EXHIBIT 4-A
Execution Copy
--------------------------------------------------
TRUSERV CORPORATION,
TRUSERV ACCEPTANCE COMPANY,
TRUSERV LOGISTICS COMPANY,
GENERAL PAINT & MANUFACTURING COMPANY
AND
TRUE ▇▇▇▇▇.▇▇▇ CORPORATION
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
LOAN AND SECURITY AGREEMENT
Dated: August 29, 2003
$275,000,000
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
FLEET CAPITAL CORPORATION
INDIVIDUALLY AND AS AGENT FOR ANY LENDER WHICH IS
OR BECOMES A PARTY HERETO
--------------------------------------------------
BANK OF AMERICA, N.A.
AS SYNDICATION AGENT
AND
CONGRESS FINANCIAL CORPORATION (CENTRAL)
AND
▇▇▇▇▇▇▇ ▇▇▇▇▇ CAPITAL, A DIVISION OF
▇▇▇▇▇▇▇ ▇▇▇▇▇ BUSINESS FINANCIAL SERVICES, INC.
AND
LASALLE BUSINESS CREDIT, LLC
AS CO-DOCUMENTATION AGENTS
--------------------------------------------------
TABLE OF CONTENTS
PAGE
----
SECTION 1. CREDIT FACILITY.............................................................................1
1.1 Loans..........................................................................................1
1.2 Letters of Credit; LC Guaranties...............................................................4
SECTION 2. INTEREST, FEES AND CHARGES..................................................................5
2.1 Interest.......................................................................................5
2.2 Computation of Interest and Fees...............................................................6
2.3 Fee Letter.....................................................................................6
2.4 Letter of Credit and LC Guaranty Fees..........................................................6
2.5 Unused Line Fee................................................................................7
2.6 Prepayment Fee.................................................................................7
2.7 Audit Fees.....................................................................................7
2.8 Reimbursement of Expenses......................................................................8
2.9 Bank Charges...................................................................................8
2.10 Collateral Protection Expenses; Appraisals.....................................................8
2.11 Payment of Charges.............................................................................9
2.12 Tax Matters....................................................................................9
SECTION 3. LOAN ADMINISTRATION........................................................................10
3.1 Manner of Borrowing Revolving Credit Loans/LIBOR Option.......................................10
3.2 Payments......................................................................................14
3.3 Mandatory and Optional Prepayments............................................................15
3.4 Application of Payments and Collections.......................................................17
3.5 All Loans to Constitute One Obligation........................................................17
3.6 Loan Account..................................................................................18
3.7 Statements of Account.........................................................................18
3.8 Increased Costs...............................................................................18
3.9 Basis for Determining Interest Rate Inadequate................................................20
3.10 Sharing of Payments, Etc......................................................................21
SECTION 4. TERM AND TERMINATION.......................................................................21
4.1 Term of Agreement.............................................................................21
4.2 Termination...................................................................................21
4.3 Voluntary Commitment Reductions...............................................................22
SECTION 5. SECURITY INTERESTS.........................................................................23
5.1 Security Interest in Collateral...............................................................23
5.2 Other Collateral..............................................................................25
5.3 Lien Perfection; Further Assurances...........................................................25
5.4 Intentionally Omitted.........................................................................26
5.5 Lien on Realty................................................................................26
5.6 Agent's Duty Upon Termination.................................................................27
SECTION 6. COLLATERAL ADMINISTRATION..................................................................27
6.1 General.......................................................................................27
6.2 Administration of Accounts....................................................................28
6.3 Administration of Inventory...................................................................30
i
TABLE OF CONTENTS
(continued)
PAGE
----
6.4 Administration of Equipment...................................................................31
6.5 Payment of Charges............................................................................32
SECTION 7. REPRESENTATIONS AND WARRANTIES.............................................................32
7.1 General Representations and Warranties........................................................32
7.2 Continuous Nature of Representations and Warranties...........................................40
7.3 Survival of Representations and Warranties....................................................40
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS........................................................40
8.1 Affirmative Covenants.........................................................................40
8.2 Negative Covenants............................................................................45
8.3 Specific Financial Covenants..................................................................54
8.4 Election of Seasonal Advance Months...........................................................54
SECTION 9. CONDITIONS PRECEDENT TO INITIAL LOANS......................................................54
9.1 Documentation.................................................................................55
9.2 No Default....................................................................................55
9.3 Other Conditions..............................................................................55
9.4 Availability..................................................................................55
9.5 No Litigation.................................................................................55
9.6 Material Adverse Effect.......................................................................55
9.7 Capital Structure, Etc........................................................................55
9.8 Cash Management and Collection Systems........................................................56
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT..........................................56
10.1 Events of Default..............................................................................56
10.2 Acceleration of the Obligations................................................................59
10.3 Other Remedies.................................................................................59
10.4 Setoff and Sharing of Payments.................................................................61
10.5 Remedies Cumulative; No Waiver.................................................................61
SECTION 11. AGENT......................................................................................62
11.1 Authorization and Action.......................................................................62
11.2 Agent's Reliance, Etc..........................................................................62
11.3 Fleet and Affiliates...........................................................................63
11.4 Lender Credit Decision.........................................................................63
11.5 Indemnification................................................................................64
11.6 Rights and Remedies to Be Exercised by Agent Only..............................................64
11.7 Agency Provisions Relating to Collateral.......................................................64
11.8 Agent's Right to Purchase Commitments..........................................................65
11.9 Right of Sale, Assignment, Participations......................................................65
11.10 Amendment......................................................................................67
11.11 Resignation of Agent; Appointment of Successor.................................................68
11.12 Audit and Examination Reports; Disclaimer by Lenders...........................................69
11.13 Syndication and Documentation Co-Agents........................................................69
11.14 Acknowledgement by Agent.......................................................................70
SECTION 12. MISCELLANEOUS..............................................................................70
ii
TABLE OF CONTENTS
(continued)
PAGE
----
12.1 Power of Attorney..............................................................................70
12.2 Indemnity......................................................................................71
12.3 Sale of Interest...............................................................................71
12.4 Severability...................................................................................71
12.5 Successors and Assigns.........................................................................72
12.6 Cumulative Effect; Conflict of Terms...........................................................72
12.7 Execution in Counterparts......................................................................72
12.8 Notice.........................................................................................72
12.9 Consent........................................................................................73
12.10 Credit Inquiries...............................................................................73
12.11 Time of Essence................................................................................74
12.12 Entire Agreement...............................................................................74
12.13 Interpretation.................................................................................74
12.14 Confidentiality................................................................................74
12.15 GOVERNING LAW; CONSENT TO FORUM................................................................74
12.16 WAIVERS BY BORROWERS...........................................................................75
12.17 Advertisement..................................................................................76
12.18 Reimbursement..................................................................................76
12.19 Register.......................................................................................77
iii
LOAN AND SECURITY AGREEMENT
THIS
LOAN AND SECURITY AGREEMENT is made as of this 29th day of August,
2003, by and among FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island
corporation with an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, individually as a Lender and as Agent ("Agent") for itself and
any other financial institution which is or becomes a party hereto (each such
financial institution, including Fleet, is referred to hereinafter individually
as a "Lender" and collectively as the "Lenders"), BANK OF AMERICA, N.A., as
Syndication Agent and CONGRESS FINANCIAL CORPORATION (CENTRAL), ▇▇▇▇▇▇▇ ▇▇▇▇▇
CAPITAL, a Division of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services, Inc., and
LASALLE BUSINESS CREDIT, LLC as Co-Documentation Agents, the LENDERS and
TRUSERV
CORPORATION ("TruServ"), a Delaware corporation with its chief executive office
and principal place of business at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, TRUSERV ACCEPTANCE COMPANY ("TruServ Acceptance") an
Illinois corporation
with its chief executive office and principal place of business at ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, TRUSERV LOGISTICS COMPANY ("TruServ
Logistics") an
Illinois corporation with its chief executive office and
principal place of business at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, GENERAL PAINT & MANUFACTURING COMPANY ("General Paint"), an
Illinois
corporation with its chief executive office and principal place of business at
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and TRUE ▇▇▇▇▇.▇▇▇ CORPORATION
("True ▇▇▇▇▇.▇▇▇"), a Delaware corporation with its chief executive office and
principal place of business at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(TruServ, TruServ Acceptance, TruServ Logistics, General Paint and True
▇▇▇▇▇.▇▇▇ are hereinafter sometimes referred to individually as a "Borrower" and
collectively as "Borrowers"). Unless the context otherwise requires, capitalized
terms used in this Agreement and not defined herein have the meanings assigned
to them in Appendix A, General Definitions. Accounting terms not otherwise
specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to $275,000,000
available upon Borrowers' request therefor, as follows:
1.1 Loans.
1.1.1 Revolving Credit Loans. Each Lender agrees, severally and not
jointly, so long as no Event of Default has occurred and is continuing (except
in the case of Agent Loans described in subsection 1.1.5), to make Revolving
Credit Loans to Borrowers from time to time during the period from the date
hereof to but not including the last day of the Term, as requested by Borrower
Representative, on its own behalf and on behalf of all other Borrowers in the
manner set forth in subsection 3.1.1 hereof, up to a maximum principal amount at
any time outstanding equal to the lesser of (i) such Lender's Revolving Loan
Commitment minus the product of such Lender's Revolving Loan Percentage and the
sum of, without duplication, the LC Amount plus outstanding LC Obligations,
minus the
Exhibit 4-A - Page 1
product of such Lender's Revolving Loan Percentage and reserves established
pursuant to this Agreement in accordance with the terms hereof (other than LC
Reserves, which are included in the LC Amount), if any and (ii) the product of
such Lender's Revolving Loan Percentage and an amount equal to the Borrowing
Base at such time minus the LC Amount minus, without duplication, outstanding LC
Obligations, minus reserves established pursuant to this Agreement in accordance
with the terms hereof (other than LC Reserves, which are included in the LC
Amount), if any. Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent shall reasonably deem
necessary or appropriate in its reasonable credit judgment, against the amount
of Revolving Credit Loans which Borrowers may otherwise request under this
subsection 1.1.1 including without limitation with respect to (i) price
adjustments, damages, unearned discounts, returned products or other matters for
which credit memoranda are issued in the ordinary course of any Borrower's
business; (ii) potential dilution related to Accounts; (iii) shrinkage, spoilage
and obsolescence of any Borrower's Inventory; (iv) slow moving Inventory; (v)
other unpaid sums chargeable against Borrowers' Loan Account as Revolving Credit
Loans under any section of this Agreement, without duplication of any other
matter listed in clauses (i) through (ix) of this sentence; (vi) amounts (other
than for property taxes not then due) owing by any Borrower to any Person to the
extent secured by a Lien on, or trust over, any Property of Borrower; (vii)
amounts owing by any Borrower in connection with Product Obligations; (viii)
amounts owing to any Member for the cash portion of any declared but unpaid
patronage dividend, including, without duplication, the Closing Reserve; and
(ix) such other specific events, conditions or contingencies as to which Agent,
in its reasonable credit judgment, determines reserves should be established
from time to time hereunder. In the event that Agent establishes any such
reserves, Agent shall notify Borrowers of such fact and shall discuss with
Borrowers the reasons for the establishment of such reserves. Notwithstanding
the foregoing, Agent shall not establish any reserves in respect of any matters
relating to any items of Collateral that have been taken into account in
determining Eligible Inventory or Eligible Accounts, as applicable. The
Revolving Credit Loans shall be repayable in accordance with the terms of the
Revolving Notes and the terms hereof and shall be secured by all of the
Collateral. Within the foregoing limits, Borrowers may borrow, repay and
reborrow the Revolving Credit Loans.
1.1.2 Overadvances. Insofar as Borrowers may request and Agent or
Majority Lenders (as provided below) may be willing in their sole and absolute
discretion to make Revolving Credit Loans to Borrowers at a time when the unpaid
balance, without duplication, of Revolving Credit Loans plus the sum of the LC
Amount plus the amount of LC Obligations that have not been reimbursed by
Borrowers or funded with a Revolving Credit Loan, plus reserves established
pursuant to subsection 1.1.1, exceeds, or would exceed with the making of any
such Revolving Credit Loan, the Borrowing Base (and such Loan or Loans being
herein referred to individually as an "Overadvance" and collectively, as
"Overadvances"), Agent shall enter such Overadvances as debits in the Loan
Account. All Overadvances shall be repaid on demand, shall be secured by the
Collateral and shall bear interest as provided in this Agreement for Revolving
Credit Loans generally. Any Overadvance made pursuant to the terms hereof shall
be made by all Lenders ratably in accordance with their respective Revolving
Loan Percentages.
Exhibit 4-A - Page 2
Overadvances in the aggregate amount of $5,000,000 or less may, unless a Default
or Event of Default has occurred and is continuing, be made in the sole and
absolute discretion of Agent. Overadvances in an aggregate amount of more than
$5,000,000 but less than $10,000,000 may, unless a Default or an Event of
Default has occurred and is continuing, be made in the sole and absolute
discretion of the Majority Lenders. Overadvances in an aggregate amount of
$10,000,000 or more and Overadvances to be made after the occurrence and during
the continuation of a Default or an Event of Default shall require the consent
of all Lenders. The foregoing notwithstanding, in no event, unless otherwise
consented to by all Lenders, (w) shall any Overadvances be outstanding for more
than sixty (60) consecutive days, (x) after all outstanding Overadvances have
been repaid, shall Agent or Lenders make any additional Overadvances unless
sixty (60) days or more have expired since the last date on which any
Overadvances were outstanding, (y) shall Overadvances be outstanding on more
than ninety (90) days within any one hundred eighty day (180) period or (z)
shall Agent make Revolving Credit Loans on behalf of Lenders under this
subsection 1.1.2 to the extent such Revolving Credit Loans would cause a
Lender's share of the Revolving Credit Loans to exceed such Lender's Revolving
Loan Commitment minus such Lender's Revolving Loan Percentage of the LC Amount.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used
solely for (i) the satisfaction of existing Indebtedness of Borrowers to Bank of
America, N.A. and the other lenders under Borrowers' existing revolving credit
facility, to the holders of Borrowers' existing senior term notes, to Bank of
Montreal and other lenders under Borrowers' existing term loan agreement (which
term loan agreement replaced the Hagerstown synthetic lease and the related
guaranty upon the sale of TruServ's distribution facility located in Hagerstown,
Maryland), (ii) the payment of transaction costs incurred in connection with the
transactions contemplated hereby, (iii) Borrowers' general operating capital
needs in a manner consistent with the provisions of this Agreement and all
applicable laws and (iv) other purposes permitted under this Agreement,
including, without limitation the payment of that portion of patronage dividends
payable in cash and principal and interest due with respect to Member Notes.
1.1.4 Swingline Loans. In order to reduce the frequency of
transfers of funds from Lenders to Agent for making Revolving Credit Loans and
so long as no Event of Default exists, Agent shall be permitted (but not
required) to make Revolving Credit Loans to Borrowers upon request by Borrowers
(such Revolving Credit Loans to be designated as "Swingline Loans") provided
that the aggregate amount of Swingline Loans outstanding at any time will not
(i) exceed $20,000,000; (ii) when added to the principal amount of Agent's other
Revolving Credit Loans then outstanding plus Agent's Revolving Loan Percentage
of the LC Amount, exceed Agent's Revolving Credit Commitment; or (iii) when
added to the principal amount of all other Revolving Credit Loans then
outstanding plus the LC Amount plus, without duplication, outstanding LC
Obligations, exceed the Borrowing Base. Within the foregoing limits, Borrowers
may borrow, repay and reborrow Swingline Loans. All Swingline Loans shall be
treated as Revolving Credit Loans for purposes of this Agreement, except that
(a) all Swingline Loans shall be Base Rate Revolving Portions and (b)
notwithstanding anything herein to the contrary (other than as set forth in the
next succeeding sentence), all principal and interest paid with respect to
Swingline Loans shall be for the sole account of Agent in its capacity as the
Exhibit 4-A - Page 3
lender of Swingline Loans. Swingline Loans shall be settled no less frequently
than weekly. Notwithstanding the foregoing, not more than 2 Business Days after
(1) Lenders receive notice from Agent that a Swingline Loan has been advanced in
respect of a drawing under a Letter of Credit or LC Guaranty or (2) in any other
circumstance, demand is made by Agent during the continuance of an Event of
Default, each Lender shall irrevocably and unconditionally purchase and receive
from Agent, without recourse or warranty from Agent, an undivided interest and
participation in each Swingline Loan to the extent of such Lender's Revolving
Loan Percentage thereof, by paying to Agent, in same day funds, an amount equal
to such Lender's Revolving Loan Percentage of such Swingline Loan.
1.1.5 Agent Loans. Upon the occurrence and during the continuance
of an Event of Default, Agent, in its sole discretion, may make Revolving Credit
Loans on behalf of Lenders, in an aggregate amount not to exceed $10,000,000, if
Agent, in its reasonable business judgment, deems that such Revolving Credit
Loans are necessary or desirable (i) to protect all or any portion of the
Collateral, (ii) to enhance the likelihood, or maximize the amount of, repayment
of the Loans and the other Obligations, or (iii) to pay any other amount
chargeable to Borrowers pursuant to this Agreement, including without limitation
costs, fees and expenses as described in Sections 2.8 and 2.9 (hereinafter,
"Agent Loans"); provided, that in no event shall (a) the maximum principal
amount of the Revolving Credit Loans exceed the aggregate Revolving Loan
Commitments and (b) Majority Lenders may at any time revoke Agent's
authorization to make Agent Loans. Any such revocation must be in writing and
shall become effective prospectively upon Agent's receipt thereof. Each Lender
shall be obligated to advance its Revolving Loan Percentage of each Agent Loan.
If Agent Loans are made pursuant to the preceding sentence, then (a) the
Borrowing Base shall be deemed increased by the amount of such permitted Agent
Loans, but only for so long as Agent allows such Agent Loans to be outstanding,
and (b) all Lenders that have committed to make Revolving Credit Loans shall be
bound to make, or permit to remain outstanding, such Agent Loans based upon
their Revolving Loan Percentages in accordance with the terms of this Agreement.
1.2 Letters of Credit; LC Guaranties. Agent agrees, for so long as
no Event of Default has occurred and is continuing and if requested by Borrower
Representative, on its own behalf and on behalf of all other Borrowers, to (i)
issue its, or cause to be issued by Bank or another Affiliate of Agent
reasonably acceptable to Borrowers, on the date requested by Borrower
Representative, on its own behalf and on behalf of all other Borrowers, Letters
of Credit for the account of Borrowers or (ii) execute LC Guaranties by which
Agent, Bank, or another Affiliate of Agent reasonably acceptable to Borrowers,
on the date requested by Borrower Representative, on its own behalf and on
behalf of all other Borrowers, shall guaranty the payment or performance by
Borrowers of their reimbursement obligations with respect to letters of credit;
provided that the LC Amount shall not exceed $50,000,000 at any time. No Letter
of Credit or LC Guaranty may have an expiration date after the last day of the
Term, unless Borrowers shall have agreed to cash collateralize any such
Letter(s) of Credit or LC Guaranty(ies) in a manner reasonably acceptable to
Agent in an amount equal to (i) 110% of the undrawn available amount of such
Letter(s) of Credit and (ii) 110% of the undrawn available amount(s) of the
letter(s) of credit being guarantied by such LC Guaranty(ies). Notwithstanding
anything to the contrary contained herein, Borrowers, Agent and Lenders hereby
agree that all
Exhibit 4-A - Page 4
LC Obligations and all obligations of Borrowers relating thereto shall be
satisfied by the prompt issuance of one or more Revolving Credit Loans that are
Base Rate Portions, which Borrowers hereby acknowledge are requested and Lenders
hereby agree to fund, regardless of whether the conditions precedent to the
making of Revolving Credit Loans set forth herein have been satisfied. In the
event that Revolving Credit Loans are not, for any reason, promptly made to
satisfy all then existing LC Obligations, each Lender hereby agrees to pay to
Agent, on demand, an amount equal to such LC Obligations multiplied by such
Lender's Revolving Loan Percentage, and until so paid, such amount shall be
secured by the Collateral and shall bear interest and be payable at the same
rate and in the same manner as Base Rate Portions. Immediately upon the issuance
of a Letter of Credit or an LC Guaranty under this Agreement, each Lender shall
be deemed to have irrevocably and unconditionally purchased and received from
Agent, without recourse or warranty, an undivided interest and participation
therein equal to such LC Amount and, at the appropriate time, LC Obligations
multiplied by such Lender's Revolving Loan Percentage.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. Interest shall accrue on the principal
amount of the Base Rate Revolving Portion outstanding at the end of each day at
a fluctuating rate per annum equal to the Applicable Margin then in effect for
Base Rate Revolving Portions plus the Base Rate. Said rate of interest shall
increase or decrease by an amount equal to any increase or decrease in the Base
Rate, effective as of the opening of business on the day that any such change in
the Base Rate occurs. If Borrower Representative, on its own behalf and on
behalf of all other Borrowers, exercises the LIBOR Option as provided in Section
3.1, interest shall accrue on the principal amount of the LIBOR Revolving
Portions outstanding at the end of each day at a rate per annum equal to the
Applicable Margin then in effect for LIBOR Revolving Portions plus the LIBOR
applicable to each LIBOR Portion for the corresponding Interest Period.
2.1.2 Default Rate of Interest. At the option of Agent or the
Majority Lenders, upon and after the occurrence of an Event of Default and
notice to Borrowers (provided that no such notice shall be required for Events
of Default described in subsection 10.1.8), and during the continuation thereof,
the principal amount of all Loans shall bear interest at a rate per annum equal
to 2.0% plus the interest rate otherwise applicable thereto (the "Default Rate")
and the fees payable with respect to outstanding Letters of Credit and LC
Guaranties shall be increased by a rate equal to 2.0% per annum.
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate
of all amounts deemed interest hereunder or under the Notes and charged or
collected pursuant to the terms of this Agreement or pursuant to the Notes
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto (the
"Maximum Rate"). If any provisions of this Agreement or the Notes are in
contravention of any such law, such provisions shall be deemed amended to
conform thereto. If at any time, the amount of interest paid hereunder is
limited by the Maximum Rate, and the
Exhibit 4-A - Page 5
amount at which interest accrues hereunder is subsequently below the Maximum
Rate, the rate at which interest accrues hereunder shall remain at the Maximum
Rate, until such time as the aggregate interest paid hereunder equals the amount
of interest that would have been paid had the Maximum Rate not applied.
2.2 Computation of Interest and Fees. Interest, Letter of Credit and LC
Guaranty fees and Unused Line Fees hereunder shall be calculated daily and shall
be computed on the actual number of days elapsed over a year of 360 days.
2.3 Fee Letter. Borrowers shall pay to Agent certain fees and other
amounts in accordance with the terms of the fee letter between Borrowers and
Agent (the "Fee Letter").
2.4 Letter of Credit and LC Guaranty Fees. Borrowers shall pay to
Agent:
(i) for standby Letters of Credit and LC Guaranties of standby
letters of credit, for the ratable benefit of Lenders a per annum fee,
payable monthly in arrears, equal to the Applicable Margin then in
effect for LIBOR Revolving Portions of the daily average aggregate
undrawn available amount of such Letters of Credit and LC Guaranties
outstanding during the applicable month, plus all normal and customary
charges associated with the issuance, processing and administration
thereof, which fees and charges shall be deemed fully earned upon
issuance of each such Letter of Credit or LC Guaranty or as advised by
Agent or Bank. Such amounts shall be due and payable monthly in arrears
on the first Business Day of each month following the issuance of such
Standby Letter of Credit or LC Guaranty of such Standby Letter of
Credit or as advised by Agent or Bank and shall not be subject to
rebate or proration upon the termination of this Agreement for any
reason;
(ii) for documentary Letters of Credit and LC Guaranties of
documentary letters of credit, for the ratable benefit of Lenders, a
per annum fee, payable monthly in arrears, equal to the Applicable
Margin then in effect for LIBOR Revolving Portions of the undrawn
available amount of each such documentary Letter of Credit or LC
Guaranty of such documentary Letters of Credit outstanding during the
applicable month plus all normal and customary charges associated with
the issuance, processing and administration of each such documentary
Letter of Credit or LC Guaranty of such documentary Letters of Credit
(which fees and charges shall be fully earned upon issuance, renewal or
extension (as the case may be) of each such documentary Letter of
Credit or LC Guaranty of such documentary Letters of Credit or as
otherwise advised by Agent or Bank. Such amounts shall be due and
payable monthly in arrears on the first Business Day of each month
following the issuance of such documentary Letter of Credit or LC
Guaranty of such documentary Letter of Credit or as otherwise advised
by Agent or Bank, and shall not be subject to rebate or proration upon
the termination of this Agreement for any reason); and
(iii) with respect to all standby Letters of Credit and LC
Guaranties, for the account of Agent only, a per annum fronting fee
equal to 0.125% of the aggregate
Exhibit 4-A - Page 6
average daily undrawn available amount of such Letters of Credit and LC
Guaranties outstanding during the applicable month, which fronting fees
shall be payable monthly in arrears on the first Business Day of each
month and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
2.5 Unused Line Fee. Borrowers shall pay to Agent, for the ratable
benefit of Lenders, a fee (the "Unused Line Fee") equal to the Applicable Margin
for the Unused Line Fee per annum multiplied by the average daily amount by
which Revolving Credit Maximum Amount exceeds the sum of (i) the outstanding
principal balance of the Revolving Credit Loans plus (ii) the LC Amount; it
being understood that the outstanding Swingline Loans shall be included as part
of the outstanding balance of the Loans for purposes of calculating the Unused
Line Fee. The Unused Line Fee shall be payable monthly in arrears on the first
day of each month hereafter.
2.6 Prepayment Fee. At the effective date of termination of this
Agreement by Borrowers or at the effective date of any reduction of the
Revolving Loan Commitments pursuant to Section 4.3, Borrowers shall pay to
Agent, for the ratable benefit of Lenders (in addition to the then outstanding
principal, accrued interest and other charges then due and payable under the
terms of this Agreement and any of the other Loan Documents) and any amounts
owing pursuant to subsection 3.2.5, as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to 0.50% (x) of the amount of the
Total Credit Facility (as such amount is calculated as of the date of
termination) if this Agreement is terminated or (y) of the reduction in
Revolving Loan Commitments, if Borrowers are electing to reduce the Revolving
Loan Commitments if such termination or reduction of Revolving Loan Commitments
occurs during the first twelve-month period of the Term (August 29, 2003 through
August 28, 2004); and 0.25% (x) of the amount of the Total Credit Facility (as
such amount is calculated as of the date of calculation) of this Agreement is
terminated or (y) of the amount of the reduction in Revolving Loan Commitments
if Borrowers are electing to reduce Revolving Loan Commitments, if such
termination or reduction occurs during the second 12-month period of the Term
(August 29, 2004 through August 28, 2005). If termination or occurs on or after
August 29, 2005, no termination charge shall be payable.
2.7 Audit Fees. Borrowers shall pay to Agent audit fees in accordance
with Agent's current schedule of fees in effect from time to time in connection
with audits of the books and records and Properties of Borrowers and their
Subsidiaries and such other matters as Agent shall deem appropriate in its
reasonable judgment, plus all reasonable out-of-pocket expenses incurred by
Agent in connection with such audits; provided, notwithstanding anything
contained in this Agreement to the contrary, that so long as no Event of Default
has occurred and is continuing, Borrowers shall not be liable for such audit
fees incurred in connection with more than three (3) such audits during any
fiscal year, whether such audits are conducted by employees of Agent or by third
parties hired by Agent; and provided, further, that, so long as no Event of
Default has occurred and is continuing, Borrowers shall not be liable for audit
fees in excess of (i) $30,000 per audit, plus reasonable out-of-pocket expenses
incurred in connection
Exhibit 4-A - Page 7
therewith, for any audit conducted by employees of Agent or, (ii) $150,000 in
the aggregate per fiscal year for all audits conducted during such fiscal year,
plus reasonable out-of-pocket expenses incurred in connection therewith. Such
audit fees and out-of-pocket expenses shall be payable as provided in Section
2.11. Agent shall conduct at least two field audits per fiscal year.
2.8 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, (i) Agent incurs reasonable
legal or accounting expenses or any other costs or out-of-pocket expenses in
connection with (1) the negotiation and preparation of this Agreement or any of
the other Loan Documents, any amendment of or modification of this Agreement or
any of the other Loan Documents, or any syndication or attempted syndication of
the Obligations (including, without limitation, printing and distribution of
materials to prospective Lenders and all reasonable out-of-pocket costs
associated with bank meetings, but excluding any closing fees paid to Lenders in
connection therewith) or (2) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby (but
excluding any costs and expenses, such as allocations of Agent's management and
credit officers, that are covered by the agency fee payable to Agent and that
are in the ordinary course of Agent's responsibility); or (ii) Agent or any
Lender incurs legal or accounting expenses or any other costs or out-of-pocket
expenses in connection with (1) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Agent, any Lender, any Borrower or
any other Person) relating to the Collateral, this Agreement or any of the other
Loan Documents or any Borrower's, any of its Restricted Subsidiaries' or any
Guarantor's affairs; (2) any attempt to enforce any rights of Agent or any
Lender against any Borrower or any other Person which may be obligated to Agent
or any Lender by virtue of this Agreement or any of the other Loan Documents,
including, without limitation, the Account Debtors; or (3) any attempt to
inspect, verify, protect, preserve, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Collateral; then all such legal and
accounting expenses, other costs and out of pocket expenses of Agent or any
Lender, as applicable, shall be charged to Borrowers; provided, that Borrowers
shall not be responsible for such costs and out-of-pocket expenses to the extent
incurred because of the gross negligence or willful misconduct of Agent or any
Lender. All amounts chargeable to Borrowers under this Section 2.8 shall be
Obligations secured by all of the Collateral, shall be payable to Agent or such
Lender, as the case may be, as provided in Section 2.11 and shall bear interest
from the date such amount becomes due and payable until paid in full at the rate
applicable to Base Rate Revolving Portions from time to time. Borrowers shall
also reimburse Agent for expenses incurred by Agent in its administration of the
Collateral to the extent and in the manner provided in Sections 2.9 and 2.10
hereof.
2.9 Bank Charges. Borrowers shall pay to Agent, on demand, any and all
fees, costs or expenses which Agent or any Lender pays to a bank or other
similar institution arising out of or in connection with (i) the forwarding to
any Borrower or any other Person on behalf of any Borrower, by Agent or any
Lender, of proceeds of Loans made to Borrowers pursuant to this Agreement and
(ii) the depositing for collection by Agent or any Lender of any check or item
of payment received or delivered to Agent or any Lender on account of the
Obligations. Amounts charged to Borrowers pursuant to this Section 2.9 shall not
be duplicative of any amounts charged to Borrowers pursuant to any other Section
or subsection of this Agreement.
2.10 Collateral Protection Expenses; Appraisals. All out-of-pocket
expenses incurred in protecting, storing, warehousing, insuring, handling,
maintaining and shipping the Collateral,
Exhibit 4-A - Page 8
and any and all excise, property, sales, and use taxes imposed by any state,
federal, or local authority on any of the Collateral or in respect of the sale
thereof shall be borne and paid by Borrowers. If Borrowers fail to promptly pay
any portion thereof when due, Agent may, at its option, but shall not be
required to, pay the same and charge Borrowers therefor. Additionally, Agent
may, from time to time, at Borrowers' expense, obtain appraisals from appraisers
(who may not be personnel of Agent), stating the then current Net Appraised Fair
Market Value of all or any portion of the real Property or the fair market value
or Net Orderly Liquidation Value of all or any other Property of any Borrower or
any of its Restricted Subsidiaries, including without limitation the Inventory
or Equipment of any Borrower and its Restricted Subsidiaries. Borrowers shall
reimburse Agent for the reasonable cost of any such appraisal, which
reimbursement amounts shall be due and payable as provided in Section 2.11;
provided that unless an Event of Default has occurred and is continuing,
Borrowers shall not be required to reimburse Agent for the cost of any appraisal
of any Property not included in the Borrowing Base. To the extent not obtained
prior to the Closing Date, Borrowers shall cooperate with Agent in obtaining
reliance letters in form and substance reasonably acceptable to Agent, from the
appraisers who issued the appraisals of Borrowers' real Property and Equipment
most recent to the Closing Date. In the event that such reliance letters are not
obtained prior to November 1, 2003, then Borrowers agree that Agent may obtain
new appraisals of such real Property and Equipment at Borrowers' expense, which
action Agent shall take.
2.11 Payment of Charges. All amounts chargeable to Borrowers under this
Agreement shall be Obligations secured by all of the Collateral, shall be,
unless specifically otherwise provided, payable on demand and shall bear
interest from the date demand was made or such amount is due, as applicable,
until paid in full at the rate applicable to Base Rate Revolving Portions from
time to time. Amounts due Agent from Borrowers pursuant to Section 2.7 (Audit
Fees), Section 2.8 (Reimbursement of Expenses) and Section 2.10 (Collateral
Protection Expenses; Appraisals) for appraisal reimbursement (but not collateral
protection expenses which shall be payable upon demand) shall be due and payable
on the later of (x) ten (10) Business Days following the date of issuance by
Agent of a reasonably detailed invoice and request for payment therefor to
Borrowers and (y) the first Business Day of the month following the date of
issuance by Agent of a reasonably detailed invoice and request for payment
thereof to Borrowers, unless an Event of Default has occurred and is continuing
in which case such amounts shall be due on demand therefor.
2.12 Tax Matters.
2.12.1 No Deductions. Any and all payments or reimbursements made
by Borrowers hereunder shall be made free and clear of and without deduction for
any and all taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto; excluding, however, the following: (i) taxes
imposed on or measured by the income of Agent or any Lender or franchise taxes
imposed by the jurisdiction under the laws of which Agent or any Lender is
organized or doing business or any political subdivision thereof; (ii) taxes
imposed on or measured by the income of Agent or such Lender by the jurisdiction
of Agent's or such Lender's applicable lending office or any political
subdivision thereof or franchise taxes; (iii) taxes imposed solely by reason of
the failure of such Person to comply with its obligations under
Exhibit 4-A - Page 9
subsection 2.12.2 or subsection 11.9.4; (iv) taxes imposed by way of withholding
on net or gross income, but not excluding such taxes arising as a result of a
change in applicable law occurring after (A) the date that such Person became a
party to this Agreement, or (B) with respect to an assignment, acquisition,
grant of a participation or the appointment of a successor Agent, the effective
date of such assignment, acquisition, participation or appointment, except to
the extent that such Person's predecessor was entitled to such amounts, or (C)
with respect to the designation of a new lending office, the effective date of
such designation, except to the extent such Person was entitled to receive such
amounts with respect to its previous lending office; and (v) taxes resulting
from such Person's gross negligence or willful misconduct (all such non-excluded
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto, herein "Tax Liabilities"). If any Borrower shall be
required by law to deduct any such Tax Liabilities from or in respect of any sum
payable hereunder to Agent or any Lender, then the sum payable hereunder shall
be increased as may be necessary so that, after all required deductions are
made, Agent or such Lender receives an amount equal to the sum it would have
received had no such deductions been made.
2.12.2 Tax Certificates. Prior to becoming a party to this
Agreement, when the forms described below expire or become invalid, and at such
other times as any Borrower may reasonably request, Agent and each Lender agrees
to furnish to Borrowers, or such other Persons as Borrowers may designate, such
duly executed and properly completed forms, certificates and documents
(including, without limitation, IRS Forms W-8 and W-9 and related
certifications) as it is legally entitled to furnish and as may be necessary or
appropriate to claim an exemption from or reduction in any withholding or other
tax for which Borrowers may be liable hereunder.
2.12.3 Tax Benefits. If Agent or any Lender determines that it has
received a refund, credit, or other reduction of taxes in respect of any Tax
Liabilities paid by Borrowers, which refund, credit or other reduction is
directly attributable to any Tax Liability paid by Borrowers, such Person shall
within 30 days from the date of actual receipt of such refund or the filing of
the tax return in which such credit or other reduction results in a lower tax
payment, pay over such refund or the amount of such tax reduction to Borrowers
(but only to the extent of Tax Liabilities paid by Borrowers), net of all
out-of-pocket expenses of such Person, and without interest (other than interest
paid by the relevant governmental authority with respect to such refund).
Notwithstanding anything to the contrary in this Agreement, upon the request of
Agent or any Lender, Borrowers agree to repay any amount paid over to the
Borrowers pursuant to the immediately preceding sentence (plus penalties,
interest, or other charges) if such Person is required to repay such amount to
the taxing governmental authority, and such repayment obligation of Borrowers
shall survive the payment in full of the Obligations and the termination of any
of the Revolving Loan Commitments.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans/LIBOR Option. Borrowings
under the credit facility established pursuant to Section 1 hereof shall be as
follows:
Exhibit 4-A - Page 10
3.1.1 Loan Requests; Revolving Credit Loans. A request for a
Revolving Credit Loan shall be made, or shall be deemed to be made, in the
following manner: (a) Borrower Representative, on its own behalf and on behalf
of all other Borrowers, may give Agent notice (which notice may be electronic or
telephonic as provided in subsection 3.1.6) of its intention to borrow, in which
notice Borrower Representative shall specify the amount of the proposed
borrowing of a Revolving Credit Loan (which, unless a Dominion Event has
occurred and is continuing, shall be no less than $1,000,000 or an integral
multiple of $100,000 in excess thereof in the case of Base Rate Revolving
Portions which are not Swingline Loans (with respect to Swingline Loans there
shall be no minimum borrowing amount)) and the proposed borrowing date, which
shall be a Business Day, no later than 11:00 a.m. (Chicago,
Illinois time) on
the proposed borrowing date (or in accordance with subsection 3.1.7, 3.1.8 or
3.1.9, as applicable, in the case of a request for a LIBOR Revolving Portion),
provided, however, that any such request made at a time when an Event of Default
has occurred and is continuing must be made directly to the Borrowers'
designated account representative (or his or her designated replacement) at
Agent; and (b) unless otherwise paid on the due date therefor, if any amount
required to be paid under this Agreement, or the Notes, whether as interest or
for any other Obligation, becomes due and payable in accordance with the terms
hereof or any Loan Document, Borrower Representative shall be deemed to have
irrevocably requested a Revolving Credit Loan on the applicable due date in the
amount required to pay such interest or other Obligation.
3.1.2 Disbursement. Borrowers hereby irrevocably authorize Agent to
disburse the proceeds of each Loan requested, or deemed to be requested,
pursuant to subsection 3.1.1 as follows: (i) the proceeds of each Revolving
Credit Loan requested under clause (a) of subsection 3.1.1 shall be disbursed by
Agent in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from Borrower Representative, on its own behalf and
on behalf of all other Borrowers, and in the case of each subsequent borrowing,
by wire transfer to such bank account as may be agreed upon by Borrowers and
Agent from time to time or elsewhere if pursuant to a written direction from
Borrowers; and (ii) the proceeds of each Revolving Credit Loan deemed requested
under clause (b) of subsection 3.1.1 shall be disbursed by Agent by way of
direct payment of the relevant interest or other Obligation. Any Loans to be
disbursed pursuant to clause (i) of the previous sentence shall be disbursed not
later than 2:00 p.m. (Chicago time) with respect to Loans that are LIBOR
Portions and 2:00 p.m. (Chicago time) with respect to Loans that are Base Rate
Portions, so long as Borrowers have requested such Loans on or prior to the
times specified herein; provided that Agent shall not be responsible for failing
to make any such disbursement by the specified times if such failure occurs for
reasons beyond Agent's reasonable control such as breakdown of the Federal wire
transfer system. Subject to subsection 3.3.3, if at any time any Loan is funded
by Agent or Lenders in excess of the amount requested or deemed requested by
Borrowers, Borrowers agree to repay the excess to Agent immediately upon the
earlier to occur of (a) any Borrower's discovery of the error and (b) notice
thereof to Borrowers from Agent or any Lender.
3.1.3 Payment by Lenders. Agent shall give to each Lender prompt
written notice by facsimile, telex or cable of the receipt by Agent from
Borrower Representative of any request for a Revolving Credit Loan. Each such
notice shall specify the requested date and
Exhibit 4-A - Page 11
amount of such Revolving Credit Loan, whether such Revolving Credit Loan shall
be subject to the LIBOR Option, and the amount of each Lender's advance
thereunder (in accordance with its applicable Revolving Loan Percentage. Each
Lender shall, not later than 2:00 p.m. (Chicago time) on such requested date,
wire to a bank designated by Agent the amount of that Lender's Revolving Loan
Percentage of the requested Revolving Credit Loan. The failure of any Lender to
make the Revolving Credit Loans to be made by it shall not release any other
Lender of its obligations hereunder to make its Revolving Credit Loan. Neither
Agent nor any other Lender shall be responsible for the failure of any other
Lender to make the Revolving Credit Loan to be made by such other Lender. The
foregoing notwithstanding, Agent, in its sole discretion, may from its own funds
make a Revolving Credit Loan on behalf of any Lender. In such event, the Lender
on behalf of whom Agent made the Revolving Credit Loan shall reimburse Agent for
the amount of such Revolving Credit Loan made on its behalf, on a weekly (or
more frequent, as determined by Agent in its sole discretion) basis, and it is
hereby understood and agreed that in no event shall any Borrower be liable to
such Lender for any fees, costs, expenses or charges payable to Agent by such
Lender in connection with the action of Agent described in the preceding
sentence. On each such settlement date, Agent will pay to each Lender the net
amount owing to such Lender in connection with such settlement, including
without limitation amounts relating to Loans, fees, interest and other amounts
payable hereunder. The entire amount of interest attributable to such Revolving
Credit Loan for the period from the date on which such Revolving Credit Loan was
made by Agent on such Lender's behalf until Agent is reimbursed by such Lender,
shall be paid to Agent for its own account.
3.1.4 Authorization. Borrowers hereby irrevocably authorize Agent,
in Agent's sole discretion, to advance to Borrowers, and to charge to Borrowers'
Loan Account hereunder as a Revolving Credit Loan (which shall be a Base Rate
Revolving Portion), a sum sufficient to pay all interest accrued on the
Obligations during the immediately preceding month and to pay all fees, costs
and expenses and other Obligations at any time due and payable by any Borrower
to Agent or any Lender hereunder.
3.1.5 Letter of Credit and LC Guaranty Requests. A request for a
Letter of Credit or LC Guaranty shall be made in the following manner: Borrower
Representative, on its own behalf and on behalf of all other Borrowers, may give
Agent and Bank a written notice of its request for the issuance of a Letter of
Credit or LC Guaranty, not later than 11:00 a.m. (Chicago,
Illinois time), two
Business Days before the proposed issuance date thereof, in which notice
Borrower Representative shall specify the proposed issuer, issuance date and
format and wording for the Letter of Credit or LC Guaranty being requested
(which shall be satisfactory to Agent and the Person being asked to issue such
Letter of Credit or LC Guaranty); provided, that any such request made at a time
when there exists an Event of Default must be made to Borrowers' designated
representative (or his or her designated replacement) at Agent. Such request
shall be accompanied by an executed application and reimbursement agreement in
form and substance satisfactory to Agent and the Person being asked to issue the
Letter of Credit or LC Guaranty, as well as any required resolutions.
3.1.6 Method of Making Requests. As an accommodation to Borrowers,
(i) Agent shall permit telephonic (unless an Event of Default exists and is
continuing) or
Exhibit 4-A - Page 12
electronic requests for Revolving Credit Loans to Agent, (ii) Agent and Bank
may, in their discretion, permit electronic transmittal of requests for Letters
of Credit and LC Guaranties to them, and (iii) Agent may, in Agent's discretion,
permit electronic transmittal of instructions, authorizations, agreements or
reports to Agent. Unless Borrower Representative, on its own behalf and on
behalf of all other Borrowers, specifically directs Agent or Bank in writing not
to accept or act upon telephonic or electronic communications from any Borrower,
and other than losses or damages caused by gross negligence or willful
misconduct of Agent, neither Agent nor Bank shall have any liability to
Borrowers for any loss or damage suffered by any Borrower as a result of Agent's
or Bank's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Agent or
Bank by any Borrower, and neither Agent nor Bank shall have any duty to verify
the origin of any such communication or the authority of the Person sending it.
Each telephonic request for a Revolving Credit Loan, Letter of Credit or LC
Guaranty accepted by Agent and Bank, if applicable, hereunder shall be promptly
followed by a written confirmation of such request from Borrowers to Agent and
Bank, if applicable.
3.1.7 LIBOR Portions. Provided that as of both the date of the
LIBOR Request and the first day of the applicable Interest Period, no Event of
Default has occurred and is continuing, in the event Borrowers desire to obtain
a LIBOR Portion, Borrower Representative, on its own behalf and on behalf of all
other Borrowers, shall give Agent a LIBOR Request no later than 11:00 a.m.
(Chicago,
Illinois time) on the third Business Day prior to the requested
borrowing date. Each LIBOR Request shall be irrevocable and binding on
Borrowers. In no event shall Borrowers be permitted to have outstanding at any
one time LIBOR Portions with more than eight (8) different Interest Periods.
3.1.8 Conversion of Base Rate Portions. Provided that as of both
the date of the LIBOR Request and the first day of the applicable Interest
Period, no Event of Default has occurred and is continuing, Borrowers may, on
any Business Day, convert any Base Rate Portion into a LIBOR Portion. If
Borrowers desire to convert a Base Rate Portion, Borrower Representative, on its
own behalf and on behalf of all other Borrowers, shall give Agent a LIBOR
Request no later than 11:00 a.m. (Chicago,
Illinois time) on the third Business
Day prior to the requested conversion date. After giving effect to any
conversion of Base Rate Portions to LIBOR Portions, Borrowers shall not be
permitted to have outstanding at any one time LIBOR Portions with more than
eight (8) different Interest Periods.
3.1.9 Continuation of LIBOR Portions. Provided that, as of both the
date of the LIBOR Request and the first day of the Interest Period, no Event of
Default has occurred and is continuing, Borrowers may, on any Business Day,
continue any LIBOR Portions into a subsequent Interest Period of the same or a
different permitted duration. If Borrowers desire to continue a LIBOR Portion,
Borrower Representative, on its own behalf and on behalf of all other Borrowers,
shall give Agent a LIBOR Request no later than 11:00 a.m. (Chicago,
Illinois
time) on the third Business Day prior to the requested continuation date. After
giving effect to any continuation of LIBOR Portions, Borrowers shall not be
permitted to have outstanding at any one time LIBOR Portions with more than
eight (8) different Interest Periods. If Borrower
Exhibit 4-A - Page 13
Representative shall fail to give timely notice of its election to continue any
LIBOR Portion or portion thereof as provided above, or if such continuation
shall not be permitted, such LIBOR Portion or portion thereof, unless such LIBOR
Portion shall be repaid, shall automatically be converted into a Base Rate
Portion at the end of the Interest Period then in effect with respect to such
LIBOR Portion.
3.1.10 Inability to Make LIBOR Portions. Notwithstanding any other
provision hereof, if any applicable law, treaty, regulation or directive, or any
change therein or in the interpretation or application thereof, shall make it
unlawful for any Lender (for purposes of this subsection 3.1.10, the term
"Lender" shall include the office or branch where such Lender or any corporation
or bank then controlling such Lender makes or maintains any LIBOR Portions) to
make or maintain its LIBOR Portions, the obligation of such affected Lender to
make or continue LIBOR Portions hereunder shall forthwith be suspended during
the pendency of such circumstances, and Borrowers shall, if the affected Lender
has any LIBOR Portions outstanding, convert such affected LIBOR Portions to Base
Rate Portions. Notwithstanding any other provision hereof, if with respect to
any Interest Period, Agent is unable to determine the LIBOR relating thereto, or
adverse or unusual conditions in, or changes in applicable law relating to, the
London interbank market make it, in the reasonable judgment of Agent,
impracticable to fund therein any of the LIBOR Portions, or make the projected
LIBOR unreflective of the actual costs of funds therefor to any Lender, the
obligation of Agent and Lenders to make or continue LIBOR Portions or convert
Base Rate Portions to LIBOR Portions hereunder shall forthwith be suspended
during the pendency of such circumstances and Borrowers shall, if any affected
LIBOR Portions are then outstanding, promptly upon request from Agent, convert
such affected LIBOR Portions into Base Rate Portions.
3.2 Payments. Except where evidenced by notes or other instruments
issued or made by Borrowers to any Lender and accepted by such Lender
specifically containing payment instructions that are in conflict with this
Section 3.2 (in which case the conflicting provisions of said notes or other
instruments shall govern and control), the Obligations shall be payable as
follows:
3.2.1 Principal; Revolving Credit Loans. Principal on account of
Revolving Credit Loans shall be payable by Borrowers to Agent for the ratable
benefit of Lenders immediately upon the earliest of (i) (x) if no Dominion Event
has occurred and is continuing, the last day of the Term or as otherwise
provided in Section 3.3 or (y) if a Dominion Event has occurred and is
continuing, the receipt by Agent or any Borrower of any proceeds of any of the
Collateral to the extent received after the occurrence of such Dominion Event
(except as otherwise provided herein), including without limitation pursuant to
subsections 3.3.1 and 6.2.4, to the extent of said proceeds, subject to
Borrowers' rights to reborrow such amounts in compliance with subsection 1.1.1
hereof; (ii) the occurrence of an Event of Default in consequence of which Agent
or Majority Lenders elect to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to Section 4
hereof; provided, however, that, if an Overadvance shall exist at any time,
Borrowers shall, on demand, repay the Overadvance. Each payment (including
principal prepayment) by Borrowers on account of principal of the Revolving
Credit Loans shall be applied first to Base Rate Revolving Portions
Exhibit 4-A - Page 14
and then to LIBOR Revolving Portions. For purposes of determining when proceeds
of Collateral are received by Agent or any Borrower, the convention in Section
3.4.1 shall apply.
3.2.2 Interest.
(i) Base Rate Portion. Interest accrued on the Base Rate
Portion shall be due and payable on the earliest of (1) the first
calendar day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month, (2) the
occurrence of an Event of Default in consequence of which Agent or
Majority Lenders elect to accelerate the maturity and payment of the
Obligations or (3) termination of this Agreement pursuant to Section 4
hereof.
(ii) LIBOR Portion. Interest accrued on each LIBOR Portion
shall be due and payable on each LIBOR Interest Payment Date and on the
earlier of (1) the occurrence of an Event of Default in consequence of
which Agent or Majority Lenders elect to accelerate the maturity and
payment of the Obligations or (2) termination of this Agreement
pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrowers to Agent, as and when
provided in Section 2 or Section 3 hereof, as applicable to Agent or a Lender,
as applicable, or to any other Person designated by Agent or such Lender in
writing.
3.2.4 Other Obligations. The balance of the Obligations requiring
the payment of money, if any, shall be payable by Borrowers to Agent for
distribution to Lenders, as appropriate, as and when provided in this Agreement,
the Other Agreements or the Security Documents, or on demand, whichever is
later.
3.2.5 Prepayment of/Failure to Borrow LIBOR Portions. Borrowers may
prepay a LIBOR Portion only upon at least three (3) Business Days' prior written
notice to Agent (which notice shall be irrevocable). In the event of (i) the
payment of any principal of any LIBOR Portion other than on the last day of the
Interest period applicable thereto (including as a result of an Event of
Default), (ii) the conversion of any LIBOR Portion other than on the last day of
the Interest Period applicable thereto, or (iii) the failure to borrow, convert,
continue or prepay any LIBOR Portion on the date specified in any notice
delivered pursuant hereto, then, in such event, Borrowers shall compensate each
Lender for the loss, cost and expense attributable to such event, as reasonably
determined by such Lender in a manner consistent with its customs and practices.
3.3 Mandatory and Optional Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral. Except as provided in subsections 6.4.2 and 8.2.9, if, at any time a
Dominion Event has occurred and is continuing, any Borrower or any of its
Restricted Subsidiaries sells any of the Collateral or if any of the Collateral
is lost or destroyed or taken by condemnation, Borrowers shall, unless
Exhibit 4-A - Page 15
otherwise agreed by Majority Lenders, pay to Agent for the ratable benefit of
Lenders as and when received by any Borrower or such Restricted Subsidiary and
as a mandatory prepayment of the Loans, as herein provided, a sum equal to the
proceeds (including insurance payments but net of costs and taxes incurred in
connection with such sale or event) received by Borrowers or such Subsidiary
from such sale, loss, destruction or condemnation. The applicable prepayment
shall be applied to reduce the outstanding principal balance of the Revolving
Credit Loans, but shall not permanently reduce the Revolving Loan Commitments.
In the event that (x) the aggregate amount of Net Appraised Fair Market Value,
with respect to real Property included in the calculation of the Borrowing Base,
and Net Appraised Orderly Liquidation Value, with respect to the Equipment
included in the calculation of the Borrowing Base, of all such real Property
included in the calculation of the Borrowing Base and Equipment included in the
calculation of the Borrowing Base so sold, lost, destroyed or condemned within
any fiscal year of Borrowers (net of replacement Equipment) exceeds $1,500,000
or (y) the aggregate of the proceeds received by any Borrower in connection with
any such sale, loss, destruction or condemnation within any fiscal year of
Borrowers (net of replacement Equipment) exceeds $1,500,000, the Net Appraised
Orderly Liquidation Value of Borrowers' Equipment or the Net Appraised Fair
Market Value of Borrowers' real Property, as applicable, shall be reduced by the
Net Appraised Orderly Liquidation Value of Borrowers' Equipment or the Net
Appraised Fair Market Value of Borrowers' real Property so sold, lost, destroyed
or condemned in excess of such amount.
3.3.2 Proceeds from Issuance of Additional Indebtedness. If any
Borrower issues any additional Indebtedness for Money Borrowed (other than
Indebtedness for Money Borrowed permitted pursuant to subsection 8.2.3),
Borrowers shall pay to Agent for the ratable benefit of Lenders, when and as
received by such Borrower and as a mandatory prepayment of the Obligations, a
sum equal to 100% of the net proceeds to such Borrower of the issuance of such
Indebtedness. Any such prepayment shall be applied to the Loans in the manner
specified in the second sentence of subsection 3.3.1 until payment thereof in
full.
3.3.3 LIBOR Portions. If the application of any payment made in
accordance with the provisions of this Section 3.3 at a time when no Event of
Default has occurred and is continuing would result in termination of a LIBOR
Portion prior to the last day of the Interest Period for such LIBOR Portion, the
amount of such prepayment shall not be applied to such LIBOR Portion, but will,
at Borrowers' option, be held by Agent in a non-interest bearing account at a
Lender or another bank satisfactory to Agent in its discretion, which account is
in the name of Agent and from which account only Agent can make any withdrawal,
in each case to be applied as such amount would otherwise have been applied
under this Section 3.3 at the earlier to occur of (i) the last day of the
relevant Interest Period or (ii) the occurrence of a Default or an Event of
Default.
3.3.4 Optional Prepayments. Borrowers may, at their option from
time to time upon not less than one day's prior written notice to Agent pay
outstanding Revolving Credit Loans provided that the amount of any such payment
is at least $1,000,000 and in integral multiples of $100,000 above $1,000,000
and that such prepayment is made ratably with respect to all Revolving Credit
Loans; provided that there shall be no minimum notice and no minimum payment
amount (x) with respect to Swingline Loans, Overadvances or Agent Loans or (y)
if as
Exhibit 4-A - Page 16
of the date of such payment Borrowers are subject to a blocked account
arrangement that requires daily transfer of funds to Agent's account.
3.4 Application of Payments and Collections.
3.4.1 Collections. All items of payment received by Agent by 12:00
noon, Chicago,
Illinois, time, on any Business Day shall be deemed received on
that Business Day. All items of payment received after 12:00 noon, Chicago,
Illinois, time, on any Business Day shall be deemed received on the following
Business Day. If as the result of collections of Accounts as authorized by
subsection 6.2.4 hereof or otherwise, a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrowers,
but shall be disbursed to Borrowers or otherwise at Borrower Representative's
direction in the manner set forth in subsection 3.1.2, upon Borrower
Representative's request at any time, so long as (x) no Default or Event of
Default has occurred and is continuing, (y) no Obligations are outstanding or
(z) all Obligations are fully cash collateralized to Agent's reasonable
satisfaction. Agent may at its option, offset such credit balance against any of
the Obligations upon and during the continuance of an Event of Default.
3.4.2 Apportionment, Application and Reversal of Payments.
Principal and interest payments shall be apportioned ratably among Lenders
(according to the unpaid principal balance of the Loans to which such payments
relate held by each Lender). Except for payments described in Section 3.10, all
payments shall be remitted to Agent and all such payments not relating to
principal or interest of specific Loans, or not constituting payment of specific
fees, and all proceeds of Accounts, or, except as provided in subsection 3.3.1,
other Collateral received by Agent, shall be applied, ratably, subject to the
provisions of this Agreement, first, to pay any fees, indemnities, or expense
reimbursements (other than amounts related to Product Obligations) then due to
Agent or Lenders from Borrowers; second, to pay interest due from Borrowers in
respect of all Loans, including Swingline Loans and Agent Loans; third, to pay
or prepay principal of Swingline Loans and Agent Loans; fourth, to pay or prepay
principal of the Revolving Credit Loans (other than Swingline Loans and Agent
Loans) and unpaid reimbursement obligations in respect of Letters of Credit;
fifth, to pay an amount to Agent equal to all outstanding LC Obligations to be
held as cash Collateral for such Obligations; sixth, to the payment of any other
Obligation (other than amounts related to Product Obligations) due to Agent or
any Lender by Borrowers; and seventh, to pay any fees, indemnities or expense
reimbursements related to Product Obligations. After the occurrence and during
the continuance of an Event of Default, Agent shall have the continuing
exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by Agent or its agent against the
Obligations, in such manner as Agent may deem advisable, notwithstanding any
entry by Agent or any Lender upon any of its books and records; provided,
however, that such payments and collection shall only be applied to fees,
indemnities or expense reimbursements related to Product Obligations after all
other Obligations have been paid in full.
3.5 All Loans to Constitute One Obligation. The Loans and LC Guarantees
shall constitute one general Obligation of Borrowers, and, unless otherwise
expressly provided in any Security Document, shall be secured by Agent's Lien
upon all of the Collateral.
Exhibit 4-A - Page 17
3.6 Loan Account. Agent shall enter all Loans as debits to a loan
account (the "Loan Account") and shall also record in the Loan Account all
payments made by Borrowers on any Obligations and all proceeds of Collateral
which are finally paid to Agent, and may record therein, in accordance with
customary accounting practice, other debits and credits, including interest and
all charges and expenses properly chargeable to Borrowers. During the Term
hereof, Borrowers shall be able to review its Loan Account online, subject to
system shutdowns for maintenance and repair and for shutdowns or access
limitations affecting the internet generally.
3.7 Statements of Account. Agent will account to Borrowers monthly with
a statement of Loans, charges and payments made pursuant to this Agreement
during the immediately preceding month, and such account rendered by Agent shall
be deemed final, binding and conclusive upon Borrowers absent demonstrable error
unless Agent is notified by Borrowers in writing to the contrary within 30 days
of the date each accounting is received by Borrowers. Such notice shall only be
deemed an objection to those items specifically objected to therein.
3.8 Increased Costs.
3.8.1 Increased Costs. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) adopted or implemented after the date of this
Agreement and having general applicability to all banks or finance companies
within the jurisdiction in which any Lender operates (excluding, for the
avoidance of doubt, the effect of and phasing in of capital requirements or
other regulations or guidelines passed prior to the date of this Agreement), or
any interpretation or application thereof by any governmental authority charged
with the interpretation or application thereof, or the compliance of such Lender
therewith, shall:
(i) (1) subject such Lender to any tax with respect to this
Agreement (other than (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital, net
worth or comparable basis for measurement, and (b) any tax excluded
from the definition of Tax Liabilities) or (2) change the basis of
taxation of payments to such Lender of principal, fees, interest or any
other amount payable hereunder or under any Loan Documents (other than
in respect of (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital, net
worth or comparable basis for measurement and (b) any tax excluded from
the definition of Tax Liabilities);
(ii) impose, modify or hold applicable any reserve (except any
reserve taken into account in the determination of the applicable
LIBOR), special deposit, assessment or similar requirement against
assets held by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of such Lender, including
(without limitation) pursuant to Regulation D of the Board of Governors
of the Federal Reserve System; or
Exhibit 4-A - Page 18
(iii) impose on such Lender or the London interbank market any
other condition with respect to any Loan Document;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining Loans hereunder or the result of any of the
foregoing is to reduce the rate of return on such Lender's capital as a
consequence of its obligations hereunder, or the result of any of the foregoing
is to reduce the amount of any payment (whether of principal, interest or
otherwise) in respect of any of the Loans, then, in any such case, Borrowers
shall pay such Lender, upon demand and certification not later than sixty (60)
days following its receipt of notice of the imposition of such increased costs,
such additional amount as will compensate such Lender for such additional cost
or such reduction, as the case may be, to the extent such Lender has not
otherwise been compensated, with respect to a particular Loan, for such
increased cost as a result of an increase in the Base Rate or the LIBOR. An
officer of the applicable Lender shall determine the amount of such additional
cost or reduced amount using reasonable averaging and attribution methods and
shall certify the amount of such additional cost or reduced amount to Borrowers,
which certification shall include a written explanation of such additional cost
or reduction to Borrowers. Such certification shall be conclusive absent
demonstrable error. If a Lender claims any additional cost or reduced amount
pursuant to this Section 3.8, then such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to designate a different
lending office or to file any certificate or document reasonably requested by
Borrowers if the making of such designation or filing would avoid the need for,
or reduce the amount of, any such additional cost or reduced amount and would
not, in the sole discretion of such Lender, be otherwise disadvantageous to such
Lender. A Lender shall not be entitled to additional amounts under this
subsection 3.8.1 to the extent such amounts could have been avoided by such
Lender's compliance with subsection 2.12.2 or 11.9.4. Notwithstanding the
foregoing, if any Lender fails to notify the Company of any event which will
entitle such Lender to compensation pursuant to this subsection 3.8.1 within
sixty (60) days after such Lender obtains knowledge of such event, then such
Lender shall not be entitled to compensation from any Borrower for such
increased cost or reduction of return arising prior to the date which is 60 days
before the date on which such Lender notifies Borrowers of such event.
3.8.2 Replacement of Lenders. Within fifteen (15) days after either
(i) receipt by Borrowers of written notice and demand from any Lender for
payment pursuant to subsection 3.8.1, (ii) notice of an event described in
subsection 3.1.10, or (iii) as provided in Section 11.10(b), in the case of
certain refusals by any Lender to consent to certain proposed amendments,
modifications, terminations or waivers with respect to this Agreement that have
been approved by Majority Lenders (any such Lender demanding such payment or
refusing to so consent being referred to herein as an "Affected Lender"),
Borrowers may, at their option, notify Agent and such Affected Lender of its
intention to do one of the following:
(a) Borrowers may obtain, at Borrowers' expense, a replacement
Lender ("Replacement Lender") for such Affected Lender, which
Replacement Lender shall be reasonably satisfactory to Agent. In the
event Borrowers obtain a Replacement Lender that will purchase all
outstanding Obligations owed to such Affected Lender and assume its
Revolving Loan Commitments hereunder within ninety (90) days following
Exhibit 4-A - Page 19
notice of Borrowers' intention to do so, the Affected Lender shall sell
and assign all of its rights and delegate all of its obligations under
this agreement to such Replacement Lender in accordance with the
provisions of Section 11.9, provided, that Borrowers have reimbursed
such Affected Lender for any amounts due such Affected Lender pursuant
to subsection 3.2.5 (as though such payment constituted a prepayment)
and any processing and recordation fee payable pursuant to subsection
11.9.1 and, in any case where such replacement occurs as the result of
a demand for payment pursuant to subsection 3.8.1, paid all amounts
required to be paid to such Affected Lender pursuant to subsection
3.8.1 through the date of such sale and assignment; or
(b) Borrowers may prepay in full all outstanding Obligations
owed to such Affected Lender (including, without limitation, any
amounts due such Affected Lender pursuant to subsection 3.2.5) and
terminate such Affected Lender's Revolving Loan Commitment, in which
case the Revolving Loan Maximum Amount will be reduced by the amount of
the terminated Revolving Loan Commitment. Borrowers shall, within
ninety (90) days following notice of its intention to do so, prepay in
full all outstanding Obligations owed to such Affected Lender
(including, in any case where such prepayment occurs as the result of a
demand for payment for increased costs, such Affected Lender's
increased costs for which it is entitled to reimbursement under this
Agreement through the date of such prepayment), and terminate such
Affected Lender's obligations under its Revolving Loan Commitment.
3.9 Basis for Determining Interest Rate Inadequate. In the event that
Agent or any Lender shall have determined that:
(i) reasonable means do not exist for ascertaining the LIBOR
for any Interest Period; or
(ii) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank market with
respect to a proposed LIBOR Portion, or a proposed conversion of a Base
Rate Portion into a LIBOR Portion; then
Agent or such Lender shall give Borrowers prompt written, telephonic or
electronic notice of the determination of such effect. If such notice is given,
(i) any such requested LIBOR Portion shall be made as a Base Rate Portion,
unless Borrower Representative, on its own behalf and on behalf of all other
Borrowers, shall notify Agent no later than 10:00 a.m. (Chicago, Illinois time)
two (2) Business Days' prior to the date of such proposed borrowing that the
request for such borrowing shall be canceled or made as an unaffected type of
LIBOR Portion, and (ii) any Base Rate Portion which was to have been converted
to an affected type of LIBOR Portion shall be continued as or converted into a
Base Rate Portion, or, if Borrowers shall notify Agent, no later than 10:00 a.m.
(Chicago, Illinois time) two (2) Business Days prior to the proposed conversion,
shall be maintained as an unaffected type of LIBOR Portion.
Exhibit 4-A - Page 20
3.10 Sharing of Payments, Etc. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of setoff, or
otherwise) on account of any Loan made by it in excess of its ratable share of
payments on account of Loans made by all Lenders, such Lender shall forthwith
purchase from each other Lender such participation in such Loan as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each other Lender; provided, that, if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lenders the purchase price to the extent of such recovery, together with an
amount equal to such Lender's ratable share (according to the proportion of (i)
the amount of such Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Borrowers agree that any Lender so purchasing a participation from another
Lender pursuant to this Section 3.10 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of Borrowers in the amount of such participation. Notwithstanding
anything to the contrary contained herein, all purchases and repayments to be
made under this Section 3.10 shall be made through Agent. Payments so received
by such Lender shall be treated hereunder in the same manner as payments
received by Agent and any Lender who fails to purchase a participation as
required by this Section 3.10 in a reasonably timely manner shall be solely
liable for the interest due thereon.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to the right of Lenders to cease making
Loans (other than Agent Loans pursuant to subsection 1.1.5) to Borrowers during
the continuance of any Default or Event of Default, this Agreement shall be in
effect for a period of four (4) years from the date hereof, through and
including August 28, 2007 (the "Term"), unless terminated as provided in Section
4.2 hereof.
4.2 Termination.
4.2.1 Termination by Lenders. Agent may, and at the direction of
Majority Lenders shall, by written notice to Borrowers, terminate this Agreement
without notice upon or after the occurrence and during the continuance of an
Event of Default; provided, however, that no notice shall be required to
terminate this Agreement if such termination is a result of an Event of Default
described in Section 10.1.8 hereof.
4.2.2 Termination by Borrowers. Upon at least 3 Business Days prior
written notice to Agent and Lenders, Borrowers may, at their option, terminate
this Agreement; provided, however, that no such termination shall be effective
until Borrowers have paid or collateralized to Agent's reasonable satisfaction
all of the Obligations in immediately available funds, all Letters of Credit and
LC Guaranties have expired, terminated or have been cash collateralized to
Agent's reasonable satisfaction (it being understood that a deposit with Agent
of an amount of (i) 110% of the undrawn available amount of any outstanding
Letters of Credit and/or (ii) 110% of the undrawn available amount of any
outstanding letters of credit being
Exhibit 4-A - Page 21
guarantied by LC Guaranties shall be satisfactory) and Borrowers have complied
with Section 2.6 and subsection 3.2.5. Upon request by Borrowers, Agent shall
deliver to Borrowers a payoff letter specifying the amount of Obligations to be
paid at termination and, if applicable, the amount of cash collateral necessary
to cash collateralize outstanding Letters of Credit and LC Guaranties. Any
notice of termination given by Borrowers shall be irrevocable unless all Lenders
otherwise agree in writing and no Lender shall have any obligation to make any
Loans or issue or procure any Letters of Credit or LC Guaranties on or after the
termination date stated in such notice. Borrowers may elect to terminate this
Agreement in its entirety only, it being understood that nothing contained in
this Section 4.2.2 shall be construed to affect Borrowers' right to reduce the
Revolving Loan Commitments in whole or in part in accordance with the terms
hereof. No section of this Agreement or type of Loan available hereunder may be
terminated singly.
4.2.3 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrowers contained in the Loan Documents
shall survive any such termination and Agent shall retain its Liens in the
Collateral and Agent and each Lender shall retain all of its rights and remedies
under the Loan Documents notwithstanding such termination until all Obligations
(other than Contingent and Collateralized Obligations) have been discharged or
paid, in full, in immediately available funds, including, without limitation,
all Obligations under Section 2.6 and subsection 3.2.5 resulting from such
termination. Notwithstanding the foregoing or the payment in full of the
Obligations, Agent shall be entitled to retain its Liens solely with respect to
that portion of the Collateral as is necessary in Agent's reasonable judgment to
protect Agent and Lenders from any loss or damage Agent and Lenders may incur as
a result of dishonored checks or other items of payment received by Agent from
any Borrower or any Account Debtor and applied to the Obligations, unless Agent
shall, at its option, (i) have received a written agreement satisfactory to
Agent, executed by any Borrower and by any Person whose loans or other advances
to Borrowers are used in whole or in part to satisfy the Obligations,
indemnifying Agent and each Lender from any such loss or damage or (ii) have
retained cash Collateral or other Collateral in such amounts for such period of
time as Agent, in its reasonable discretion, may deem necessary to protect Agent
and each Lender from any such loss or damage. Except as expressly provided in
the preceding sentence upon payment in full of all of the Obligations (other
than Contingent and Collateralized Obligations), Agent and Lenders shall release
all of their respective right, title and interest in the Collateral to or at the
direction of Borrowers.
4.3 Voluntary Commitment Reductions. Borrowers shall have the right to
permanently reduce the amount of the Revolving Loan Commitments (in which case,
the Revolving Credit Maximum Amount shall be reduced on a dollar for dollar
basis), on a pro rata basis for each Lender, at any time and from time to time
upon written notice to Agent of such reduction, which notice shall specify the
amount and the proposed date of such reduction, shall be irrevocable once given,
and shall be given at least three (3) Business Days prior to the proposed date
of such reduction, shall be effective only upon Agent's receipt thereof and
shall be accompanied by the payment of the applicable termination charge in
accordance with
Exhibit 4-A - Page 22
Section 2.6; provided that the aggregate amount of such reductions shall not
exceed $25,000,000 within any calendar year or $75,000,000 within the Term.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
grants to Agent for the benefit of itself and each Lender a continuing Lien upon
the following Property of such Borrower and interests in Property of such
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including, any and all licenses, options, warranties,
service contracts, program services, test rights, maintenance rights,
support rights, improvement rights, renewal rights and
indemnifications, and any substitutions, replacements, additions or
model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Commercial Tort Claims described in Exhibit 5.2;
(vii) Deposit Accounts;
(viii) Documents;
(ix) Equipment;
(x) Financial Assets;
(xi) Fixtures;
(xii) General Intangibles, including Payment Intangibles and
Software;
(xiii) Goods (including all of its Equipment, Fixtures and
Inventory), and all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(xiv) Instruments;
(xv) Intellectual Property;
Exhibit 4-A - Page 23
(xvi) Inventory;
(xvii) Investment Property;
(xviii) money (of every jurisdiction whatsoever);
(xix) Letter-of-Credit Rights;
(xx) Payment Intangibles;
(xxi) Security Entitlements;
(xxii) Software;
(xxiii) Supporting Obligations;
(xxiv) Uncertificated Securities; and
(xxv) to the extent not included in the foregoing, all other
personal property of any kind or description;
together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, or evidencing,
embodying, incorporating or referring to any of the foregoing, and all Proceeds,
products, offspring, rents, issues, profits and returns of and from any of the
foregoing; provided that, "Collateral" shall not include (i) more than 66% of
any outstanding voting stock or other equity interest entitled to vote in any
entity which is not formed under the laws of the United States or any state
thereof or the District of Columbia, (ii) any Computer Hardware and Software or
Intellectual Property or other rights arising under any contracts, instruments,
licenses or other documents to the extent that the grant of a Lien or security
interest therein would (A) result in a breach of the terms of, or constitute a
default under, such contract, instrument, license, agreement or other document
(other than to the extent that any such term would be rendered ineffective
pursuant to Section 9-406, 9-407 or 9-408 of the Uniform Commercial Code or any
successor provision of the Uniform Commercial Code of any relevant jurisdiction
or other applicable law) or (B) give any other party to such contract,
instrument, license or other document the right to terminate its obligations
thereunder pursuant to a valid and enforceable provision (other than to the
extent that any such term would be rendered ineffective pursuant to Section
9-406, 9-407 or 9-408 of the Uniform Commercial Code or any successor provision
of the Uniform Commercial Code of any relevant jurisdiction or other applicable
law), it being understood that (1) upon request of Agent, such Borrower will in
good faith use reasonable efforts to obtain consent for the creation of a
security interest in favor of Agent (and to Agent's enforcement of such security
interest) in Agent's rights under such contract, instrument, license, agreement
or other document, and (2) any exclusion from Collateral pursuant to this clause
"(ii)" shall not apply to the Proceeds of any such contract, instrument,
license, agreement or other document, (iii) any of Borrower's motor vehicles,
tractors, trailers, rolling stock, material handling equipment or any other
similar item governed by a certificate of title statute, (iv) proceeds from any
Commercial Tort Claim or other litigation
Exhibit 4-A - Page 24
to the extent such proceeds are required to be paid to a third party or parties,
(v) Property upon which a Permitted Purchase Money Lien has been granted, (vi)
any real Property owned by Borrowers as of the Closing Date for which, as of the
Closing Date, Agent has not required a Mortgage and (vii) the Equity Interest in
TruServ Specialty Company LLC or any other Subsidiary of TruServ that is not a
Restricted Subsidiary.
5.2 Other Collateral.
5.2.1 Commercial Tort Claims. Borrowers shall promptly notify Agent
in writing upon any Borrower incurring or otherwise obtaining a Commercial Tort
Claim which could reasonably be expected to result in cash proceeds of $100,000
or more after the Closing Date against any third party and, upon request of
Agent, promptly enter into an amendment to this Agreement and do such other acts
or things deemed appropriate by Agent to give Agent a security interest in any
such Commercial Tort Claim. Borrowers represent and warrant that as of the date
of this Agreement, to their knowledge, no Borrower possesses any Commercial Tort
Claims which could reasonably be expected to result in cash proceeds of $100,000
or more, except as described on Exhibit 5.2.
5.2.2 Other Collateral. Borrowers shall promptly notify Agent in
writing upon acquiring or otherwise obtaining any Collateral after the date
hereof consisting of Deposit Accounts, Investment Property, Letter-of-Credit
Rights or Electronic Chattel Paper except that Borrowers shall not be required
to give such notice to the extent that the aggregate value of such Collateral is
less than $250,000 and, upon the reasonable request of Agent, promptly execute
such other documents, and do such other acts or things deemed appropriate by
Agent, in its reasonable judgment, to deliver to Agent control with respect to
such Collateral; promptly notify Agent in writing upon acquiring or otherwise
obtaining any Collateral after the date hereof consisting of Instruments (other
than Instruments deposited for collection in the ordinary course of business in
a Dominion Account or another account permitted hereunder or otherwise delivered
to Agent) or Documents (other than Documents to which Section 8.1.11 is
applicable) except that Borrowers shall not be required to give such notice to
the extent that the aggregate value of such Collateral is less than $100,000
and, upon the reasonable request of Agent, will promptly execute such other
documents, and do such other acts or things deemed appropriate by Agent, in its
reasonable judgment, to deliver to Agent possession of such Documents which are
negotiable and Instruments, and, with respect to nonnegotiable Documents, to
have such nonnegotiable Documents issued in the name of Agent; and with respect
to Collateral in the possession of a third party, other than Certificated
Securities, Goods covered by a Document, Inventory in transit, Equipment in the
hands of third parties for repair or maintenance, and Inventory and Equipment
with third parties the value of which is not included in the calculation of the
Borrowing Base and the aggregate book value or fair market value of which is
less $1,000,000 at any single location or $2,000,000 at all locations, obtain an
acknowledgement from the third party that it is holding the Collateral for the
benefit of Agent.
5.3 Lien Perfection; Further Assurances. Borrowers shall execute such
UCC-1 financing statements as are required by the UCC and such other
instruments, assignments or documents as are necessary to perfect Agent's Lien
upon any of the Collateral and shall take
Exhibit 4-A - Page 25
such other action as may be required to perfect or to continue the perfection of
Agent's Lien upon the Collateral. Unless prohibited by applicable law, each
Borrower hereby authorizes Agent to execute and file any such financing
statement, including, without limitation, financing statements that indicate the
Collateral (i) as all assets of such Borrower or words of similar effect, or
(ii) as Agent may elect, as being of an equal or lesser scope, or with greater
or lesser detail, than as set forth in Section 5.1, on such Borrower's behalf.
Each Borrower also hereby ratifies its authorization for Agent to have filed in
any jurisdiction any like financing statements or amendments thereto if filed
prior to the date hereof. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof. At Agent's request, each
Borrower shall also promptly execute or cause to be executed and shall deliver
to Agent any and all documents, instruments and agreements deemed necessary by
Agent, to give effect to or carry out the terms or intent of the Loan Documents.
5.4 Intentionally Omitted.
5.5 Lien on Realty. The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by the Mortgages upon all
real Property of Borrowers described therein. If any Borrower shall acquire at
any time or times hereafter any fee simple interest in other real Property
(other than leasehold interests in sales offices or warehouses), such Borrower
agrees promptly to execute and deliver to Agent, for its benefit and the ratable
benefit of Lenders, as additional security and Collateral for the Obligations,
deeds of trust, security deeds, mortgages or other collateral assignments
reasonably satisfactory in form and substance to Agent and its counsel, but in
each case in substantially the same form as the Mortgages, with such changes
necessitated by local or state law (herein collectively referred to as "New
Mortgages") covering such real Property. The Mortgages and each New Mortgage
shall be duly recorded (at Borrowers' expense) in each office where such
recording is required to constitute a valid Lien on the real Property covered
thereby. In respect to any Mortgage or any New Mortgage, Borrowers shall deliver
to Agent, at Borrowers' expense, mortgagee title insurance policies issued by a
title insurance company reasonably satisfactory to Agent, which policies shall
be in form and substance reasonably satisfactory to Agent and shall insure a
valid Lien in favor of Agent for the benefit of itself and each Lender on the
Property covered thereby, subject only to Permitted Liens and those other
exceptions reasonably acceptable to Agent and its counsel. Borrowers shall also
deliver to Agent such other usual and customary documents, including, if
requested by Agent with respect to real Property with a fair market value of
$100,000 or more, ALTA Surveys of the real Property described in the Mortgages
or any New Mortgage, as Agent and its counsel may reasonably request relating to
the real Property subject to the Mortgages or the New Mortgages. Agent hereby
agrees that Chicago Title Insurance Company shall be an acceptable title
insurance company for purposes of this Section 5.5. The foregoing
notwithstanding, Borrowers shall not be required to deliver a Mortgage, an ALTA
Survey or a mortgagee title insurance policy to Agent with respect to Borrowers'
real Property located on ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ or with
respect Borrowers' real Property consisting of vacant land in Longview, Texas,
unless, after the occurrence and during the continuance of Event of Default,
requested to do so by Agent in which case, Borrowers shall
Exhibit 4-A - Page 26
deliver Mortgages, ALTA Surveys and mortgagee title insurance policies for such
real Property in compliance with this Section 5.5 within 30 days of the date of
Agent's request.
5.6 Agent's Duty Upon Termination. Agent agrees that upon termination
of this Agreement and payment in full of all Obligations (other than Contingent
and Collateralized Obligations), Agent and Lenders shall release all of their
respective right, title and interest in the Collateral and the Lien granted to
Agent in the Collateral shall automatically terminate and all rights to the
Collateral shall revert to the applicable Borrower. Agent further agrees that
upon such termination of the security interest or release or reassignment of any
Collateral, Agent shall, at the expense of the applicable Borrower, return all
Collateral (other than cash collateral for letter of credit reimbursement
Obligations or such other Collateral as retained by Agent pursuant to subsection
4.2.3) then in Agent's possession and execute and deliver to the applicable
Borrower such documents as such Borrower shall reasonably request to evidence
the termination of the Lien granted to Agent hereby or pursuant to the Security
Documents or the release and re-assignment of such Collateral, as the case may
be.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General.
6.1.1 Location of Collateral. All Collateral, other than Inventory
in transit and motor vehicles, Equipment in the hands of third parties for
repair or maintenance, possessory Collateral delivered to Agent, Collateral in
the possession of any Lender and Inventory and Equipment with third parties the
value of which is not included in the calculation of the Borrowing Base and the
aggregate book value or fair market value of which is less $1,000,000 at any
single location or $2,000,000 at all locations, will at all times be kept by
Borrowers and their Restricted Subsidiaries at one or more of the business
locations set forth in Exhibit 6.1.1 hereto, as updated by Borrowers (without
the requirement of consent or action by any other party) from time to time
providing prior written notice to Agent of any new location.
6.1.2 Insurance of Collateral. Borrowers shall maintain and pay for
insurance upon all Collateral wherever located and with respect to the business
of Borrowers and each of their Subsidiaries, covering casualty, hazard, public
liability, workers' compensation and such other risks in such amounts and with
such insurance companies as is standard for comparable businesses in Borrowers'
industry. Borrowers shall deliver insurance certificates evidencing such
insurance coverage to Agent as promptly as practicable. Borrowers shall obtain
satisfactory lender's loss payable endorsements, naming Agent as a loss payee,
assignee or additional insured, as appropriate, as its interest may appear, to
the extent such an endorsement is permitted by law with respect to such
policies, and showing only such other loss payees, assignees and additional
insureds as are satisfactory to Agent. Unless otherwise accepted by Agent, each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 10 days' prior written notice to Agent in the event of
cancellation of the policy for nonpayment of premium and not less than 30 days'
prior written notice to Agent in the event of cancellation of the policy for any
other reason whatsoever and, with respect to property and casualty insurance, a
clause specifying that the interest of Agent shall not be impaired or
Exhibit 4-A - Page 27
invalidated by any act or neglect of any Borrower, any of its Subsidiaries or
the owner of the Property or by the occupation of the premises for purposes more
hazardous than are permitted by said policy. Upon the occurrence and during the
continuance of an Event of Default and subsequent request by Agent, Borrowers
agree to deliver to Agent, promptly as rendered, true copies of all reports made
in any reporting forms to insurance companies and any insurance policies then in
effect. All proceeds of business interruption insurance (if any) of Borrowers
and their Subsidiaries shall be remitted to Agent for application to the
outstanding balance of the Revolving Credit Loans.
Unless Borrowers provide Agent with evidence of the insurance
coverage required by this Agreement, Agent may purchase insurance at Borrowers'
expense to protect Agent's interests in the Properties of Borrowers and their
Subsidiaries. This insurance may, but need not, protect the interests of
Borrowers and their Subsidiaries. The coverage that Agent purchases may not pay
any claim that any Borrowers or any Subsidiary makes or any claim that is made
against any Borrower or any such Subsidiary in connection with said Property.
Borrowers may later cancel any insurance purchased by Agent, but only after
providing Agent with evidence that Borrowers and their Subsidiaries have
obtained insurance as required by this Agreement. If Agent purchases insurance,
Borrowers will be responsible for the costs of that insurance, including
interest and any other charges Agent may impose in connection with the placement
of insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs
of the insurance may be more than the cost of insurance that Borrowers and their
Subsidiaries may be able to obtain on their own.
6.1.3 Protection of Collateral. Neither Agent nor any Lender shall
be liable or responsible in any way for the safekeeping of any of the Collateral
or for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Agent's or any Lender's actual possession and
except that each Lender shall be liable and responsible for its own gross
negligence or willful misconduct) or for any diminution in the value thereof, or
for any act or default of any warehouseman, carrier, forwarding agency or other
person whomsoever, but the same shall be at Borrowers' sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrowers
shall keep accurate and complete records of their Accounts and all payments and
collections thereon and shall submit to Agent on such periodic basis as Agent
shall request a sales and collections report for the preceding period, in form
acceptable to Agent. Concurrently with the delivery of each Borrowing Base
Certificate described in subsection 8.1.4, or more frequently as reasonably
requested by Agent, from and after the date hereof, Borrowers shall deliver to
Agent a detailed aged trial balance of all of its Accounts, specifying the
names, addresses, face values, dates of invoices and due dates for each Account
Debtor obligated on an Account so listed ("Schedule of Accounts"), and upon
Agent's request therefor, Agent shall have on-site access to copies of proof of
delivery and the original copy of all documents, including, without limitation,
repayment histories and present status reports relating to the Accounts so
scheduled and such
Exhibit 4-A - Page 28
other matters and information relating to the status of then existing Accounts
as Agent shall reasonably request. If requested by Agent, Borrowers shall
execute and deliver to Agent formal written assignments of all of its Accounts,
simultaneously with the delivery of a Borrowing Base Certificate, which shall
include all Accounts that have been created since the date of the last
assignment.
6.2.2 Discounts, Allowances, Credits. If any Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrowers shall report such discounts, allowances or
credits, as the case may be, to Agent as part of the next required Schedule of
Accounts by either showing total amount due in respect of such Account as a net
amount or by showing such discounts, allowances or credits as a separate line
item.
6.2.3 Account Verification. Any of Agent's officers, employees or
agents shall have the right, at any time or times hereafter, in the name of
Agent, any designee of Agent or any Borrower, to verify the validity, amount or
any other matter relating to any Accounts by mail, telephone, electronic
communication or otherwise; provided, that, unless an Event of Default has
occurred and is continuing, Agent shall not conduct such verification process in
the name of Agent and shall provide Borrower Representative five (5) Business
Days' advance notice of the conduct of any such verification process. Borrowers
shall cooperate fully with Agent in an effort to facilitate and promptly
conclude any such verification process. Agent agrees to consult with Borrowers
concerning the manner in which it intends to conduct such certification process.
Such consultation, however, shall not be required for each certification cycle,
but only with respect to the general manner in which all such certifications
shall be conducted.
6.2.4 Maintenance of Dominion Account. Borrowers shall maintain a
Dominion Account or Accounts pursuant to lockbox and blocked account
arrangements acceptable to Agent with Bank (or such other bank as is acceptable
to Agent in its discretion); provided that such blocked account arrangements
shall provide for control and springing dominion over Borrowers' cash deposited
into all deposit accounts in the event (i) Availability is less than $25,000,000
or (ii) an Event of Default has occurred and is continuing (a "Dominion Event").
Upon the occurrence of a Dominion Event, Agent shall be entitled to deliver
notice to Bank or such other bank that Bank or such other bank shall comply with
the instructions of Agent in such Dominion Account or Accounts. Agent shall
deliver a copy of any such notice to Borrowers at or about the same time as
Agent delivers such notice to Bank or any such other bank. Borrowers shall issue
to Bank (or such other bank as is acceptable to Agent in its discretion) an
irrevocable letter of instruction (which Borrowers will cause Bank (or
Exhibit 4-A - Page 29
such other bank as is acceptable to Agent in its discretion) to agree to)
directing Bank (or such other bank as is acceptable to Agent in its discretion)
upon receipt of written instructions from Agent, to transfer all payments or
other remittances received in the Dominion Account to Agent's account for
application on account of the Obligations as provided in subsection 3.2.1 and
Section 3.4. Agent hereby agrees that it shall not deliver such letter of
instruction unless a Dominion Event has occurred and is continuing. After the
occurrence and during the continuance of a Dominion Event, all funds deposited
in any Dominion Account shall immediately become the property of Agent, for the
ratable benefit of Lenders, and Borrowers shall obtain the agreement by Bank (or
such other bank) in favor of Agent to waive any recoupment, set-off rights, and
any security interest in, or against, the funds so deposited (other than for
customary items, such as returned items and reasonable bank charges). Agent
assumes no responsibility for such lockbox and blocked account arrangements,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. If Agent has notified
Borrower, Bank or the applicable banks that a Dominion Event has occurred and
has directed such banks to make daily transfer of payments or other remittances
received in the Dominion Account to Agent's account and, at any time 150 days
(60 days if the Dominion Event is triggered by an Event of Default) or more
after the effective date of such notice, average Availability for any 60
consecutive day period, ending on a day that is on or after such 150th (or 60th
day, if applicable) day, equals or exceeds $25,000,000 and no Event of Default
has occurred and is continuing, then Agent agrees to rescind its notice to Bank
or the applicable banks directing Bank or such banks to make daily transfers of
all payments and other remittances received in the Dominion Account to Agent's
account for application to the Obligations. Upon a subsequent occurrence of a
Dominion Event, Agent shall have the right to renotify Bank or such banks to
make daily transfers to the Agent's account for application to the Obligations.
6.2.5 Collection of Accounts, Proceeds of Collateral. Each Borrower
agrees that all invoices rendered on and after the Closing Date and other
requests made by any Borrower on or after the Closing Date for payment in
respect of Accounts shall contain a written statement directing payment in
respect of such Accounts to be paid to a lockbox established pursuant to
subsection 6.2.4. To expedite collection, each Borrower shall endeavor in the
first instance to make collection of its Accounts for Agent. After the
occurrence and during the continuance of a Dominion Event, all remittances
received by any Borrower on account of Accounts, together with the proceeds of
any other Collateral, shall be held as Agent's property, for its benefit and the
benefit of Lenders, by such Borrower as trustee of an express trust for Agent's
benefit and such Borrower shall as soon as practical deposit all monetary
proceeds of Collateral in the Dominion Account. Agent retains the right at all
times after the occurrence and during the continuance of an Event of Default to
notify Account Debtors that Borrowers' Accounts have been assigned to Agent and
to collect Borrowers' Accounts directly in its own name, or in the name of
Agent's agent, and to charge the collection costs and expenses, including
attorneys' fees, to Borrowers.
6.2.6 Taxes. If an Account includes a charge for any tax payable to
any governmental taxing authority, Agent is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing authority for the account of
Borrowers and to charge Borrowers therefor, except for taxes that (i) are being
actively contested in good faith and by appropriate proceedings and with respect
to which Borrowers maintain reasonable reserves on their books therefor and (ii)
could not reasonably be expected to result in any Lien other than a Permitted
Lien. In no event shall Agent or any Lender be liable for any taxes to any
governmental taxing authority that may be due by any Borrower.
6.3 Administration of Inventory. Borrowers shall keep records of their
Inventory which records shall be complete and accurate and complete in all
material respects. Borrowers shall furnish to Agent Inventory reports
concurrently with the delivery of each Borrowing Base
Exhibit 4-A - Page 30
Certificate described in subsection 8.1.4 or more frequently as reasonably
requested by Agent after the occurrence and during the continuance of an Event
of Default or when Availability is less than $35,000,000, which reports will be
in such other format and detail as Agent shall reasonably request and shall
include a current list of all locations (other than with respect to Inventory
with third parties the value of which is not included in the calculation of the
Borrowing Base and the aggregate book value or fair market value of which is
less $1,000,000 at any single location or $2,000,000 at all locations) of
Borrowers' Inventory. Agent and Lenders acknowledge that Borrowers shall not be
required to provide a list of current locations more frequently than monthly. In
addition to such periodic Inventory reports, Borrowers shall furnish to Agent
such other data and information regarding Borrowers' Inventory as reasonably
request by Agent from time to time. Borrowers shall conduct a physical inventory
no less frequently than annually and shall provide to Agent a report based on
each such physical inventory promptly thereafter, together with such supporting
information as Agent shall reasonably request.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrowers shall keep
records of their Equipment (which records may be in summary form if permitted by
GAAP) which shall be complete and accurate in all material respects necessary
for Borrowers to comply with GAAP itemizing and describing the kind, quantity
and book value of its Equipment and all dispositions made in accordance with
subsection 6.4.2 hereof, and Borrowers shall, and shall cause each of their
Restricted Subsidiaries to, furnish Agent with a current schedule containing the
foregoing information on at least an annual basis and more often if reasonably
requested by Agent; provided that Borrowers shall not be required to deliver any
such schedule more frequently than quarterly if no Event of Default has occurred
and is continuing. Promptly after the request therefor by Agent, Borrowers shall
deliver to Agent any and all evidence of ownership, if any, of any of their
Equipment.
6.4.2 Dispositions of Equipment or Other Fixed Assets. Borrowers
shall not, and shall not permit any of their Restricted Subsidiaries to, sell,
lease or otherwise dispose of or transfer any of their respective Equipment or
other fixed assets or any part thereof without the prior written consent of
Agent; provided, however, that the foregoing restriction shall not apply, for so
long as no Event of Default has occurred and is continuing, to (i) dispositions
of Equipment and other fixed assets, provided that all proceeds thereof are
remitted to Agent for application to the Loans as provided in subsection 3.3.1,
or (ii) replacements of Equipment or other fixed assets that are substantially
worn, damaged or obsolete with Equipment or other fixed assets of like kind,
function and value which are useful in the business of any Borrower or one of
its Restricted Subsidiaries, provided that the replacement Equipment or other
fixed assets shall be acquired within 180 days after any disposition of the
Equipment or other fixed assets that are to be replaced and the replacement
Equipment or other fixed assets shall be free and clear of Liens other than
Permitted Liens that are not Purchase Money Liens. If, within any calendar year,
Borrowers dispose of Equipment or real Property included in the calculation of
the Borrowing Base pursuant to clause (i) above with an aggregate book value or
fair market value in excess of $1,500,000, Borrowers shall deliver to Agent an
amended Borrowing Base
Exhibit 4-A - Page 31
Certificate not later than five (5) Business days after the consummation of any
such dispositions, revised to reflect such dispositions.
6.5 Payment of Charges. All amounts chargeable to Borrowers under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Base Rate Revolving Portions from
time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Agent and each
Lender to enter into this Agreement and to make advances hereunder, Borrowers
warrant, represent and covenant to Agent and each Lender, on a joint and several
basis, that:
7.1.1 Qualification. Each Borrower and each of its Restricted
Subsidiaries is a corporation, limited partnership or limited liability company
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization. Each Borrower and each of its
Restricted Subsidiaries is duly qualified and is authorized to do business and
is in good standing as a foreign limited liability company, limited partnership
or corporation, as applicable, in each state or jurisdiction listed on Exhibit
7.1.1 hereto as of the date of this Agreement and at all other times in all
states and jurisdictions in which the failure of any Borrower or any of its
Restricted Subsidiaries to be so qualified could reasonably be expected to have
a Material Adverse Effect.
7.1.2 Power and Authority. Each Borrower and each of its Restricted
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents by Borrowers and each Restricted Subsidiary have been duly
authorized by all necessary corporate or other relevant action and do not and
will not: (i) require any consent or approval of the shareholders, partners or
members of any Borrower or any of the shareholders, partners or members, as the
case may be, of any Restricted Subsidiary of any Borrower; (ii) contravene any
Borrower's or any of its Restricted Subsidiaries' charter, articles or
certificate of incorporation, partnership agreement, certificate of formation,
by-laws, limited liability agreement, operating agreement or other
organizational documents (as the case may be); (iii) violate, or cause any
Borrower or any of its Restricted Subsidiaries to be in default under, any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award in effect having applicability to such Borrower
or any of its Restricted Subsidiaries, the violation of which could reasonably
be expected to have a Material Adverse Effect; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which any Borrower or any of its
Restricted Subsidiaries is a party or by which it or its Properties may be bound
or affected, the breach of or default under which could reasonably be expected
to have a Material Adverse Effect; or (v) result in, or require, the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to any
of the Properties now owned or hereafter acquired by any Borrower or any of its
Restricted Subsidiaries.
Exhibit 4-A - Page 32
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each Borrower and each of its Restricted
Subsidiaries party thereto, enforceable against such Borrower and/or such
Restricted Subsidiary (as applicable) in accordance with its respective terms,
subject as to enforcement (regardless of whether such enforcement is being
sought in equity or at law), to general principles of equity and bankruptcy,
insolvency and similar laws affecting creditors' rights generally.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states, as of the
date of this Agreement, (i) the correct name of each of the Subsidiaries of each
Borrower, its jurisdiction of incorporation or organization and the percentage
of its Equity Interests owned by the applicable Borrower, (ii) the name of each
Borrower's and each of its Subsidiaries' corporate or joint venture
relationships and the nature of the relationship, (iii) the number, nature and,
other than with respect to TruServ, holder of all outstanding Equity Interests
of each Borrower and the holder of Equity Interests of each Subsidiary of each
Borrower and (iv) the number of authorized, issued and treasury Equity Interests
of each Borrower. Borrower has good title to all of the Equity Interests it
purports to own of each of such Subsidiaries, free and clear in each case of any
Lien other than Permitted Liens. All such Equity Interests have been duly issued
and are fully paid and non-assessable. As of the date of this Agreement, there
are no outstanding options to purchase, or any rights or warrants to subscribe
for, or any commitments or agreements to issue or sell any Equity Interests
(other than Equity Interests of TruServ) or obligations convertible into, or any
powers of attorney relating to any Equity Interests of any Borrower (other than
TruServ) or any of its Subsidiaries. Except as set forth on Exhibit 7.1.4, as of
the date of this Agreement, there are no outstanding agreements or instruments
binding upon any of any Borrower's or any of its Subsidiaries' partners, members
or shareholders, as the case may be, relating to the ownership of its Equity
Interests.
7.1.5 Names; Organization. During the five-year period preceding
the date of this Agreement, neither any Borrower nor any of its Restricted
Subsidiaries has been known as or has used any legal, fictitious or trade names
except those listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit
7.1.5, neither any Borrower nor any of its Restricted Subsidiaries has been the
surviving entity of a merger or consolidation or has acquired all or
substantially all of the assets of any Person within the five-year period
preceding the date of this Agreement. Each of each Borrower's and each of its
Subsidiaries' state(s) of incorporation or organization, Type of Organization
and Organizational I.D. Number is set forth on Exhibit 7.1.5. The exact legal
name of each Borrower and each of its Subsidiaries is set forth on Exhibit
7.1.5, as Exhibit 7.1.5 may be updated upon not less than thirty (30) days'
prior written notice to Agent for changes to the exact legal name of Borrower or
any of its Subsidiaries.
7.1.6 Business Locations; Agent for Process. Each of each
Borrower's and each of its Restricted Subsidiaries' chief executive office,
location of books and records and other places of business are as listed on
Exhibit 6.1.1 hereto, as updated from time to time by Borrowers in accordance
with the provisions of subsection 6.1.1. During the preceding one-year period,
neither any Borrower nor any of its Restricted Subsidiaries has had an office,
place of business or agent for service of process, other than as listed on
Exhibit 6.1.1. All tangible
Exhibit 4-A - Page 33
Collateral is and will at all times be kept by Borrowers and their Restricted
Subsidiaries in accordance with subsection 6.1.1. Except as shown on Exhibit
6.1.1, as of the date of this Agreement, no Inventory is stored with a bailee,
distributor, warehouseman or similar party, nor is any Inventory consigned to
any Person (other than Agent or a person with an agency relationship with Agent)
other than Inventory with third parties the value of which is not included in
the calculation of the Borrowing Base and the aggregate book value or fair
market value of which is less $1,000,000 at any single location or $2,000,000 at
all locations.
7.1.7 Title to Properties; Priority of Liens. Each Borrower and
each of its Restricted Subsidiaries has good and indefeasible title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its
real Property, except where the absence of good title or a valid interest could
not, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and good title to all of the Collateral and all of its
other Property, in each case, free and clear of all Liens except Permitted Liens
and other imperfections of title that could not reasonably be expected to cause
a Material Adverse Effect. The Liens granted to Agent under Section 5 hereof,
upon the filing of financing statements delivered on the date hereof, the
execution of control agreements with respect to Dominion Accounts and the filing
of the Patent Security Agreement and the Trademark Security Agreement in the
U.S. Patent and Trademark Office, are first priority Liens, subject only to the
priority and existence of Permitted Liens to the extent that a security interest
therein may be perfected by the filing of a financing statement, the execution
of control agreements or filing in the U.S. Patent and Trademark Office.
7.1.8 Accounts. Agent may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrowers with
respect to any account or Accounts. With respect to each of Borrowers' Accounts,
whether or not such Account is an Eligible Account, unless otherwise disclosed
to Agent in writing:
(i) It is genuine and in all respects what it purports to be,
and, unless excluded from Eligible Accounts on the most recent
Borrowing Base Certificate, it is not evidenced by a judgment;
(ii) Unless excluded from Eligible Accounts on the most recent
Borrowing Base Certificate, it arises out of a completed, bona fide
sale and delivery of goods or rendition of services by a Borrower, in
the ordinary course of its business and in accordance, in all material
respects, with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the
contract between a Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Agent;
(iv) There are no facts, events or occurrences which in any
way impair, in any material respect, the validity or enforceability of
any Accounts or tend to
Exhibit 4-A - Page 34
reduce, in any material respect, the amount payable thereunder from the
face amount of the invoice and statements delivered or made available
to Agent with respect thereto that are not taken into account in
preparing the applicable Borrowing Base Certificate;
(v) To the best of Borrowers' knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) such
Account Debtor is Solvent (unless, in each case, such Account Debtor's
Accounts are excluded from Eligible Accounts in the most recent
Borrowing Base Certificate); and
(vi) To the best of Borrowers' knowledge, there are no
proceedings or actions which are threatened or pending against the
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectibility of such Account, unless such Account is excluded from
Eligible Accounts in the most recent Borrowing Base Certificate.
7.1.9 Equipment. The Equipment of each Borrower and its Restricted
Subsidiaries is in good operating condition and repair, in all material
respects, and where necessary to the conduct of the business of Borrowers and
each of their Restricted Subsidiaries, all necessary replacements of and repairs
thereto shall be made so that the operating efficiency thereof shall be
maintained and preserved, reasonable wear and tear excepted.
7.1.10 Financial Statements; Fiscal Year. The Consolidated balance
sheets of Borrowers and their Subsidiaries (including the accounts of all
Subsidiaries of Borrowers and their respective Subsidiaries for the respective
periods during which a Subsidiary relationship existed) as of June 28, 2003, and
the related statements of income, changes in shareholder's equity, and changes
in financial position for the periods ended on such dates, have been prepared in
accordance with GAAP (subject to year-end adjustments and the absence of
footnotes), and present fairly in all material respects the financial positions
of Borrowers and such Persons, taken as a whole, at such dates and the results
of Borrowers' and such Persons' operations, taken as a whole, for such periods.
As of the date of this Agreement, since June 28, 2003, there has been no
material adverse change in the financial position of Borrowers and such other
Persons, taken as a whole, as reflected in the Consolidated balance sheet as of
such date. As of the date of this Agreement, the fiscal year of Borrowers and
each of its Subsidiaries ends on December 31 of each year.
7.1.11 Full Disclosure. The financial statements referred to in
subsection 7.1.10 hereof do not, nor does this Agreement or any other notice or
certificate required hereunder of Borrowers to Agent or any Lender contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading at the time and in
light of the circumstances for which such information was provided. As of the
date of this Agreement, there is no fact which Borrowers have failed to disclose
to Agent or any Lender in writing either directly or in TruServ's public filings
with the Securities and Exchange Commission which could reasonably be expected
to have a Material Adverse Effect. To the extent that any such financial
statements, any notice or certificate or any other document to
Exhibit 4-A - Page 35
which this subsection 7.1.11 applies contained a forecast, budget or projections
(collectively, "Forecasts"), such Forecasts were prepared in good faith on the
basis of (i) assumptions, methods and tests that are consistent with Borrowers'
past practices and are believed by Borrowers to be reasonable and (ii)
information believed by Borrowers to have been accurate based upon information
available to Borrowers at the time such Forecasts were furnished to Agent or any
Lender.
7.1.12 Solvent Financial Condition. Borrowers and their Restricted
Subsidiaries, taken as a whole are now and, after giving effect to the initial
Loans to be made and the initial Letters of Credit and LC Guaranties to be
issued hereunder and all related transactions will be, Solvent.
7.1.13 Surety Obligations. Except as set forth on Exhibit 7.1.13,
as of the date of this Agreement, neither any Borrower nor any of its Restricted
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract or has issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person.
7.1.14 Taxes. TruServ's federal tax identification number is
▇▇-▇▇▇▇▇▇▇. The federal tax identification number of each Restricted Subsidiary
of TruServ is shown on Exhibit 7.1.14 hereto as such Exhibit may be updated by
Borrowers (without the requirement of consent or action by any other party, from
time to time, by providing prior written notice to Agent of any such tax
identification number). Each Borrower and each of its Subsidiaries has filed all
federal and all material state and local tax returns and other reports relating
to taxes it is required by law to file, and has paid, or made provision for the
payment of, all such taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties as and when such taxes, assessments,
fees, levies and charges are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings, and each Borrower and each of its Restricted Subsidiaries maintains
reasonable reserves on its books therefor and except for taxes in immaterial
amounts which inadvertently remain unpaid. The provision for taxes on the books
of each Borrower and its Restricted Subsidiaries, as applicable, is adequate as
required by GAAP for all years not closed by applicable statutes, and for the
current fiscal year.
7.1.15 Brokers. Other than fees payable hereunder, under the
commitment letter entered into between TruServ, FCC and Fleet Securities, Inc.
and dated July 25, 2003 and the Fee Letter, there are no claims for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each Borrower
and each of its Restricted Subsidiaries owns, possesses or licenses or has the
right to use all the patents, trademarks, service marks, trade names,
copyrights, licenses and other Intellectual Property necessary for the present
and planned future conduct of its business without any known conflict with the
rights of others, except for such conflicts as could not reasonably be expected
to have a Material Adverse Effect. All such registrations and applications for
material patents, trademarks,
Exhibit 4-A - Page 36
service marks, trade names, copyrights, licenses and other similar rights of any
Borrower existing on the date of this Agreement are listed on Exhibit 7.1.16
hereto. No claim which could reasonably be expected to have a Material Adverse
Effect has been asserted in writing to any Borrower or any Restricted Subsidiary
of any Borrower which is currently pending that their use of their Intellectual
Property or the conduct of their business does or may infringe upon the
Intellectual Property rights of any third party. To Borrowers' knowledge and
except as set forth on Exhibit 7.1.16 hereto, as of the date of this Agreement,
no Person is engaging in any activity that infringes in any respect upon any
Borrower's or any of its Restricted Subsidiaries' material Intellectual
Property, which infringement could reasonably be expected to have a Material
Adverse Effect. Except as set forth on Exhibit 7.1.16, as of the date of this
Agreement and as of each date such exhibit is required to be updated, each
Borrower's and each of its Restricted Subsidiaries' (i) material owned
trademarks, service marks and copyrights are registered with the U.S. Patent and
Trademark Office or in the U.S. Copyright Office, as applicable and (ii)
material license agreements and similar arrangements relating to its Inventory
(1) permit, and do not restrict, the assignment by any Borrower or any of its
Restricted Subsidiaries to Agent, or any other Person designated by Agent, of
all of such Borrower's or such Restricted Subsidiary's, as applicable, rights,
title and interest pertaining to such license agreement or such similar
arrangement and (2) would permit the continued use by such Borrower or such
Restricted Subsidiary, or Agent or its assignee, of such license agreement or
such similar arrangement and the right to sell Inventory subject to such license
agreement for a period of no less than 6 months after a default or breach of
such agreement or arrangement. The consummation and performance of the
transactions and actions contemplated by this Agreement and the other Loan
Documents, including, without limitation, the exercise by Agent of any of its
rights or remedies under Section 10, will not result in the termination or
impairment of any of such Borrower's or any of its Restricted Subsidiaries'
ownership or rights relating to its Intellectual Property, except for such
Intellectual Property rights the loss or impairment of which could not
reasonably be expected to have a Material Adverse Effect. Except as listed on
Exhibit 7.1.16 and except as could not reasonably be expected to have a Material
Adverse Effect, (i) neither any Borrower nor any of its Restricted Subsidiaries
is in breach of, or default under, any term of any license or sublicense with
respect to any of its Intellectual Property and (ii) to the knowledge of
Borrowers, no other party to such license or sublicense is in breach thereof or
default thereunder, and such license is valid and enforceable.
7.1.17 Governmental Consents. Each Borrower and each of its
Restricted Subsidiaries has, and is in good standing with respect to, all
governmental consents, approvals, licenses, authorizations, permits,
certificates, inspections and franchises necessary to continue to conduct its
business as heretofore or proposed to be conducted by it and to own or lease and
operate its Properties as now owned or leased by it, except where the failure to
possess or so maintain such rights could not reasonably be expected to have a
Material Adverse Effect.
7.1.18 Compliance with Laws. Each Borrower and each of its
Restricted Subsidiaries has duly complied, and its Properties, business
operations and leaseholds are in compliance with, the provisions of all federal,
state and local laws, rules and regulations applicable to such Borrower or such
Restricted Subsidiary, as applicable, its Properties or the conduct of its
business, except, in each case, for such non-compliance as could not reasonably
be
Exhibit 4-A - Page 37
expected to have a Material Adverse Effect, and there have been no citations,
notices or orders of noncompliance issued to any Borrower or any of its
Restricted Subsidiaries under any such law, rule or regulation, except where
such noncompliance could not reasonably be expected to have a Material Adverse
Effect. Each Borrower and each of its Restricted Subsidiaries has established
and maintains an adequate monitoring system to insure that it remains in
compliance in all material respects with all federal, state and local rules,
laws and regulations applicable to it, including the Fair Labor Standards Act
(29 U.S.C. Section 201, et seq.), as amended. No Inventory has been produced by
Borrower in violation of such Fair Labor Standards Act.
7.1.19 Restrictions. Neither any Borrower nor any of its Restricted
Subsidiaries is a party or subject to any contract or agreement (other than this
Agreement and the other Loan Documents or other contract or agreement that would
not subject any Borrower to injunctive relief or any material monetary damages)
which restricts, in any manner that would have a Material Adverse Effect, its
right or ability to incur Indebtedness for Money Borrowed, other than as set
forth on Exhibit 7.1.19 hereto, none of which prohibit the execution of or
compliance with this Agreement or the other Loan Documents by any Borrower or
any of its Restricted Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit 7.1.20 hereto or
as described in any report on Form 10-K, 10-Q or 8-K filed on or after January
1, 2003 but prior to July 31, 2003, there are no actions, suits, proceedings or
investigations pending, or to the knowledge of Borrowers, threatened, against or
affecting any Borrower or any of its Restricted Subsidiaries, or the business,
operations, Properties, profits or condition of any Borrower or any of its
Restricted Subsidiaries which, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Exhibit 7.1.20 also describes in
reasonable detail the settlement agreement in respect of the derivative action
(the "▇▇▇▇▇▇ Litigation") brought by a former Member of TruServ (▇▇▇▇▇▇ City
Properties), the amounts to be paid out by TruServ pursuant to such settlement
agreement (either directly or indirectly through insurance proceeds) and the
amount of insurance proceeds TruServ will receive in connection with such
litigation. Neither any Borrower nor any of its Restricted Subsidiaries is in
default with respect to any order, writ, injunction, judgment, decree or rule of
any court, governmental authority or arbitration board or tribunal, which,
singly or in the aggregate, would reasonably be expected to have a Material
Adverse Effect.
7.1.21 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or any
Borrower's performance hereunder, constitute a Default or an Event of Default.
Neither any Borrower nor any of its Restricted Subsidiaries is in default in
(and no event has occurred and no condition exists which constitutes, or which
the passage of time or the giving of notice or both would constitute, a default
in) the payment of any Indebtedness for Money Borrowed to any Person in excess
of $1,000,000, other than, for dates after the date of this Agreement, defaults
or events of default under the Member Notes or the Redeemable Subordinated Notes
relating to non-payment of interest or principal, which payments, if made, would
cause an Event of Default under subsection 10.1.15.
Exhibit 4-A - Page 38
7.1.22 Leases. Exhibit 7.1.22 as of the date of this Agreement and
as of each other date such Exhibit is required to be updated, hereto is a
complete listing (which may be listed by categories for personal property leases
having annual Rentals of $10,000 per year or less) of all capitalized and
operating personal property leases of Borrowers and their Restricted
Subsidiaries and all real property leases of Borrowers and their Restricted
Subsidiaries. Each Borrower and each of its Restricted Subsidiaries is in full
compliance with all of the terms of each of its respective capitalized and
operating leases, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
7.1.23 Pension Plans. Except as disclosed on Exhibit 7.1.23 hereto,
neither any Borrower nor any of its Restricted Subsidiaries has any Plan. Each
Borrower and each of its Restricted Subsidiaries is in compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect to
each Plan, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. No fact or situation in connection
with any Plan exists that would reasonably be expected to result in a Material
Adverse Effect. Neither any Borrower nor any of their Restricted Subsidiaries
has any withdrawal liability in connection with a Multiemployer Plan, that would
reasonably be expected to result in a Material Adverse Effect.
7.1.24 Trade Relations. There exists no actual or, to Borrowers'
knowledge, threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship between any Borrower or any
of its Restricted Subsidiaries and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrowers and their Restricted Subsidiaries, or with any material supplier,
except in each case, where the same could not reasonably be expected to have a
Material Adverse Effect, and there exists no present condition or state of facts
or circumstances which would prevent any Borrower or any of its Restricted
Subsidiaries from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted, which condition or state of facts or
circumstances could reasonably be expected to have a Material Adverse Effect.
7.1.25 Labor Relations. Except as described on Exhibit 7.1.25
hereto, as of the date of this Agreement, neither any Borrower nor any of its
Restricted Subsidiaries is a party to any collective bargaining agreement. There
are no material grievances, disputes or controversies with any union or any
other organization of any Borrower's or any of its Restricted Subsidiaries'
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization that have caused or
resulted in a Material Adverse Effect.
7.1.26 Related Businesses. Borrowers operate a member-owned
wholesale cooperative engaged in the business of selling hardware and related
merchandise and paint and paint applicators and engage in certain other
businesses. These operations require financing on a basis such that the credit
supplied can be made available from time to time to Borrowers, as required for
the continued successful operation of Borrowers taken as a whole. Borrowers have
requested the Lenders to make credit available hereunder primarily for the
purposes of
Exhibit 4-A - Page 39
subsection 1.1.3 and generally for the purposes of financing the operations of
Borrowers. Each Borrower and each Restricted Subsidiary of each Borrower expects
to derive benefit (and the Board of Directors of each Borrower and each
Restricted Subsidiary of each Borrower has determined that such Borrower or
Restricted Subsidiary may reasonably be expected to derive benefit), directly or
indirectly, from a portion of the credit extended by Lenders hereunder, both in
its separate capacity and as a member of the group of companies, since the
successful operation and condition of each Borrower and each Restricted
Subsidiary of each Borrower is dependent on the continued successful performance
of the functions of the group as a whole. Each Borrower acknowledges that, but
for the agreement of each of the other Borrowers to execute and deliver this
Agreement, Agent and Lenders would not have made available the credit facilities
established hereby on the terms set forth herein.
7.2 Continuous Nature of Representations and Warranties. Each Loan
request made or deemed made pursuant to subsection 3.1.1 hereof shall constitute
Borrowers' reaffirmation, as of the date of each such loan request, in all
material respects, of each representation, warranty or other statement made or
furnished to Agent or any Lender by or on behalf of any Borrower, any Subsidiary
of any Borrower, or any Guarantor in this Agreement, any of the other Loan
Documents, or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto, except for changes in the nature of any
Borrower's or one of any Borrower's Subsidiary's (or Restricted Subsidiary's as
applicable) business or operations that would render the information in any
schedule or exhibit attached hereto or to any other Loan Document either
inaccurate, incomplete or misleading, so long as (i) Majority Lenders have
consented to such changes, (ii) such changes are expressly permitted by this
Agreement or (iii) such changes do not have or evidence a Material Adverse
Effect. Notwithstanding the foregoing, representations and warranties which by
their terms are applicable only to a specific date shall be deemed made only at
such date.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent
and each Lender and the parties thereto and the closing of the transactions
described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the Term, and thereafter for so long
as there are any Obligations (other than Contingent and Collateralized
Obligations) outstanding, Borrowers covenant that, unless otherwise consented to
by Majority Lenders, in writing, they shall:
8.1.1 Visits and Inspections; Lender Meeting. Permit (i)
representatives of Agent, and during the continuation of any Default or Event of
Default any Lender, from time to time, as often as may be reasonably requested,
but only during normal business hours, to visit and inspect the Properties of
each Borrower and each of its Restricted Subsidiaries, inspect, audit and make
extracts from its books and records, and discuss with its officers, its
employees and its independent accountants (provided that Borrowers shall have
the right to have their representatives present during any conversations between
Agent, any Lender or any of their
Exhibit 4-A - Page 40
representatives or agents and Borrowers' independent accountants), each
Borrower's and each of its Restricted Subsidiaries' business, assets,
liabilities, financial condition, business prospects and results of operations
and (ii) appraisers engaged pursuant to Section 2.10 (whether or not personnel
of Agent), from time to time, but no more frequently than one time per calendar
year, unless an Event of Default has occurred and is continuing, then as often
as may be reasonably requested, but, in any case, only during normal business
hours, to visit and inspect the Properties of each Borrower and each of its
Restricted Subsidiaries, for the purpose of completing appraisals pursuant to
Section 2.10. Agent, if no Default or Event of Default then exists, shall give
Borrowers reasonable prior notice of any such inspection or audit referred to in
the foregoing two sentences. Without limiting the foregoing, Borrowers will
participate and will cause their key management personnel to participate in a
meeting with Agent and Lenders once during each year (except that during the
continuation of an Event of Default such meetings may be held more frequently as
requested by Agent or Majority Lenders), which meeting(s) shall be held at such
times and such places as may be reasonably requested by Agent.
8.1.2 Notices. Promptly notify Agent in writing of the occurrence
of any event or the existence of any fact which renders any representation or
warranty (other than those representations and warranties that relate solely to
a specific date) in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading in any material respect as of the date made
or remade. In addition, Borrowers agree to provide Agent with prompt written
notice of any change in the information disclosed in any Exhibit hereto if such
change would make the information disclosed in any Exhibit materially misleading
when taken as a whole, in each case after giving effect to the materiality
limits and Material Adverse Effect qualifications contained therein.
8.1.3 Financial Statements. Keep, and cause each of their
Subsidiaries to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with
customary accounting practices reflecting all its financial transactions; and
cause to be prepared and furnished to Agent and each Lender, the following, all
financial statements to be delivered pursuant to clauses (i) and (ii) below to
be prepared in accordance with GAAP applied on a consistent basis, unless
Borrowers' certified public accountants concur in any change therein and such
change is disclosed to Agent and is consistent with GAAP (except that monthly
and quarterly financial statements shall be subject to year-end adjustments and
need not contain notes):
(i) not later than 105 days after the close of each fiscal
year of TruServ, unqualified (except for a qualification for a change
in accounting principles with which the accountant concurs) audited
(with respect to Consolidated financial statements only) financial
statements of TruServ and its Subsidiaries as of the end of such year,
on a Consolidated and consolidating basis, certified by a firm of
independent certified public accountants of recognized standing
selected by TruServ but reasonably acceptable to Agent (it being
understood that PriceWaterhouseCoopers is acceptable to Agent) and,
within a reasonable time thereafter a copy of any management letter
issued in connection therewith;
Exhibit 4-A - Page 41
(ii) (x) in the case of each month which is not the last month
of a fiscal quarter or a fiscal year, not later than 30 days after the
end of each such month hereafter, (y) in the case of each month which
is the end of a fiscal quarter other than the last fiscal quarter of
each fiscal year, not later than 60 days after the end of each such
month hereafter and (z) in case of each month which is the last month
of a fiscal year, not later than 60 days after the end of each such
month thereafter, unaudited interim financial statements of TruServ and
its Subsidiaries as of the end of such month and of the portion of the
fiscal year then elapsed, on a Consolidated and consolidating basis,
certified by the principal financial officer of TruServ (or such other
officer reasonably acceptable to Agent) as prepared in accordance with
GAAP and fairly presenting in all material respects the financial
position and results of operations of TruServ and its Subsidiaries for
such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(iii) for each month which is the end of a fiscal quarter or a
fiscal year and unaudited financial statements are not provided within
30 days of the end of such month, a flash report ("Flash Report")
containing the information provided on unaudited financial statements,
and it is hereby understood and agreed that notwithstanding anything to
the contrary contained herein, under no circumstances will any Borrower
or any of its officers be deemed to make a representation or warranty
as to the accuracy of the information contained in such Flash Report;
(iv) together with each delivery of financial statements
pursuant to clauses (i) and (ii) of this subsection 8.1.3, a management
report in substantially the form of the management report as of June
30, 2003 delivered to Agent prior to the Date of this Agreement;
(v) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which TruServ has filed with the Securities and Exchange Commission and
copies of any other regular, periodic and special reports or
registration statements which TruServ or any of its Subsidiaries files
with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor or any national securities
exchange;
(vi) upon request of Agent, copies of any annual report on
Form 5500 required to be filed under ERISA for each Plan; and
(vii) such other data and information (financial and
otherwise) as Agent or any Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or Borrowers' or any
of their Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, Borrowers shall forward to
Agent a copy of the accountants' letter to TruServ's management that is prepared
in connection with such financial statements and
Exhibit 4-A - Page 42
to the extent not then prohibited by the applicable rules, regulations and
standards governing certified public accountants, also shall cause to be
prepared and shall furnish to Agent a certificate of the aforesaid certified
public accountants certifying to Agent that, based upon their examination of the
financial statements of Borrowers and their Subsidiaries performed in connection
with their examination of said financial statements, they are not aware of any
Default or Event of Default under subsection 8.2.8 or Section 8.3 only with
respect to compliance with the Fixed Charge Coverage Ratio as of the end of any
fiscal year, or, if they are aware of such Default or Event of Default,
specifying the nature thereof. Concurrently with the delivery of the financial
statements described in paragraphs (i) and (ii) of this subsection 8.1.3, or
more frequently if reasonably requested by Agent, Borrowers shall cause to be
prepared and furnished to Agent a Compliance Certificate in the form of Exhibit
8.1.3 hereto executed by the chief financial officer (or such other officer
reasonably acceptable to Agent) of TruServ (a "Compliance Certificate");
provided that Agent agrees not to request a Compliance Certificate more often
than monthly unless such request is related to a Distribution or Subordinated
Debt payment proposed to be made by Borrowers. Concurrently with the delivery of
the financial statements described in paragraph (i) of this subsection 8.1.3,
Borrowers shall cause to be prepared and furnished to Agent updates of Exhibits
7.1.16 and 7.1.22 dated as of the most recently preceding fiscal year end, or
more frequently if requested by Agent after the occurrence and during the
continuance of an Event of Default.
The foregoing notwithstanding, Borrowers shall not be required to
provide consolidating financial statements (or Projections pursuant to
subsection 8.1.7) with respect to any Subsidiary unless such Subsidiary has both
assets and annual revenues of more than $3,000,000.
8.1.4 Borrowing Base Certificates. On or before the 20th day of
each month from and after the date hereof, Borrowers shall deliver to Agent, in
form delivered by Borrowers to Agent on the Closing Date or such other form as
is reasonably acceptable to Agent, a Borrowing Base Certificate as of the last
day of the immediately preceding month, with such supporting materials as Agent
shall reasonably request. If Borrowers deem it advisable, or Agent shall
request, Borrowers shall execute and deliver to Agent Borrowing Base
Certificates more frequently than monthly; it being understood and acknowledged
by Agent and Lenders that information regarding Eligible Inventory on such
Borrowing Base Certificates cannot, in a commercially practical manner, be
updated more often than monthly. In delivering any Borrowing Base Certificate to
Agent, Borrowers may assume, unless otherwise notified to the contrary by Agent
in writing, that any item of Inventory or any Account which is not excluded by a
specific category of ineligible items listed in the definition of Eligible
Accounts or Eligible Inventory, as the case may be, is Eligible Inventory or an
Eligible Account.
8.1.5 Landlord, Processor and Storage Agreements. Provide Agent
with copies of all agreements between any Borrower or any of its Restricted
Subsidiaries and any landlord, warehouseman, processor, distributor or consignee
which owns or is the lessee of any premises at which any Equipment or Inventory
(other than Equipment in the hands of third parties for repair or maintenance
and Inventory and Equipment with third parties the value of which is not
included in the calculation of the Borrowing Base and the aggregate book value
or fair market
Exhibit 4-A - Page 43
value of which is less $1,000,000 at any single location or $2,000,000 at all
locations), may, from time to time, be kept. With respect to any lease (other
than leases for sales offices), warehousing agreement or any processing
agreement in any case entered into after the Closing Date, Borrowers shall use
commercially reasonable best efforts to provide Agent with a Collateral Access
Agreement with respect to such premises. Such Collateral Access Agreement shall
be in the form supplied by Agent to Borrowers on the Closing Date with such
reasonable revisions as are customarily accepted by Agent or by similar
financial institutions in similar financial transactions. In the event that
Borrowers fail to provide Agent with any such Collateral Access Agreement,
Borrowers consent to the establishment of such reserves as deemed reasonably
necessary by Agent to protect against any potential landlord lien or similar
charge against the Collateral located at the location for which Agent has not
received a Collateral Access Agreement.
8.1.6 Guarantor Financial Statements. Deliver or cause to be
delivered to Agent financial statements, if any, for each Guarantor (to the
extent not consolidated with the financial statements delivered to Agent under
subsection 8.1.3) in form and substance reasonably satisfactory to Agent at such
intervals and covering such time periods as Agent may reasonably request.
8.1.7 Projections. No later than January 1 of each fiscal year of
TruServ, deliver to Agent Projections of TruServ and each of its Subsidiaries
for such fiscal year, month by month and for the other remaining fiscal years
within the Term, year by year. Such Projections shall be on a consolidated basis
unless otherwise required by the last sentence of subsection 8.1.3.
8.1.8 Restricted Subsidiaries. Cause each Restricted Subsidiary of
each Borrower, whether now or hereafter in existence, promptly upon Agent's
request therefor, to execute and deliver to Agent a Guaranty Agreement and a
security agreement pursuant to which such Restricted Subsidiary guaranties the
payment of all Obligations and grants to Agent a first priority Lien (subject
only to Permitted Liens) on all of its Properties of the types described in, and
not excluded from, Section 5.1. Additionally, the applicable Borrower shall
execute and deliver to Agent a pledge agreement pursuant to which such Borrower
grants to Agent a first priority Lien (subject only to Permitted Liens) with
respect to all of the issued and outstanding Equity Interests of each such
Restricted Subsidiary.
8.1.9 Deposit and Brokerage Accounts. For each deposit account or
brokerage account that any Borrower or any Restricted Subsidiary at any time
opens or maintains, Borrowers shall, or shall cause such Restricted Subsidiary
to, at Agent's request and option, pursuant to an agreement in form and
substance reasonably satisfactory to Agent, cause the depository bank or
securities intermediary, as applicable, to agree to comply at any time with
instructions from Agent to such depository bank or securities intermediary, as
applicable, directing the disposition of funds from time to time credited to
such deposit or brokerage account, without further consent of Borrowers;
provided that, unless an Event of Default has occurred and is continuing,
Borrowers shall not be required to comply with this covenant for any
Exhibit 4-A - Page 44
such deposit or brokerage account, unless the average daily balance maintained
in any such account in any 30-day period exceeds $250,000.
8.1.10 Interest Rate Protection. Within 60 days following the
Closing Date, Borrowers shall obtain and thereafter maintain at all time
thereafter (except for up to two (2) periods each of five (5) Business Days or
less during any fiscal year) interest rate protection in form, on terms and with
parties reasonably acceptable to Agent for a notional amount of not less than
$25,000,000.
8.1.11 Bills of Lading and Other Documents of Title. With respect
to any Inventory which is Eligible On-Water Inventory, (a) Borrowers shall cause
all bills of lading and other documents of title in respect of such Inventory to
name Agent as consignee, unless and until Agent may direct otherwise; (b) at
such time and from time to time as Agent may direct, Borrowers shall cause all
bills of lading and other documents of title in respect of such Inventory to
name, Agent or such other financial institution or other person as Agent may
specify to be named as consignee; (c) without limiting any other rights of Agent
or any Lender hereunder, Agent shall have the right to endorse and negotiate on
behalf of, and as attorney-in-fact for (or to direct Borrowers' Customs Broker
to endorse and negotiate on behalf of, and as attorney-in-fact for), each
Borrower any ▇▇▇▇ of lading or other document of title with respect to such
Inventory naming a Borrower as consignee to Agent; (d) there shall be three (3)
originals of each of such ▇▇▇▇ of lading or other documents of title which
unless and until Agent shall direct otherwise, shall be delivered as follows:
(i) one (1) original to such Customs Broker as the Borrowers may specify (so
long as Agent has received a Collateral Access Agreement, in form and substance
satisfactory to Agent, duly authorized, executed and delivered by such Customs
Broker), and (ii) unless retained by the seller of such Inventory with respect
to Inventory bought on open account, two (2) originals to Agent or to such other
person as Agent may designate for such purpose; (e) the Borrowers shall obtain a
copy (but not the originals) of such ▇▇▇▇ of lading or other documents of title
in respect of such Inventory; and (f) Borrowers shall cause the ▇▇▇▇ of lading
or other document of title with respect to such Inventory to be issued in a form
so as to constitute negotiable documents of title (within the meaning of the
UCC) made to the order of Agent. The foregoing notwithstanding, Agent
acknowledges and agrees that prior to the occurrence and continuance of an Event
of Default Borrowers shall be able to manage and deal with the importation of
their Inventory in the ordinary course of business.
8.1.12 TruServ Specialty Company LLC. If at any time the fair
market value of TruServ Specialty Company LLC's assets (other than franchise
agreements and accounts receivable due from franchisees and uncollected in the
ordinary course of business) exceed $1,500,000 then, to the extent permitted by
applicable law, Borrowers shall cause TruServ Specialty Company LLC to make a
Distribution to TruServ out of funds legally available therefor within five (5)
Business Days of such time.
8.2 Negative Covenants. During the Term, and thereafter for so long as
there are any Obligations outstanding (other than Contingent and Collateralized
Obligations), Borrowers covenant that, unless otherwise consented to by Majority
Lenders, in writing, they shall not:
Exhibit 4-A - Page 45
8.2.1 Mergers; Consolidations; Acquisitions; Structural Changes.
Merge or consolidate, or permit any Restricted Subsidiary of any Borrower to
merge or consolidate, with any Person; nor change its or any of its Restricted
Subsidiaries' state of incorporation or organization, Type of Organization or
Organizational I.D. Number; nor change its or any of its Restricted
Subsidiaries' legal name (except on 30 days' prior written notice to Agent); nor
acquire, nor permit any of its Restricted Subsidiaries to acquire, all or any
substantial part of the Properties of any Person, except for:
(i) mergers of any Restricted Subsidiary of a Borrower into
another Borrower or another wholly-owned Restricted Subsidiary of a
Borrower; and
(ii) acquisitions of assets consisting of fixed assets or real
property that constitute Capital Expenditures permitted under
subsection 8.2.8.
8.2.2 Loans. Make, or permit any Restricted Subsidiary of any
Borrower to make, any loans or other advances of money to any Person, other than
(i) for salary, travel, relocation and entertainment advances, advances against
commissions and other similar advances to employees in the ordinary course of
business, (ii) extensions of trade credit and advance payments on leases,
licenses and other contracts, in each case, in the ordinary course of business,
(iii) deposits with financial institutions and securities intermediaries
permitted or required under this Agreement, (iv) prepaid expenses, including,
without limitation, lease prepayments, (v) loans or advances from any Borrower
to any other Borrower or to any Restricted Subsidiary, (vi) loans or advances
from any Restricted Subsidiary to any Borrower or any other Restricted
Subsidiary, (vii) loans existing on the date hereof and set forth on Exhibit
8.2.2, (viii) Member Loans in an aggregate amount outstanding at any time not to
exceed $10,000,000 less the aggregate amount of Member Guaranties outstanding at
such time, and (ix) any loan that consists of an Account from a former Member
that is converted in the ordinary course of business into a loan and does not
involve the advance of money.
8.2.3 Total Indebtedness for Money Borrowed. Create, incur, assume,
or suffer to exist, or permit any Restricted Subsidiary of any Borrower to
create, incur or suffer to exist, any Indebtedness for Money Borrowed, except:
(i) Obligations owing to Agent, any Lender or any Affiliate of
any Lender or Agent under this Agreement or any of the other Loan
Documents;
(ii) Indebtedness for Money Borrowed, including without
limitation Subordinated Debt, existing on the date of this Agreement
and listed on Exhibit 8.2.3, any renewals, replacements, refinancings
or extensions thereof;
(iii) Permitted Purchase Money Indebtedness;
(iv) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
Exhibit 4-A - Page 46
(v) Guaranties of any Indebtedness for Money Borrowed
permitted hereunder;
(vi) Indebtedness for Money Borrowed permitted under
subsections 8.2.2(v) and (vi);
(vii) Indebtedness for Money Borrowed outstanding pursuant to
the Redeemable Subordinated Notes;
(viii) Indebtedness for Money Borrowed outstanding pursuant to
the Member Notes;
(ix) reimbursement obligations owing with respect to the B of
A LCs and with respect to documentary letters of credit;
(x) Indebtedness for Money Borrowed arising out of performance
or surety bonds in the ordinary course of business;
(xi) Indebtedness for Money Borrowed arising out of Derivative
Obligations;
(xii) Indebtedness for Money Borrowed in respect of sale and
leaseback transactions not prohibited by the terms hereof involving
existing facilities;
(xiii) Indebtedness for Money Borrowed in respect of deferred
compensation, incentive plans and similar arrangements;
(xiv) Member Guaranties in an aggregate amount outstanding at
any time not to exceed $10,000,000 less the aggregate amount of Member
Loans outstanding at such time; and
(xv) Indebtedness for Money Borrowed not included in
paragraphs (i) through (xiv) above which does not exceed at any time,
in the aggregate, the sum of $1,000,000.
8.2.4 Affiliate Transactions. Enter into, or be a party to, or
permit any Subsidiary of any Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or any holder of any Equity Interests
of any Borrower or any Subsidiary of any Borrower, including without limitation
any management, consulting or similar fees, except (i) pursuant to the
reasonable requirements of such Borrower's or such Subsidiary's business and
upon fair and reasonable terms which are no less favorable to such Borrower or
such Subsidiary than would be obtained in a comparable arms-length transaction
with a Person not an Affiliate or Security holder of any Borrower; (ii) payment
of customary directors' fees and indemnities; (iii) transactions with Affiliates
that were consummated prior to the date hereof and have been disclosed to Agent
prior to the Closing Date; (iv) transactions between any of Borrowers or any
Exhibit 4-A - Page 47
of Guarantors; (v) transactions pursuant to which TruServ purchases or sells
Equity Interests of TruServ to any such Affiliate; and (vi) as otherwise
permitted under this Agreement.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of any Borrower to create or suffer to exist, any Lien upon any of
its Property, income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Agent for the
benefit of Lenders or Affiliates or upon any Property in possession of
or control of any Lender;
(ii) Liens for taxes, assessments or governmental charges
(excluding any Lien imposed pursuant to any of the provisions of ERISA)
not yet due, being contested in the manner described in subsection
7.1.14 hereto or other than taxes in immaterial amounts that
inadvertently remain unpaid, but only if, in the case of contested
taxes, such Lien would not reasonably be expected to adversely affect
Agent's rights or the priority of Agent's lien on any Collateral (other
than Collateral having de minimis value);
(iii) Liens arising in the ordinary course of the business of
any Borrower or any of its Subsidiaries by operation of law or
regulation, including, without limitation, Liens of landlords,
mechanics, materialmen, repairmen and suppliers, but only if payment in
respect of any such Lien is not at the time required (or are being
contested in good faith and for which adequate reserves have been made)
and such Liens do not, in the aggregate, materially detract from the
value of the Property of such Borrower or any of its Restricted
Subsidiaries or materially impair the use thereof in the operation of
the business of such Borrower or any of its Restricted Subsidiaries;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) such other Liens as appear on Exhibit 8.2.5 hereto and any
renewals, refinancings, replacements or extensions thereof;
(vi) Liens incurred or pledges of financial instruments (such
as certificates of deposit) or deposits made in the ordinary course of
business in connection with (1) worker's compensation, social security,
unemployment insurance and other like laws, (2) sales contracts, bids,
leases, statutory obligations, work in progress advances and other
similar obligations not incurred in connection with the borrowing of
money or the payment of the deferred purchase price of property or (3)
surety or appeal bonds, insurance bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(vii) reservations, easements (including, without limitation,
reciprocal easement agreements and utility easements) covenants, zoning
and other land use regulations, imperfections of title, title
exceptions, encroachments, or encumbrances
Exhibit 4-A - Page 48
affecting real Property owned or leased by a Borrower or one of its
Restricted Subsidiaries; provided that such exceptions do not in the
aggregate materially interfere with the use of such Property in the
ordinary course of any Borrower's or such Restricted Subsidiary's
business;
(viii) local, county, state and federal laws, ordinances or
governmental regulations now or hereafter in effect relating to the
real Property owned or leased by Borrowers;
(ix) with respect to the real Property owned by Borrowers on
or prior to the Closing Date, all matters disclosed by the mortgagee
title insurance policies delivered by Borrower to Agent pursuant to
Section 5.5 hereof;
(x) Liens related to dispositions of Properties permitted
pursuant to subsection 8.2.7 hereof;
(xi) judgment Liens that do not give rise to an Event of
Default under subsection 10.1.14;
(xii) Liens consisting of cash or cash equivalents pledged to
secure Borrowers' reimbursement obligations with respect to the B of A
LCs or outstanding documentary letters of credit;
(xiii) Liens arising in respect of Capitalized Lease
Obligations permitted hereunder;
(xiv) Licenses, leases or subleases granted to others not
interfering in any material respect with the business of the Borrowers
taken as a whole;
(xv) Liens of a collection bank arising under, or described
by, Section 4-201 of the Uniform Commercial Code;
(xvi) normal and customary rights of setoff upon deposits of
cash in favor of banks or other depositary institutions;
(xvii) Liens of sellers of goods to a Borrower or any of its
Restricted Subsidiaries arising under Article 2 of the Uniform
Commercial Code or similar provisions of applicable law in the ordinary
course of business, covering only the goods sold and securing the
unpaid purchase price for such goods and related expenses;
(xviii) Liens on property leased by a Borrower including the
interest of lessor incurred under a lease entered into as part of a
sale and leaseback transaction;
(xix) any escrow, holdback or similar arrangement in
connection with any sale, lease or transfer or other disposition of any
asset not prohibited hereunder;
Exhibit 4-A - Page 49
(xx) such other Liens as Majority Lenders may hereafter
approve in writing; and
(xxi) Liens not described in the foregoing clauses (i) through
(xx) and securing Indebtedness not to exceed $1,000,000.
8.2.6 Payments and Amendments of Certain Debt.
(i) make or permit any Subsidiary of any Borrower to make any
payment of any part or all of any Subordinated Debt or take any other
action or omit to take any other action in respect of any Subordinated
Debt, which are prohibited by the subordination agreement relative
thereto or the subordination provisions thereof, including, without
limitation, Member Notes and Redeemable Subordinated Notes;
(ii) prepay or permit any Subsidiary of any Borrower to prepay
(either directly or indirectly through a repurchase) any principal or
interest on any Subordinated Debt, except for principal and interest
prepayments (either directly or indirectly through a repurchase) of
amounts due under Member Notes or Redeemable Subordinated Notes in an
aggregate sum not to exceed $250,000 within any fiscal year of
Borrowers, so long as, in either case, after giving effect to any such
prepayment, no Default or Event of Default would exist and be
continuing; or
(iii) amend or modify, in any manner adverse to Borrowers,
Agent or Lenders, any agreement, instrument or document evidencing or
relating to any Subordinated Debt.
8.2.7 Distributions. Declare or make, or permit any Subsidiary of
any Borrower to declare or make, any Distributions, except for:
(i) Distributions by any Subsidiary of a Borrower to a
Borrower;
(ii) Distributions paid solely in Equity Interests of a
Borrower or any of its Subsidiaries;
(iii) annual Distributions in the form of cash patronage
dividends to its Members in an amount not to exceed 20% of the amount
of the patronage source income included in the net margin as set forth
in TruServ's Consolidated financial statements for the preceding fiscal
year or such greater percentage as required by applicable tax law or
IRS regulations;
(iv) so long as (x) no Default or Event of Default exists at
the time of or would be caused by the making of such Distributions and
(y) after giving effect to any such Distribution, Availability on an
average basis for the 60 days immediately prior to the date of the
proposed Distribution and on the date of the proposed Distribution
exceeds $15,000,000, TruServ may make annual Distributions in the form
of cash patronage dividends which, when aggregated with Distributions
made within such fiscal year as
Exhibit 4-A - Page 50
permitted pursuant to clause (iii) of this subsection 8.2.7, do not
exceed 30% of the patronage source income included in the net margin as
set forth in TruServ's consolidated financial statement for the
preceding fiscal year; provided that for purposes of calculating the
permitted cash patronage dividend in 2004 for the year 2003, net margin
shall be calculated without regard to costs incurred in connection with
the refinancing of the old credit facilities which costs shall not be
materially greater than the estimated amount of such costs contained in
the projections dated July 10, 2003 and delivered to Agent and Lenders;
(v) so long as (x) no Default or Event of Default exists at
the time or would be caused by the making of such Distribution and (y)
the Fixed Charge Ratio for the most recently ended twelve-month period
(or, if shorter, the period commencing on September 1, 2003 and ending
on the last day of the most recently ended month) determined on a pro
forma basis after giving effect to any such Distribution, and any
Restricted Subordinated Debt Payment made that does not violate
subsection 10.1.15 in the same month as the contemplated Distributions,
exceeds 1.10 to 1, TruServ may make Distributions (in cash or
otherwise) in the form of patronage cash dividends;
(vi) Distributions by TruServ in the form of patronage
dividends payable in the form of Member Notes;
(vii) So long as no Default or Event of Default exists at the
time or would be caused by the making of such Distribution, TruServ may
make Distributions in amounts equal to or less than the remaining
amount of the Closing Reserve; and
(viii) Distributions (in cash or otherwise) in the form of
redemption or acquisition of Equity Interests of its Members and
amortization payments on its Member equity accounts in the ordinary
course of business and in accordance with and as required by membership
agreements.
8.2.8 Capital Expenditures. Make any at the time when the Fixed
Charge Coverage Ratio for the most recently ended twelve-month period (or, if
shorter, the period commencing on September 1, 2003 and ending on the last day
of the most recently ended month) is less than 1.00 to 1.00, Capital
Expenditures (including, without limitation, by way of capitalized leases)
which, in the aggregate, as to Borrowers and all of their Restricted
Subsidiaries, exceed $18,000,000 during any fiscal year of Borrowers, except
that 50% of the unused portion of the Capital Expenditure allowance for any
fiscal year may be carried over to the immediately succeeding fiscal year only,
to be used in such succeeding fiscal year after all of the Capital Expenditure
allowance for that year has been used.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of
any of, or permit any Restricted Subsidiary of any Borrower to sell, lease or
otherwise dispose of any of, its Properties, including any disposition of
Property as part of a sale and leaseback transaction, to or in favor of any
Person, except for:
Exhibit 4-A - Page 51
(i) sales of Inventory in the ordinary course of business;
(ii) transfers of Property to a Borrower by a Restricted
Subsidiary of a Borrower or another Borrower, including intercompany
loans;
(iii) dispositions of Property that is substantially worn,
damaged, uneconomic, no longer useful in the conduct of any Borrower's
business, or obsolete (subject to subsection 6.4.2 hereof);
(iv) dispositions of investments described in paragraphs (iv),
(v), (vi) and (vii) of the definition of the term "Restricted
Investments";
(v) delivery of Collateral to Agent or a Lender;
(vi) dispositions of delinquent Accounts (which Accounts are
not Eligible Accounts) for collection in the ordinary course of
business;
(vii) dispositions permitted by subsection 6.4.2;
(viii) licenses of Intellectual Property to third parties;
(ix) dispositions of any Property of any Borrower (including
dispositions of any existing facility in connection with a sale and
leaseback transaction) so long as the net proceeds of such disposition
are applied to the Obligations and, if applicable, any reductions to
the Fixed Asset Sublimit are made as provided in subsection 3.3.1;
(x) leases or subleases of Borrower's or of Restricted
Subsidiary's real Property and, if excluded from the calculation of the
Borrowing Base, Fixtures and Equipment, in each case, for fair value in
an arm's length transaction; and
(xi) other dispositions expressly authorized by this
Agreement.
8.2.10 Equity Interests of Restricted Subsidiaries. Permit any of
their Restricted Subsidiaries to issue any additional Equity Interests except to
a Borrower and except for director's qualifying Equity Interests.
8.2.11 ▇▇▇▇-and-Hold Sales, Etc. Except for sales that are not
material, either individually or in the aggregate, and are or will be reflected
in current Borrowing Base Certificates as not being Eligible Accounts, make, or
permit any Restricted Subsidiary of any Borrower to make, a sale to any customer
on a ▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval,
repurchase or return or consignment basis.
8.2.12 Restricted Investment. Make or have, or permit any
Restricted Subsidiary of any Borrower to make or have, any Restricted
Investment.
Exhibit 4-A - Page 52
8.2.13 Restricted Subsidiaries and Joint Ventures. Create, acquire
or otherwise suffer to exist, or permit any Restricted Subsidiary of any
Borrower to create, acquire or otherwise suffer to exist, any Restricted
Subsidiary or joint venture arrangement not in existence as of the date hereof.
8.2.14 Tax Consolidation. Except as required by applicable law,
file or consent to the filing of any consolidated income tax return with any
Person other than another Borrower and Borrowers' Subsidiaries.
8.2.15 Organizational Documents. Agree to, or suffer to occur, any
amendment, supplement or addition to its or any of their Restricted
Subsidiaries' charter, articles or certificate of incorporation, certificate of
formation, limited partnership agreement, bylaws, limited liability agreement,
operating agreement or other organizational documents (as the case may be), that
would reasonably be expected to have a Material Adverse Effect.
8.2.16 Fiscal Year End. Change, or permit any Subsidiary of any
Borrower to change, its fiscal year end.
8.2.17 Negative Pledges. Enter into any agreement limiting the
ability of any Borrower or any of its Restricted Subsidiaries to voluntarily
create Liens upon any of its Property, other than Property secured by a Purchase
Money Lien and leased or licensed Property.
8.2.18 Leases. Except for leases entered into in connection with a
sale and leaseback transaction in which the proceeds of the sale are used to
repay the Revolving Credit Loans, leases existing on the Closing Date that are
listed on Exhibit 7.1.22 on the Closing Date and extensions, renewals and
replacements thereof, become, or permit any of their Restricted Subsidiaries to
become, a lessee under any operating lease (other than a lease under which a
Borrower or any of its Restricted Subsidiaries is lessor) of Property if the
aggregate Rentals payable during any current or future period of twelve (12)
consecutive months under the lease in question and all other leases under which
Borrowers or any of their Restricted Subsidiaries is then lessee would exceed
$3,000,000. The term "Rentals" means, as of any date of determination, all
scheduled rental payments.
8.2.19 Updated Environmental Surveys. Borrowers shall deliver to
Agent updated Phase I and, with respect to Borrowers' facility in ▇▇▇▇▇,
Illinois, updated Phase II environmental surveys in form and substance
reasonably acceptable to Agent on or prior to the date which is 60 days after
the Closing Date. Borrowers shall comply with the recommendations of the
consultants that prepared the existing and updated surveys and any further
recommendations resulting from the additional testing, investigations or actions
recommended in such surveys to the extent such compliance is necessary to insure
that Borrowers remain in compliance with subsection 7.1.18. Borrowers
acknowledge and agree that Agent shall establish reserves in accordance with
subsection 1.1.1 with respect to the cost of any environmental remediation
action that is required to comply with subsection 7.1.18.
Exhibit 4-A - Page 53
8.2.20 Fixtures. Permit any Equipment (other than (i) shelving,
(ii) racking, (iii) leasehold improvements or (iv) other Equipment with an
aggregate book or fair market value of less than $250,000) to become affixed to
any real Property leased to any Borrower or any of its Restricted Subsidiaries
so that an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a Collateral
Access Agreement or leasehold mortgage in favor of and in form reasonably
acceptable to Agent or permit any of the Equipment of any Borrower or any of its
Restricted Subsidiaries to become an accession to any personal Property other
than Equipment that is subject to first priority (except for Permitted Liens)
Liens in favor of Agent.
8.3 Specific Financial Covenants.
During the Term, and thereafter for so long as there are any
Obligations outstanding, Borrowers covenant that, unless otherwise consented to
by Majority Lenders, in writing, it shall comply with all of the financial
covenants set forth in Exhibit 8.3 hereto. If GAAP changes from the basis used
in preparing the audited financial statements delivered to Agent by Borrowers on
or before the Closing Date, Borrowers, Agent and Lenders shall negotiate in good
faith such amendments to the financial covenants contained in Exhibit 8.3 as are
necessary to provide each of Borrowers and Agent and Lenders with the same
economic benefits and protection as each party enjoyed prior to the change in
GAAP. Until such time as any such amendment is mutually agreed upon, Borrowers
will provide Agent with certificates demonstrating compliance with such
financial covenants based upon GAAP as in effect on the Closing Date and will
include, at the election of Borrowers or upon the request of Agent, calculations
setting forth the adjustments necessary to demonstrate whether Borrowers are (or
are not) in compliance with such financial covenants based upon GAAP as in
effect on the date of such audited financial statements.
8.4 Election of Seasonal Advance Months.
Borrowers shall provide Agent, together with the delivery of the
Projections pursuant to Section 8.1.7, a statement of which two (2) months (the
"Seasonal Advance Months") of the three (3) months surrounding Borrowers' spring
market shall have an advance rate of 90% for the Net Appraised Orderly
Liquidation Value of Eligible Inventory provided that in no case shall the
failure of Borrowers to deliver such statement constitute a Default or an Event
of Default, but such failure shall have the effect that, for the applicable
year, such advance rate shall remain at 85% for all twelve months.
SECTION 9. CONDITIONS PRECEDENT TO INITIAL LOANS
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Agent or
any Lender under the other sections of this Agreement, no Lender shall be
required to make the initial Loans contemplated hereby, nor shall Agent be
required to issue or procure the initial Letter(s) of Credit or LC Guaranty(ies)
contemplated hereby unless and until each of the following conditions has been
satisfied:
Exhibit 4-A - Page 54
9.1 Documentation.
Agent shall have received, in form and substance satisfactory to Agent
and its counsel, a duly executed copy of this Agreement and the other Loan
Documents, together with such additional documents, instruments, opinions and
certificates as Agent and its counsel shall require in connection therewith from
time to time, all in form and substance satisfactory to Agent and its counsel.
9.2 No Default.
No Default or Event of Default shall exist.
9.3 Other Conditions.
Each of the conditions precedent set forth in the Loan Documents shall
have been satisfied.
9.4 Availability.
Agent shall have determined that immediately after Lenders have made
the initial Loans and after Agent has issued or procured the initial Letters of
Credit and LC Guaranties contemplated hereby, and Borrowers have paid (or, if
accrued, treated as paid), all closing costs incurred in connection with the
transactions contemplated hereby, Availability (calculated without taking into
effect the Closing Reserve) shall not be less than $50,000,000.
9.5 No Litigation.
No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.
9.6 Material Adverse Effect.
As of the Closing Date, since March 19, 2003, there has not been any
material adverse change in its business, assets, financial condition, income or
prospects and no event or condition exists which would be reasonably likely to
result in any Material Adverse Effect.
9.7 Capital Structure, Etc.
Agent shall have reviewed the term and conditions and documentation
evidencing Borrower's Indebtedness for Money Borrowed, including, without
limitation, mortgage or real estate Indebtedness, capital or operating lease
Indebtedness, senior unsecured Indebtedness and Subordinated Debt and the
results of said review shall be reasonably satisfactory to Agent.
Exhibit 4-A - Page 55
9.8 Cash Management and Collection Systems.
Agent shall have reviewed Borrowers' cash management and collection
systems and the results of said review shall be reasonably satisfactory to
Agent. Agent's satisfaction with Borrowers' cash management and collection
systems shall be evidenced by the making of the initial Revolving Credit Loan.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default.
The occurrence of one or more of the following events shall constitute
an "Event of Default":
10.1.1 Payment of Obligations. Borrowers shall fail to pay any of
the Obligations hereunder or under any Note on the due date thereof (whether due
at stated maturity, on demand, upon acceleration or otherwise).
10.1.2 Misrepresentations. Any representation or warranty or other
statement made or furnished to Agent or any Lender by or on behalf of any
Borrower, any Subsidiary of any Borrower or any Guarantor in this Agreement, any
of the other Loan Documents or any instrument, certificate or financial
statement (other than a Flash Report) furnished in compliance with or in
reference thereto proves to have been false or misleading in any material
respect when made, furnished or reaffirmed pursuant to Section 7.2 hereof.
Exhibit 4-A - Page 56
10.1.3 Breach of Specific Covenants. Any Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Section or
subsection 6.1.2, 6.2.4, 6.2.5, 8.1.1, 8.1.3, 8.1.7, 8.1.10, 8.1.11, 8.1.12, 8.2
or 8.3 hereof on the date that Borrowers are required to perform, keep or
observe such covenant or shall fail or neglect to perform, keep or observe any
covenant contained in Section or subsection 5.2, 5.3, 6.1.1, 8.1.2, 8.1.4 or
8.1.9 hereof within 5 days (10 days with respect to Sections 5.2 or 5.3)
following the date on which Borrowers are required to perform, keep or observe
such covenant. The foregoing notwithstanding, with respect to subsection 8.1.4,
Borrowers acknowledge that they shall only be entitled to the 5-day grace period
provided above twice within any calendar year.
10.1.4 Breach of Other Covenants. Borrowers shall fail or neglect
to perform, keep or observe any covenant contained in this Agreement, any of the
Security Agreements, or the Other Agreements (other than a covenant which is
dealt with specifically elsewhere in Section 10.1 hereof) and the breach of such
other covenant is not cured to Agent's satisfaction within 30 days after the
sooner to occur of any Borrower's receipt of notice of such breach from Agent or
the date on which such failure or neglect first becomes known to any Financial
Officer of any Borrower.
10.1.5 Other Defaults. There shall occur any default or event of
default on the part of any Borrower, any Restricted Subsidiary of any Borrower
or any other Guarantor under any agreement, document or instrument to which such
Borrower, such Restricted Subsidiary of such Borrower or such Guarantor is a
party or by which such Borrower, such Restricted Subsidiary of such Borrower or
such Guarantor or any of its Property is bound, evidencing or relating to any
Indebtedness for Money Borrowed (other than the Obligations) with an outstanding
principal balance in excess of $1,000,000, if the payment or maturity of such
Indebtedness for Money Borrowed is or could be accelerated in consequence of
such event of default or demand for payment of such Indebtedness is made or
could be made in accordance with the terms thereof.
10.1.6 Uninsured Losses. Any material loss, theft, damage or
destruction of any portion of the Collateral having a fair market value of
$1,000,000, in the aggregate, if not fully covered (subject to such deductibles
and self-insurance retentions as Agent shall have permitted) by insurance.
10.1.7 ERISA. A Reportable Event shall occur that constitutes
grounds for the termination by the Pension Benefit Guaranty Corporation of any
Plan or for the appointment by the appropriate United States district court of a
trustee for any Plan, or any Plan shall be terminated, or if any Borrower, any
Subsidiary of any Borrower or any other Guarantor is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Borrower's, such Subsidiary's or such Guarantor's complete
or partial withdrawal from such Plan, and any such event could reasonably be
expected to have a Material Adverse Effect.
10.1.8 Insolvency and Related Proceedings. Any Borrower, any
Restricted Subsidiary or any Guarantor shall suffer the appointment of a
receiver, trustee, custodian or
Exhibit 4-A - Page 57
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against any Borrower,
any Restricted Subsidiary of any Borrower or any other Guarantor under U.S.
federal bankruptcy laws (if against any Borrower, any Restricted Subsidiary of
any Borrower or any other Guarantor the continuation of such proceeding for more
than 60 days), or any Borrower, any Restricted Subsidiary of any Borrower or any
other Guarantor shall make any offer of settlement, extension or composition to
their respective unsecured creditors generally.
10.1.9 Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of any Borrower, any Restricted
Subsidiary of any Borrower or any other Guarantor and such cessation of business
has or would have a Material Adverse Effect; or any Borrower, any Restricted
Subsidiary of any Borrower or any other Guarantor shall suffer the loss or
revocation of any material license or permit now held or hereafter acquired by
any Borrower, any Restricted Subsidiary of any Borrower or any other Guarantor
which is necessary to the continued or lawful operation of its business and such
loss or revocation has or would have a Material Adverse Effect; or any Borrower,
any Restricted Subsidiary of any Borrower or any other Guarantor shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs and such injunction or restraint has or would have a Material Adverse
Effect; or any material lease or agreement pursuant to which any Borrower, any
Restricted Subsidiary of any Borrower or any other Guarantor leases, uses or
occupies any Property shall be canceled or terminated prior to the expiration of
its stated term, except any such lease or agreement the cancellation or
termination of which has not had or would not have a Material Adverse Effect; or
any material portion of the Collateral shall be taken through condemnation or
the value of such Property shall be impaired through condemnation and such
taking or impairment has or would have a Material Adverse Effect.
10.1.10 Change of Ownership. A Change of Control shall have
occurred.
10.1.11 Challenge to Agreement. Any Borrower, any Subsidiary of
Borrower or any other Guarantor, or any Affiliate of any of them, shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Agent.
10.1.12 Repudiation of or Default Under Guaranty Agreement. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
10.1.13 Criminal Forfeiture. Any Borrower, any Subsidiary of
Borrower or any other Guarantor shall be criminally indicted or convicted under
any law (other than misdemeanors not involving any material amount of
potentially forfeited Property) that would reasonably be expected to lead to a
forfeiture of any Property of any Borrower, any Subsidiary of Borrower or any
other Guarantor.
Exhibit 4-A - Page 58
10.1.14 Judgments. Any money judgment, writ of attachment or
similar processes (collectively, "Judgments") are issued or rendered against any
Borrower, any Restricted Subsidiary or TruServ Specialty Company LLC of any
Borrower or any other Guarantor, or any of their respective Property which
Judgment is not stayed, released or discharged within 30 days (i) in the case of
money Judgments, in an amount of $1,000,000 or more for any single Judgment or
$2,500,000 or more for all such Judgments in the aggregate, in each case in
excess of any applicable insurance with respect to which the insurer has
admitted liability, and (ii) in the case of non-monetary Judgments, such
Judgment or Judgments (in the aggregate) could reasonably be expected to have a
Material Adverse Effect.
10.1.15 Payment on Subordinated Debt and Certain Equity Interests.
Any Borrower shall make, or shall permit any Subsidiary to make, any Restricted
Subordinated Debt Payment, any redemption or acquisition of Equity Interests of
its Members or any amortization payments on its Members' equity accounts unless
at the time of such payment and after giving effect thereto (x) no Event of
Default has occurred and is continuing or would result from such payment and (y)
the Fixed Charge Coverage Ratio for the most recently ended twelve-month period
(or, if shorter, the period commencing on September 1, 2003 and ending on the
last day of the most recently ended month) determined on a pro forma basis after
giving effect to any such payment exceeds 1.10 to 1.
10.2 Acceleration of the Obligations.
Upon or at any time after the occurrence and during the continuance of
an Event of Default, (i) the Revolving Loan Commitments shall, at the option of
Agent or Majority Lenders be terminated and/or (ii) Agent or Majority Lenders
may declare all or any portion of the Obligations at once due and payable
without presentment, demand protest or further notice by Agent or any Lender,
and Borrowers shall forthwith pay to Agent, the full amount of such Obligations,
provided, that upon the occurrence of an Event of Default specified in
subsection 10.1.8 hereof, the Revolving Loan Commitments shall automatically be
terminated and all of the Obligations shall become automatically due and
payable, in each case without declaration, notice or demand by Agent or any
Lender.
10.3 Other Remedies.
Upon the occurrence and during the continuance of an Event of Default,
Agent shall have and may exercise from time to time the following other rights
and remedies:
10.3.1 All of the rights and remedies of a secured party under the
UCC or under other applicable law, and all other legal and equitable rights to
which Agent or Lenders may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral,
and to (i) require each Borrower and each of its Restricted Subsidiaries to
assemble the Collateral, at Borrowers'
Exhibit 4-A - Page 59
expense, and make it available to Agent at a place designated by Agent which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of any Borrower or any
Restricted Subsidiary of any Borrower, Borrowers agree not to charge, or permit
any of its Restricted Subsidiaries to charge, Agent for storage thereof).
10.3.3 The right to sell or 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, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Agent, in
its sole discretion, may deem advisable. Agent may, at Agent's option, disclaim
any and all warranties regarding the Collateral in connection with any such
sale. Borrowers agree that 10 days' written notice to Borrowers or any of their
Restricted Subsidiaries of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Agent may designate in said notice. Agent shall have the right to
conduct such sales on any Borrower's or any of its Restricted Subsidiaries'
premises, without charge therefor, and such sales may be adjourned from time to
time in accordance with applicable law. Agent shall have the right to sell,
lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Agent, on behalf of Lenders, may purchase
all or any part of the Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. The proceeds realized from the
sale of any Collateral may be applied, after allowing 2 Business Days for
collection, first to the costs, expenses and attorneys' fees incurred by Agent
in collecting the Obligations, in enforcing the rights of Agent and Lenders
under the Loan Documents and in collecting, retaking, completing, protecting,
removing, storing, advertising for sale, selling and delivering any Collateral,
second to the interest due upon any of the Obligations; and third, subject to
the provisions of the last sentence of subsection 3.4.2, to the principal of the
Obligations. If any deficiency shall arise, each Borrower and each Guarantor
shall remain jointly and severally liable to Agent and Lenders therefor.
10.3.4 For the purposes of enabling Agent to exercise its rights
and remedies hereunder, Agent is hereby granted a license or other right to use,
subject, in the case of names, tradenames, trademarks and any Property of a
similar nature to sufficient quality control and inspection rights in favor of
Borrowers to avoid the risk of invalidation of such Property, to the extent
permitted by law and the terms of any applicable license, without charge, each
Borrower's and each of its Restricted Subsidiaries' labels, patents, copyrights,
licenses, rights of use of any name, trade secrets, trade names, trademarks and
advertising matter, or any Property of a similar nature, as it pertains to the
Collateral, in completing, advertising for sale and selling any Collateral and
each Borrower's and each of its Restricted Subsidiaries' rights under all
licenses and all franchise agreements shall inure to Agent's benefit.
10.3.5 Agent may, at its option, require Borrowers to deposit with
Agent funds equal to the LC Amount and, if Borrowers fail to promptly make such
deposit, Agent may advance such amount as a Revolving Credit Loan (whether or
not an Overadvance is created thereby). Each such Revolving Credit Loan shall be
secured by all of the Collateral and shall constitute a Base Rate Revolving
Portion. Any such deposit or advance shall be held by Agent
Exhibit 4-A - Page 60
as a reserve to fund future payments on such LC Guaranties and future drawings
against such Letters of Credit. At such time as all LC Guaranties have been paid
or terminated and all Letters of Credit have been drawn upon or expired, any
amounts remaining in such reserve shall be applied against any outstanding
Obligations, or, if all Obligations have been indefeasibly paid in full,
returned to Borrowers.
10.4 Setoff and Sharing of Payments.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, during the continuance of any
Event of Default, each Lender is hereby authorized by Borrowers at any time or
from time to time, with prior written consent of Agent and with reasonably
prompt subsequent notice to Borrowers (any prior or contemporaneous notice to
Borrowers being hereby expressly waived) to set off and to appropriate and to
apply any and all (i) balances held by such Lender at any of its offices for the
account of any Borrower or any of its Restricted Subsidiaries (regardless of
whether such balances are then due to a Borrower or its Restricted
Subsidiaries), and (ii) other property at any time held or owing by such Lender
to or for the credit or for the account of any Borrower or any of its Restricted
Subsidiaries, against and on account of any of the Obligations. Any Lender
exercising a right to set off shall, to the extent the amount of any such set
off exceeds its Revolving Loan Percentage of the amount set off, purchase for
cash (and the other Lenders shall sell) interests in each such other Lender's
pro rata share of the Obligations as would be necessary to cause such Lender to
share such excess with each other Lender in accordance with their respective
Revolving Loan Percentages. Each Borrower agrees, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with respect
to amounts in excess of its pro rata share of the Obligations and upon doing so
shall deliver such excess to Agent for the benefit of all Lenders in accordance
with the Revolving Loan Percentages.
10.5 Remedies Cumulative; No Waiver.
All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of Borrowers contained in this Agreement and
the other Loan Documents, or in any document referred to herein or contained in
any agreement supplementary hereto or in any schedule or in any Guaranty
Agreement given to Agent or any Lender or contained in any other agreement
between any Lender and Borrowers or between Agent and Borrowers heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and not
in derogation or substitution of any of the terms, covenants, conditions, or
agreements of Borrowers herein contained. The failure or delay of Agent or any
Lender to require strict performance by Borrowers of any provision of this
Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance, Liens,
rights, powers and remedies, but all such requirements, Liens, rights, powers,
and remedies shall continue in full force and effect until all Loans and other
Obligations owing or to become owing from Borrowers to Agent and each Lender
have been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrowers contained in this Agreement or any of
the other Loan Documents and no Default or Event of Default by Borrowers under
this
Exhibit 4-A - Page 61
Agreement or any other Loan Documents shall be deemed to have been suspended or
waived by Lenders, unless such suspension or waiver is by an instrument in
writing specifying such suspension or waiver and is signed by a duly authorized
representative of Agent and directed to Borrowers.
SECTION 11. AGENT
11.1 Authorization and Action.
Each Lender hereby appoints and authorizes Agent to take such action on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto. Each Lender hereby
acknowledges that Agent shall not have by reason of this Agreement assumed a
fiduciary relationship in respect of any Lender. In performing its functions and
duties under this Agreement, Agent shall act solely as agent of Lenders and
shall not assume, or be deemed to have assumed, any obligation toward, or
relationship of agency or trust with or for, Borrower. As to any matters not
expressly provided for by this Agreement and the other Loan Documents (including
without limitation enforcement and collection of the Notes), Agent may, but
shall not be required to, exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
whenever such instruction shall be requested by Agent or required hereunder, or
a greater or lesser number of Lenders if so required hereunder, and such
instructions shall be binding upon all Lenders; provided, that Agent shall be
fully justified in failing or refusing to take any action which exposes Agent to
any liability or which is contrary to this Agreement, the other Loan Documents
or applicable law, unless Agent is indemnified to its satisfaction by the other
Lenders against any and all liability and expense which it may incur by reason
of taking or continuing to take any such action. If Agent seeks the consent or
approval of the Majority Lenders (or a greater or lesser number of Lenders as
required in this Agreement), with respect to any action hereunder, Agent shall
send notice thereof to each Lender and shall notify each Lender at any time that
the Majority Lenders (or such greater or lesser number of Lenders) have
instructed Agent to act or refrain from acting pursuant hereto.
11.2 Agent's Reliance, Etc.
Neither Agent, any Affiliate of Agent, nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing,
Agent: (i) may treat each Lender party hereto as the holder of Obligations until
Agent receives written notice of the assignment or transfer or such lender's
portion of the Obligations signed by such Lender and in form reasonably
satisfactory to Agent; (ii) 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 of such counsel, accountants or experts; (iii) makes no warranties or
representations to any Lender
Exhibit 4-A - Page 62
and shall not be responsible to any Lender for any recitals, statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Documents; (iv) shall not have any duty beyond Agent's customary
practices in respect of loans in which Agent is the only lender, to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the part of
Borrowers, to inspect the property (including the books and records) of
Borrowers, to monitor the financial condition of Borrowers or to ascertain the
existence or possible existence or continuation of any Default or Event of
Default; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (vi) shall not be liable to any Lender for
any action taken, or inaction, by Agent upon the instructions of Majority
Lenders pursuant to Section 11.1 hereof or refraining to take any action pending
such instructions; (vii) shall not be liable for any apportionment or
distributions of payments made by it in good faith pursuant to Section 3 hereof;
(viii) shall incur no liability under or in respect of this Agreement or the
other Loan Documents by acting upon any notice, consent, certificate, message or
other instrument or writing (which may be by telephone, facsimile, telegram,
cable or telex) believed in good faith by it to be genuine and signed or sent by
the proper party or parties; and (ix) may assume that no Event of Default has
occurred and is continuing, unless Agent has actual knowledge of the Event of
Default, has received notice from Borrowers or Borrowers' independent certified
public accountants stating the nature of the Event of Default, or has received
notice from a Lender stating the nature of the Event of Default and that such
Lender considers the Event of Default to have occurred and to be continuing. In
the event any apportionment or distribution described in clause (vii) above is
determined to have been made in error, the sole recourse of any Person to whom
payment was due but not made shall be to recover from the recipients of such
payments any payment in excess of the amount to which they are determined to
have been entitled.
11.3 Fleet and Affiliates.
With respect to its commitment hereunder to make Loans, Fleet shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
Agent; and the terms "Lender," "Lenders" or "Majority Lenders" shall, unless
otherwise expressly indicated, include Fleet in its individual capacity as a
Lender. Fleet and its Affiliates may lend money to, and generally engage in any
kind of business with, Borrowers, and any Person who may do business with or own
Equity Interests of any Borrower, all as if Fleet were not Agent and without any
duty to account therefor to any other Lender.
11.4 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon Agent or any other Lender and based on the financial statements
referred to herein and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
Exhibit 4-A - Page 63
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Agent
shall not have any duty or responsibility, either initially or on an ongoing
basis, to provide any Lender with any credit or other similar information
regarding Borrowers.
11.5 Indemnification.
Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrowers), in accordance with their respective Aggregate Percentages, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent under this Agreement; provided
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for its ratable share, as set forth above, of any
out-of-pocket expenses (including attorneys' fees) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Borrowers. The
obligations of Lenders under this Section 11.5 shall survive the payment in full
of all Obligations and the termination of this Agreement. If after payment and
distribution of any amount by Agent to Lenders, any Lender or any other Person,
including Borrowers, any creditor of any Borrower, a liquidator, administrator
or trustee in bankruptcy, recovers from Agent any amount found to have been
wrongfully paid to Agent or disbursed by Agent to Lenders, then Lenders, in
accordance with their respective Aggregate Percentages, shall reimburse Agent
for all such amounts.
11.6 Rights and Remedies to Be Exercised by Agent Only.
Each Lender agrees that, except as set forth in Section 10.4, no Lender
shall have any right individually (i) to realize upon the security created by
this Agreement or any other Loan Document, (ii) to enforce any provision of this
Agreement or any other Loan Document, or (iii) to make demand under this
Agreement or any other Loan Document.
11.7 Agency Provisions Relating to Collateral.
Each Lender authorizes and ratifies Agent's entry into this Agreement
and the Security Documents for the benefit of Lenders. Each Lender agrees that
any action taken by Agent with respect to the Collateral in accordance with the
provisions of this Agreement or the Security Documents, and the exercise by
Agent of the powers set forth herein or therein, together with such other powers
as are reasonably incidental thereto, shall be authorized and binding upon all
Lenders. Agent is hereby authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender to take any action
with respect to any Collateral or the
Exhibit 4-A - Page 64
Loan Documents which may be necessary to perfect and maintain perfected Agent's
Liens upon the Collateral, for its benefit and the ratable benefit of Lenders.
Lenders hereby irrevocably authorize Agent, at its option and in its discretion,
to release any Lien granted to or held by Agent upon any Collateral (i) upon
termination of the Agreement and payment and satisfaction of all Obligations; or
(ii) constituting property being sold or disposed of if Borrowers certify to
Agent that the sale or disposition is made in compliance with subsection 8.2.9
hereof (and Agent may rely conclusively on any such certificate, without further
inquiry); or (iii) constituting property in which no Borrower owned any interest
at the time the Lien was granted or at any time thereafter; or (iv) in
connection with any foreclosure sale or other disposition of Collateral after
the occurrence and during the continuation of an Event of Default; or (v) if
approved, authorized or ratified in writing by Agent at the direction of all
Lenders. Upon request by Agent at any time, Lenders will confirm in writing
Agent's authority to release particular types or items of Collateral pursuant
hereto. Agent shall have no obligation whatsoever to any Lender or to any other
Person to assure that the Collateral exists or is owned by any Borrower or is
cared for, protected or insured or has been encumbered or that the Liens granted
to Agent herein or pursuant to the Security Documents have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of its rights, authorities and powers granted or available to
Agent in this Section 11.7 or in any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
sole discretion, but consistent with the provisions of this Agreement, including
given Agent's own interest in the Collateral as a Lender and that Agent shall
have no duty or liability whatsoever to any Lender.
11.8 Agent's Right to Purchase Commitments.
Agent shall have the right, but shall not be obligated, at any time
upon written notice to any Lender and with the consent of such Lender, which may
be granted or withheld in such Lender's sole discretion, to purchase for Agent's
own account all of such Lender's interests in this Agreement, the other Loan
Documents and the Obligations, for the face amount of the outstanding
Obligations owed to such Lender, including without limitation all accrued and
unpaid interest and fees.
11.9 Right of Sale, Assignment, Participations.
Borrowers hereby consent to any Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, such Lender's rights, title, interests,
remedies, powers and duties hereunder or thereunder subject to the terms and
conditions set forth below:
11.9.1 Sales, Assignments. Each Lender hereby agrees that, with
respect to any sale or assignment (i) no such sale or assignment shall be for an
amount of less than $10,000,000, (ii) each such sale or assignment shall be made
on terms and conditions which are
Exhibit 4-A - Page 65
customary in the industry at the time of the transaction, (iii) Agent and, in
the absence of a Default or Event of Default, Borrowers, must consent, such
consent not to be unreasonably withheld, to each such assignment to a Person
that is not an existing Lender, (iv) the assigning Lender shall pay to Agent a
processing and recordation fee of $3,500 and any out-of-pocket attorneys' fees
and expenses incurred by Agent in connection with any such sale or assignment
and (v) Agent, the assigning Lender and the assignee Lender shall each have
executed and delivered an Assignment and Acceptance Agreement. To the extent
Borrowers' consent is not required for the addition of any Lender, Agent shall
notify Borrower of the identity of such new Lender. After such sale or
assignment has been consummated (x) the assignee Lender thereupon shall become a
"Lender" for all purposes of this Agreement and (y) the assigning Lender shall
have no further liability for funding the portion of Revolving Loan Commitments
assumed by such other Lender.
11.9.2 Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other Lender or other lending institution
(a "Participant"), provided that (i) no such participation shall be for an
amount of less than $10,000,000, (ii) no Participant shall thereby acquire any
direct rights under this Agreement, (iii) no Participant shall be granted any
right to consent to any amendment, except to the extent any of the same pertain
to (1) reducing the aggregate principal amount of, or interest rate on, or fees
applicable to, any Loan or (2) extending the final stated maturity of any Loan
or the stated maturity of any portion of any payment of principal of, or
interest or fees applicable to, any of the Loans; provided that the rights
described in this subclause (2) shall not be deemed to include the right to
consent to any amendment with respect to or which has the effect of requiring
any mandatory prepayment of any portion of any Loan or any amendment or waiver
of any Default or Event of Default, (iv) no sale of a participation in
extensions of credit shall in any manner relieve the originating Lender of its
obligations hereunder, (v) the originating Lender shall remain solely
responsible for the performance of such obligations, (vi) Borrowers and Agent
shall continue to deal solely and directly with the originating Lender in
connection with the originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (vii) in no event shall any financial
institution purchasing the participation grant a participation in its
participation interest in the Loans without the prior written consent of Agent,
and, in the absence of a Default or an Event of Default, Borrowers, which
consents shall not unreasonably be withheld and (viii) all amounts payable by
Borrowers hereunder shall be determined as if the originating Lender had not
sold any such participation.
11.9.3 Certain Agreements of Borrowers. Borrowers agree that (i)
they will use commercially reasonable efforts to assist and cooperate with each
Lender in any manner reasonably requested by such Lender to effect the sale of
participation in or assignments of any of the Loan Documents or any portion
thereof or interest therein, including, without limitation, assisting in the
preparation of appropriate disclosure documents and making members of management
available at reasonable times to meet with and answer questions of potential
assignees and Participants; and (ii) subject to the provisions of Section 12.14
hereof, such Lender may disclose credit information regarding Borrowers to any
potential Participant or assignee.
Exhibit 4-A - Page 66
11.9.4 Non U.S. Resident Transferees. If, pursuant to this Section
11.9, any interest in this Agreement or any Loans is transferred to any
transferee which is not a "United States Person," the transferor Lender shall
cause such transferee (other than any Participant), and may cause any
Participant, concurrently with and as a condition precedent to the effectiveness
of such transfer, to (i) represent to the transferor Lender (for the benefit of
the transferor Lender, Agent, and Borrowers) that under applicable law and
treaties no taxes will be required to be withheld by Agent, any Borrowers or the
transferor Lender with respect to any payments to be made to such transferee in
respect of the interest so transferred, (ii) furnish to the transferor Lender,
Agent and Borrowers the appropriate Internal Revenue Service Form (wherein such
transferee claims entitlement to complete exemption from United States federal
withholding tax on all interest payments hereunder), and (iii) agree (for the
benefit of the transferor Lender, Agent and Borrowers) to provide the transferor
Lender, Agent and Borrowers a new Form W-8 upon the obsolescence, expiration or
invalidity of any previously delivered form and comparable statements in
accordance with applicable United States laws and regulations and amendments
duly executed and completed by such transferee, and to comply from time to time
with all applicable United States laws and regulations with regard to such
withholding tax exemption.
11.10 Amendment.
(a) No amendment or waiver of any provision of this Agreement
or any other Loan Document (including without limitation any Note), nor
consent to any departure by Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Majority Lenders and Borrowers, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose
for which given; provided, that no amendment, waiver or consent shall
be effective, unless (i) in writing and signed by each Lender, to do
any of the following: (1) increase or decrease the aggregate Loan
Commitments, or any Lender's Revolving Loan Commitment, (2) reduce the
principal of, or interest on, any amount payable hereunder or under any
Note, reduce the amount of any fees payable to Agent or any Lender
hereunder (excluding fees payable in connection with Product
Obligations, which are negotiated separately), other than those payable
only to Fleet in its capacity as Agent, which may be reduced by Fleet
unilaterally, (3) increase or decrease any interest rate payable
hereunder, (4) postpone any date fixed for any payment of principal of,
or interest on, any amounts payable hereunder or under any Note or any
fees (excluding fees payable in connection with Product Obligations,
which are negotiated separately) payable to Agent or any Lender
hereunder other than those payable only to Fleet in its capacity as
Agent, which may be postponed by Fleet unilaterally, (5) increase any
advance percentage contained in the definition of the term Borrowing
Base, or amend the definitions of Borrowing Base (including the
definitions contained therein), Eligible Accounts or Eligible Inventory
in a manner that makes such definitions more favorable to Borrowers in
any material respect, (6) reduce the number of Lenders that shall be
required for Lenders or any of them to take any action hereunder, (7)
release or discharge any Person liable for the performance of any
obligations of any Borrower hereunder or under any of the Loan
Documents, (8) amend any provision of this Agreement that requires the
consent of all Lenders or consent to or waive any breach thereof, (9)
amend the definition of the term Majority
Exhibit 4-A - Page 67
Lenders or Supermajority Lenders, (10) amend this Section 11.10, (11)
release any substantial portion of the Collateral, unless otherwise
permitted pursuant to Section 11.7 hereof or (12) amend subsection
8.2.19 in any manner that makes the provisions of such subsection more
favorable to Borrowers in any material respect; (ii) in writing and
signed by Supermajority Lenders, Agent and Syndication Agent decrease
(make more favorable to Borrower) the Availability covenant contained
in Exhibit 8.3; or (iii) in writing and signed by Agent in addition to
the Lenders required above to affect the rights or duties of Agent
under this Agreement, any Note or any other Loan Document. If a fee is
to be paid by Borrowers in connection with any waiver or amendment
hereunder, the agreement evidencing such amendment or waiver may, at
the discretion of Agent (but shall not be required to), provide that
only Lenders executing such agreement by a specified date may share in
such fee (and in such case, such fee shall be divided among the
applicable Lenders on a pro rata basis without including the interests
of any Lenders who have not timely executed such agreement).
Notwithstanding anything to the contrary contained herein, Borrowers
shall have the right, from time to time and at any time, to amend
Exhibits 6.1.1, 7.1.5, 7.1.14, 7.1.16, and 7.1.22 by giving written
notice in the manner prescribed in Section 12.8 to Agent, and upon
delivery of such notices, such Exhibits shall be deemed to have been
amended for all purposes hereunder.
(b) If, in connection with any proposed amendment,
modification, termination or waiver of any of the provisions of this
Agreement requiring the consent or approval of all Lenders under
Section 11.10(a), the consent of Majority Lenders is obtained but the
consent of one or more other Lenders whose consent is required to be
obtained is not obtained, then Borrowers shall have the right, so long
as all such non-consenting Lenders are either replaced or prepaid as
described in clauses (i) or (ii) below, to either (i) replace the
non-consenting Lenders with one or more Replacement Lenders pursuant to
subsection 3.8.2 so long as each such Replacement Lender consents to
the proposed amendment, modification, termination or waiver or (ii)
prepay in full the Obligations of the non-consenting Lenders and
terminate the non-consenting Lender's Revolving Loan Commitment in
accordance with subsection 3.8.2.
11.11 Resignation of Agent; Appointment of Successor.
Agent may resign as Agent by giving not less than thirty (30) days'
prior written notice to Lenders and Borrowers. If Agent shall resign under this
Agreement, then, (i) subject to the consent of Borrowers (which consent shall
not be unreasonably withheld and which consent shall not be required during any
period in which a Default or an Event of Default has occurred and is
continuing), Majority Lenders shall appoint from among Lenders a successor agent
for Lenders or (ii) if a successor agent shall not be so appointed and approved
within the thirty (30) day period following Agent's notice to Lenders and
Borrowers of its resignation, then Agent shall appoint a successor agent who
shall serve as Agent until such time as Majority Lenders appoint a successor
agent, subject to Borrowers' consent as set forth above. Upon its appointment,
such successor agent shall succeed to the rights, powers and duties of Agent and
the term "Agent" shall mean such successor 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
Exhibit 4-A - Page 68
such former Agent or any of the parties to this Agreement. After the resignation
of any Agent hereunder, the provisions of this Section 11 shall inure to the
benefit of such former Agent and such former Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or not
taken by it while it was an Agent under this Agreement. A successor Agent must
be a United States Person.
11.12 Audit and Examination Reports; Disclaimer by Lenders.
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each audit or
examination report (each a "Report" and collectively, "Reports")
prepared by or on behalf of Agent, which request Agent shall honor;
(b) expressly agrees and acknowledges that Agent (i) does not
make any representation or warranty as to the accuracy of any Report,
and (ii) shall not be liable for any information contained in any
Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific
information regarding Borrowers and will rely significantly upon
Borrowers' books and records, as well as on representations of
Borrowers' personnel;
(d) agrees to keep all Reports confidential and strictly for
its internal use, and not to distribute except to its participants, or
use any Report in any other manner, in accordance with the provisions
of Section 12.14; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to
hold Agent and any such other Lender preparing a Report harmless from
any action the indemnifying Lender may take or conclusion the
indemnifying Lender may reach or draw from any Report in connection
with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrowers, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or
loans of Borrowers; and (ii) to pay and protect, and indemnify, defend
and hold Agent and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs,
expenses and other amounts (including attorneys' fees and expenses)
incurred by Agent and any such other Lender preparing a Report as the
direct or indirect result of any third parties who might obtain all or
part of any Report through the indemnifying Lender.
11.13 Syndication and Documentation Co-Agents.
The Syndication Agent and Documentation Co-Agents identified in the
introductory paragraph of this Agreement, in their respective capacities as
such, shall have no rights, powers,
Exhibit 4-A - Page 69
duties or responsibilities and no rights, powers, duties or responsibilities
shall be read into this Agreement or any other Loan Document or otherwise exist
on behalf of or against such entity, in their respective capacities as such. If
Syndication Agent or either Co-Documentation Agent resigns, as such agent, no
successor Co-Syndication or Co-Documentation Agent shall be appointed.
11.14 Acknowledgement by Agent.
Agent acknowledges that the Subordination provisions governing the
Member Notes and Redeemable Subordinated Notes as described in TruServ's annual
report contained in Form 10-K for the fiscal year ending December 31, 2002 are
acceptable to it.
SECTION 12. MISCELLANEOUS
12.1 Power of Attorney.
Each Borrower hereby irrevocably designates, makes, constitutes and
appoints Agent (and all Persons designated by Agent) as such Borrower's true and
lawful attorney (and agent-in-fact), solely with respect to the matters set
forth in this Section 12.1, and Agent, or Agent's agent, may, without notice to
any Borrower and in any Borrower's or Agent's name, but at the cost and expense
of Borrowers:
12.1.1 At such time or times as Agent or said agent, in its sole
discretion, may determine, endorse any Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Agent or under Agent's
control.
12.1.2 At such time or times upon or after the occurrence and
during the continuance of an Event of Default (provided that the occurrence of
an Event of Default shall not be required with respect to clauses (iv), (vi),
(viii) and (ix) below), as Agent or its agent in its sole discretion may
determine: (i) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of any Borrower's rights and remedies with respect to the
collection of the Accounts; (ii) settle, adjust, compromise, discharge or
release any of the Accounts or other Collateral or any legal proceedings brought
to collect any of the Accounts or other Collateral; (iii) sell or assign any of
the Accounts and other Collateral upon such terms, for such amounts and at such
time or times as Agent deems advisable, and at Agent's option, with all
warranties regarding the Collateral disclaimed; (iv) subject to the occurrence
and continuation of a Dominion Event or an Event of Default, take control, in
any manner, of any item of payment or proceeds relating to any Collateral; (v)
prepare, file and sign any Borrower's name to a proof of claim in bankruptcy or
similar document against any Account Debtor or to any notice of lien, assignment
or satisfaction of lien or similar document in connection with any of the
Collateral; (vi) subject to the occurrence and continuation of a Dominion Event
or an Event of Default, receive, open and dispose of all mail addressed to any
Borrower and notify postal authorities to change the address for delivery
thereof to such address as Agent may designate; (vii) endorse the name of any
Exhibit 4-A - Page 70
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Agent on account of the Obligations;
(viii) endorse the name of any 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; (ix)
subject to Section 6.2.3, use any Borrower's stationery and sign the name of any
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing
equipment and Computer Hardware and Software relating to the Accounts,
Inventory, Equipment and any other Collateral; (xi) make and adjust claims under
policies of insurance; and (xii) do all other acts and things necessary, in
Agent's determination, to fulfill any Borrower's obligations under this
Agreement.
The power of attorney granted hereby shall constitute a power
coupled with an interest and shall be irrevocable until the Obligations (other
than Contingent and Collateralized Obligations) and this Agreement has been
terminated.
12.2 Indemnity.
Each Borrower hereby agrees to indemnify Agent and each Lender (and
each of their Affiliates) and hold Agent and each Lender (and each of their
Affiliates) harmless from and against any liability, loss, damage, suit, action
or proceeding ever suffered or incurred by any such Person (including reasonable
attorneys' fees and legal expenses) as the result of such Borrower's failure to
observe, perform or discharge such Borrower's duties hereunder. In addition,
each Borrower shall defend Agent and each Lender (and each of their Affiliates)
against and save it harmless from all claims of any Person with respect to the
Collateral (except those resulting from the gross negligence or intentional
misconduct of Agent, any Lender or any Affiliate of Agent or any Lender, as
applicable). Without limiting the generality of the foregoing, these indemnities
shall extend to any claims asserted against Agent or any Lender (and each of
their Affiliates) by any Person under any Environmental Laws by reason of any
Borrower's or any other Person's failure to comply with laws applicable to solid
or hazardous waste materials or other toxic substances. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrowers under this
Section 12.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
12.3 Sale of Interest.
No Borrower may sell, assign or transfer any interest in this
Agreement, any of the other Loan Documents, or any of the Obligations, or any
portion thereof, including, without limitation, such Borrower's rights, title,
interests, remedies, powers and duties hereunder or thereunder.
12.4 Severability.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
Exhibit 4-A - Page 71
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.5 Successors and Assigns.
This Agreement, the Other Agreements and the Security Documents shall
be binding upon and inure to the benefit of the successors and assigns of each
Borrower, Agent and each Lender permitted under Section 11.9 hereof.
12.6 Cumulative Effect; Conflict of Terms.
The provisions of the Other Agreements and the Security Documents are
hereby made cumulative with the provisions of this Agreement. Except as
otherwise provided in any of the other Loan Documents by specific reference to
the applicable provision of this Agreement, if any provision contained in this
Agreement is in direct conflict with, or inconsistent with, any provision in any
of the other Loan Documents, the provision contained in this Agreement shall
govern and control.
12.7 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 and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
12.8 Notice.
Except as otherwise provided herein, all notices, requests and demands
to or upon a party hereto, to be effective, shall be in writing, and shall be
sent by certified or registered mail, return receipt requested, by personal
delivery against receipt, by overnight courier or by facsimile and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given, delivered or received immediately when delivered against receipt,
three (3) Business Days' after deposit in the mail, postage prepaid, one (1)
Business Day after deposit with an overnight courier or, in the case of
facsimile notice, when sent with respect to machine confirmed, addressed as
follows:
(A) If to Agent: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Exhibit 4-A - Page 72
With a copy to: Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrowers: c/o
TruServ Corporation
World Headquarters
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President &Treasurer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois)
Suite 2300
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(C) If to any Lender, at its address indicated on the signature pages
hereof or in an Assignment and Acceptance Agreement,
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; provided, however, that any notice,
request or demand to or upon Agent or a Lender pursuant to subsection 3.1.1 or
4.2.2 hereof shall not be effective until received by Agent or such Lender.
12.9 Consent.
Whenever Agent's, Majority Lenders', Supermajority's or all Lenders'
consent is required to be obtained under this Agreement, any of the Other
Agreements or any of the Security Documents as a condition to any action,
inaction, condition or event, except as otherwise specifically provided herein,
Agent, Majority Lenders, Supermajority Lenders or all Lenders, as applicable,
shall be authorized to give or withhold such consent in its or their sole and
absolute discretion and to condition its or their consent upon the giving of
additional Collateral security for the Obligations, the payment of money or any
other matter.
12.10 Credit Inquiries.
Borrowers hereby authorize and permit Agent and each Lender to respond
to usual and customary credit inquiries from third parties concerning any
Borrower or any of its Restricted Subsidiaries.
Exhibit 4-A - Page 73
12.11 Time of Essence.
Time is of the essence of this Agreement, the Other Agreements and the
Security Documents.
12.12 Entire Agreement.
This Agreement and the other Loan Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written.
12.13 Interpretation.
No provision of this Agreement or any of the other Loan Documents shall
be construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such provision.
12.14 Confidentiality.
Agent and each Lender shall hold all nonpublic information obtained
pursuant to the requirements of this Agreement in accordance with Agent's and
such Lender's customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure reasonably required by a prospective participant or assignee
in connection with the contemplated participation or assignment or as required
or requested by any governmental authority or representative thereof or pursuant
to legal process and shall require any such participant or assignee to agree to
comply with this Section 12.14. Notwithstanding the foregoing or anything
contained in any Loan Document to the contrary, the parties (and each employee,
representative, or other agent of the parties) may disclose to any and all
persons, without limitation of any kind, the tax treatment and any facts that
may be relevant to the tax structure of the transactions contemplated by this
Agreement, provided, however, that no party (and no employee, representative, or
other agent thereof) shall disclose any other information that is not relevant
to understanding the tax treatment and tax structure of such transactions
(including the identity of any party and any information that could lead another
to determine the identity of any party), or any other information to the extent
that such disclosure could result in a violation of any federal or state
securities law.
12.15 GOVERNING LAW; CONSENT TO FORUM.
THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED IN AND SHALL
BE DEEMED TO HAVE BEEN MADE IN CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS;
PROVIDED,
Exhibit 4-A - Page 74
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN ILLINOIS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD,
MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT'S LIEN UPON SUCH COLLATERAL AND
THE ENFORCEMENT OF AGENT'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED,
AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS
OF ANY BORROWER, AGENT OR ANY LENDER, EACH BORROWER HEREBY CONSENTS AND AGREES
THAT THE CIRCUIT COURT OF ▇▇▇▇ COUNTY, ILLINOIS, OR, AT AGENT'S OPTION, THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN
DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN BORROWERS ON THE ONE HAND AND AGENT OR ANY LENDER ON THE OTHER
HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO
THIS AGREEMENT. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
BORROWER HEREBY WAIVES ANY OBJECTION WHICH ANY BORROWER MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWERS' ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY
LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
12.16 WAIVERS BY BORROWERS.
EACH BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND
EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE
Exhibit 4-A - Page 75
COLLATERAL; (II) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS , CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT
OR ANY LENDER ON WHICH BORROWERS MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES
AND CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS REGARD; (III) NOTICE
PRIOR TO AGENT'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING AGENT TO
EXERCISE ANY OF AGENT'S REMEDIES; (IV) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; (v) NOTICE OF ACCEPTANCE HEREOF; AND (VI)
EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM OR RECOVER ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S ENTERING INTO
THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12.17 Advertisement.
Borrowers hereby authorize Agent to publish the name of Borrowers and
the amount of the credit facility provided hereunder in any "tombstone" or
comparable advertisement which Agent elects to publish.
12.18 Reimbursement.
The undertaking by Borrowers to repay the Obligations and each
representation, warranty or covenant of each Borrower are and shall be joint and
several. To the extent that any Borrower shall be required to pay a portion of
the Obligations which shall exceed the amount of loans, advances or other
extensions of credit received by such Borrower and all interest, costs, fees and
expenses attributable to such loans, advances or other extensions of credit,
then such Borrower shall be reimbursed by the other Borrowers for the amount of
such excess. This Section 12.18 is intended only to define the relative rights
of Borrowers, and nothing set forth in Section 12.18 is intended or shall impair
the obligations of each Borrower, jointly and severally, to pay to Agent and
Lenders the Obligations as and when the same shall become due and payable in
accordance with the terms hereof. Each Borrower acknowledges and agrees that any
reimbursement right it may have against any other Borrower is subordinate to the
payment and discharge of the
Exhibit 4-A - Page 76
Obligations in full. No Borrower shall exercise any rights which it may have
acquired pursuant to this Section 12.18 nor shall such Borrower seek any
reimbursement from any other Borrower unless and until all of the Obligations
shall have been paid to Agent and Lenders and discharged, in full, and if any
payment shall be made to any such Borrower on account of such reimbursement
rights at any time when the Obligations shall not have been paid and discharged,
in full each and every amount so paid shall forthwith be paid to Agent and
Lenders to be credited and applied against the Obligations, whether matured or
unmatured. Notwithstanding anything to the contrary set forth in this Section
12.18 or any other provisions of this Agreement, it is the intent of the parties
hereto that the liability incurred by each Borrower in respect of the
Obligations of the other Borrowers (and any Lien granted by each Borrower to
secure such Obligations), not constitute a fraudulent conveyance or fraudulent
transfer under the provisions of any applicable law of any state or other
governmental unit ("Fraudulent Conveyance"). Consequently, each Borrower, Agent
and each Lender hereby agree that if a court of competent jurisdiction
determines that the incurrence of liability by any Borrower in respect of the
Obligations of any other Borrower (or any Liens granted by such Borrower to
secure such Obligations) would, but for the application of this sentence,
constitute a Fraudulent Conveyance, such liability (and such Liens) shall be
valid and enforceable only to the maximum extent that would not cause the same
to constitute a Fraudulent Conveyance, and this Agreement and the other Loan
Documents shall automatically be deemed to have been amended accordingly, nunc
pro tunc.
12.19 Register.
Agent shall maintain a register (the "Register") for the registration
or transfer of the Obligations, and shall enter the names and addresses of the
registered holders of the Obligations, the transfers of the Obligations and the
names and addresses of the transferees of the Obligations. Each Lender shall be
provided reasonable opportunities to inspect the Register from time to time.
Borrowers shall treat any registered holder as the absolute owner of any
Obligations held by such holder, as indicated in the Register, for the purpose
of receiving payment of all amounts payable with respect to such Obligation and
for all other purposes. The Obligations and Letters of Credit are registered
obligations and the right, title, and interest of any Lender or Issuer, as the
case may be, and their assignees in and to such Obligations or Letters of Credit
as the case may be, shall be transferable only upon notation of such transfer in
the Register. Solely for purposes of this Section 12.19 and for tax purposes
only, Agent shall be Borrowers' agent for purposes of maintaining the Register.
This Section 12.19 shall be construed so that the Loans and Letters of Credit
are at all times maintained in "registered form" within the meaning of Sections
163(f), 871(h)(2) and 881(c)(2) of the IRC Code and any related regulations (and
any other relevant or successor provisions of the IRC Code or such regulations).
(SIGNATURE PAGE FOLLOWS)
Exhibit 4-A - Page 77
(SIGNATURE PAGE TO
LOAN AND SECURITY AGREEMENT)
IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year specified at the beginning of this Agreement.
TRUSERV CORPORATION, as a Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: Vice President and Treasurer
-------------------------------
TRUSERV ACCEPTANCE COMPANY, as a Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: Vice President and Treasurer
-----------------------------
TRUSERV LOGISTICS COMPANY, as a Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Vice President and Treasurer
------------------------------
GENERAL PAINT & MANUFACTURING COMPANY,
as a Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: Vice President and Treasurer
-----------------------------
Exhibit 4-A - Page 78
TRUE ▇▇▇▇▇.▇▇▇ CORPORATION, as a Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Vice President and Treasurer
------------------------------
FLEET CAPITAL CORPORATION,
as Agent and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Title: Senior Vice President
-----------------------------
Revolving Loan Commitment: $50,000,000
BANK OF AMERICA, N.A.,
as Syndication Agent and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------
Title: Vice President
-----------------------------
Revolving Loan Commitment: $50,000,000
Address:
Bank America, N.A.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile No.:312.974.8780
Exhibit 4-A - Page 79
▇▇▇▇▇▇▇ ▇▇▇▇▇ CAPITAL, a Division of ▇▇▇▇▇▇▇
▇▇▇▇▇ Business Financial Services, Inc., as
Co-Documentation Agent and as a Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Assistant Vice President
-------------------------------
Revolving Loan Commitment: $45,000,000
Address:
▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital, a Division of ▇▇▇▇▇▇▇
▇▇▇▇▇ Business
Financial Services, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Facsimile No.: 312.499.3245
LASALLE BUSINESS CREDIT, LLC, as
Co-Documentation Agent and as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: Vice President
-------------------------------
Revolving Loan Commitment: $40,000,000
Address:
LaSalle Business Credit, LLC
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: 312.904.6450
Exhibit 4-A - Page 80
CONGRESS FINANCIAL CORPORATION (CENTRAL),
as Co-Documentation Agent and as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: Senior Vice President
--------------------------------
Revolving Loan Commitment: $50,000,000
Address:
Congress Financial Corporation (Central)
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: 312.332.0424
THE CIT GROUP/BUSINESS CREDIT, INC., as a
Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
-------------------------------
Revolving Loan Commitment: $25,000,000
Address:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: 312.424.9740
Exhibit 4-A - Page 81
M & I ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ BANK, as a Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: Vice President
-------------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Vice President
------------------------------
Revolving Loan Commitment: $15,000,000.00
Address:
M&I ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: 414.765.7625
Exhibit 4-A - Page 82
APPENDIX A
GENERAL DEFINITIONS
When used in the
Loan and Security Agreement dated as of August 29,
2003, by and among Fleet Capital Corporation, individually and as Agent, Bank of
America, N.A., as Syndication Agent, and Congress Financial Corporation
(Central), ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital, a Division of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial
Services, Inc. and LaSalle Business Credit, LLC, as Co-Documentation Agents, the
other financial institutions which are or become parties thereto and
TruServ
Corporation, TruServ Acceptance Company, TruServ Logistics Company, General
Paint & Manufacturing Company and True ▇▇▇▇▇.▇▇▇ Corporation (a) the terms
Account, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit
Account, Document, Electronic Chattel Paper, Equipment, Financial Asset,
Fixture, General Intangibles, Goods, Instruments, Inventory, Investment
Property, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Security,
Security Entitlement, Software, Supporting Obligations, Tangible Chattel Paper
and Uncertificated Security have the respective meanings assigned thereto under
the UCC; (b) all terms reflecting Collateral having the meanings assigned
thereto under the UCC shall be deemed to mean such Property, whether now owned
or hereafter created or acquired by any Borrower or in which such Borrower now
has or hereafter acquires any interest; (c) capitalized terms which are not
otherwise defined have the respective meanings assigned thereto in said
Loan and
Security Agreement; and (d) the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of any Account, Contract Right, Chattel Paper or General Intangible.
Affected Lender - as defined in subsection 3.8.2 of the Agreement.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; (ii) which beneficially owns or holds
10% or more of any class of the Equity Interests of a Person; or (iii) 10% or
more of the Equity Interests (or in the case of a Person which is not a
corporation, 10% or more of the Equity Interests) of which is beneficially owned
or held by a Person or a Subsidiary of a Person.
Agent - Fleet Capital Corporation in its capacity as agent for the
Lenders under the Agreement and any successor in that capacity appointed
pursuant to subsection 11.11 of the Agreement.
Agent Loans - as defined in subsection 1.1.5 of the Agreement.
Aggregate Percentage - with respect to each Lender, the percentage
equal to the quotient of (i) such Lender's Loan Commitment divided by (ii) the
aggregate of all Loan Commitments.
Agreement - the
Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits and Schedules thereto and this
Appendix A, as each of the same may be amended, supplemented, extended, renewed
or otherwise modified from time to time.
A-1
ALTA Survey - a survey prepared in accordance with the standards
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1997, known as the "Minimum Standard Detail
Requirements of Land Title Surveys". The ALTA Survey shall be in sufficient form
to satisfy the requirements of Chicago Title Insurance Company to provide
extended coverage over survey defects and shall also show the location of all
easements, utilities, and covenants of record, dimensions of all improvements,
encroachments from any adjoining property, and certify as to the location of any
flood plain area affecting the subject real estate. The ALTA Survey shall
contain the following certification: "To [Name of Applicable Borrower], Fleet
Capital Corporation, as Agent, and Chicago Title Insurance Company. This is to
certify that this map of plat and the survey on which it is based were made in
accordance with the "Minimum Standard Detail Requirements for Land Title
Surveys" jointly established and adopted by ALTA and ACSM in 1997. (signed
(SEAL) License No. __________".
Applicable Margin - from the Closing Date to, but not including, the
first Adjustment Date (as hereinafter defined) the percentages set forth below
with respect to the Base Rate Revolving Portion, the LIBOR Revolving Portion,
and the Unused Line Fee:
Base Rate Revolving Portion 0.25%
LIBOR Revolving Portion 2.25%
Unused Line Fee 0.375%
The percentages set forth above will be adjusted on the first day of
the month following delivery by Borrowers to Agent of the financial statements
required to be delivered pursuant to subsection 8.1.3(ii) of the Agreement for
TruServ's fiscal quarters ending in each March, June, September and December
within the Term hereof, commencing with the fiscal quarter ending in March, 2004
(each such date an "Adjustment Date"), effective prospectively, by reference to
the applicable "Financial Measurement" (as defined below) for the Applicable
Margin Period most recently ending in accordance with the following:
Base Rate LIBOR Revolving Unused Line
Financial Measurement Revolving Portion Portion Fee
--------------------- ----------------- --------------- -----------
(greater than or equal to) 2.00 to 1 0% 2.00% 0.375%
(less than) 2.00 to 1, but
(greater than or equal to) 1.35 to 1 0.25% 2.25% 0.375%
(less than) 1.35% to 1, but
(greater than or equal to) 1.15 to 1 0.50% 2.50% 0.375%
(less than) 1.15 to 1 0.75% 2.75% 0.50%
provided that, (i) if TruServ's audited financial statements for any fiscal year
delivered pursuant to subsection 8.1.3(i) of the Agreement reflect a Financial
Measurement that yields a higher Applicable Margin than that yielded by the
monthly financial statements previously delivered pursuant to subsection
8.1.3(ii) of the Agreement for the last month of such fiscal year, the
Applicable Margin shall be readjusted retroactively for the period that was
incorrectly calculated
A-2
and (ii) if Borrowers fail to deliver the financial statements required to be
delivered pursuant to subsection 8.1.3(i) or subsection 8.1.3(ii) of the
Agreement on or before the due date thereof, the Applicable Margin shall
automatically adjust to the highest Applicable Margin set forth above, effective
prospectively from such due date until the earlier of the date on which the
applicable financial statements are delivered or the next Adjustment Date. For
purposes hereof, "Financial Measurement" shall mean the Fixed Charge Coverage
Ratio.
Applicable Margin Period - (x) for the fiscal quarter of TruServ ending
in March, 2004, the two fiscal quarters most recently ending, (y) for the fiscal
quarter of TruServ ending in June, 2004, the three fiscal quarters most recently
ending and (z) for the fiscal quarter ending in September, 2004 and each
subsequent fiscal quarter within the Term hereof, the four fiscal quarters most
recently ending.
Assignment and Acceptance Agreement - an assignment and acceptance
agreement in form and content reasonably acceptable to Agent pursuant to which a
Lender assigns to another Lender all or any portion of any of such Lender's
Revolving Loan Commitment, as permitted pursuant to the terms of this Agreement.
Availability - as of any date, the amount of additional money which
Borrowers are entitled to borrow from time to time as Revolving Credit Loans,
such amount being the difference derived when the sum of (x) the principal
amount of Revolving Credit Loans then outstanding (including any amounts which
Agent or any Lender may have paid for the account of any Borrower pursuant to
any of the Loan Documents and which have not been reimbursed by Borrowers), plus
(y) to the extent not taken into account in the determination of the Borrowing
Base, the LC Amount and, without duplication, outstanding LC Obligations, plus
(z) to the extent not taken into account in the determination of the Borrowing
Base, the amount of any reserves established by Agent in accordance with the
terms of this Agreement is subtracted from the Borrowing Base. For purposes of
this definition, the Borrowing Base shall be determined by reference to the most
recently delivered Borrowing Base Certificate. If the amount outstanding is
equal to or greater than the Borrowing Base, Availability is 0.
Bank - Fleet National Bank.
Base Rate - the higher of (i) the rate of interest announced or quoted
by Bank from time to time as its prime rate for commercial loans, whether or not
such rate is the lowest rate charged by Bank to its most preferred borrowers;
and, if such prime rate for commercial loans is discontinued by Bank as a
standard, a comparable reference rate designated by Bank as a substitute
therefor shall be the prime rate; and (ii) the Federal Funds Effective Rate as
in effect from time to time plus 0.5%.
Base Rate Portion - a Base Rate Revolving Portion.
Base Rate Revolving Portion - that portion of the Revolving Credit
Loans that is not subject to a LIBOR Option.
B of A LCs - those certain letters of credit outstanding as of the
Closing Date issued by Bank of America, N.A. (or an Affiliate thereof) for the
benefit of TruServ or another Borrower in the face amount of $12,095,861.49.
A-3
Borrower Representative - TruServ.
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(i) the Revolving Credit Maximum Amount; or
(ii) an amount equal to the sum of
(a) 85% of the net amount of Eligible Accounts outstanding at
such date; plus
(b) the least of
(1) $160,000,000,
(2) 65% of the value of Eligible Inventory (other than that
portion of Eligible Inventory consisting of Eligible On-Water
Inventory) on such date plus the lesser of (x) the "Maximum
On-Water Amount" (as defined below) or (y) 65% of the value of
Eligible On-Water Inventory on such date and
(3) 85% (90% during the Seasonal Advance Months) of the Net
Appraised Orderly Liquidation Value of Eligible Inventory at such
date plus
(c) an amount (the "Fixed Asset Sublimit") the lesser of (i)
$25,000,000 or (ii) the sum of (x) the product of the Equipment Percentage
multiplied by 80% multiplied by the Net Appraisal Orderly Liquidation Value of
Borrowers' Equipment plus (y) the product of the Real Property Percentage
multiplied by 65% of the Net Appraised Fair Market Value of Borrowers' real
Property.
For purposes hereof, (1) the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at Agent's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any time
issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time, (2) the amount of Eligible Inventory
shall be determined on a first-in, first-out, lower of cost or market basis in
accordance with GAAP and (3) the Maximum On-Water Amount shall be equal to (i)
$20,000,000 from the date of this Agreement until December 31, 2003, (ii)
$27,000,000 from January 1, 2004 to December 31, 2004, (iii) $34,000,000 from
January 1, 2005 to December 31, 2005 and (iv) $40,000,000 from January 1, 2006
until the last day of the Term.
Borrowing Base Certificate - a certificate by a responsible officer of
Borrower Representative, on its own behalf and on behalf of all other Borrowers,
substantially in the form of Exhibit 8.1.4 (or another form reasonably
acceptable to Agent) setting forth the calculation of the Borrowing Base,
including a calculation of each component thereof, all in such detail as shall
be reasonably satisfactory to Agent. All calculations of the Borrowing Base in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by Borrowers and certified to Agent; provided, that Agent
shall have the right to review and adjust, in the exercise of its reasonable
judgment, any such calculation after giving notice thereof to Borrowers and
A-4
after discussing such adjustment with Borrowers, (1) to reflect its reasonable
estimate of declines in value of any of the Collateral described therein, and
(2) to the extent that Agent determines that such calculation is not in
accordance with this Agreement.
Business Day - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of Wisconsin or the State of
Illinois or is a day on which banking institutions located in either of such
states are closed; provided that with respect to LIBOR Revolving Portions,
Business Day shall also exclude any day that is not a London Banking Day.
Capital Expenditures - expenditures made for the acquisition of any
fixed assets or improvements, replacements, substitutions or additions thereto
which have a useful life of more than one year, including the total principal
portion of Capitalized Lease Obligations payable within the applicable fiscal
year or other period being measured; provided that (x) expenditures incurred to
replace assets damaged, destroyed or taken by a governmental authority with
insurance, eminent domain or condemnation proceeds or awards and (y)
expenditures of proceeds of sales of assets for like kind items replacing such
asset or assets shall not constitute Capital Expenditures hereunder.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Cash Equivalents - shall mean (i) securities issued directly or fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
(or foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits and Eurodollar certificates of deposit of (y) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $250,000,000 or (z) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from ▇▇▇▇▇'▇ is at least
P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each case
with maturities of not more than one year from the date of acquisition, (iii)
commercial paper and variable or fixed rate notes issued by any Approved Bank
(or by the parent company thereof) or any commercial paper or variable rate
notes issued by, or guaranteed by any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within nine months of the date of acquisition,
(iv) repurchase agreements with a bank or trust company (including a Lender) or
a recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America, (v) obligations of any state of the United States or any
political subdivision thereof rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's having maturities of
not more than one year from the date of acquisition thereof, and (vi) auction
preferred stock rated in the highest short-term credit rating category by S&P or
Moody's.
Change of Control - means the occurrence of any of the following
events: (i) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of TruServ, together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of TruServ was approved by a
A-5
vote of at least a majority of the directors of TruServ then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved (each, an "approved
director"), cease for any reason to constitute a majority of the Board of
Directors of TruServ then in office, unless such occurrence is caused by the
death, disability or resignation of any approved director who is replaced within
one hundred eighty (180) days (one hundred twenty (120) days if two or more
seats are so vacant) of such occurrence; or (ii) at any time a majority of the
Board of Directors of TruServ consists of Members (unless such occurrence is
caused by the death, disability or resignation of any outside director who is
replaced within one hundred eighty (180) days (one hundred twenty (120) days if
two or more seats are so vacant) of such occurrence and, as a result of such
replacement, the Members no longer constitute a majority of the Board of
Directors of TruServ); or (iii) 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 TruServ to
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act); or (iv) the adoption by the Members of TruServ of a plan for the
liquidation or dissolution of TruServ.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied or waived and the initial Loan is made
or the initial Letter of Credit or LC Guaranty is issued under the Agreement.
Closing Reserve - a reserve established by Agent on the Closing Date in
the amount of $4,900,000 for Distributions or Subordinated Debt Payments. After
the Closing, the Closing Reserve shall be reduced on a dollar-for-dollar basis
for any such payment of cash patronage dividends, interest or principal on
Member Notes or Subordinated Redeemable Notes or Class A or Class B Common Stock
repurchases. Once the amount of the Closing Reserve is reduced to $0, there
shall be no further reduction to the Closing Reserve.
Collateral - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
Collateral Access Agreement - means an agreement in form and substance
reasonably satisfactory to Agent pursuant to which a mortgagee or lessor of real
Property on which Collateral is stored or otherwise located, a warehouseman,
processor or other bailee of Inventory or a Customs Broker, acknowledges the
Liens of Agent and waives or subordinates any Liens held by such Person on such
property, and, in the case of any such agreement with a mortgagee or lessor,
permits the Agent access to and use of such real Property for a reasonable
amount of time following the occurrence and during the continuance of an Event
of Default to assemble, complete and sell any Collateral stored or otherwise
located thereon, and in the case of a Customs Broker agrees to such terms and
conditions as Agent may reasonably require including, but not limited to, acting
as agent for the Agent with regard to bills of lading and documents of title.
The forms of Collateral Access Agreement delivered by Agent to Borrowers on or
before the Closing Date are acceptable to Agent.
Compliance Certificate - as defined in subsection 8.1.3 of the
Agreement.
A-6
Computer Hardware and Software - all of any Borrower's rights
(including rights as licensee and lessee) with respect to (i) computer and other
electronic data processing hardware, including all integrated computer systems,
central processing units, memory units, display terminals, printers, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware; (ii) all Software and
all software programs designed for use on the computers and electronic data
processing hardware described in clause (i) above, including all operating
system software, utilities and application programs in any form (source code and
object code in magnetic tape, disk or hard copy format or any other listings
whatsoever); (iii) any firmware associated with any of the foregoing; and (iv)
any documentation for hardware, Software and firmware described in clauses (i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals,
specifications, training materials, charts and pseudo codes.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Contingent and Collateralized Obligations - collectively, contingent
indemnification Obligations, letter of credit reimbursement Obligations, cash
collateralized as provided in Section 4.2.2 and other costs, expenses or other
Obligations (including, without limitation, Product Obligations) not specified
in a final payoff letter delivered by Agent to Borrowers.
Contract Right - any right of any Borrower to payment under a contract
for the sale or lease of goods or the rendering of services, which right is at
the time not yet earned by performance.
Copyright Security Agreement - the Copyright and License Security
Agreement(s) to be executed by each applicable Borrower on or about the Closing
Date in favor of Agent for its benefit and the benefit of Lenders pursuant to
the priorities provided for in the Agreement, as such Copyright and License
Security Agreement has been or will be amended, supplemented, extended, renewed
or otherwise modified from time to time.
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets shown
on a balance sheet at such date in accordance with GAAP.
Customs Broker - means any Person selected by any Borrower after
written notice by such Loan Party to Agent who is reasonably acceptable to Agent
(United Parcel Services, Inc. is acceptable to Agent) to perform port of entry
services to process Inventory imported by such Borrower, from outside the United
States of America and to supply facilities, labor and materials to such Borrower
in connection therewith.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Derivative Obligations - every obligation of a Person under any forward
contract, futures contract, exchange contract, swap, option or other financing
agreement or arrangement
A-7
(including, without limitation, caps, floors, collars and similar agreement),
the value of which is dependent upon interest rates, currency exchange rates,
commodities or other indices.
Distribution - in respect of any Person means and includes: (i) the
payment of any dividends or other distributions on Equity Interests (except
distributions in such Equity Interests) and (ii) the redemption or acquisition
of Equity Interests of such Person, as the case may be, unless made
contemporaneously from the net proceeds of the sale of Equity Interests. Amounts
paid pursuant to the settlement agreement entered into in connection with the
▇▇▇▇▇▇ Litigation shall not constitute Distributions. For avoidance of doubt,
(i) any payment made by any Borrower in connection with the settlement of any
bona fide commercial dispute with any former Member shall not constitute a
Distribution and (ii) the adjustment of a Member's loss allocation account,
without payment, in cash or in kind, to such Member shall not constitute a
Distribution.
Dominion Account - a special bank account or accounts of Agent or of
any Borrower for the benefit of Agent established by Borrowers or any one of
them pursuant to subsection 6.2.4 of the Agreement at banks selected by Borrower
Representative, but acceptable to Agent in its reasonable discretion, and over
which Agent shall have control.
Dominion Event - as defined in subsection 6.2.4 of the Agreement.
Eligible Account - an Account arising in the ordinary course of the
business of any Borrower from the sale of goods or rendition of services which
Agent, in the reasonable exercise of its credit judgment, deems to be an
Eligible Account. Without limiting the generality of the foregoing, no Account
shall be an Eligible Account if:
(i) it arises out of a sale made or services rendered by a Borrower to
a Subsidiary of a Borrower or an Affiliate of a Borrower or to a Person
controlled by an Affiliate of a Borrower; or
(ii) it remains unpaid after the earlier of (x) 180 days after the
original invoice date shown on the invoice and (y) 60 days after the original
due date shown on the invoice; or
(iii) the total unpaid Accounts of the Account Debtor exceed 10% of the
net amount of all Eligible Accounts, but only to the extent of such excess; or
(iv) any representation or warranty including, without limitation,
those contained in subsection 7.1.8, contained in the Agreement with respect to
such Account has been breached; or
(v) the Account Debtor is also a creditor or supplier of a Borrower or
any Subsidiary of a Borrower, or the Account Debtor has disputed liability with
respect to such Account, or the Account Debtor has made any claim with respect
to any other Account due from such Account Debtor to a Borrower or any
Subsidiary of a Borrower which claim exceeds the amount of such other Account,
or the Account otherwise is or may become subject to right of setoff by the
Account Debtor, provided, that any such Account shall be eligible to the extent
such amount thereof exceeds such contract, dispute, excess claim, setoff or
similar right; or
(vi) the Account Debtor is a Member of TruServ which is the holder
and/or owner of a Member Note and/or equity interest in TruServ; provided that
any such Account shall be eligible to the extent thereof exceeds the principal
amount of such Member's Member Note(s) plus the
A-8
aggregate Net Equity Value of such Member's shares of TruServ's Class A and
Class B common stock; or
(vii) the Account Debtor is an Inactive Member; or
(viii) the Account Debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other petition or other application for
relief under the federal bankruptcy laws, as now constituted or hereafter
amended, has been filed against the Account Debtor, or if the Account Debtor has
failed, suspended business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or
a significant portion of its assets or affairs; or
(ix) it arises from a sale made or services rendered to an Account
Debtor outside the United States, unless the sale is either (1) to an Account
Debtor located in Ontario or any other province of Canada in which the Personal
Property Security Act has been adopted in substantially the same form as
currently in effect in Ontario or (2) on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its reasonable judgment;
or
(x) (1) it arises from a sale to the Account Debtor on a ▇▇▇▇-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment, or any other
repurchase or return basis; or (2) it is subject to a reserve established by a
Borrower for potential returns or refunds, to the extent of such reserve; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the applicable Borrower
assigns its right to payment of such Account to Agent, in a manner satisfactory
to Agent, in its reasonable credit judgment, so as to comply with the Assignment
of Claims Act of 1940 (31 U.S.C. Section 203 et seq., as amended); or
(xii) it is not at all times subject to Agent's duly perfected, first
priority security interest or is subject to a Lien that is not a Permitted Lien;
or
(xiii) the goods giving rise to such Account have not been delivered to
and accepted by the Account Debtor or the services giving rise to such Account
have not been performed by the applicable Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument of any
kind, or has been reduced to judgment; or
(xv) Any Borrower or a Subsidiary of any Borrower has made any
agreement with the Account Debtor for any extension, compromise, settlement or
modification of the Account or deduction therefrom, except for discounts or
allowances which are made in the ordinary course of business for prompt payment
and which discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or
A-9
(xvi) 25% or more of the Accounts owing from the Account Debtor are not
Eligible Accounts hereunder or any of the Accounts owing from the Account Debtor
have been sold for collection purposes; or
(xvii) any Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof.
Eligible Inventory - Inventory of any Borrower (other than packaging
materials and supplies, tooling, samples and literature); which Agent, in its
reasonable credit judgment deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory if:
(i) it is not in good, new and saleable condition; or
(ii) it is slow-moving, obsolete or unmerchantable; or
(iii) it does not meet all standards imposed by any governmental
agency or authority; or
(iv) it does not conform in all respects to any covenants, warranties
and representations set forth in the Agreement; or
(v) it is not at all times subject to Agent's duly perfected, first
priority security interest (subject to Permitted Liens) or is subject to a Lien
that is not a Permitted Lien; or
(vi) it is not situated at a location in compliance with the
Agreement, provided that Inventory situated at a location not owned by such
Borrower will be Eligible Inventory only if Agent has received a satisfactory
Collateral Access Agreement in a form substantially similar to the form
delivered by Agent to Borrowers on or prior to the Closing Date with such
revisions thereto as reasonably agreed to by Agent, with respect to such
location; or
(vii) it is Inventory on consignment (other than to Agent or a Person
with an agency relationship with Agent); or
(viii) except as otherwise provided in clause (ix) below, it is in
transit; or
(ix) it is Inventory which is located outside the United States of
America unless it is in transit to either the premises of a Customs Broker in
the United States or premises of a Borrower in the United States of America
which are either owned and controlled by a Borrower or leased by a Borrower, as
the case may be, provided, that, (a) title to such Inventory is evidenced by
negotiable bills of lading (within the meaning of the UCC) made to the order of
Agent (or as otherwise directed by Agent) and Agent has a first priority
perfected security interest in and lien upon, and control and possession of, one
(1) original (or all originals of such documents with respect to Inventory
purchased pursuant to documentary letter of credit arrangements) of such
documents of title with respect to such Inventory (either directly or through a
Customs Broker as contemplated in Section 8.1.11 hereof), (b) such Inventory
would otherwise be Eligible Inventory hereunder and title to such Inventory is
in the name of a Borrower, and (c) Agent has received (i) with respect to
Inventory in transit to a Customs Broker, a Collateral Access
A-10
Agreement, duly authorized, executed and delivered by such Customs Broker to
Agent (provided, that, for this purpose, if Agent has established reserves for
amounts due or to become due to such Customs Broker, then an agreement from such
Customs Broker that would otherwise constitute a Collateral Access Agreement
except that it provides for such Customs Broker to retain an interest in any
documents of title with respect to any Collateral to secure unpaid fees and
charges owing to such Customs Broker, shall be deemed a Collateral Access
Agreement), (ii) with respect to Inventory in transit to premises leased by a
Borrower, a Collateral Access Agreement, duly authorized, executed and delivered
by the applicable lessor to Agent, (iii) a copy of the certificate of marine
cargo insurance in connection therewith in which Agent has been named as an
additional insured and loss payee in a manner, and in all other respects,
acceptable to Agent, (iv) a copy of the invoice (if any), manifest and any other
shipping documents with respect thereto, and (v) other evidence required by
Agent evidencing title of a Loan Party in such Inventory.
Eligible On-Water Inventory - Inventory which is in transit, but is
Eligible Inventory by reason of its compliance with the provisions of clause
(ix) of the definition of Eligible Inventory.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, orders and consent decrees relating to health (but
excluding health and safety to the extent regulated by OSHA), safety and
environmental matters.
Equipment Percentage - as of any date, the percentage equal to one
hundred percent (100%) minus the percentage obtained by dividing the number of
full calendar months elapsed since the Closing Date by eighty-four (84).
Equity Interests - all shares of stock, partnership interests,
membership interests, member units or other ownership interests in any other
Person and all warrants, options or other rights to acquire the same.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute, and all rules and regulations from time to
time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Federal Funds Effective Rate - for any date, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by Agent from three federal
funds brokers of recognized standing selected by it.
Fee Letter - as defined in Section 2.3 of the Agreement.
Financial Officer - as defined in the last paragraph of this
Appendix A.
Fixed Asset Sublimit - as defined in clause (ii)(c) of the definition
of Borrowing Base.
Flash Report - as defined in clause (iii) of subsection 8.1.3.
▇-▇▇
▇▇▇▇ - generally accepted accounting principles in the United States of
America in effect from time to time.
General Paint - as defined in the preamble to this Agreement.
Guarantors - Each Person who now or hereafter guarantees payment or
performance of the whole or any part of the Obligations.
Guaranty Agreements - Each guaranty in form and substance acceptable to
Agent hereafter executed by any Guarantor.
▇▇▇▇▇▇ Litigation - as defined in subsection Section 7.1.2 of the
Agreement.
Inactive Member - any Member with respect to which TruServ's main
corporate office has acknowledged its receipt of the documents required by
TruServ's organizational documents (including its by-laws and membership
agreement) to terminate such Member's membership.
Indebtedness - as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease Obligations;
(ii) all obligations of other Persons which such Person has
guaranteed;
(iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such Person;
(iv) Derivative Obligations; and
(v) in the case of Borrowers (without duplication), the Obligations.
Indebtedness for Money Borrowed - means (i) Indebtedness arising from
the lending of money by any Person to any Borrower or any of its Subsidiaries;
(ii) Indebtedness, whether or not in any such case arising from the lending by
any Person of money to any Borrower or any of its Subsidiaries, (1) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (2) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (3) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Purchase Money Indebtedness; (iv) Indebtedness that
constitutes a Capitalized Lease Obligation; (v) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and (vi)
Indebtedness of any Borrower or any of its Subsidiaries under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under clauses
(i) through (v) hereof, if owed directly by Borrower or any of its Subsidiaries.
Indebtedness for Money Borrowed shall not include trade payables or accrued
expenses.
A-12
Intellectual Property - means: all past, present and future: trade
secrets, know-how and other proprietary information; trademarks, internet domain
names, service marks, trade dress, trade names, business names, designs, logos,
slogans (and all translations, adaptations, derivations and combinations of the
foregoing), indicia and other source and/or business identifiers, and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights, unpatented inventions (whether or not
patentable); patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to ▇▇▇ for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.
Interest Period - as applicable to any LIBOR Portion, a period
commencing on the date such LIBOR Portion is advanced, continued or converted,
and ending on the date which is one (1) month, two (2) months, three (3) months,
or six (6) months later, as may then be requested by Borrower; provided that (i)
any Interest Period which would otherwise end on a day which is not a Business
Day shall end in the next preceding or succeeding Business Day as is Agent's
custom in the market to which such LIBOR Portion relates; (ii) there remains a
minimum of one (1) month, two (2) months, three (3) months or six (6) months
(depending upon which Interest Period Borrower selects) in the Term, unless
Borrowers and Lenders have agreed to an extension of the Term beyond the
expiration of the Interest Period in question; and (iii) all Interest Periods of
the same duration which commence on the same date shall end on the same date.
IRC - the Internal Revenue Code of 1986, as amended and in effect and
any successor statute.
IRS - the Internal Revenue Service or any successor agency thereto.
LC Amount - at any time, the aggregate undrawn available amount of all
Letters of Credit and LC Guaranties then outstanding plus the amount of the LC
Reserve.
LC Guaranty - any guaranty pursuant to which Agent or any Affiliate of
Agent shall guaranty the payment or performance by Borrowers of their
reimbursement obligation under any letter of credit.
LC Obligations - any Obligations that arise from any draw against any
Letter of Credit or against any Letter of Credit supported by an LC Guaranty
that have not been satisfied by the issuance of a Revolving Credit Loan or
otherwise.
LC Reserve - an amount estimated by Agent in consultation with
Borrowers on the Closing Date and on an a quarterly basis thereafter in
increments of $1,000,000 of the aggregate undrawn available amount of all
documentary letters of credit issued for the account of any
A-13
Borrower by Syndication Agent or a Co-Documentation Agent or their Affiliates
outstanding within such fiscal quarter. The LC Reserve shall not include any
amount for the B of A LCs which are separately cash collateralized.
Letter of Credit - any standby or documentary letter of credit payable
on sight drafts issued by Agent or any Affiliate of Agent for the account of any
Borrower.
LIBOR - as applicable to any LIBOR Portion, for the applicable Interest
Period, the rate per annum (rounded upward, if necessary, to the nearest 1/8 of
one percent) as determined on the basis of the offered rates for deposits in
U.S. dollars, for a period of time comparable to such Interest Period which
appears on the Telerate page 3750 as of 11:00 a.m. (London time) on the day that
is two (2) London Banking Days preceding the first day of such Interest Period;
provided, however, that if the rate described above does not appear on the
Telerate System on any applicable interest determination date, the LIBOR shall
be the rate (rounded upwards as described above, if necessary) for deposits in
U.S. dollars for a period substantially equal to the Interest Period on the
Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that
service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on the day that is two (2) London Banking Days prior to the first day of
such Interest Period. If both the Telerate and Reuters systems are unavailable,
then the rate for that date will be determined on the basis of the offered rates
for deposits in U.S. dollars for a period of time comparable to such Interest
Period which are offered by four (4) major banks in the London interbank market
at approximately 11:00 a.m. (London time), on the day that is two (2) London
Banking Days preceding the first day of such Interest Period as selected by
Agent. The principal London office of each of the major London banks so selected
will be requested to provide a quotation of its U.S. dollar deposit offered
rate. If at least two (2) such quotations are provided, the rate for that date
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate for that date will be determined on the basis of
the rates quoted for loans in U.S. dollars to leading European banks for a
period of time comparable to such Interest Period offered by major banks in New
York City at approximately 11:00 a.m. (New York City time), on the day that is
two (2) London Banking Days preceding the first day of such Interest Period. In
the event that Agent is unable to obtain any such quotation as provided above,
it will be determined that LIBOR pursuant to an Interest Period cannot be
determined. In the event that the Board of Governors of the Federal Reserve
System shall impose a Reserve Percentage with respect to LIBOR deposits of Bank,
then for any period during which such Reserve Percentage shall apply, LIBOR
shall be equal to the amount determined above divided by an amount equal to 1
minus the Reserve Percentage.
LIBOR Interest Payment Date - as to any LIBOR Portion in respect of
which the Interest Period is (a) three months or less, the last day of such
Interest Period or (b) more than three months, the date which is three months
from the first day of such Interest Period and, in addition, the last day of
such Interest Period.
LIBOR Option - the option granted pursuant to Section 3.1 of the
Agreement to have the interest on all or any portion of the principal amount of
the Revolving Credit Loans based on the LIBOR.
LIBOR Portion - a LIBOR Revolving Portion.
A-14
LIBOR Request - a notice in writing (or by telephone confirmed
electronically or by telecopy or other facsimile transmission on the same day as
the telephone request) from Borrower to Agent requesting that interest on a
Revolving Credit Loan be based on the LIBOR, specifying: (i) the first day of
the Interest Period (which shall be a Business Day); (ii) the length of the
Interest Period; (iii) whether the LIBOR Portion is a new Loan, a conversion of
a Base Rate Portion, or a continuation of a LIBOR Portion; and (iv) the dollar
amount of the LIBOR Revolving Portion, which shall be in an amount not less than
$1,000,000 or an integral multiple of $100,000 in excess thereof.
LIBOR Revolving Portion - that portion of the Revolving Credit Loans
specified in a LIBOR Request (including any portion of Revolving Credit Loans
which is being borrowed by Borrower concurrently with such LIBOR Request) which,
as of the date of the LIBOR Request specifying such LIBOR Revolving Portion, has
met the conditions for basing interest on the LIBOR in Section 3.1 of the
Agreement and the Interest Period of which has not terminated.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on common law, statute or contract. The term "Lien" shall also include
rights of seller under conditional sales contracts or title retention
agreements, reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of the Agreement, a Borrower
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of Agent
pursuant to Section 3.6 of the Agreement.
Loan Commitment - with respect to any Lender, the amount of such
Lender's Revolving Loan Commitment.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - all loans and advances of any kind made by Agent, any Lender,
or any Affiliate of Agent or any Lender, pursuant to the Agreement.
London Banking Day - any date on which commercial banks are open for
business in London, England.
Majority Lenders - as of any date, Lenders holding 51% of the Revolving
Loan Commitments determined on a combined basis and following the termination of
the Revolving Loan Commitments, Lenders holding 51% or more of the outstanding
Loans, LC Amounts and LC Obligations not yet reimbursed by Borrower or funded
with a Revolving Credit Loan; provided, that (i) in each case, if there are 2 or
more Lenders with outstanding Loans, LC Amounts, unfunded and unreimbursed LC
Obligations or Revolving Loan Commitments, at least 2 Lenders shall be required
to constitute Majority Lenders; and (ii) prior to termination of the Revolving
Loan Commitments, if any Lender breaches its obligation to fund any requested
Revolving Credit Loan, for so long as such breach exists, its voting rights
hereunder shall be
A-15
calculated with reference to its outstanding Loans, LC Amounts and unfunded and
unreimbursed LC Obligations, rather than its Revolving Loan Commitment.
Material Adverse Effect - (i) a material adverse effect on the
business, condition (financial or otherwise), operation, performance or
properties of Borrowers and their Subsidiaries taken as a whole, (ii) a material
adverse effect on the rights and remedies of Agent or Lenders under the Loan
Documents, or (iii) the material impairment of the ability of any Borrower or
any of its Subsidiaries to perform its obligations hereunder or under any Loan
Document.
Maximum On-Water Amount - as defined in the definition of Borrowing
Base.
Member -a Person that has executed and delivered a TruServ Membership
Agreement.
Member Loan - any loan or other advance of money made by any Borrower
or any Subsidiary of any Borrower to any Member, other than any loan that
consists of an Account from a former Member that is converted into a loan and
does not involve the advance of money.
Member Guaranty - any guaranty by any Borrower or any Subsidiary of any
Borrower of any third party loan to any Member, it being understood the amount
of the applicable guarantor's obligation in respect of any Member Guaranty shall
be deemed to be the aggregate amount of the debt, obligation or other liability
guarantied thereby that is recourse to the applicable guarantor.
Member Notes - those certain subordinated promissory notes issued or to
be issued by TruServ to Members or former Members in partial payment of
patronage dividends or repayment of Securities or Equity Interests of TruServ.
Mortgages - the mortgage or deed of trust executed by a Borrower on or
about the Closing Date in favor of Agent, for the benefit of itself and Lenders,
by which such Borrower has granted to Agent, as security for the Obligations, a
Lien upon the real Property of such Borrower located at (i) ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇, ▇▇, (ii) ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇, (iii) ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇, (iv) ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and (v) ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇, together with all mortgages, deeds of trust and comparable
documents now or at any time hereafter securing the whole or any part of the
Obligations.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Net Appraised Fair Market Value - with respect to any of any Borrower's
real Property subject to a Mortgage, the amount estimated to be realized, net of
reasonable sale expenses (as estimated by Agent), in a sale of such real
Property by a willing Buyer to a willing Seller, such amount to be determined by
an appraisal of such real Property conducted by a qualified company selected by
Agent in its reasonable discretion as provided in Section 2.10 of the Agreement.
Net Appraised Orderly Liquidation Value - with respect to any item of
Collateral in which Agent for its benefit and the benefit of Lender has a first
perfected security interest (subject to Permitted Liens), the amount estimated
to be recoverable in the orderly liquidation of such item of Collateral over a
three month period with respect to Inventory or a six month period with respect
to Equipment or any other item of such Collateral, net of liquidation expenses
(as
A-16
estimated by Agent), such amount to be determined by an appraisal of such item
of Collateral conducted by a qualified company selected by Agent in its
reasonable discretion as provided in Section 2.10 of the Agreement.
Net Equity Value - an amount equal to the redemption value of a
Member's Equity Interest in TruServ minus the loss allocation, the proportionate
share of accumulated retained deficits or any other loss allocated to such
Member's Equity Interest.
New Mortgages - as defined in Section 5.5 of the Agreement.
Notes - the Revolving Notes.
Obligations - all Loans, all LC Obligations and all other advances,
debts, liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or payable from
any Borrower to Agent, for its own benefit, from any Borrower to Agent for the
benefit of any Lender, from any Borrower to any Lender or from any Borrower to
Bank or any other Affiliate of Agent, of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, in each case
arising under the Agreement or any other Loan Document, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired, any Product Obligations owing to Agent, Bank, any Lender
or any Affiliate of Bank, Agent or any Lender and any letter of credit
reimbursement obligations owed by Borrower to Syndication Agent, a Documentation
Agent or any of their Affiliates. Reimbursement obligations owing with respect
to the B of A LCs shall not be included within Obligations.
Organizational I.D. Number - with respect to any Person, the
organizational identification number assigned to such Person by the applicable
governmental unit or agency of the jurisdiction of organization of such Person.
Other Agreements - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other third
party and delivered to Agent or any Lender in respect of the transactions
contemplated by the Agreement.
Overadvance - as defined in subsection 1.1.2 of the Agreement.
Patent Security Agreement - the Patent and License Security
Agreement(s) to be executed by each applicable Borrower on or about the Closing
Date in favor of Agent for its benefit and the benefit of Lenders pursuant to
the priorities provided for in the Agreement, as such Patent and License
Security Agreement has been or will be amended, supplemented, extended, renewed
or otherwise modified from time to time.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of
the Agreement.
Permitted Purchase Money Indebtedness - With respect to any fiscal
year, Purchase Money Indebtedness and Capital Lease Obligations (without
duplication) of any Borrower incurred during such fiscal year which is secured
by a Purchase Money Lien and/or is subject to
A-17
a capital lease and the principal amount of which, when aggregated with the
principal amount of all other such Purchase Money Indebtedness and Capitalized
Lease Obligations of Borrowers and their Subsidiaries incurred during such year
does not exceed in the aggregate $5,000,000. For the purposes of this
definition, the principal amount of any Purchase Money Indebtedness consisting
of capitalized leases (as opposed to operating leases) shall be computed as a
Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of any Borrower or any of their Subsidiaries that is covered by Title
IV of ERISA.
Product Obligations - every obligation of any Borrower under and in
respect of any one or more of the following types of services or facilities
extended to such Borrower by Bank, Agent, any Lender or any Affiliate of Bank,
Agent or any Lender: (i) credit cards, (ii) cash management or related services
including the automatic clearing house transfer of funds for the account of such
Borrower pursuant to agreement or overdraft, (iii) cash management, including
controlled disbursement services and (iv) Derivative Obligations.
Projections - Borrowers' forecasted Consolidated and consolidating (to
the extent required by the last sentence of subsection 8.1.3) (i) balance
sheets, (ii) profit and loss statements, and (iii) cash flow statements
(consolidated only), all prepared on a consistent basis with the historical
financial statements of Borrowers and their Subsidiaries, together with
appropriate supporting details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness for
Money Borrowed (other than the Obligations) for the payment of all or any part
of the purchase price of any equipment, real Property or fixed assets, (ii) any
Indebtedness for Money Borrowed (other than the Obligations) incurred at the
time of or within 10 days prior to or after the acquisition of any equipment,
real Property or fixed assets for the purpose of financing all or any part of
the purchase price thereof, and (iii) any renewals, extensions or refinancings
thereof, but not any increases in the principal amounts thereof outstanding at
the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
Real Property Percentage - as of any date, the percentage equal to one
hundred percent minus the percentage obtained by dividing the number of full
calendar months elapsed since the Closing Date by one hundred twenty (120).
A-18
Redeemable Subordinated Notes - these certain redeemable (subordinated)
term notes in the aggregate principal amount of $3,150,000 as of the Closing
Date.
Redemption Value - with respect to each share of TruServ's Class A and
Class B common stock the par value ($100) of such share or such other par value
as results from the amendment of any organizational document and any
corresponding exchange or conversion of TruServ's Class A and Class B Common
Stock.
Rentals - as defined in subsection 8.2.18 of the Agreement.
Replacement Lender - as defined in subsection 3.8.2 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(c) of
ERISA, except for any such event for which the 30-day notice requirement has
been waived.
Reserve Percentage - the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed on member banks of the Federal Reserve System against "Euro-currency
Liabilities" as defined in Regulation D.
Restricted Investment -any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments by a Borrower, to the extent existing on the Closing
Date, in one or more Subsidiaries of such Borrower;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in
the ordinary course of business of any Borrower or any of its Subsidiaries;
(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United States of
America; provided that such obligations mature within one year from the date of
acquisition thereof;
(v) investments in certificates of deposit maturing within one year
from the date of acquisition and fully insured by the Federal Deposit Insurance
Corporation;
(vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from the date
of creation thereof;
(vii) investments in money market, mutual or similar funds having
assets in excess of $100,000,000 and the investments of which are limited to
investment grade securities;
(viii) loans and advances permitted under subsection 8.2.2 of the
Agreement;
(ix) investments in Cash Equivalents;
A-19
(x) investments consisting of Equity Interests, instruments or notes
received in settlement of debts in the ordinary course of business;
(xi) investments existing on the date hereof and listed on Exhibit
8.2.12 hereto;
(xii) investments in TruServ Specialty Company LLC not to exceed an
aggregate amount of $1,500,000 at any one time, or, so long as Borrowers are in
compliance with subsection 8.1.12, in any greater amount;
(xiii) TruServ Equity Interests acquired prior to the Closing Date or
after the Closing Date if such purchase or acquisition was permitted by the
terms hereof;
(xiv) investments consisting of any escrow, holdback or similar
arrangement in connection with any sale, lease or transfer or other disposition
of any asset not prohibited hereunder; and
(xv) investments otherwise expressly permitted or required pursuant
to the Agreement.
Restricted Subordinated Debt Payment - any payment of principal on
account of or in respect of Subordinated Debt.
Restricted Subsidiary- (i) any Subsidiary of TruServ that is
incorporated under the laws of the United States of America, any state thereof
or the District of Columbia unless any such Subsidiary has no on-going business
operations and has liabilities and assets (determined separately) of less than
$50,000, (ii) so long as Borrowers are in compliance with subsection 8.1.12 of
the Agreement, TruServ Specialty Company LLC, and (iii) Advocate Services, Inc.,
Advocate Retail Services, Inc. and Servistar Paint Company so long as no such
Subsidiary has assets in excess of $50,000, appropriate documents filed to
effect the dissolution of any such Subsidiary remain on file with the Secretary
of the Commonwealth of Pennsylvania and such dissolution is pursued by
appropriate action.
Revolving Credit Loan - a Loan made by any Lender pursuant to Section
1.1 of the Agreement.
Revolving Credit Maximum Amount - $275,000,000, as such amount may be
reduced from time to time pursuant to the terms of the Agreement.
Revolving Loan Commitment - with respect to any Lender, the amount of
such Lender's Revolving Loan Commitment pursuant to subsection 1.1.1 of the
Agreement, as set forth below such Lender's name on the signature page hereof or
any Assignment and Acceptance Agreement executed by such Lender.
Revolving Loan Percentage - with respect to each Lender, the percentage
equal to the quotient of such Lender's Revolving Loan Commitment divided by the
aggregate of all Revolving Loan Commitments.
Revolving Notes - the Secured Promissory Notes to be executed by
Borrowers on or about the Closing Date in favor of each Lender to evidence the
Revolving Credit Loans, which
A-20
shall be in the form of Exhibit 1.1 to the Agreement, together with any
replacement or successor notes therefor.
Seasonal Advance Months - as defined in Section 8.4 of the Agreement.
Security Documents - the Copyright Security Agreement, the Guaranty
Agreements, the Mortgages, the Patent Security Agreement, the Stock Pledge
Agreement, the Trademark Security Agreement and all other instruments and
agreements now or at any time hereafter securing the whole or any part of the
Obligations.
Solvent - as to any Person, that such Person (i) owns Property whose
fair saleable value on a discounted cash flow basis is greater than the amount
required to pay all of such Person's Indebtedness (including contingent debts
but excluding intercompany obligations other than reimbursement obligations
incurred pursuant to Section 12.18 hereof), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
Stock Pledge Agreement - the Stock Pledge Agreement executed by
Borrowers or any one of them as applicable on or about the Closing Date in favor
of Agent for the benefit of itself and Lenders pursuant to the priorities set
forth in the Agreement, as such Stock Pledge Agreement shall be amended,
supplemented, extended, renewed or otherwise modified from time to time after
the Closing Date.
Subordinated Debt - Indebtedness of any Borrower or any Subsidiary of
any Borrower that is subordinated to the Obligations in a manner satisfactory to
Agent, and contains terms, including without limitation, payment terms,
satisfactory to Agent.
Subsidiary - any Person of which another Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting Stock
at the time of determination.
Supermajority Lenders - as of any date, Lenders holding 75% of the
Revolving Loan Commitments determined on a combined basis and following the
termination of the Revolving Loan Commitments, Lenders holding 75% or more of
the outstanding Loans, LC Amounts and LC Obligations not yet reimbursed by
Borrower or funded with a Revolving Credit Loan; provided that (i) in each case,
if there are 2 or more Lenders with outstanding Loans, LC Amounts, unfunded and
unreimbursed LC Obligations or Revolving Loan Commitments, at least 2 Lenders
shall be required to constitute Supermajority Lenders; and (ii) prior to
termination of the Revolving Loan Commitments, if any Lender breaches its
obligation to fund any requested Revolving Credit Loan, for so long as such
breach exists, its voting rights hereunder shall be calculated with reference to
its outstanding Loans, LC Amounts and unfunded and unreimbursed LC Obligations,
rather than its Revolving Loan Commitment.
Swingline Loans - as defined in subsection 1.1.4 of the Agreement.
Tax Liabilities - as defined in subsection 2.12.1 of the Agreement.
Term - as defined in Section 4.1 of the Agreement.
A-21
Total Credit Facility - $275,000,000, as reduced from time to time
pursuant to the terms of the Agreement.
Trademark Security Agreement - the Trademark and License Security
Agreement(s) to be executed by each applicable Borrower on or about the Closing
Date in favor of Agent for its benefit and the benefit of Lenders pursuant to
the priorities provided for in this Agreement, as such Trademark and License
Security Agreement has been or will be amended, supplemented, extended, renewed
or otherwise modified from time to time.
TruServ - as defined in the preamble to this Agreement.
TruServ Acceptance - as defined in the preamble to this Agreement.
TruServ Logistics - as defined in the preamble to this Agreement.
True ▇▇▇▇▇.▇▇▇ - as defined in the preamble to this Agreement.
Type of Organization - with respect to any Person, the kind or type of
entity by which such Person is organized, such as a corporation or limited
liability company.
UCC - the Uniform Commercial Code as in effect in the State of Illinois
or the State of Delaware, as applicable, on the date of this Agreement, as it
may be amended or otherwise modified.
United States Person - a "United States Person" as defined in Section
7701(a)(30) of the IRC.
Unused Line Fee - as defined in Section 2.5 of the Agreement.
Voting Stock - Securities or Equity Interests of any class or classes
of a corporation, limited partnership or limited liability company or any other
entity the holders of which are ordinarily, in the absence of contingencies,
entitled to vote with respect to the election of corporate directors (or Persons
performing similar functions).
OTHER TERMS. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the UCC to the
extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all amendments, supplements, waivers and other modifications thereto and any and
all extensions or renewals thereof. When the phrase "to the knowledge of
Borrower" or words of similar meaning is or are used herein, such phrase shall
refer to matters actually known by TruServ's chief financial officer, treasurer,
assistant treasurer
A-22
and/or corporate controller (individually, a "Financial Officer" and
collectively, "Financial Officers") or matters which such officers should have
known in the reasonable and prudent exercise of their duties as financial
officers of TruServ.
A-23
LIST OF EXHIBITS AND SCHEDULES
Exhibit 1.1 Form of Revolving Note
Exhibit 5.2 Commercial Tort Claims
Exhibit 6.1.1 Business Locations
Exhibit 7.1.1 Jurisdictions in which Borrower and each Subsidiary is Authorized to do Business
Exhibit 7.1.4 Capital Structure of Borrower and each Subsidiary
Exhibit 7.1.5 Names; Organization
Exhibit 7.1.13 Surety Obligations
Exhibit 7.1.14 Tax Identification Numbers of Subsidiaries
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19 Contracts Restricting Right to Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.22 Capitalized and Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.25 Labor Relations
Exhibit 8.1.3 Form of Compliance Certificate
Exhibit 8.1.4 Form of Borrowing Base Certificate
Exhibit 8.2.2 Existing Loans
Exhibit 8.2.3 Existing Indebtedness
Exhibit 8.2.5 Permitted Liens
Exhibit 8.2.12 Permitted Investments
Exhibit 8.3 Financial Covenants
EXHIBIT 1.1
FORM OF REVOLVING CREDIT NOTE
(SECURED PROMISSORY NOTE)
$______________ ______________ __, 20__
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned (individually a "BORROWER" and
collectively "BORROWERS") promises to pay to ______________________________
("LENDER") or its registered assigns, at the principal office of Fleet Capital
Corporation, as agent for said Lender, or at such other place in the United
States of America as the holder of this Note may designate from time to time in
writing, in lawful money of the United States of America and in immediately
available funds, the principal amount of __________________________________
Dollars ($___________) or such lesser principal amount as may be outstanding
pursuant to the Loan Agreement (as hereinafter defined) with respect to the
Revolving Credit Loan, together with interest on the unpaid principal amount of
this Note outstanding from time to time.
This Revolving Note (the "NOTE") is one of the Revolving Notes referred
to in, and is issued pursuant to, that certain
Loan and Security Agreement among
Borrowers, the lender signatories thereto (including Lender) and Fleet Capital
Corporation ("FCC") as agent for such lenders (FCC, in such capacity, "AGENT")
dated as of ________________, 2003 (hereinafter, as amended from time to time,
the "LOAN AGREEMENT"), and is entitled to all of the benefits and security of
the Loan Agreement. All of the terms, covenants and conditions of the Loan
Agreement and the other Loan Documents are hereby made a part of this Note and
are deemed incorporated herein in full. All capitalized terms used herein,
unless otherwise specifically defined in this Note, shall have the meanings
ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement and, if
not sooner paid in full, on August __, 2007, unless the term hereof is extended
in accordance with the Loan Agreement. Interest thereon shall be paid until such
principal amount is paid in full at such interest rates and at such times as are
specified in the Loan Agreement.
Upon and after the occurrence, and during the continuation, of an Event
of Default, this Note shall or may, as provided in the Loan Agreement, become or
be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
Exhibit 8.2.12 - Page 1
This Note shall be interpreted, governed by, and construed in
accordance with, the internal laws of the State of Illinois.
BORROWERS:
TRUSERV CORPORATION
By:
------------------------------------
Name:
---------------------------
Title:
--------------------------
TRUSERV ACCEPTANCE COMPANY
By:
------------------------------------
Name:
---------------------------
Title:
--------------------------
TRUSERV LOGISTICS COMPANY
By:
------------------------------------
Name:
---------------------------
Title:
--------------------------
GENERAL PAINT & MANUFACTURING COMPANY
By:
------------------------------------
Name:
---------------------------
Title:
--------------------------
TRUE ▇▇▇▇▇.▇▇▇ CORPORATION
By:
------------------------------------
Name:
---------------------------
Title:
--------------------------
Exhibit 8.2.12 - Page 2
EXHIBIT 8.3
FINANCIAL COVENANTS
DEFINITIONS
CONSOLIDATED NET INCOME (LOSS) - with respect to any period, the net
income (or loss) of Borrowers determined in accordance with GAAP on a
Consolidated basis; provided, however, Consolidated Net Income shall not
include: (a) the income (or loss) of any Person (other than a subsidiary of a
Borrower) in which such Borrower or any of its wholly-owned subsidiaries has an
ownership interest unless received in a cash distribution or requiring the
payment of cash; (b) the income (or loss) of any Person accrued prior to the
date it became a Subsidiary of a Borrower or is merged into or consolidated with
a Borrower; (c) all amounts included in determining net income (or loss) in
respect of the write-up of assets on or after the Closing Date, including the
subsequent amortization or expensing of the written-up portion of the assets;
(d) extraordinary gains as defined under GAAP; (e) gains from asset dispositions
(other than sales of inventory); (f) any non-cash gain amortization resulting
from Borrowers' sale and leaseback transaction; and (g) any revenue realized
from any sale where the sales proceeds are paid with notes, instruments or
Equity Interests, to the extent such sales proceeds have not been written off as
a bad debt expense; and provided, further, that rent expense for any period
shall be increased to reflect the actual cash rent paid within the applicable
period.
EBITDA - with respect to any period, the sum of Consolidated Net Income
(Loss) before Interest Expense, income taxes, depreciation and amortization for
such period (but excluding any extraordinary gains for such period), all as
determined for Borrowers and their Subsidiaries on a Consolidated basis and in
accordance with GAAP.
FIXED CHARGE COVERAGE RATIO - with respect to any period, the ratio of
(i) EBITDA for such period minus the sum of (a) any provision for income taxes
payable in cash and included in the determination of net earnings for such
period plus (b) Capital Expenditures during such period, to (ii) Fixed Charges
for such period, all as determined for Borrowers and their Subsidiaries on a
Consolidated basis and in accordance with GAAP.
FIXED CHARGES - with respect to any period, the sum of: (i) scheduled
principal payments required to be made during such period in respect of
Indebtedness for Money Borrowed (including the principal portion of Capitalized
Lease Obligations), plus (ii) Interest Expense for such period, plus (iii)
Distributions made by TruServ within such period (net of contributions received
from Members within such period), all as determined for Borrowers and their
Subsidiaries on a Consolidated basis and in accordance with GAAP; provided that
Fixed Charges shall not include interest or principal payments made with respect
to Member Notes or Redeemable Subordinated Notes or cash patronage dividends to
the extent that such interest or principal payments or Distributions reduce on a
dollar-for-dollar basis the Closing Reserve, and provided further that with
respect to fiscal quarters ending on or prior to the last week of August, 2004,
the amounts of scheduled principal payments required to be made within the
applicable fiscal period in respect of Indebtedness for Money Borrowed
(including the principal portion of Capitalized Lease Obligations) and the
amount of Distributions made by TruServ within such period (net of contributions
received from Members within such period) shall be computed by
Exhibit 8.3 - Page 1
(i) multiplying the actual amount of such principal payments or Distributions
made within the applicable period by number of months elapsed since September 1,
2003 and the last day of the month in which the applicable fiscal period ends
and (ii) dividing the product obtained in clause (ii) above by twelve. By way
any of example, assume that between September 1, 2003 and the last day of the
fiscal quarter ending in the last week of March 2004, Borrowers make $16,000,000
in scheduled principal payments and $10,000,000 in Distributions. The amount of
scheduled principal payments and Distributions to be used in this definition of
Fixed Changes and subsequent definition of Fixed Change Coverage Ratio for the
twelve month period ending on the last day of the fiscal quarter ending in the
last week of March 2004 would then be (x) $9,333,333.33 (7 x $16,000,000) / 12)
and (y) $5,833,333.33 (7 x $10,000,000 / 12), respectively. In determining the
amount of any scheduled principal payment required to be made during the
applicable period in respect of Indebtedness for Money Borrowed, consensual or
permitted deferred amounts and repayments of Member Notes made in connection
with the transfer and assignment of a Member Note from one Member to another
shall be disregarded.
INTEREST EXPENSE - with respect to any period, cash interest expense
paid for such period, including without limitation the interest portion of
Capitalized Lease Obligations, the Letter of Credit and LC Guaranty fees owing
for such period and the Unused Line Fee owing for such period, all as determined
for Borrowers and their Subsidiaries on a Consolidated basis and in accordance
with GAAP.
COVENANTS
AVAILABILITY. At all times maintain Availability of at least
$15,000,000.
FIXED CHARGE COVERAGE RATIO. If as of the last date of any fiscal
quarter, commencing with the fiscal quarter ending December 31, 2003, average
Availability for the 60 consecutive day period then ended is less than
$35,000,000, then Borrowers shall not permit the Fixed Charge Coverage Ratio for
the twelve consecutive months ending on the last day of such fiscal quarter (or,
if shorter, the period commencing on September 1, 2003 and ending on the last
day of such fiscal quarter) to be less than 1.10 to 1.
Exhibit 8.3 - Page 2