favor of the Agent.
"SUBSIDIARY GUARANTOR LOCKBOX" means the lockbox established
by each Subsidiary Guarantor pursuant to the security agreement
executed by such Subsidiary Guarantor in favor of the Agent.
"SUPPLEMENTAL SCHEDULE" means the schedule which is attached
hereto as Annex II and is incorporated into this Agreement.
"THIRD PARTY INTELLECTUAL PROPERTY" means any Intellectual
Property not owned by the Borrower or a Subsidiary.
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"TRADE LETTER OF CREDIT" means any letter of credit used for
the purchase of goods in the ordinary course of the account party's
business, issued by the Letter of Credit Bank from time to time at the
request of the Borrower pursuant to the terms of this Agreement.
"TYPE" means, when used in respect of any Advance, the LIBOR
Rate or the Alternate Base Rate in effect in respect of such Advance.
"UCC" means the Uniform Commercial Code in effect in the State
of Ohio from time to time.
"UNITED STATES" and "U.S." each means United States of
America.
"WITHDRAWAL LIABILITY" means (in respect of the Borrower, its
Subsidiaries and their ERISA Affiliates and for the purposes of clause
(iii) of Section 8.3(j) of this Agreement), at any date of
determination, the amount equal to the aggregate present value (as
defined in section 3 of ERISA) at such date of the amount claimed to
have been incurred as a result of a withdrawal LESS any portion thereof
as to which the Borrower reasonably believes, after appropriate
consideration of the possible adjustments arising under subtitle E of
Title IV of ERISA, the Borrower, its Subsidiaries and their ERISA
Affiliates will have no liability; PROVIDED; HOWEVER, that the Borrower
shall obtain promptly written advice from independent actuarial
consultants supporting such determination.
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ANNEX III
TO
CREDIT AND SECURITY AGREEMENT
CONDITIONS PRECEDENT TO INITIAL ADVANCES
122
ANNEX IV
TO
CREDIT AND SECURITY AGREEMENT
SUPPLEMENTAL SCHEDULE