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Exhibit 4e
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and among
HUFFY CORPORATION
ROYCE UNION BICYCLE COMPANY
HUFFY SERVICE FIRST, INC.
AMERICAN SPORTS DESIGN COMPANY,
as Borrowers
HUFFY BRANDS COMPANY
HCAC, INC.
HUFCO-DELAWARE COMPANY
HUFFY SPORTS, INC.
HUFFY RISK MANAGEMENT, INC.,
as Guarantors
and
CONGRESS FINANCIAL CORPORATION (CENTRAL),
as Agent
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
Dated: as of January 31, 2001
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS...............................................................................1
SECTION 2. CREDIT FACILITIES........................................................................25
2.1 Revolving Loan Facility.............................................................25
2.2 Letter of Credit Accommodations.....................................................26
2.3 Commitments.........................................................................28
2.4 Maximum Credit; Inventory Loan Limit................................................28
SECTION 3. INTEREST AND FEES........................................................................29
3.1 Interest............................................................................29
3.2 Changes in Laws and Increased Costs of Loans........................................31
3.3 Fees................................................................................32
SECTION 4. CONDITIONS PRECEDENT.....................................................................32
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations......................................................................32
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations......................................................................33
SECTION 5. SECURITY INTEREST........................................................................33
SECTION 6. COLLECTION AND ADMINISTRATION............................................................35
6.1 Borrowers' Loan Account.............................................................35
6.2 Statements..........................................................................35
6.3 Collection of Accounts..............................................................35
6.4 Payments............................................................................37
6.5 Mandatory Prepayments...............................................................38
6.6 Taxes...............................................................................39
6.7 Authorization to Make Loans.........................................................41
6.8 Appointment of Agent for Requesting Loans and Receipts of Loans
and Statements......................................................................42
6.9 Authorization to Make Loans.........................................................42
6.10 Use of Proceeds.....................................................................43
6.11 Pro Rata Treatment..................................................................43
6.12 Sharing of Payments, Etc............................................................43
6.13 Settlement Procedures...............................................................44
(i)
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SECTION 7. COLLATERAL REPORTING AND COVENANTS.......................................................46
7.1 Collateral Reporting................................................................46
7.2 Accounts Covenants..................................................................47
7.3 Inventory Covenants.................................................................49
7.4 Equipment Covenants.................................................................49
7.5 Power of Attorney...................................................................50
7.6 Bills of Lading and Other Documents of Title........................................51
7.7 Right to Cure.......................................................................51
7.8 Access to Premises..................................................................52
SECTION 8. REPRESENTATIONS AND WARRANTIES...........................................................52
8.1 Corporate Existence, Power and Authority; Subsidiaries..............................52
8.2 Financial Statements; No Material Adverse Change....................................53
8.3 Chief Executive Office; Collateral Locations........................................53
8.4 Priority of Liens; Title to Properties..............................................53
8.5 Tax Returns.........................................................................53
8.6 Litigation..........................................................................54
8.7 Compliance with Other Agreements and Applicable Laws................................54
8.8 Environmental Compliance............................................................55
8.9 Employee Benefits...................................................................56
8.10 Bank Accounts.......................................................................56
8.11 Intellectual Property...............................................................56
8.12 Financial Statements................................................................57
8.13 Disclosure..........................................................................58
8.14 Governmental Authority..............................................................58
8.15 Capitalization......................................................................58
8.16 Labor Disputes......................................................................59
8.17 Corporate Name; Prior Transactions..................................................59
8.18 Restrictions on Subsidiaries........................................................59
8.19 Accuracy and Completeness of Information............................................59
8.20 Survival of Warranties; Cumulative..................................................60
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.......................................................60
9.1 Maintenance of Existence............................................................60
9.2 New Collateral Locations............................................................60
9.3 Compliance with Laws, Regulations, Etc..............................................60
9.4 Payment of Taxes and Claims.........................................................61
9.5 Insurance...........................................................................62
9.6 Financial Statements and Other Information..........................................62
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.............................64
9.8 Encumbrances........................................................................66
9.9 Indebtedness........................................................................68
9.10 Loans, Investments, Guarantees, Etc.................................................71
9.11 Dividends and Redemptions...........................................................72
9.12 Transactions with Affiliates........................................................73
(ii)
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9.13 Changes in Business.................................................................73
9.14 Sale and Leasebacks.................................................................74
9.15 Compliance with ERISA...............................................................74
9.16 Additional Bank Accounts............................................................74
9.17 End of Fiscal Years; Fiscal Quarters................................................75
9.19 Year 2000 Compliance................................................................75
9.20 Costs and Expenses..................................................................75
9.21 Further Assurances..................................................................76
9.22 Adjusted Tangible Net Worth.........................................................76
SECTION 10. EVENTS OF DEFAULT AND REMEDIES..........................................................76
10.1 Events of Default...................................................................76
10.2 Remedies............................................................................78
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW ...........................................80
11.1 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver........................................................................80
11.2 Waiver of Notices...................................................................81
11.3 Amendments and Waivers..............................................................81
11.4 Confidentiality.....................................................................83
11.5 Waiver of Counterclaims.............................................................84
11.6 Indemnification.....................................................................84
SECTION 12. THE AGENT................................................................................84
12.1 Appointment, Powers and Immunities..................................................84
12.2 Reliance by Agent...................................................................85
12.3 Events of Default...................................................................85
12.4 Congress in its Individual Capacity.................................................86
12.5 Indemnification.....................................................................86
12.6 Non-Reliance on Agent and Other Lenders.............................................86
12.7 Failure to Act......................................................................87
12.8 Additional Loans....................................................................87
12.9 Concerning the Collateral and the Related Financing Agreements......................87
12.10 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders...............................................................88
12.11 Collateral Matters...................................................................88
12.12 Agency for Perfection................................................................90
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS.........................................................90
13.1 Term................................................................................90
13.2 Interpretative Provisions...........................................................91
13.3 Notices.............................................................................92
13.4 Partial Invalidity..................................................................92
13.5 Successors..........................................................................92
(iii)
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13.6 Assignments; Participations.........................................................93
13.7 Participant's Security Interests....................................................95
13.8 Entire Agreement....................................................................96
SECTION 14. ACKNOWLEDGMENT AND RESTATEMENT...........................................................96
14.1 Existing Obligations................................................................96
14.2 Acknowledgment of Security Interests................................................97
14.3 Existing Agreement..................................................................97
14.4 Restatement.........................................................................97
(iv)
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INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Compliance Certificate
Schedule 6.7 Authorized Persons
Schedule 8.1 Subsidiaries
Schedule 8.2 Material Adverse Changes
Schedule 8.3 List of Locations
Schedule 8.4 Existing Liens
Schedule 8.5 Tax Audit Issues
Schedule 8.7 Existing Defaults
Schedule 8.6 Pending Litigation
Schedule 8.8 Environmental Matters
Schedule 8.9 ERISA Matters
Schedule 8.10 List of Bank Accounts
Schedule 8.11 Intellectual Property
Schedule 8.12 Pro Forma Balance Sheet and Cash
Flow Projections
Schedule 8.16 Labor Disputes
Schedule 8.17 Corporate Name; Prior Transactions
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Loans, Investments, Guarantees
(v)
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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This Amended and Restated Loan and Security Agreement, as of dated
January 31, 2001, is entered into by and among Huffy Corporation, an Ohio
corporation ("Huffy"), Royce Union Bicycle Company, an Ohio corporation
("Royce"), Huffy Service First, Inc., an Ohio corporation ("Huffy Service"),
American Sports Design Company, an Ohio corporation ("American", and together
with Huffy, Royce and Huffy Service, each individually, a "Borrower" and
collectively, "Borrowers"), Huffy Risk Management, Inc., an Ohio corporation
("HRMI"), Huffy Brands Company, an Ohio corporation, as successor by merger with
Hufco Company ("Huffy Brands"), HCAC, Inc., an Ohio corporation, formerly known
as True Temper Hardware Company ("HCAC"), Hufco-Delaware Company, a Delaware
corporation, formerly known as ▇▇▇▇▇ Baby Products Company ("Hufco-Delaware")
and Huffy Sports, Inc., a Wisconsin corporation, formerly known as ▇▇▇▇▇ ▇▇▇▇
Products Company ("Huffy Sports", and together with HRMI, Huffy Brands, HCAC and
Hufco-Delaware, each individually a "Guarantor" and collectively, "Guarantors"),
the financial institutions from time to time parties hereto as lenders, whether
by execution of this Agreement or an Assignment and Acceptance (each
individually, a "Lender" and, collectively, "Lenders"), Congress Financial
Corporation (Central), an Illinois corporation, in its capacity as
administrative and collateral agent for Lenders (in such capacity, "Agent").
W I T N E S S E T H:
--------------------
WHEREAS, Borrowers, Guarantors, Lenders and Agent are parties to the
Loan Agreement, dated January 26, 2000, by and among them, pursuant to which
Lenders have made and may make loans and provide other financial accommodations
to Borrowers;
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders
amend and restate the Loan Agreement pursuant to and in accordance with the
terms and conditions set forth herein; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
amend and restate the Loan Agreement and to make such loans and provide such
financial accommodations to Borrowers on a pro rata basis according to its
Commitment (as defined below) on the terms and conditions set forth herein and
Agent is willing to act as administrative and collateral agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
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1.1 "Accounts" shall mean, as to each Borrower, all present and future
rights of such Borrower to payment for goods sold or leased or for services
rendered, whether or not evidenced by instruments or chattel paper, and whether
or not earned by performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one- sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Affiliates" shall mean, with respect to a specified Person, a
partnership, corporation or any other person which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds twenty (20%)
percent or more of any class of voting securities of such Person or other equity
interests in such Person, (b) any Person of which such Person beneficially owns
or holds twenty (20%) percent or more of any class of voting securities or in
which such Person beneficially owns or holds twenty (20%) percent or more of the
equity interests and (c) any director or officer of such Person. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.4 "Agent" shall mean Congress Financial Corporation (Central) in its
capacity as administrative and collateral agent on behalf of Lenders pursuant to
the terms hereof and any replacement or successor administrative and collateral
agent hereunder.
1.5 "Applicable Margin" shall mean, at any time, as to the Interest
Rate for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, the
applicable percentage (on a per annum basis) set forth below if the Monthly
Average Excess Availability for the immediately preceding month is at or within
the amounts indicated for such percentage as of the last day of the immediately
preceding month:
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Applicable Prime Applicable Eurodollar
Excess Availability Rate Margin Rate Margin
------------------- ----------- -----------
(a) $40,000,000 or 0% 1 3/4%
greater
(b) Greater than or 0% 2 1/4%
equal to
$20,000,000 and
less than
$40,000,000
(c) less than .25% 2 3/4%
$20,000,000
PROVIDED, THAT, the Applicable Margin shall be determined and established as of
the date hereof and thereafter determined and established once each month
(commencing with the month beginning February 1, 2001).
1.6 "Asset Sale" shall mean, for any Person, (a) any direct or indirect
sale, lease, conveyance or other disposition (including, without limitation, by
way of merger or consolidation or by exchange of assets and whether by operation
of law or otherwise) made by such Person in one or series of transactions of any
property or assets of such Person or any of its Subsidiaries (including, without
limitation, any disposition pursuant to sale and leaseback transactions and any
sale or other disposition of outstanding or newly issued shares of Capital Stock
or other securities of any of the Subsidiaries of such Person or by any
Subsidiary of such Person) and (b) any other sale, disposition or other
realization upon any property or assets of such person or any of its
Subsidiaries; except in each case for sales or other dispositions in the
ordinary course of business consistent with current practices of such Person as
of the date hereof.
1.7 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder in accordance with the provisions of Section 13.6
hereof.
1.8 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.9 "Borrowers" shall mean, collectively, the following (together with
their respective successors and assigns): (a) Huffy Corporation, an Ohio
corporation; (b) Royce Union Bicycle Company, an Ohio corporation; (c) Huffy
Service First, Inc., an Ohio corporation, also known as Huffy Assembly
Solutions; and (d) American Sports Design Company, an Ohio corporation, doing
business as Airborne Direct; sometimes being referred to herein individually as
a "Borrower".
1.10 "Borrowing Base" shall mean, as to each Borrower, at any time:
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(a) the sum of:
(i) eighty-five (85%) percent of the Net Amount of the
Eligible Accounts of such Borrower, PLUS
(ii) as to Huffy, the lesser of (A) the Inventory Loan Limit
for Huffy or (B) the sum of: (1) sixty-six (66%) percent of the Eligible
Inventory of the Huffy Bicycle Company Division of Huffy consisting of finished
goods, other than in the months of January, June, July, August, September and
December of any year and sixty-two (62%) percent of the Eligible Inventory of
the Huffy Bicycle Company Division of Huffy consisting of finished goods at all
times during the months of January, June, July, August, September and December
of each year plus (2) fifty-four (54%) percent of the Eligible Inventory of the
Huffy Sports Company Division of Huffy consisting of finished goods and raw
materials, other than during the months of January, June, July, August,
September and December of any year and forty-seven (47%) percent of the Eligible
Inventory of the Huffy Sports Company Division of Huffy consisting of finished
goods and raw materials at all times during the months of January, June, July,
August, September and December of each year and
(iii) as to Royce, the lesser of (A) the Inventory Loan
Limit for Royce or (B) sixty-six (66%) percent of the Eligible Inventory of
Royce other than in the months of January, June, July, August, September and
December of any year and sixty-two (62%) percent of the Eligible Inventory of
Royce consisting of finished goods at all times during the months of January,
June, July, August, September and December of each year; MINUS
(b) reserves to reflect outstanding Letter of Credit
Accommodations as provided in Section 2.2 hereof; MINUS
(c) reserves to reflect amounts due or to become due to owners
and lessors of locations of such Borrower, and amounts due or to become due to
any other person to whom any Collateral is consigned or who has custody, control
or possession of any Collateral or is otherwise the owner or operator of any
premises on which any Collateral is located and amounts due or to become due to
licensors or owners of Intellectual Property used by any Borrower or Guarantor,
in each case as provided in Sections 1.31(g) and 1.31(l) hereof; PROVIDED, THAT,
(i) the reserves established pursuant to this Section shall not exceed at any
time the aggregate of amounts payable to such persons for up to the next three
(3) months (or Agent's good faith estimate of such amounts) and including
amounts, if any, then outstanding and unpaid by Borrowers to such persons;
PROVIDED, THAT, as to such reserves for amounts payable to Customs Brokers, the
amount thereof shall be based on amounts owing in connection with Inventory and
documents of title then in the control of the Customs Broker and (ii) such
limitation on the amount of the reserves pursuant to this Section shall only
apply so long as: (A) no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred, (B) Borrowers or Agent shall not have received notice of
any default or event of default under the arrangements of Borrowers with such
person and (C) Agent shall have received evidence, in form and substance
satisfactory to Agent, that
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Borrowers have not granted to such person a security interest in or lien upon
any assets of Borrowers; MINUS
(d) the Dilution Reserve; MINUS
(e) all other reserves (including, without limitation, reserves
with respect to security interests or liens of third parties permitted hereunder
or in connection with litigation) which Agent may, in good faith, deem necessary
or desirable to maintain, including, without limitation, reserves for any
amounts which Agent or any Lender may need to pay in the future for the account
of any Borrower or Guarantor.
For purposes only of applying the Inventory Loan Limit, Agent may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Loans to the extent Agent is in effect
basing the issuance of the Letter of Credit Accommodations on the Value of the
Eligible Inventory being purchased with such Letter of Credit Accommodations. In
determining the actual amounts of such Letter of Credit Accommodations to be so
treated for purposes of the sublimit, the outstanding Loans and Reserves shall
be attributed first to any components of the lending formulas set forth above
that are not subject to such sublimit, before being attributed to the components
of the lending formulas subject to such sublimit. The amounts of Eligible
Inventory shall, at Agent's option, be determined based on the lesser of the
amount of Inventory set forth in the general ledger of the applicable Borrower
or the perpetual inventory record maintained by such Borrower.
1.11 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York, the State of Illinois or the State of North
Carolina, and a day on which Agent and each Lender is open for the transaction
of business, except that if a determination of a Business Day shall relate to
any Eurodollar Rate Loans, the term Business Day shall also exclude any day on
which banks are closed for dealings in dollar deposits in the London interbank
market or other applicable Eurodollar Rate market.
1.12 "Business Unit Sale" shall mean an Asset Sale consisting of the
sale of all or substantially all of the assets of Huffy or any division of Huffy
(including the Huffy Sports Company Division of Huffy or the Huffy Bicycle
Company Division of Huffy), or the sale of all or substantially all of the
assets of any other Borrower or Guarantor, or any other Subsidiary of Huffy, or
an Asset Sale consisting of the sale of all or substantially all of the Capital
Stock of any Borrower or Guarantor, or any other Subsidiary of Huffy.
1.13 "Capital Expenditures" shall mean all expenditures for any fixed
or capital assets or improvements, or for replacements, substitutions or
additions thereto, which have a useful life of more than one (1) year,
including, but not limited to, the direct or indirect acquisition of such assets
by way of increased product service charges, offset items or otherwise and shall
include payments in respect of Capital Leases, PROVIDED, THAT, any such
expenditure for an amount of less than $5,000 shall not be deemed a Capital
Expenditure for purposes hereof.
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1.14 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.15 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations, limited liability company interests or
other equivalents (however designated) of such Person's capital stock at any
time outstanding, and any and all rights, warrants or options exchangeable for
or convertible into such capital stock or interests (but excluding any debt
security that is exchangeable for or convertible into such capital stock).
1.16 "Cash Equivalents" shall mean any of the following: (a) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof; (b) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within one hundred eighty (180) days of the date
of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Exchange Act) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor; (c) repurchase obligations with a term
of not more than thirty (30) days for underlying securities of the types
described in clause (a) above entered into with a bank meeting the
qualifications described in clause (b) above; (d) investments in commercial
paper, maturing not more than ninety (90) days after the date of acquisition,
issued by a corporation (other than an Affiliate of any Borrower) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
▇▇▇▇▇'▇ Investor Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, a division of McGraw Hill Companies, Inc.; and (e)
investments in securities with maturities of six (6) months or less from the
date of acquisition issued or fully guaranteed by any State, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group, a division of McGraw Hill Companies, Inc. or "A" by ▇▇▇▇▇'▇ Investor
Service, Inc.
1.17 "Change of Control" shall mean (a) the liquidation or dissolution
of any Borrower or Guarantor or the adoption of a plan by the stockholders of
any Borrower or Guarantor relating to the dissolution or liquidation of such
Borrower or Guarantor; (b) the acquisition by any Person or group (as such term
is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership,
directly or indirectly, of fifty (50%) percent or more of the voting power of
the total outstanding voting stock of Huffy, except as otherwise consented to in
writing by Agent and Lenders; (c) during any period of two (2) years,
individuals who at the beginning of such period constituted the Board of
Directors of Huffy (together with any new directors whose nomination for
election was approved by a vote of at least a majority of the directors then
still in office who
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were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Huffy then still in office;
or (d) the failure of Huffy to own one hundred (100%) percent of the voting
power of the total outstanding voting stock of each of Royce, American, Huffy
Brands, Hufco-Delaware and Huffy Sports, or the failure of Huffy Brands to own
one hundred (100%) percent of the voting power of the total outstanding voting
stock of each of Huffy Service, and HCAC, in each case other than pursuant to a
transfer of such outstanding voting stock to any Borrower or Guarantor consented
to by Agent and other than pursuant to a sale of the voting stock of any
Borrower or Guarantor consented to by Agent.
1.18 "Celina Property" shall mean the approximately fifty (50) acres
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ owned by Huffy.
1.19 "Closing Date" shall mean January 31, 2001.
1.20 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.21 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.22 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor, or any other person to whom any Collateral (including
Inventory, Equipment, bills of lading or other documents of title) is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, INTER ALIA,
acknowledges the first priority security interest of Agent in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, whether for processing, storage or
otherwise, and agrees to permit Agent access to, and the right to remain on, the
premises of such lessor, consignee or other person so as to exercise Agent's
rights and remedies and otherwise deal with such Collateral and in the case of
any person who at any time has custody, control or possession of any bills of
lading or other documents of title, agrees to hold such bills of lading or other
documents as bailee for Agent and to follow all instructions of Agent with
respect thereto.
1.23 "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signatures pages
hereto designated as the Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 13.6 hereof, as the same may be
adjusted from time to time in accordance with the terms hereof; sometimes being
collectively referred to herein as "Commitments".
1.24 "Congress" shall mean Congress Financial Corporation (Central), an
Illinois corporation, in its individual capacity and its successors and assigns.
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1.25 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to any Borrower pursuant to Sections 2.1 and 2.2 hereof.
1.26 "Customs Broker" shall mean the persons selected by any Borrower
after written notice by such Borrower to Agent who are reasonably 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, PROVIDED, THAT, as
to each such person (a) Agent shall have received a Collateral Access Agreement
duly authorized, executed and delivered by such person, (b) such agreement is in
full force and effect and (c) such person shall be in compliance in all material
respects with the terms thereof.
1.27 "Defaulting Lender" shall have the meaning set forth in Section
6.13 hereof.
1.28 "Dilution" shall mean for any twelve (12) consecutive month
period, the fraction, expressed as a percentage, the numerator of which is the
aggregate amount of non-cash reductions in the Accounts of any Borrower for such
period and the denominator of which is the aggregate dollar amount of the sales
of such Borrower for such period.
1.29 "Dilution Reserve" shall mean a reserve in amounts established by
Agent to reflect that Dilution with respect to any category of Eligible Accounts
of any Borrower as calculated by Agent for any period is or is reasonably
anticipated to be greater than five (5%) percent.
1.30 "Eligible Accounts" shall mean, as to each Borrower, Accounts
created by such Borrower which are and continue to be acceptable to Agent based
on the criteria set forth below. In general, Accounts shall be Eligible Accounts
if:
(a) such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) (i) as to Accounts with an original due date of sixty (60)
days or more, such Accounts do not remain unpaid more than one hundred twenty
(120) days past the original invoice date thereof, or (ii) as to Accounts with
an original due date of more than thirty (30) days but less than sixty (60)
days, such Accounts do not remain unpaid more than sixty (60) days after the
original due date thereof, but in any event no more than one hundred twenty
(120) days after the invoice date thereof, or (iii) as to Accounts with an
original due date of thirty (30) days or less, such Accounts do not remain
unpaid more than ninety (90) days after the original invoice date thereof;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(c) of this Agreement;
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(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditioned or contingent;
(e) the chief executive office or other principal office of the
account debtor with respect to such Accounts is located in the United States of
America or Canada (PROVIDED, THAT, at any time promptly upon Agent's request,
such Borrower shall execute and deliver, or cause to be executed and delivered,
such other agreements, documents and instruments as may be required by Agent to
perfect the security interests of Agent in those Accounts of an account debtor
with its chief executive office or principal place of business in Canada in
accordance with the applicable laws of the Province of Canada in which such
chief executive office or principal place of business is located and take or
cause to be taken such other and further actions as Agent may request to enable
Agent as secured party with respect thereto to collect such Accounts under the
applicable Federal or Provincial laws of Canada) or, at Agent's option, if the
chief executive office and principal place of business of the account debtor
with respect to such Accounts is located other than in the United States of
America or Canada, then if either: (i) the account debtor has delivered to such
Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Agent and payable only in the United States of America and in
U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Agent and if required by Agent, the original of such letter of
credit has been delivered to Agent or Agent's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Agent, or
(ii) such Account is subject to credit insurance payable to Agent issued by an
insurer and on terms and in an amount acceptable to Agent, or (iii) such Account
is otherwise acceptable in all respects to Agent (subject to such lending
formula with respect thereto as Agent may determine);
(f) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts, EXCEPT the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by such Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts;
(g) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(h) such Accounts are subject to the first priority, valid and
perfected security interest of Agent (for itself and the ratable benefit of
Lenders) and any goods giving rise thereto are not, and were not at the time of
the sale thereof, subject to any liens except those permitted in this Agreement;
(i) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an Affiliate of any Borrower or
Guarantor (PROVIDED, THAT, for purposes of this clause (i), RPM and Hershey
shall not be considered Affiliates of Huffy solely because a single employee,
officer or director of RPM or Hershey is also a director of Huffy);
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(j) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agent;
(k) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(l) the aggregate amount of such Accounts of Borrowers owing by a
single account debtor (other than Kmart, Wal-Mart, Target, Sears, Sports
Authority and Toys R Us) do not constitute more than ten (10%) percent of the
aggregate amount of all otherwise Eligible Accounts of Borrowers and such
Accounts of Borrowers owing by each of Wal-Mart and Toys R Us do not, in each
case, constitute more than forty-five (45%) percent of the aggregate amount of
all otherwise Eligible Accounts of Borrowers and such Accounts of Borrowers
owing by each of Kmart, Sears and Target do not, in each case, constitute more
than forty (40%) percent of the aggregate amount of all otherwise Eligible
Accounts of Borrowers and such Accounts of Borrowers owing by Sports Authority
do not constitute more than fifteen (15%) percent of the aggregate amount of all
otherwise Eligible Accounts of Borrowers (but the portion of the Accounts not in
excess of the applicable percentages may be deemed Eligible Accounts);
(m) such Accounts are not evidenced by any instrument or chattel
paper;
(n) such Accounts are owed by account debtors whose total
indebtedness to such Borrower does not exceed the credit limit with respect to
such account debtors as determined by such Borrower from time to time in the
ordinary course of business, to the extent such credit limits are satisfactory
to Agent (but the portion of the Accounts not in excess of such credit limit
which is satisfactory to Agent may be deemed Eligible Accounts); and
(o) such Accounts are owed by account debtors deemed creditworthy
at all times by Agent, as determined by Agent in good faith.
General criteria for Eligible Accounts may be established and revised from time
to time by Agent in its good faith, reasonable judgment. Any Accounts which are
not Eligible Accounts shall nevertheless be part of the Collateral.
1.31 "Eligible Inventory" shall mean, as to Huffy and Royce, Inventory
of Royce and the Huffy Bicycle Company Division of Huffy consisting of finished
goods held for resale in the ordinary course of the business of such Borrower
and Inventory of the Huffy Sports Company Division of Huffy consisting of
finished goods held for resale in the ordinary course of such Borrower and raw
materials for such finished goods, in each case which are acceptable to Agent
based on the criteria set forth below. In general, Eligible Inventory shall not
include:
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(a) work-in-process;
(b) raw materials (other than raw materials of the Huffy Sports
Company Division of Huffy as provided above);
(c) components which are not part of finished goods;
(d) spare parts for equipment;
(e) packaging and shipping materials;
(f) supplies used or consumed in such Borrower's business;
(g) Inventory at premises other than those owned and controlled
by such Borrower, EXCEPT
(i) any Inventory that would otherwise be deemed Eligible
Inventory at locations in the United States of America which are not owned and
operated by such Borrower may nevertheless be considered Eligible Inventory: (A)
as to locations which are leased by such Borrower if Agent shall have received a
Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor, EXCEPT THAT
notwithstanding that Agent shall not have received a Collateral Access Agreement
as to a specific leased location, so long as no Event of Default exists or has
occurred, any Inventory that would otherwise be Eligible Inventory at a location
leased and operated by a Borrower shall be Eligible Inventory, PROVIDED, THAT,
without limiting any other rights and remedies of Agent under this Agreement or
under the other Financing Agreements, including rights with respect to the
establishment of reserves or otherwise, Agent shall have established such
reserves for purposes of calculating the Borrowing Base as Agent may determine
in respect of amounts at any time payable by such Borrower to the owner and
lessor of such location (subject to any applicable limitations set forth in
Section 1.10 hereof) and after giving effect to such reserves, there is Excess
Availability, and (B) as to locations owned and operated by a third person, if
Agent shall have received a Collateral Access Agreement from such owner and
operator with respect to such location, duly authorized, executed and delivered
by such owner and operator (EXCEPT THAT notwithstanding that Agent shall not
have received a Collateral Access Agreement from such owner and operator, so
long as no Event of Default exists or has occurred, any Inventory that would
otherwise be Eligible Inventory shall be Eligible Inventory, PROVIDED THAT,
without limiting any other rights and remedies of Agent under this Agreement or
under the other Financing Agreements, including rights with respect to the
establishment of reserves or otherwise, Agent shall have established such
reserves for purposes of calculating the Borrowing Base as Agent may determine
in respect of amounts at any time payable by such Borrower to such owner and
operator of such location (subject to any applicable limitations set forth in
Section 1.11 hereof) and after giving effect to such reserves, there is Excess
Availability and, in addition, if required by Agent: (1) UCC-1 financing
statements between the owner and operator, as consignee or bailee and such
Borrower, as consignor or ▇▇▇▇▇▇, in form and substance
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satisfactory to Agent, which are duly assigned to Agent and (2) a written notice
to any lender to the owner and operator of the first priority security interest
in such Inventory of Agent and
(ii) any Inventory that would otherwise be Eligible
Inventory located outside the United States of America which 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, as the case may be, which are either
owned and controlled by such Borrower or leased by such Borrower (but only if
Agent has received a Collateral Access Agreement duly authorized, executed and
delivered by such Customs Broker or the owner and lessor of such leased
premises, as the case may be or Agent shall have established reserves for
amounts due or to become due to such Customs Broker as provided for above and
subject to any applicable limitations set forth in Section 1.10 hereof,
PROVIDED, THAT, (A) Agent has a first priority perfected security interest in
and lien upon, and control and possession of, all originals of documents of
title with respect to such Inventory (either directly or as to one (1) such
original through a Customs Broker as contemplated in Section 7.6 hereof), (B)
Agent has received each of the following: (1) a Collateral Access Agreement,
duly authorized, executed and delivered by the Customs Broker handling the
shipping and delivery of such Inventory (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), (2) a copy of the certificate of
marine cargo insurance in connection therewith in which it has been named as an
additional insured and loss payee in a manner acceptable to Agent and (3) a copy
of the invoice and manifest with respect thereto, and (C) such Inventory is not
subject to any Letter of Credit Accommodation;
(h) Inventory subject to a security interest or lien in favor of
any person other than Agent except those permitted in this Agreement;
(i) ▇▇▇▇ and hold goods;
(j) unserviceable, obsolete or slow moving Inventory;
(k) Inventory which is not subject to the first priority, valid
and perfected security interest of Agent;
(l) Inventory which uses or to which is affixed or incorporated
any Intellectual Property owned by any other Person, unless (i) such Borrower
has the right to use such Intellectual Property for such purposes pursuant to a
license agreement listed on Schedule 8.11 hereto, PROVIDED, THAT, (A) such
license agreement is in full force and effect and constitutes the legal, valid,
binding and enforceable obligations of the parties thereto, (B) no default or
event of default exists or has occurred thereunder and is continuing, and (C) no
party thereto has sent any notice of default or any notice of its intention to
terminate or not renew such agreement and (ii) Agent has received an agreement
from the owner and licensor of such Intellectual Property in form and substance
satisfactory to Agent, providing, INTER ALIA, for Agent to have the right to use
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such Intellectual Property to realize on the Collateral on terms and conditions
acceptable to Agent, EXCEPT THAT notwithstanding that Agent shall not have
received such an agreement as to any specific Intellectual Property used by any
Borrower which is affixed to or incorporated in any Inventory that would
otherwise be Eligible Inventory shall be Eligible Inventory, PROVIDED, THAT,
without limiting any other rights or remedies of Agent under this Agreement or
under the other Financing Agreements, including rights with respect to the
establishment of reserves or otherwise, Agent shall have established such
reserves for purposes of calculating the Borrowing Base as Agent may determine
in respect of amounts at any time payable by such Borrower to the owner and
licensor of such Intellectual Property and after giving effect to such reserves,
there is Excess Availability; (m) returned, damaged and/or defective Inventory;
and (n) Inventory purchased or sold on consignment. General criteria for
Eligible Inventory may be established and revised from time to time by Agent in
its good faith, reasonable judgment. Any inventory which is not Eligible
Inventory shall nevertheless be part of the Collateral.
1.32 "Eligible Transferee" shall mean (a) any Lender; (b) any Affiliate
of a Lender; and (c) any other commercial bank, financial institution or
"accredited investor" (as defined in Regulation D under the Securities Exchange
Act) approved by Agent and, unless an Event of Default has occurred and is
continuing at the time any assignment is effected hereunder, Huffy, such
approval not to be unreasonably withheld, conditioned or delayed by Huffy, and
such approval to be deemed given by Huffy if no objection from Huffy is received
by the assigning Lender and Agent within five (5) Business Days after notice of
such proposed assignment has been provided by the assigning Lender or Agent to
Huffy; PROVIDED, THAT, neither any Borrower, Guarantor nor any Affiliate of any
Borrower or Guarantor shall qualify as an Eligible Transferee.
1.33 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower or
Guarantor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
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1.34 "Equipment" shall mean, as to each Borrower, all of such
Borrower's now owned and hereafter acquired equipment, machinery, computers and
computer hardware and software (whether owned or licensed), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.35 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.36 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.37 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower (or on its behalf by Huffy)
and approved by Lender) on or about 9:00 a.m. (New York time) two (2) Business
Days prior to the commencement of such Interest Period in amounts substantially
equal to the principal amount of the Eurodollar Rate Loans requested by and
available to such Borrower in accordance with this Agreement, with a maturity of
comparable duration to the Interest Period selected by such Borrower (or on its
behalf by Huffy).
1.38 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.39 "Excess Availability" shall mean, as to each Borrower, the amount,
as determined by Agent, calculated at any time, equal to: (a) the Borrowing Base
of such Borrower, MINUS (b) the sum of: (i) the amount of all then outstanding
and unpaid Obligations of such Borrower (other than pursuant to its guarantee of
the Obligations of the other Borrowers), plus (ii) the aggregate amount of all
trade payables and other obligations of such Borrower which are more than sixty
(60) days past due as of such time.
1.40 "Excluded Property" shall mean (a) the following assets of
Borrower and Guarantors as to which Agent is being granted a security interest
and lien pursuant to the terms hereof but has not as of the date hereof
necessarily taken all required actions in order to perfect its security
interests and liens: (i) motor vehicles, (ii) the Capital Stock of the existing
Subsidiaries of Huffy as of the date hereof which are not incorporated in any
jurisdiction in the United States of America, (iii) the Inventory and Equipment
located in Mexico, PROVIDED, THAT, in no event shall Inventory and Equipment
having a value of more than $10,000,000 be located at any time in Mexico, (iv)
certain portable scanning equipment, personal computers, other hand-held or
mobile personal equipment and related accessories and tools to the extent used
by employees of Huffy Service in the ordinary course of business at customer's
locations, to the extent such locations are
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not in jurisdictions where a financing statement has been filed by Agent, and
(b) the Celina Property and the Harrisburg Property. The foregoing shall not be
construed as a waiver of any claims or rights of Agent or any Lender with
respect to any of the assets described in this definition or to limit or affect
the rights of Agent to at any time take such action as Agent may require, or to
require any Borrower or Guarantor to take such action, so as to preserve,
protect or establish the security interest, lien, claim or other interest of
Agent or any Lender in such assets (whether pursuant to Section 9.21 hereof or
otherwise).
1.41 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.42 "Existing Agreement" shall mean the Loan and Security Agreement,
dated January 26, 2000, by and among Agent, Lenders, Borrowers and Guarantors.
1.43 "Fee Letter" shall mean the amended and restated letter agreement,
dated on or about the date hereof, by and among Borrowers, Guarantors and Agent,
setting forth certain fees payable by Borrowers to Agent for the benefit of
itself and Lenders, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.44 "Final Maturity Date" shall mean December 31, 2002, or such later
date as determined pursuant to Section 12.1 hereof.
1.45 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by any
Borrower or Obligor in connection with this Agreement, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.46 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
if any change in generally accepted accounting principles after the date hereof
affects the calculation of compliance with the financial covenants in Section
9.22 hereof, Huffy may by notice to Agent, or Agent may, by notice to Huffy
require that such covenants thereafter be calculated in accordance with
generally accepted accounting principles as in effect and applied by Guarantor
immediately before such change in generally accepted accounting principles
occurred. If such notice is given, the financial statements delivered pursuant
to Section 9.6 hereof after such change occurs shall be accompanied by
reconciliations of the difference between the calculation set forth therein and
a calculation made in accordance with generally accepted accounting principles
as in effect from time to time after such change occurs.
1.47 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory
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authority) thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
1.48 "Guarantors" shall mean collectively, the following (together with
their respective successors and assigns): (a) Huffy Risk Management, Inc., an
Ohio corporation; (b) Huffy Brands Company, an Ohio corporation; (c) HCAC, Inc.,
an Ohio corporation, formerly known as True Temper Hardware Company; (d)
Hufco-Delaware Company, a Delaware corporation, formerly known as ▇▇▇▇▇ Baby
Products Company; and (e) Huffy Sports, Inc., a Wisconsin corporation, formerly
known as ▇▇▇▇▇ ▇▇▇▇ Products Company.
1.49 "Harrisburg Property" shall mean the approximately 16.14 acres at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ owned by HCAC and a
portion of which is currently leased to True Temper Hardware Company.
1.50 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons, flammable explosives,
friable asbestos, urea formaldehyde insulation, radioactive materials,
polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type
of pollutants or contaminants (including materials which include hazardous
constituents) and including any other substances, materials or wastes that are
or become regulated under any Environmental Law (including any that are or
become classified as hazardous or toxic under any Environmental Law).
1.51 "Hedging Obligations" shall mean, with respect to any Person, the
obligations of such Person under any of the following agreements or arrangements
to the extent that the primary purpose thereof is the reduction of risk for
fluctuations in interest rates or currency or commodity values relating to its
customary business and not for speculative purposes: (a) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements and
(b) other agreements or arrangements designed to protect such person against
fluctuations in interest rates or currency or commodity values.
1.52 "Huffy" shall mean Huffy Corporation, an Ohio corporation, and its
successors and assigns.
1.53 "Indebtedness" shall mean, with respect to any Person, any
liability (a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, indentures or similar instruments; (b)
representing the balance deferred and unpaid of the purchase price of any
property or services, other than ordinary course compensation to employees
(EXCEPT any such balance that constitutes an account payable to a trade supplier
in the ordinary course of business of such Person in connection with obtaining
goods, materials or services, to the extent such balance is not more than ninety
(90) days past due); (c) all Capital Leases; (d) any contractual obligations,
contingent or otherwise, of such Person to pay or be liable for the payment of
any indebtedness described in this definition of another Person, including,
without limitation, any such indebtedness, directly or indirectly guaranteed,
endorsed (other than for collection or
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deposit in the ordinary course of business), co-made or discounted or sold with
recourse by such Person, or in respect of which such Person is otherwise
directly or indirectly liable, including contractual obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase, or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received; (e) all obligations with respect to
redeemable stock and redemption or repurchase obligations under any Capital
Stock or other equity securities issued by such Person; (f) all reimbursement
obligations and other liabilities, contingent or otherwise, of such Person with
respect to bonds, letters of credit, banker's acceptances or similar documents
or instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any security interest in, or mortgage or lien upon the interest in
any asset of such Person, whether or not such obligations, liabilities or
indebtedness are assumed by or are a personal liability of such Person, all as
of such time; and (h) all obligations, liabilities and indebtedness of such
Person (marked to market) constituting Hedging Obligations.
1.54 "Intellectual Property" shall mean, as to each Borrower, such
Borrower's now owned and hereafter arising or acquired: patents, patent rights,
patent applications, copyrights, works which are the subject matter of
copyrights, copyright registrations, trademarks, trade names, trade styles,
trademark and service ▇▇▇▇ applications, and licenses and rights to use any of
the foregoing; all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to ▇▇▇ for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill; customer and other lists in
whatever form maintained; and trade secret rights, copyright rights, rights in
works of authorship, and contract rights relating to computer software programs,
in whatever form created or maintained.
1.55 "Interest Expense" shall mean, for any period, as to any Person
and its Subsidiaries, all of the following as determined in accordance with
GAAP, total interest expense, whether paid or accrued (including the interest
component of Capital Leases for such period), including, without limitation, all
bank fees, commissions, discounts and other fees and charges owed with respect
to letters of credit, banker's acceptances or similar instruments, but excluding
(a) amortization of discount and amortization of deferred financing fees and
closing costs, (b) interest paid in property other than cash and (c) any other
interest expense not payable in cash.
1.56 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as a
Borrower (or Huffy on behalf of such Borrower) may elect, the exact duration to
be determined in accordance with the customary practice in the applicable
Eurodollar Rate market; PROVIDED, THAT, no Borrower (and Huffy on behalf of such
Borrower) may elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
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1.57 "Interest Rate" shall mean:
(a) Subject to clauses (b) and (c) of this definition below:
(i) as to Prime Rate Loans, a rate equal to the Applicable
Margin on a per annum basis in excess of the Prime Rate, and
(ii) as to Eurodollar Rate Loans, a rate equal to the
Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate
(in each case, based on the Eurodollar Rate applicable for the Interest Period
selected by a Borrower (or on its behalf by Huffy) as in effect three (3)
Business Days after the date of receipt by Agent of the request by or on behalf
of such Borrower for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to
such Borrower or Huffy).
(b) Subject to clause (c) of this definition below, the Interest
Rate payable by Borrowers shall be increased or decreased, as the case may be,
as of the first day of each month (commencing with the month beginning February
1, 2001.)
(c) Notwithstanding anything to the contrary set forth in clauses
(a) and (b) above, the Applicable Margin otherwise used to calculate the
Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall be the
highest percentage set forth in the definition of the term Applicable Margin for
each category of Loans (without regard to the amount of Excess Availability)
plus two (2%) percent per annum, at Agent's option, (i) for the period (A) from
and after the date of termination or non-renewal hereof until Agent and Lenders
have received full and final payment of all Obligations (notwithstanding entry
of a judgment against a Borrower) and (B) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Agent, and (ii) on Loans to any Borrower at any time
outstanding in excess of the Borrowing Base of such Borrower (whether or not
such excess(es), arise or are made with or without Agent's or any Lender's
knowledge or consent and whether made before or after an Event of Default).
1.58 "Inventory" shall mean, as to each Borrower, all of such
Borrower's now owned and hereafter existing or acquired raw materials, work in
process, finished goods and all other inventory of whatsoever kind or nature,
wherever located.
1.59 "Inventory Loan Limit" shall mean, at any time, (a) as to Huffy,
the amount equal to $41,250,000 minus the amount of the Loans based on Eligible
Inventory to Royce then outstanding and (b) as to Royce, the amount equal to
$41,250,000 minus the amount of the Loans based on Eligible Inventory to Huffy
then outstanding.
1.60 "Lenders" shall mean the financial institutions who are
signatories hereto as lenders and other persons made a party to this Agreement
as a Lender in accordance with Section 13.6 hereof, and their respective
successors and assigns; sometimes being referred to herein individually as a
"Lender".
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1.61 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Agent or any Lender for the account of any
Borrower or (b) with respect to which Agent on behalf of Lenders has agreed to
indemnify the issuer or guaranteed to the issuer the performance by any Borrower
of its obligations to such issuer; sometimes being referred to herein
individually as a "Letter of Credit Accommodation."
1.62 "Loans" shall mean the loans made to or for the benefit of any
Borrower by or on behalf of any Lender or by Agent for the ratable account of
any Lender, on a revolving basis pursuant to the Credit Facility (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.63 "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance, operations or properties of
Borrowers and Guarantors taken as a whole or the Huffy Bicycle Company Division
of Huffy, Royce and American, taken as a whole or any other Borrower or (b) the
legality, validity or enforceability of this Agreement or any of the other
Financing Agreements; (c) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Agent or any Lender upon the
Collateral or any other property which is security for the Obligations; (d) the
Collateral of any Borrower (taken as a whole) or the value of the Collateral;
(e) the ability of any Borrower to repay the Obligations or of any Borrower to
perform its obligations under this Agreement or any of the other Financing
Agreements; or (f) the ability of Agent or any Lender to enforce the Obligations
or realize upon the Collateral or otherwise with respect to the rights and
remedies of Agent or any Lender under this Agreement or any of the other
Financing Agreements.
1.64 "Maximum Credit" shall mean $75,000,000.
1.65 "Maximum Interest Rate" shall mean the maximum non-usurious rate
of interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken, reserved, charged or received in respect of
the Obligations.
1.66 "Monthly Average Excess Availability" shall mean, at any time, the
daily average of the aggregate Excess Availability of Borrowers for the
immediately preceding calendar month as calculated by Agent in good faith.
1.67 "Net Available Proceeds" shall mean the aggregate cash proceeds
received by any Borrower, Guarantor or other Subsidiary of Huffy from any Asset
Sale,
(a) net of the direct costs incurred specifically with respect to
such Asset Sale consisting of legal, accounting and investment banking fees,
sales commissions, title and recording tax expenses, and
(b) net of all payments required to be made by such Borrower,
Guarantor or Subsidiary, as the case may be, on any indebtedness (other than the
Obligations) secured by a
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valid and perfected security interest on the assets subject to such Asset Sale
which has priority over the Liens of Agent therein, and
(c) net of any portion of the proceeds from such Asset Sale
required under the terms of such sale to be held in escrow to be used to pay
liabilities of such Borrower, Guarantor or other Subsidiary, as the case may be,
relating to the assets subject to such Asset Sale; PROVIDED, THAT, immediately
upon the release of any funds from such escrow to any Borrower, Guarantor or
other Subsidiary, as the case may be, such amount so released shall constitute
Net Available Proceeds, and
(d) net of all Federal, State, foreign and local taxes paid or
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax arrangements), PROVIDED, THAT, in the case of a
Business Unit Sale to the extent such taxes are not payable upon the
effectiveness of such Business Unit Sale if as of the date of such Business Unit
Sale and after giving effect thereto, the aggregate Excess Availability
Borrowers shall be less than $25,000,000, (i) an amount equal to the good faith
estimate thereof of independent certified public accountants acceptable to Agent
shall be set aside from the proceeds and held in escrow to be used only to pay
such taxes, (ii) upon the request of Agent, at the end of any tax year or upon
any Business Unit Sale, the estimate of the amount of such taxes shall be
reviewed by the independent certified public accountants acceptable to Agent and
the amount held in escrow adjusted to reflect the estimate established pursuant
to such review, if necessary, (iii) upon the payment of such taxes (or as the
Agent may agree) or any reduction in the amount of the funds held in escrow, the
amount remaining in such escrow, or the amount of the reduction, as the case may
be, shall constitute Net Available Proceeds and shall be applied to the
Obligations and (iv) on December 31, 2002 or such later date as Agent may agree,
to the extent any amounts then remain in such escrow, (A) the amounts then held
in escrow shall be released, (B) the amounts then held in escrow shall
constitute Net Available Proceeds and (C) such amounts shall be applied to the
Obligations, and
(e) in the case of a Business Unit Sale, net of severance
obligations to non-senior management employees of the Division or Borrower,
Guarantor or other Subsidiary, as the case may be, whose assets or Capital Stock
are subject to such Asset Sale and amounts payable to senior management
employees of any Division, Borrower, Guarantor or other Subsidiary, as the case
may be, upon such sale under retention agreements with such senior management
employees and non-compete agreements with such senior management employees;
PROVIDED, THAT, (i) such retention agreements shall only be entered into with
the persons included on a list provided to Agent on or before the date hereof,
(ii) the terms of any such retention agreement, and severance and non-compete
obligations shall be substantially consistent with the terms of similar
agreements, severance policies used by Huffy in connection with prior sales of
business units, and
(f) net of (i) customary contingent indemnification liabilities
to the purchaser in transactions of such type and (ii) premiums payable for
insurance to cover liabilities retained by such Borrower, Guarantor or other
Subsidiary, as the case may be, relating to the assets subject to such Business
Unit Sale with respect to environmental remediation liabilities and/or product
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liability claims (the liabilities and premiums described in clauses (i) and (ii)
above being referred to collectively as the "Contingent Liabilities").
Net Available Proceeds shall exclude any non-cash proceeds received from any
Asset Sale, but shall include such proceeds when and as converted to cash or
other immediately available funds. Any instruments issued to any Borrower,
Guarantor or other Subsidiary, as the case may be, as part of the consideration
for such Asset Sale shall be delivered to Agent.
1.68 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credit and allowances of any nature
at any time issued, owing, granted, outstanding or claimed with respect thereto.
1.69 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time on an orderly liquidation
value basis as set forth in the most recent acceptable appraisal of Inventory
received by Agent in accordance with Section 7.3, net of operating expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
original cost of the aggregate amount of the Inventory subject to such
appraisal.
1.70 "Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its Subsidiaries (if any), the amount
equal to the difference between: (a) the aggregate net book value of all assets
of such Person and its Subsidiaries, calculating the book value of inventory for
this purpose on a first-in-first-out basis, after deducting from such book
values all appropriate reserves in accordance with GAAP (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and (b)
the aggregate amount of the Indebtedness and other liabilities of such Person
and its Subsidiaries (including tax and other proper accruals that would appear
on a balance sheet prepared in accordance with GAAP consistently applied).
1.71 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Agent or any
Lender and/or any of their Affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under this Agreement or any of the
other Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to any Borrower
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Agent or any Lender.
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1.72 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantor), other than a Borrower.
1.73 "Other Taxes" shall mean any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Financing Agreements.
1.74 "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
13.6 of this Agreement governing participations.
1.75 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.76 "Permits" shall have the meaning set forth in Section 8.7 hereof.
1.77 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.78 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.79 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.80 "Pro Rata Share" shall mean as to any Lender, the fraction
(expressed as a percentage) the numerator of which is such Lender's Commitment
and the denominator of which is the aggregate amount of all of the Commitments
of Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.6 hereof; PROVIDED, THAT, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.81 "Real Property" shall mean, as to each Borrower, all now owned and
hereafter acquired real property of such Borrower, including leasehold
interests, together with all buildings, structures, and other improvements
located thereon and all licenses, easements and appurtenances relating thereto,
wherever located.
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1.82 "Receivables" shall mean: (a) all Accounts; (b) all amounts at any
time payable to any Borrower in respect of the sale or other disposition by any
Borrower of any Account or other obligation for the payment of money; (c) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; (d) all
letters of credit, indemnities, guarantees, security or other deposits and
proceeds thereof issued payable to any Borrower or otherwise in favor of or
delivered to any Borrower in connection with any Account; and (e) all other
contract rights, chattel paper, instruments, notes, general intangibles and
other forms of obligations owing to any Borrower, whether from the sale and
lease of goods or other property, licensing of any property (including
Intellectual Property or other general intangibles), rendition of services or
from loans or advances by any Borrower or to or for the benefit of any third
person (including loans or advances to any Affiliates or Subsidiaries) or
otherwise associated with any Accounts, Inventory or general intangibles of any
Borrower (including, without limitation, choses in action, causes of action, tax
refunds, tax refund claims, any funds which may become payable to any Borrower
in connection with the termination of any employee benefit plan and any other
amounts payable to any Borrower from any employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which any Borrower is beneficiary).
1.83 "Records" shall mean, as to each Borrower, all of such Borrower's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of such
Borrower with respect to the foregoing maintained with or by any other person).
1.84 "Reference Bank" shall mean First Union National Bank, or such
other bank as Agent may from time to time designate.
1.85 "Register" shall have the meaning set forth in Section 13.6
hereof.
1.86 "Required Lenders" shall mean, at any time, those Lenders whose
Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of
the aggregate of the Commitments of all Lenders, or if the Commitments shall
have been terminated, Lenders to whom at least sixty-six and two-thirds (66
2/3%) percent of the then outstanding Obligations are owing.
1.87 "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
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1.88 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has reason to believe it will continue to have) sufficient capital (and not
unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose all rights
of subrogation, contribution or indemnification arising pursuant to any
guarantees given by such Person) are greater than the Indebtedness of such
Person, and including subordinated and contingent liabilities computed at the
amount which, to the best of such Person's knowledge, represents an amount which
can reasonably be expected to become an actual or matured liability (and
including as to contingent liabilities arising pursuant to any guarantee the
face amount of such liability as reduced to reflect the probability of it
becoming a matured liability).
1.89 "Special Agent Advances" shall have the meaning set forth in
Section 12.11 hereof.
1.90 "Subsidiary" shall mean, with respect to any Person, any
corporation, limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one ore more Subsidiaries of such Person.
1.91 "Sussex Lease" shall mean the Lease and Development Agreement,
dated May 29, 1996, between Asset Holdings Company VI, LLC and Huffy, with
respect to the premises of Huffy at ▇▇▇ ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.92 "Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of any Lender, such taxes (including income
taxes, franchise taxes or capital taxes) as are imposed on or measured by such
Lender's net income or capital by any jurisdiction (or any political subdivision
thereof).
1.93 "Value" shall mean, with respect to Inventory of each Borrower,
the lower of (a) cost computed on a first-in-first-out cost basis in accordance
with the historical practices of such Borrower previously disclosed to Agent and
in accordance with GAAP or (b) market value in accordance with GAAP, as
determined by such Borrower in its good faith judgment so long as the final
determination is acceptable to Agent.
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SECTION 2. CREDIT FACILITIES
-----------------
2.1 REVOLVING LOAN FACILITY.
(a) Subject to and upon the terms and conditions contained
herein, each Lender severally (and not jointly) agrees to fund its Pro Rata
Share of Loans to each Borrower from time to time in amounts requested by such
Borrower (or on its behalf by Huffy), up to the amount at any time outstanding
equal to the Borrowing Base of such Borrower.
(b) Agent may, in good faith, from time to time, upon not less
than ten (10) days prior notice to Huffy, (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Agent determines in good faith
that the likelihood of collection of such Accounts has decreased or (ii) reduce
the lending formula(s) with respect to Eligible Inventory to the extent that
Agent determines in its good faith judgment that: (A) the number of days of the
turnover of the Inventory for any one hundred twenty (120) day period as
determined in the good faith judgment of Agent has increased or (B) the quality
or mix of the Inventory has deteriorated or (C) the advance percentage in the
lending formula is more than eighty-five (85%) percent of the Net Recovery
Percentage with respect to such category of Eligible Inventory as set forth in
the most recent acceptable appraisal thereof received by Agent. In determining
whether to reduce the lending formula(s), Agent may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing reserves. The amount of any
reduction in any lending formula by Agent pursuant to this Section 2.1(b) shall
have a proportional relationship to the matter described herein which is the
basis for such reduction in the good faith determination of Agent. To the extent
a reserve shall have been established which is sufficient to address any event,
condition or matter in a manner satisfactory to Agent, in its good faith
determination, Agent shall not exercise its rights under this Section 2.1(b) to
reduce the lending formulas, to address such event, condition or matter.
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of a Borrower (or Huffy on behalf of such Borrower),
Agent agrees, for the ratable risk of each Lender according to its Pro Rata
Share, to provide or arrange for Letter of Credit Accommodations for the account
of such Borrower containing terms and conditions acceptable to Agent and the
issuer thereof. Any payments made by Agent or any Lender to any issuer thereof
and/or related parties in connection with the Letter of Credit Accommodations
shall constitute additional Loans to such Borrower pursuant to this Section 2.
Agent shall administer Letter of Credit Accommodations in accordance with its
customary practices and policies as from time to time in effect.
(b) In addition to any customary charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrowers shall pay to Agent, for the benefit of Lenders, a
letter of credit fee at a rate equal to one and one-half (1 1/2%) percent per
annum on the daily outstanding balance of the Letter of Credit Accommodations
for the
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immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, except that Agent may, and upon the written
direction of Required Lenders shall, require Borrowers to pay to Agent such
letter of credit fee at a rate equal to three and one- half (3 1/2%) percent per
annum for (i) the period from and after the date of the termination of this
Agreement until Agent, for the ratable benefit of Lenders, has received full and
final payment of all Obligations (notwithstanding entry of a judgment against
any Borrower) and (ii) the period from and after the date of the occurrence of
an Event of Default and for so long as such Event of Default is continuing. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrowers to pay
such fee shall survive the termination or non-renewal of this Agreement.
(c) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such
Letter of Credit Accommodation shall have delivered to the proposed issuer of
such Letter of Credit Accommodation at such times and in such manner as such
proposed issuer may require, an application in form and substance satisfactory
to such proposed issuer and Agent for the issuance of the Letter of Credit
Accommodation and such other documents as may be required pursuant to the terms
thereof, and the form and terms of the proposed Letter of Credit Accommodation
shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit Accommodation, and no law, rule or regulation applicable to
money center banks generally and no request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit Accommodation refrain from, the issuance of letters of
credit generally or the issuance of such Letters of Credit Accommodation; and
(iii) the Excess Availability, prior to giving effect to any reserves with
respect to such Letter of Credit Accommodations, on the date of the proposed
issuance of any Letter of Credit Accommodations, shall be equal to or greater
than: (A) if the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory and the documents of title with respect thereto
are consigned to the issuer, the sum of (1) the percentage equal to one hundred
(100%) percent minus the then applicable percentage for Eligible Inventory set
forth in the definition of the Borrowing Base multiplied by the Value of such
Eligible Inventory, plus (2) freight, taxes, duty and other amounts which Agent
estimates in good faith must be paid in connection with such Inventory upon
arrival and for delivery to one of such Borrower's locations for Eligible
Inventory within the United States of America and (iv) if the proposed Letter of
Credit Accommodation is for any other purpose or the documents of title are not
consigned to the issuer in connection with a Letter of Credit Accommodation for
the purpose of purchasing Eligible Inventory, an amount equal to one hundred
(100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Agent and Lenders with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, a reserve
shall be established in the applicable amount set forth in Section 2.2(c)(iii)
above.
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(d) Except in Agent's discretion, with the consent of all
Lenders, the amount of all outstanding Letter of Credit Accommodations and all
other commitments and obligations made or incurred by Agent or any Lender in
connection therewith, shall not at any time exceed $50,000,000. At any time an
Event of Default exists or has occurred and is continuing, upon the request of
Agent, Borrowers will either furnish cash collateral to secure the reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish cash collateral to Agent, for the ratable benefit of Lenders, for the
Letter of Credit Accommodations.
(e) Borrowers shall indemnify and hold Agent and Lenders
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses which Agent or any Lender may suffer or incur in connection
with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including, but not limited to, any losses, claims,
damages, liabilities, costs and expenses due to any action taken by any issuer
or correspondent with respect to any Letter of Credit Accommodation, except for
losses, claims, damages, liabilities, costs and expenses as a result of the
gross negligence or wilful misconduct of Agent and Lenders as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
Each Borrower assumes all risks with respect to the acts or omissions of the
drawer under or beneficiary of any Letter of Credit Accommodation and for such
purposes the drawer or beneficiary shall be deemed such Borrower's agent. Each
Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State
and local taxes, duties and levies relating to any goods subject to any Letter
of Credit Accommodations or any documents, drafts or acceptances thereunder.
Each Borrower hereby releases and holds Agent and Lenders harmless from and
against any acts, waivers, errors, delays or omissions, whether caused by such
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for any losses, claims,
damages, liabilities, costs and expenses suffered by such Borrower as a result
of the gross negligence or willful misconduct of Agent and Lenders as determined
pursuant to final, non-appealable order of a court of competent jurisdiction.
The provisions of this Section 2.2(e) shall survive the payment of Obligations
and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant any Borrower any right or authority to pledge the credit of Agent or
Lenders in any manner. Agent and Lenders shall have no liability of any kind
with respect to any Letter of Credit Accommodation provided by an issuer other
than Agent or Lenders unless Agent has duly executed and delivered to such
issuer the application or a guarantee or indemnification in writing with respect
to such Letter of Credit Accommodation. Each Borrower shall be bound by any
interpretation made in good faith by Agent, or any other issuer or correspondent
under or in connection with any Letter of Credit Accommodation or any documents,
drafts or acceptances thereunder, notwithstanding that such interpretation may
be inconsistent with any instructions of any Borrower. Agent shall have the sole
and exclusive right and authority to, and Borrowers shall not: (i) at any time
an Event of Default exists or has occurred and is continuing, (A) approve or
resolve any questions of non-compliance of documents, (B) give any instructions
as to acceptance or rejection of any documents or goods or (C) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, and (ii) at all times, (A) grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents, and (B)
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agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Agent may take such actions
either in its own name or in any Borrower's or Guarantor's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been granted or undertaken by such Borrower to Agent, for the
ratable benefit of Lenders. Any duties or obligations undertaken by Agent to any
issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement by Agent in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been undertaken by such Borrower to Agent, for the ratable benefit of
Lenders, and to apply in all respects to such Borrower.
(h) Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender's Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).
(i) Borrowers are irrevocably and unconditionally obligated,
without presentment, demand or protest, to pay to Agent any amounts paid by an
issuer of a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Loans in accordance with Section
2.2(a) or otherwise). In the event that Borrowers fail to pay Agent on the date
of any payment under a Letter of Credit Accommodation in an amount equal to the
amount of such payment, the Agent (to the extent it has actual notice thereof)
shall promptly notify each Lender of the unreimbursed amount of such payment and
each Lender agrees, upon one (1) Business Day's notice, to fund to the Agent the
purchase of its participation in such Letter of Credit Accommodation in an
amount equal to its Pro Rata Share of the unpaid amount. The obligation of each
Lender to deliver to Agent an amount equal to its respective participation
pursuant to the foregoing sentence is absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuance of any
Event of Default, the failure to satisfy any other condition set forth in
Section 4 or any other event or circumstance. If such amount is not made
available by a Lender when due, Agent shall be entitled to recover such amount
on demand from such Lender with interest thereon, for each day from the date
such amount was due until the date such amount is paid to Agent at the interest
rate then payable by Borrowers in respect of Loans that are Prime Rate Loans as
set forth in Section 3.1(a) hereof.
2.3 COMMITMENTS. The aggregate amount of each Lender's Pro Rata Share
of the Loans and Letter of Credit Accommodations shall not exceed the amount of
such Lender's Commitment, as the same may from time to time be amended with the
written acknowledgment of Agent.
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2.4 MAXIMUM CREDIT; INVENTORY LOAN LIMIT. Except in Agent's discretion,
with the consent of all Lenders, (a) the aggregate amount of the Loans and the
Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit; (b) the aggregate amount of the Loans based on Eligible
Inventory outstanding at any time (and including as such Loans for this purpose
the portion of any Letter of Credit Accommodations used for the purpose of
purchasing Inventory not subject to a reserve as provided in Section 2.2(c)
hereof) outstanding at any time shall not exceed $41,250,000; and (c) the
aggregate amount of the Loans based on Eligible Inventory consisting of raw
materials outstanding at any time shall not exceed $5,000,000.
SECTION 3. INTEREST AND FEES
-----------------
3.1 INTEREST.
(a) Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrowers (or Huffy on behalf of a Borrower) may from time
to time request Eurodollar Rate Loans or that Prime Rate Loans be converted to
Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an
additional Interest Period. Such request from or on behalf of a Borrower shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Agent of such a
request from or on behalf of a Borrower, such Eurodollar Rate Loans shall be
made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be, PROVIDED, THAT, (i) no
Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrowers shall have complied with such
customary procedures as are established by Agent and specified by Agent to a
Borrower (or Huffy) from time to time for requests by Borrowers for Eurodollar
Rate Loans, (iv) no more than six (6) Interest Periods may be in effect at any
one time, (v) the aggregate amount of the Eurodollar Rate Loans to any Borrower
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by a Borrower shall not exceed ninety (90%) percent
of the lowest principal amount of the Loans to such Borrower which it is
anticipated will be outstanding during the applicable Interest Period, in each
case as determined by Agent (but with no obligation of Agent or any Lender to
make such Loans) and (vii) Agent and Lenders shall have determined that the
Interest Period or Adjusted Eurodollar Rate is available to such Lender and can
be readily determined as of the date of the request for such Eurodollar Rate
Loan by a Borrower. Any request by a Borrower (or by Huffy on behalf of such
Borrower) for any Eurodollar Rate Loans or to convert Prime Rate Loans to
Eurodollar
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Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Agent,
Lenders and Reference Bank shall not be required to purchase United States
Dollar deposits in the London interbank market or other applicable Eurodollar
Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall
be deemed to apply as if Agent, Lenders and Reference Bank had purchased such
deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Agent has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by
Agent to Huffy, convert to Prime Rate Loans in the event that this Agreement
shall terminate or not be renewed. Borrowers shall pay to Agent, for the benefit
of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan
account of any Borrower) any amounts required to compensate any Lender, the
Reference Bank or any Participant with any Lender for any loss (including loss
of anticipated profits), cost or expense incurred by such person, as a result of
the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of
the foregoing.
(d) Interest shall be payable by Borrowers to Agent, for the
benefit of Lenders, monthly in arrears not later than the first day of each
calendar month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The interest rate on non-contingent
Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
first day of the month after any change in such Prime Rate is announced based on
the Prime Rate in effect on the last day of the month in which any such change
occurs.
(e) No agreements, conditions, provisions or stipulations
contained in this Agreement or any of the other Financing Agreements or any
Event of Default, or the exercise by Agent or any Lender of the right to
accelerate the payment or the maturity of all or any portion of the Obligations,
or the exercise by Agent or any Lender of any option whatsoever contained in
this Agreement or any of the other Financing Agreements, or the prepayment by
any Borrower of any of the Obligations, or the occurrence of any event or
contingency whatsoever, shall entitle Agent and Lenders to contract for, charge
or receive, in any event, interest exceeding the Maximum Interest Rate. In no
event shall Borrowers be obligated to pay interest exceeding such Maximum
Interest Rate. All agreements, conditions or stipulations, if any, which may in
any event or contingency whatsoever operate to bind, obligate or compel
Borrowers to pay a rate of interest exceeding the Maximum Interest Rate shall be
without binding force or effect, at law or in equity, to the extent of the
excess of interest over such Maximum Interest Rate. In the event any interest is
contracted for, charged or received in excess of the Maximum Interest Rate
("Excess"), each Borrower acknowledges and stipulates that any such contract,
charge or receipt shall be the result of an accident and BONA FIDE error, and
that any Excess received by Agent or any Lender shall be applied, first, to the
payment of the then outstanding and unpaid principal hereunder; second, to the
payment of the other Obligations then outstanding and unpaid; and third,
returned to such Borrower, it being the intent of the parties hereto not to
enter at any time
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into a usurious or otherwise illegal relationship. Each Borrower recognizes
that, with fluctuations in the rate of interest set forth in this Section 3.1 of
this Agreement and the Maximum Interest Rate, such an unintentional result could
inadvertently occur. By the execution of this Agreement, each Borrower agrees
that (i) the credit or return of any Excess shall constitute the acceptance by
such Borrower of such Excess, and (ii) no Borrower shall seek or pursue any
other remedy, legal or equitable, against Agent or any Lender, based in whole or
in part upon contracting for, charging or receiving of any interest in excess of
the Maximum Interest Rate. For the purpose of determining whether or not any
Excess has been contracted for, charged or received by Agent or any Lender, all
interest at any time contracted for, charged or received by Agent or any Lender
in connection with this Agreement or any of the other Financing Agreements shall
be amortized, prorated, allocated and spread during the entire term of this
Agreement in accordance with the amounts outstanding from time to time hereunder
and the Maximum Interest Rate from time to time in effect in order to lawfully
charge the maximum amount of interest permitted under applicable law.
3.2 CHANGES IN LAWS AND INCREASED COSTS OF LOANS.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Agent to Huffy, convert to Prime
Rate Loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall either (A) make it unlawful
for a Lender, Reference Bank or any Participant to make or maintain Eurodollar
Rate Loans or to comply with the terms hereof in connection with the Eurodollar
Rate Loans, or (B) shall result in the increase in the costs to a Lender,
Reference Bank or any Participant with a Lender of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by any Lender in respect thereof, by
an amount deemed by Agent to be material or (ii) the cost to a Lender, Reference
Bank or any Participant with a Lender of making or maintaining any Eurodollar
Rate Loans shall otherwise increase by an amount deemed by Agent to be material.
Borrowers shall pay to Agent, for the ratable benefit of Lenders, upon demand by
Agent (or Agent may, at its option, charge any loan account of any Borrower) any
amounts required to compensate Lenders, the Reference Bank or any Participant
with a Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof. A certificate of
Agent or any Lender setting forth the basis for the determination of such amount
necessary to compensate such Lender as aforesaid shall be delivered to Huffy and
shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Agent or any Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Agent, for the ratable benefit of Lenders, upon demand by
Agent (or Agent may, at its option, charge any loan account of any Borrower) any
amounts required to compensate such Lender, the Reference Bank or any
Participant with such Lender for
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any additional loss (including loss of anticipated profits), cost or expense
incurred by such person as a result of such prepayment or payment, including,
without limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such person
to make or maintain such Eurodollar Rate Loans or any portion thereof.
3.3 FEES. Borrowers agree to pay to Agent for the benefit of Lenders as
set forth therein the fees and other amounts set forth in the Fee Letter by
Borrowers and Agent in the amounts and at the times specified therein.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 CONDITIONS PRECEDENT TO LOANS AND LETTER OF CREDIT ACCOMMODATIONS.
Each of the following is a condition precedent to Lenders (or Agent on behalf of
Lenders) making the Loans and providing the Letter of Credit Accommodations
hereunder:
(a) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent, for itself and the ratable benefit of
Lenders, has valid perfected and first priority security interests in and liens
upon the Collateral (other than the Excluded Property) and any other property
which is intended to be security for the Obligations, subject only to the
security interests and liens permitted herein or in the other Financing
Agreements;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be reasonably
satisfactory in form and substance to Agent, and Agent shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Agent may have requested in
connection therewith, such documents where requested by Agent or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(c) no act, condition or event shall have occurred in the
assets, business or prospects of any Borrower since the date of Agent's latest
field examination which has or is reasonably likely to have a Material Adverse
Effect;
(d) Agent shall have completed a field review of the Records and
such other information with respect to the Collateral as Agent may require to
determine the amount of Loans available to Borrowers including, without
limitation, current agings of receivables, current perpetual inventory records
and/or roll-forwards of Accounts and Inventory through the Closing Date,
together with such supporting documentation as may be necessary or appropriate,
and other documents and information that will enable Agent to accurately
identify and verify the Collateral, the results of which shall be reasonably
satisfactory to Agent, not more than five (5) Business Days prior to the date
hereof;
(e) Borrowers shall have established the Blocked Accounts and
Agent shall have received, in form and substance satisfactory to Agent, all
agreements with the depository banks
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and Borrowers with respect to such Blocked Accounts as Agent may require
pursuant to Section 6.3 hereof, duly authorized, executed and delivered by such
depository banks and each Borrower;
(f) Agent shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Agent, and certificates of insurance
policies and/or endorsements naming Agent as loss payee;
(g) Agent shall have received, in form and substance
satisfactory to Agent, the opinion letter of counsel(s) to Borrowers and
Guarantors with respect to the Financing Agreements and the security interests
and liens of Agent with respect to the Collateral and such other matters as
Agent may request;
(h) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Agent, in form and substance satisfactory to Agent;
(i) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all respects with
the same effect as though such representations and warranties had been made on
and as of the date of the making of each such Loan or providing each such Letter
of Credit Accommodations and after giving effect thereto, except to the extent
that such representations and warranties expressly related solely to an earlier
date (in which case such representations and warranties shall have been true and
accurate on and as of such earlier date);
(j) no law, regulation, order, judgment or decree of any
Governmental Authority shall, and neither Agent nor any Lender shall have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any arbitrator or
Governmental Authority which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or (B) the consummation of the
transactions contemplated pursuant to the terms hereof of the Financing
Agreements or (ii) has or could reasonably be expected to have a Material
Adverse Effect; and
(k) no Event of Default and no act, condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodations and
after giving effect thereto.
SECTION 5. SECURITY INTEREST
-----------------
5.1 To secure payment and performance of all Obligations, each Borrower
hereby grants to Agent, for itself and the ratable benefit of Lenders, a
continuing security interest in, a lien upon, and a right of set off against,
and hereby assigns to Agent, for itself and the ratable benefit of Lenders, as
security, the following property and interests in property of such Borrower,
whether now owned or hereafter acquired or existing, and wherever located
(together with all
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other collateral security for the Obligations at any time granted to or held by
Agent or any Lender, collectively, the "Collateral"):
(a) Receivables;
(b) all other present and future contract rights, general
intangibles (including, but not limited to, tax and duty refunds, goodwill,
processes, drawings, blueprints, customer lists, licenses, whether as licensor
or licensee, Intellectual Property, choses in action and other claims and
existing and future leasehold interests in equipment, real estate and fixtures),
chattel paper, documents, instruments, securities and other investment property,
letters of credit, bankers' acceptances and guaranties;
(c) all present and future monies, credit balances, deposits,
deposit accounts and other property of such Borrower now or hereafter held or
received by or in transit to Agent, any Lender or its Affiliates or at any other
depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
and all present and future liens, security interests, rights, remedies, title
and interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (i) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Receivables or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (iv) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
(d) Inventory;
(e) Equipment;
(f) Real Property, PROVIDED, THAT, for purposes of this Section
5.1, the Real Property shall not include the Celina Property or the Harrisburg
Property;
(g) Records; and
(h) all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
5.2 Notwithstanding anything to the contrary contained in Section 5.1
above, the types or items of Collateral described in such Section shall not
include any rights or interest in any contract, lease, permit, license, charter
or license agreement covering real or personal property of a Borrower, as such,
if under the terms of such contract, lease, permit, license, charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to Agent is prohibited and such prohibition has not
been or is not waived or the consent
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of the other party to such contract, lease, permit, license, charter or license
agreement has not been or is not otherwise obtained; PROVIDED, THAT, the
foregoing exclusion shall in no way be construed (a) to apply if any such
prohibition is unenforceable under Section 9-318 of the UCC or other applicable
law or (b) so as to limit, impair or otherwise affect Agent's unconditional
continuing security interests in and liens upon any rights or interests of such
Borrower in or to monies due or to become due under any such contract, lease,
permit, license, charter or license agreement (including any Accounts) .
SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
6.1 BORROWERS' LOAN ACCOUNT. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor and (c) all other appropriate
debits and credits as provided in this Agreement, including, without limitation,
fees, charges, costs, expenses and interest. All entries in the loan account(s)
shall be made in accordance with Agent's customary practices as in effect from
time to time.
6.2 STATEMENTS. Agent shall render to Huffy each month a statement
setting forth the balance in each Borrower's loan account(s) maintained by Agent
for such Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Agent but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers and Guarantors
and conclusively binding upon Borrowers and Guarantors as an account stated
except to the extent that Agent receives a written notice from Huffy of any
specific exceptions of Huffy thereto within thirty (30) days after the date such
statement has been mailed by Agent. Until such time as Agent shall have rendered
to Huffy a written statement as provided above, the balance in each Borrower's
loan account(s) shall be presumptive evidence of the amounts due and owing to
Agent and Lenders by Borrowers.
6.3 COLLECTION OF ACCOUNTS.
(a) Each Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Agent may specify, with such banks as are acceptable to
Agent into which Borrowers shall promptly deposit and direct their respective
account debtors to directly remit all payments on Accounts and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. The banks
at which the Blocked Accounts are established shall enter into an agreement, in
form and substance satisfactory to Agent, providing that all items received or
deposited in the Blocked Accounts are the property of Agent, that the depository
bank has no lien upon, or right to setoff against, the Blocked Accounts, the
items received for deposit therein, or the funds from time to time on deposit
therein and that with respect to the Blocked Accounts, the depository bank will
wire, or otherwise transfer, in immediately available funds, on a daily basis,
all funds received or
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deposited into such Blocked Accounts to such bank account of Agent as Agent may
from time to time designate for such purpose ("Payment Account").
(b) Agent shall instruct the depository banks at which the
Blocked Accounts of each Borrower are maintained to transfer the funds on
deposit in such Blocked Accounts to such operating bank account of such Borrower
as the applicable Borrower (or Huffy on behalf of such Borrower) may specify in
writing to Agent until such time as Agent shall notify the depository bank
otherwise. Agent may instruct the depository banks at which the Blocked Accounts
of any Borrower are maintained (with a copy of such instruction to Huffy) to
transfer all funds received or deposited into such Blocked Accounts to the
Payment Account at any time that either: (i) an Event of Default shall exist or
have occurred and be continuing or (ii) the aggregate Excess Availability of
Borrowers is less than $25,000,000.
(c) For purposes of calculating the amount of the Loans
available to Borrowers, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Agent of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Agent's usual and customary
practices as in effect from time to time and within sufficient time to credit
such Borrower's loan account on such day, and if not, then on the next Business
Day. For the purposes of calculating interest on the Obligations, such payments
or other funds received will be applied (conditional upon final collection) to
the Obligations one (1) Business Day following the date of receipt of
immediately available funds by Agent in the Payment Account provided such
payments or other funds and notice thereof are received in accordance with
Agent's usual and customary practices as in effect from time to time and within
sufficient time to credit such Borrower's loan account on such day, and if not,
then on the next Business Day.
(d) Each Borrower and all of its directors, employees and
Subsidiaries shall, acting as trustee for Agent and Lenders, receive, as the
property of agent, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Agent. In no event
shall the same be commingled with a Borrower's own funds. Borrowers have closed
and terminated the lockboxes previously maintained by Borrowers at Bank of
America, N.A., Bank One and PNC Bank, N.A. and does not currently maintain any
lockboxes at such banks. Each Borrower agrees to reimburse Agent and Lenders on
demand for any amounts owed or paid to any bank at which a Blocked Account is
established or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts arising out of Agent's or any Lender's payments to or
indemnification of such bank or person in connection with such Blocked Account
or any amounts received therein or transferred therefrom. The obligation of
Borrowers to reimburse Agent and Lenders for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 PAYMENTS.
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(a) All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Agent may designate from time to
time. Subject to Section 6.4(b) below, Agent and Lenders may apply payments
received or collected from any Borrower or Guarantor or for the account of any
Borrower or Guarantor (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Agent determines, PROVIDED,
THAT, so long as no Event of Default shall exist or have occurred and be
continuing, (i) all such payments shall be applied to Obligations which are then
due and payable before being applied to pay any Obligations which are not then
due and payable, and (ii) all such payments to be applied to Loans shall be
applied to Prime Rate Loans before being applied to Eurodollar Rate Loans.
Payments and collections received in any currency other than the currency in
which any outstanding Obligations are denominated will be accepted and/or
applied at the discretion of Agent. Huffy will be promptly notified by Agent in
the event that any non-dollar denominated payment or collection is not
immediately so accepted or applied. At Agent's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of any
Borrower. If after receipt of any payment of, or proceeds of Collateral applied
to the payment of, any of the Obligations, Agent or any Lender is required to
surrender or return such payment or proceeds to any Person for any reason, then
the Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Agent and such
Lender. Each Borrower shall be liable to pay to Agent and Lenders, and does
hereby indemnify and hold Agent or such Lenders harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain
effective notwithstanding any contrary action which may be taken by Agent or any
Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
(b) Except as otherwise provided with respect to Defaulting
Lenders, aggregate principal payments and interest payments shall be apportioned
ratably among the Lenders (according to their applicable Pro Rata Shares) and
payments of the fees (other than fees designated for Agent's sole and separate
account and fees otherwise payable in accordance with the Fee Letter) shall, as
applicable, be apportioned ratably among the Lenders. Agent shall apply payments
received or collected from any Borrower or Guarantor or for the account of any
Borrower or Guarantor (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: FIRST, to pay any fees, indemnities
or expense reimbursements then due to Agent or any Lender from any Borrower;
SECOND, to pay interest due in respect of any Loans; THIRD, to pay principal due
in respect of the Loans; and FOURTH, to pay or prepay any other Obligations
whether or not then due, in such order and manner as Agent determines.
Notwithstanding anything to the contrary contained in this Agreement, unless so
directed by Huffy, or unless an Event of Default shall exist or have occurred
and be continuing, Agent and Lenders shall not apply any payments which it
receives to any Eurodollar Rate Loans, except on the expiration date of the
Interest Period applicable to any such Eurodollar Rate Loans, or in the event
that there are no outstanding Prime Rate Loans.
6.5 MANDATORY PREPAYMENTS.
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(a) In the event that the aggregate amount of the Loans and the
Letter of Credit Accommodations made or provided to any Borrower outstanding at
any time shall exceed the Borrowing Base of such Borrower, or the aggregate
amount of the outstanding Letter of Credit Accommodations exceed the sublimit
for Letter of Credit Accommodations set forth in Section 2.2(d), or the
aggregate amount of Loans made or provided to Borrowers at any time with respect
to Eligible Inventory shall exceed the Inventory Loan Limit, or the aggregate
amount of the Loans and the Letter of Credit Accommodations outstanding at any
time shall exceed the Maximum Credit, such event shall not limit, waive or
otherwise affect any rights of Agent and Lenders in that circumstance or on any
future occasions and Borrowers shall, upon demand by Agent, which may be made at
any time or from time to time, immediately pay to Agent, for the ratable benefit
of Lenders, the entire amount of any such excess(es) for which payment is
demanded or provide cash collateral up to such amount as may be required by
Agent.
(b) On each date when any reduction to the lending formula
with respect to Eligible Inventory set forth in the definition of the Borrowing
Base becomes effective, regardless of the amounts of Eligible Inventory,
Borrowers shall absolutely and unconditionally, automatically and without
demand, pay to Agent, for the ratable benefit of Lenders, in respect of the
Loans an amount equal to the excess, if any, of the aggregate unpaid principal
amount of the Loans with respect to Eligible Inventory over the amount of the
Borrowing Base calculated using the applicable percentage with respect to
Eligible Inventory as so reduced.
(c) Without limiting the obligations of Borrowers or Guarantors
to obtain the consent of Agent and Lenders to any Asset Sale, or any right of
Agent and Lenders to receive any payments hereunder, upon the date of the
transfer of any interest in any assets or properties of any Borrower, Guarantor
or other subsidiary of Huffy pursuant to a Business Unit Sale, Borrowers and
Guarantors shall absolutely and unconditionally, automatically and without
demand, pay to Agent, for the ratable benefit of Lenders, an amount equal to the
sum of: (i) all expenses of Agent and any Lender related to such sale, including
all expenses, liabilities and advances incurred or made by Agent or any Lender
in connection therewith (including attorneys' fees and legal expenses), plus
(ii) the amount equal to the greater of the Loans and Letter of Credit
Accommodations based on the assets subject to such Asset Sale or the Borrowing
Base of the Borrower whose assets or Capital Stock is subject to such Asset Sale
or if the assets or Capital Stock subject to such Asset Sale are not assets or
Capital Stock of a Borrower, then the amount of the payment shall be up to an
amount equal to the Collateral of such Guarantor or other Subsidiary. Borrowers
and Guarantors shall cause the proceeds from any such Asset Sale in the amount
of the prepayment required hereunder to be paid by the purchaser pursuant to
such Asset Sale directly to Agent for application to the Obligations in
accordance with the terms hereof.
(d) The Net Available Proceeds of any Business Unit Sale shall
be applied as follows:
(i) first, to the payment in full of the expenses of such
sale of Agent or any Lender, including all expenses, liabilities and advances
incurred or made by Agent or such Lender in connection therewith (including
reasonable attorneys' fees and legal expenses); and
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(ii) second, to the payment of the Obligations in whatever
manner and order Agent chooses in accordance with the provisions of this
Agreement and applicable law (or to be held as cash collateral in respect of the
Obligations constituting contingent obligations of Debtors) up to an amount
equal to the greater of (1) the Borrowing Base of the Division or Borrower whose
assets or Capital Stock is subject to such Asset Sale or (2) the amount of the
Obligations owing by such Borrower (and including for this purpose any Division
of any Borrower); PROVIDED, THAT, if the Person whose assets or Capital Stock
are sold shall not be a Borrower, then the amount of the payment to be applied
to the Obligations shall be up to an amount equal to the Collateral of such
Person.
(e) Nothing contained in this Section 6.5 shall be construed as
a consent to any Asset Sale or waiver of any conditions to or limitations on any
Asset Sale set forth herein or in any of the other Financing Agreements.
6.6 TAXES.
(a) Any and all payments by or on behalf of any Borrower or
Guarantor hereunder and under any other Financing Agreement shall be made, in
accordance with Section 6.4, free and clear of and without deduction for any and
all Taxes, excluding (i) income taxes imposed on the net income of any Lender
(or any transferee or assignee of such Lender, including any Participant, any
such transferee or assignee being referred to as a "Transferee") and (ii)
franchise or similar taxes imposed on or determined by reference to the net
income of any Lender (or Transferee), in each case by the United States of
America or by the jurisdiction under the laws of which such Lender (or
Transferee) (A) is organized or any political subdivision thereof or (B) has its
applicable lending office located. In addition, Borrowers agree to pay to the
relevant Governmental Authority in accordance with applicable law any Other
Taxes.
(b) If any Borrower or Guarantor shall be required by law to
deduct or withhold in respect of any Taxes or Other Taxes from or in respect of
any sum payable hereunder to Agent or any Lender, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender (or Agent on behalf of such Lender) receives an amount equal to the sum
it would have received had no such deductions or withholdings been made;
(ii)such Borrower or Guarantor shall make such deductions
and withholdings;
(iii) such Borrower or Guarantor shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) to the extent not paid to Agent and Lenders pursuant
to clause (i) above, such Borrower or Guarantor shall also pay to Agent or any
Lender, at the time interest is paid, all
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additional amounts which Agent or any Lender specifies as necessary to preserve
the after-tax yield such Lender would have received if such Taxes or Other Taxes
had not been imposed.
(c) Within thirty (30) days after the date of any payment by any
Borrower or Guarantor of Taxes or Other Taxes, upon Agent's request, such
Borrower or Guarantor shall furnish to Agent the original or a certified copy of
a receipt evidencing payment thereof, or other evidence of payment reasonably
satisfactory to Agent.
(d) Borrowers will indemnify Agent and each Lender (or
Transferee) for the full amount of Taxes and Other Taxes paid by Agent or such
Lender (or Transferee, as the case may be). If Agent or such Lender (or
Transferee) receives a refund in respect of any Taxes or Other Taxes for which
Lender (or Transferee) has received payment from any Borrower or Guarantor
hereunder, so long as no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred and be continuing, Agent or such Lender (as the case may
be) shall credit to the loan account of Borrowers the amount of such refund plus
any interest received (but only to the extent of indemnity payments made, or
additional amounts paid, by Borrowers or Guarantors under this Section 6.6 with
respect to the Taxes or Other Taxes giving rise to such refund). If a Lender (or
any Transferee) claims a tax credit in respect of any Taxes for which it has
been indemnified by Borrowers or Guarantors pursuant to this Section 6.6, such
Lender will apply the amount of the actual dollar benefit received by such
Lender as a result thereof, as reasonably calculated by Lender and net of all
expenses related thereto, to the Loans. If Taxes or Other Taxes were not
correctly or legally asserted, Agent or such Lender shall, upon Huffy's request
and at Borrowers' expense, provide such documents to Huffy in form and substance
satisfactory to Agent, as Huffy may reasonably request, to enable Borrowers to
contest such Taxes or Other Taxes pursuant to appropriate proceedings then
available to such Borrower (so long as providing such documents shall not, in
the good faith determination of Agent, have a reasonable likelihood of resulting
in any liability of Agent or any Lender).
(e) In the event any Transferee is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") such Non-U.S. Lender shall deliver to Huffy two
(2) copies of either United States Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions thereof
or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for purposes of
Section 881(c) of the Code, is not a ten (10%) percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of any Borrower or Guarantor and is
not a controlled foreign corporation related to any Borrower or Guarantor
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from U.S.
Federal withholding tax on payments by Borrowers or Guarantors under this
Agreement and the other Financing Agreements. Such forms shall be delivered by
any Transferee that is a Non-U.S. Lender on or before the date it becomes a
party to this Agreement (or, in the case of a Transferee that is a Participant,
on or before the date such Participant becomes a Transferee hereunder) and on or
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before the date, if any, such Non-U.S. Lender changes its applicable lending
office by designating a different lending office (a "New Lending Office"). In
addition, a Non-U.S. Lender shall upon written notice from Huffy promptly
deliver such new forms as are required by the Code or the regulations issued
thereunder to claim exemption from, or reduction in the rate of, U.S. Federal
withholding tax upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Notwithstanding any other provision of this
Section 6.5(e), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 6.5(e) that such Non-U.S. Lender is not legally able to
deliver.
(f) Borrowers and Guarantors shall not be required to indemnify
any Non-U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to subsections (a) or
(d) above to the extent that the (i) the obligation to withhold amounts with
respect to United States Federal withholding tax was applicable on the date such
Non-U.S. Lender became a party to this Agreement (or, in the case of a
Transferee that is a Participant, on the date such Participant became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; PROVIDED, THAT, this subsection (f) shall not apply (A) to any Transferee
or New Lending Office that becomes a Transferee or New Lending Office as a
result of an assignment, participation, transfer or designation made at the
request of Borrowers or Guarantors and (B) to the extent the indemnity payment
or additional amounts any Transferee, acting through a New Lending Office, would
be entitled to receive (without regard to this subsection (f)) do not exceed the
indemnity payment or additional amounts that the person making the assignment,
participation or transfer to such Transferee making the designation of such New
Lending Office, would have been entitled to receive in the absence of such
assignment, participation, transfer or designation or (ii) the obligation to pay
such additional amounts would not have arisen but for a failure by such Non-U.S.
Lender to comply with the provisions of subsection (e) above.
6.7 AUTHORIZATION TO MAKE LOANS. Agent and each Lender is authorized to
make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be any of
the persons listed on Schedule 6.7 hereto or such other persons as any Borrower
or Guarantor may at any time and from time to time designate in writing to Agent
or any Lender to be authorized to request Loans or Letter of Credit
Accommodations or, at the discretion of Agent or any Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day and, as to Loans, may be the same day as the date the request for
such Loan is deemed to be received by Agent pursuant to the terms hereof) and
the amount of the requested Loan. Requests received after 11:00 a.m. Chicago
time on any day shall be deemed to have been made as of the opening of business
on the immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrowers when deposited
to the credit of any Borrower or otherwise disbursed or established in
accordance with the instructions of any Borrower or in accordance with the terms
and conditions of this Agreement.
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6.8 APPOINTMENT OF AGENT FOR REQUESTING LOANS AND RECEIPTS OF LOANS AND
STATEMENTS.
(a) Each Borrower hereby irrevocably appoints and constitutes
Huffy as its agent to request and receive Loans and Letter of Credit
Accommodations pursuant to this Agreement and the other Financing Agreements
from Agent or any Lender in the name or on behalf of such Borrower. Subject to
the terms and conditions contained herein, Agent or Lenders may disburse the
Loans to such bank account of a Borrower or otherwise make such Loans to a
Borrower and provide such Letter of Credit Accommodations to a Borrower as Huffy
may designate or direct, without notice to any other Borrower or Obligor.
(b) Huffy hereby accepts the appointment by Borrowers to act as
the agent of Borrowers pursuant to this Section 6.8. Huffy shall ensure that the
disbursement of any Loans to each Borrower requested by or paid to Huffy, or the
issuance of any Letter of Credit Accommodations for a Borrower hereunder, shall
be paid to or for the account of such Borrower.
(c) Each Borrower hereby irrevocably appoints and constitutes
Huffy as agent to receive statements on account and all other notices from Agent
or any Lender with respect to the Obligations or otherwise under or in
connection with this Agreement and the other Financing Agreements.
(d) No purported termination of the appointment of Huffy as
agent as aforesaid shall be effective, except after ten (10) days' prior written
notice to Agent.
6.9 AUTHORIZATION TO MAKE LOANS. Agent is authorized to make the Loans
and provide the Letter of Credit Accommodations, for the account and risk of
Lenders, based upon telephonic or other instructions received from anyone
purporting to be an officer of Borrower or other authorized person or, at the
discretion of Agent, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount of
the requested Loan. Requests received after 11:00 a.m. Chicago time on any day
shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, a Borrower when deposited
to the credit of any Borrower or otherwise disbursed or established in
accordance with the instructions of any Borrower (or Huffy on behalf of such
Borrower) or in accordance with the terms and conditions of this Agreement.
6.10 USE OF PROCEEDS. Borrowers shall use the proceeds of the Loans
made or Letter of Credit Accommodations provided by or on behalf of any Lender
to Borrowers pursuant to the provisions hereof only for general operating,
working capital and other proper corporate purposes of Borrowers not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or for
the purposes of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans to be
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considered a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended.
6.11 PRO RATA TREATMENT. Except to the extent otherwise provided in
this Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rate Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata
Shares and shall be distributed accordingly.
6.12 SHARING OF PAYMENTS, ETC.
(a) Each Borrower and Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim any
Agent or Lender may otherwise have, each Lender shall be entitled, at its option
(but subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it for the account of any Borrower or
Guarantor at any of its offices, in dollars or in any other currency, against
any principal of or interest on any Loans owed to such Lender or any other
amount payable to such Lender hereunder, that is not paid when due (regardless
of whether such balances are then due to a Borrower), in which case it shall
promptly notify Huffy and Agent thereof; PROVIDED, THAT, such Lender's failure
to give such notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from any
Borrower or Guarantor payment of any principal of or interest on any Loan owing
to it or payment of any other amount under this Agreement or any other Financing
Agreement through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by any Borrower to such
Lender than the percentage thereof received by any other Lender, it shall
promptly pay to Agent, for the benefit of Lenders, the amount of such excess and
simultaneously purchase from such other Lenders a participation in the Loans or
such other amounts, respectively, owing to such other Lenders (or such interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all Lenders
shall share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) in
accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) Each Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise, in a manner consistent with
this Section, all rights of setoff, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Loans or other amounts (as the case may be) owing to such
Lender in the amount of such participation.
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(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
Indebtedness or obligation of any Borrower. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the extent
practicable, assign such rights to Agent for the benefit of Lenders and, in any
event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share in
the benefits of any recovery on such secured claim.
6.13 SETTLEMENT PROCEDURES.
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and Lenders, Agent
may, subject to the terms of this Section, make available, on behalf of Lenders,
the full amount of the Loans requested or charged to any Borrower's loan
account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof,
without any requirement of prior notice to Lenders of the proposed Loans.
(b) With respect to all Loans made by Agent on behalf of
Lenders as provided in this Section, the amount of each Lender's Pro Rata Share
of the outstanding Loans shall be computed weekly, and shall be adjusted upward
or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
Chicago time on the Business Day immediately preceding the date of each
settlement computation; PROVIDED, THAT, Agent retains the absolute right at any
time or from time to time to make the above described adjustments at intervals
more frequent than weekly, but in no event more than twice in any week. Agent
shall deliver to each of the Lenders after the end of each week, or at such
lesser period or periods as Agent shall determine, a summary statement of the
amount of outstanding Loans for such period (such week or lesser period or
periods being hereinafter referred to as a "Settlement Period"). If the summary
statement is sent by Agent and received by a Lender prior to 2:00 p.m. Chicago
time, then such Lender shall make the settlement transfer described in this
Section by no later than 2:00 p.m. Chicago time on the next Business Day
following the date of receipt. If, as of the end of any Settlement Period, the
amount of a Lender's Pro Rata Share of the outstanding Loans is more than such
Lender's Pro Rata Share of the outstanding Loans as of the end of the previous
Settlement Period, then such Lender shall forthwith (but in no event later than
the time set forth in the preceding sentence) transfer to Agent by wire transfer
in immediately available funds the amount of the increase. Alternatively, if the
amount of a Lender's Pro Rata Share of the outstanding Loans in any Settlement
Period is less than the amount of such Lender's Pro Rata Share of the
outstanding Loans for the previous Settlement Period, Agent shall forthwith
transfer to such Lender by wire transfer in immediately available funds the
amount of the decrease. The obligation of each of the Lenders to transfer such
funds and effect such settlement shall be irrevocable and unconditional and
without recourse to or warranty by Agent. Each of Agent and Lenders agrees to
▇▇▇▇ its books and records at the end of each Settlement Period to show at all
times the dollar amount of its Pro Rate Share of the outstanding Loans and
Letter of Credit Accommodations. Each Lender shall only be entitled to receive
interest on its Pro Rata Share of the Loans to the extent such Loans have been
funded by such Lender. Because the Agent on behalf of Lenders may be advancing
and/or may be repaid Loans prior to the time when Lenders
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will actually advance and/or be repaid such Loans, interest with respect to
Loans shall be allocated by Agent in accordance with the amount of Loans
actually advanced by and repaid to each Lender and the Agent and shall accrue
from and including the date such Loans are so advanced to but excluding the date
such Loans are either repaid by any Borrower or actually settled with the
applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available
and the settlement described above shall not yet have occurred, upon repayment
of any Loans by Borrower, Agent may apply such amounts repaid directly to any
amounts made available by any Agent pursuant to this Section. In lieu of weekly
or more frequent settlements, Agent may at any time require each Lender to
provide Agent with immediately available funds representing its Pro Rata Share
of each Loan, prior to Agent's disbursement of such Loan to any Borrower. In
such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is not funding a particular Loan to a Borrower
pursuant to this Section above on any day, Agent may assume that each Lender
will make available to Agent such Lender's Pro Rata Share of the Loan requested
or otherwise made on such day and Agent may, in its discretion, but shall not
obligated to, cause a corresponding amount to be made available to such Borrower
on such day. If Agent makes such corresponding amount available to such Borrower
and such corresponding amount is not in fact made available to Agent by such
Lender, Agent shall be entitled to recover such corresponding amount on demand
from such Lender together with interest thereon for each day from the date such
payment was due until the date such amount is paid to Agent at the interest rate
provided for in Section 3.1 hereof. During the period in which such Lender has
not paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to a Borrower shall, for all purposes hereof, be
a Loan made by Agent for its own account. Upon any such failure by a Lender to
pay Agent, Agent shall promptly thereafter notify such Borrower of such failure
and such Borrower shall immediately pay such corresponding amount to Agent for
its own account. A Lender who fails to pay Agent its Pro Rata Share of any Loans
made available by the Agent on such Lender's behalf, or any Lender who fails to
pay any other amount owing by its Agent, is a "Defaulting Lender". Agent shall
not be obligated to transfer to a Defaulting Lender any payments made by or on
behalf of any Borrower or any Obligor to Agent for the Defaulting Lender's
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder. Amounts payable to a Defaulting Lender shall instead be paid
to or retained by Agent. Agent may hold and, in its discretion, relend to a
Borrower the amount of all such payments received or retained by it for the
account of such Defaulting Lender. For purposes of voting or consenting to
matters with respect to this Agreement and the other Financing Agreements and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
"Lender" and such Lender's Commitment shall be deemed to be zero (0). This
Section shall remain effective with respect to a Defaulting Lender until such
default is cured. The operation of this Section shall not be construed to
increase or
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otherwise affect the Commitment of any Lender, or relieve or excuse the
performance by any Borrower or Obligor of their duties and obligations
hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or
the other Financing Agreements shall be deemed to require Agent to advance funds
on behalf of any Lender or to relieve any Lender from its obligation to fulfill
its Commitment hereunder or to prejudice any rights that any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
----------------------------------
7.1 COLLATERAL REPORTING.
(a) Borrowers shall provide Agent with the following documents
in a form satisfactory to Agent:
[(i) as soon as possible after the end of each week (but
in any event within two (2) Business Days after the end thereof), on a weekly
basis or more frequently as Agent may request, a schedule of sales made, credits
issued and cash received as of the immediately preceding week as to the Accounts
and as of the last day of the immediately preceding month as to Inventory;]
(ii) on a monthly basis or more frequently as Agent may
request, (A) agings of accounts payable (including the status of payments to
owners and lessors of the leased premises of Borrowers and warehouses and
processors used by Borrowers and payments to owners and licensors of
Intellectual Property to any Borrower or Guarantor), (B) agings of accounts
receivable (together with a reconciliation to the previous month's aging and to
its general ledger), and (C) perpetual inventory reports by category and
location;
(iii) upon Agent's request in good faith, (A) copies of
customer statements and credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (B) copies of shipping and delivery
documents, (C) copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by Borrowers, and (D) a statement of the
outstanding loans and payments made, and Accounts owing to, Affiliates as of the
last day of the immediately preceding month; and
(iv) such other reports as to the Collateral as Agent or
any Lender shall reasonably request from time to time.
(b) If any Borrower's or Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, each Borrower and Guarantor hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Agent and to follow Agent's
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instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.
(a) Each Borrower shall notify Agent promptly of: (i) any
material delay in such Borrower's performance of any of its obligations to any
material account debtor or the assertion of any material claims, offsets,
defenses or counterclaims by any material account debtor, or any material
disputes with material account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information known to any Borrower
or Guarantor relating to the financial condition of any material account debtor
and (iii) any event or circumstance which, to such Borrower's knowledge, would
be reasonably likely to cause Agent to consider any then existing Accounts as no
longer constituting Eligible Accounts. No credit, discount, allowance or
extension, or agreement with respect to any credit, discount, allowance or
extension, shall be granted by any Borrower to any account debtor without
Agent's consent, EXCEPT in the ordinary course of such Borrower's business
consistent with the practices of such Borrower as of the date hereof and so long
as Agent shall have received notice thereof to the extent required under Section
7.1 above. So long as no Event of Default exists or has occurred and is
continuing, each Borrower in its discretion shall have the right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Agent shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrowers to deliver any
other information to Agent, Borrowers shall promptly report to Agent any single
return of Inventory by any one account debtor at any one time if the Inventory
so returned in such case has a value in excess of $250,000. At any time that
Inventory is returned, reclaimed or repossessed, the Account (or portion
thereof) which arose from the sale of such returned, reclaimed or repossessed
Inventory shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrowers shall, upon Agent's request, (i) hold the returned
Inventory in trust for Agent and Lenders, (ii) segregate all returned Inventory
from all of its other property, (iii) dispose of the returned Inventory solely
according to Agent's instructions in good faith, and (iv) not issue any credits,
discounts or allowances with respect thereto without Agent's prior written
consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice or schedule thereof delivered to Agent shall be true and complete (other
than as to de minimis amounts), (ii) no payments shall be made thereon except
payments immediately delivered to Agent pursuant to the terms of this Agreement,
(iii) except as reported to Agent in accordance with the terms hereof, no
credit, discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor and except for credits, discounts,
allowances or extensions made or given in the ordinary course of business of
Borrowers consistent with the current practices of Borrowers as of the date
hereof, (iv) except as reported to Agent in accordance with the terms hereof,
there shall be no setoff, deductions, contras, defenses,
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counterclaims or disputes existing or asserted with respect thereto, (v) none of
the transactions giving rise thereto will violate any applicable Federal, State,
Provincial, district, county or local laws or regulations in any material
respect, all documentation relating thereto will be legally sufficient in all
material respects under such laws and regulations and all such documentation
will be legally enforceable in accordance with its terms.
(d) Agent shall have the right at any time or times, in Agent's
name or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Each Borrower shall deliver or cause to be delivered to
Agent or such Lender as Agent may specify, immediately upon such Borrower's
receipt thereof, with appropriate endorsement and assignment, with full recourse
to such Borrower, all chattel paper and instruments constituting Collateral
which such Borrower now owns or may at any time hereafter acquire (i) prior to
an Event of Default, if the aggregate amount of all such chattel paper and
instruments equals or exceeds $250,000 and (ii) after an Event of Default, all
such chattel paper and other instruments regardless of the amount thereof,
except as Agent may otherwise agree.
(f) Agent may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
or other obligors in respect thereof that the Receivables have been assigned to
Agent and that Agent has a security interest therein and Agent may direct any or
all accounts debtors or other obligors in respect thereof to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
other party or parties in any way liable for payment thereof without affecting
any of the Obligations, (iii) demand, collect or enforce payment of any
Receivables or such other obligations, but without any duty to do so, and Agent
and Lenders shall not be liable for any failure to collect or enforce the
payment thereof nor for the negligence of its agents or attorneys with respect
thereto and (iv) take whatever other action Agent or any Lender may in good
▇▇▇▇▇ ▇▇▇▇ necessary or desirable for the protection of its or their interests.
At any time that an Event of Default exists or has occurred and is continuing,
at Agent's request, all invoices and statements sent to any account debtor or
other obligor shall state that the Receivables and such other obligations have
been assigned to Agent and are payable directly and only to Agent and each
Borrower shall deliver to Agent such originals of documents evidencing the sale
and delivery of goods or the performance of services giving rise to any
Receivables as Agent may require.
7.3 INVENTORY COVENANTS. With respect to the Inventory: (a) each
Borrower shall at all times maintain inventory records reasonably satisfactory
to Agent, keeping in all material respects correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory, the
cost therefor and daily withdrawals therefrom and additions thereto; (b) by no
later than March 15, 2001, the books and records of each Borrower shall be
reconciled and adjusted to reflect the results of the 2000 year-end physical
inventory and all reports with respect to Inventory provided by any Borrower to
Agent and Lenders shall be based on the amount of the
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Inventory after giving effect to such reconciliation and adjustment; (c) each
Borrower shall conduct a physical count of the Inventory of such Borrower at
least once each year, but at any time or times as Agent may request on or after
an Event of Default and for so long as the same is continuing, and promptly
following such physical inventory shall supply Agent with a report in the form
and with such specificity as may be reasonably satisfactory to Agent concerning
such physical count; (d) each Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Agent, EXCEPT (i) for sales of Inventory in the ordinary course of such
Borrower's business, (ii) to move Inventory directly from one location of such
Borrower set forth or permitted herein to another such location of such Borrower
or any other Borrower (so long as a financing statement between Agent as secured
party and such other Borrower, as debtor, covering such Inventory has previously
been recorded in the appropriate governmental offices of the jurisdiction of
such location), PROVIDED, THAT, in no event shall the Inventory and Equipment
located in Mexico have an aggregate value in excess of $10,000,000 at any time
and (iii) for Inventory shipped from the manufacturer thereof to any Borrower or
to any Borrower's customer which is in transit from such manufacturer to the
locations set forth or permitted herein or to such customer; (e) upon Agent's
request, Borrowers shall, at their expense, no more than twice in any twelve
(12) month period, but at any time or times as Agent may request on or after an
Event of Default and for so long as the same is continuing, deliver or cause to
be delivered to Agent written reports or appraisals as to the Inventory in form,
scope and methodology reasonably acceptable to Agent and by an appraiser
reasonably acceptable to Agent, addressed to Agent and Lenders, and upon which
Agent and Lenders are expressly permitted to rely; (f) each Borrower shall
produce, use, store and maintain the Inventory, with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (g) each Borrower assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory, EXCEPT for liabilities incurred by a
Lender due to acts or omissions of such Lender which constitute gross negligence
or wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction; (h) each Borrower shall not sell Inventory to
any customer on approval, or any other basis which entitles the customer to
return or may obligate such Borrower to repurchase such Inventory (except for
the right of return of customers for Inventory which is defective or
non-conforming); (i) each Borrower shall keep the Inventory in good and
marketable condition (other than obsolete Inventory); and (j) each Borrower
shall not, without prior written notice to Agent, acquire or accept any
Inventory on consignment or approval.
7.4 EQUIPMENT COVENANTS. With respect to the Equipment: (a) upon
Agent's request, Borrowers shall, at their expense, at any time or times an
Event of Default exists or has occurred and is continuing, as Agent may request,
deliver or cause to be delivered to Agent written reports or appraisals as to
the Equipment in form, scope and methodology acceptable to Agent and by an
appraiser acceptable to Agent addressed to Agent and upon which Agent and
Lenders are expressly permitted to rely; (b) each Borrower shall keep the
Equipment in order, repair, running and marketable condition (ordinary wear and
tear excepted); (c) each Borrower shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws; (d) the Equipment is and shall be
used
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in Borrower's business and not for personal, family, household or farming use;
(e) each Borrower shall not remove any Equipment from the locations set forth or
permitted herein, except (i) to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of such Borrower,
(ii) to move Equipment directly from one location set forth or permitted herein
to another such location, (iii) for the movement of motor vehicles used by or
for the benefit of such Borrower in the ordinary course of business and (iv) for
portable scanning equipment, personal computers, other hand-held or mobile
personal equipment and related accessories and tools to the extent used by
employees of Huffy Service in the ordinary course of business at customer's
locations; (f) the Equipment is now and shall remain personal property and each
Borrower shall not permit any of the Equipment to be or become a part of the
Real Property or a fixture; and (g) each Borrower assumes all responsibility and
liability arising from the use of the Equipment.
7.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably designates and
appoints Agent (and all persons designated by Agent) as such Borrower's true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower's or Agent's
name, to: (a) at any time an Event of Default exists or has occurred and is
continuing, (i) demand payment on Receivables or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Receivables or other Collateral by
legal proceedings or otherwise, (iii) exercise all of such Borrower's rights and
remedies to collect any Receivables or other Collateral, (iv) sell or assign any
Receivables or other Collateral upon such terms, for such amount and at such
time or times as Agent deems advisable, (v) settle, adjust, compromise, extend
or renew Receivables, (vi) discharge and release any Receivables, (vii) prepare,
file and sign such Borrower's name on any proof of claim in bankruptcy or other
similar document in connection with the Collateral against an account debtor or
other obligor in respect thereof, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables and other Collateral to an address designated
by Agent, and open all mail addressed to such Borrower and handle and store all
mail relating to any of the Collateral and make available for Borrowers to
obtain all other mail at the offices of Agent or such other reasonable location
as Agent may specify for such purpose, and (ix) do all acts and things which are
necessary, in Agent's good faith determination, to fulfill such Borrower's
obligations under this Agreement and the other Financing Agreements and (b) at
any time to (i) take control in any manner of any item of payment constituting
Collateral or in respect of Collateral or proceeds thereof received in or for
deposit in the Blocked Accounts or otherwise received by Agent or any Lender,
(ii) have access to any lockbox or postal box into which such Borrower's mail
relating to any of the Collateral or which Agent believes may be related to
Collateral is deposited, (iii) endorse such Borrower's name upon any items of
payment constituting Collateral or proceeds thereof at any time received by or
on behalf of Agent or any Lender and deposit the same in Agent's or a Lender's
account for application to the Obligations, (iv) endorse such Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any other
Collateral, (v) clear Inventory the purchase of which was financed with Letter
of Credit Accommodations through US Customs, in such Borrower's name, Agent's
name or the name of Agent's designee, and to sign and deliver to customs
officials powers of attorney in such Borrower's name for such purpose, (vi) sign
such Borrower's name on any verification of Accounts and notices thereof to
account debtors and other obligors in respect
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thereof and (vii) execute in such Borrower's name and file any PPSA financing
statements or UCC financing statements or amendments thereto. Each Borrower
hereby releases Agent and each Lender and its officers, employees and designees
from any liabilities arising from any act or acts under this power of attorney
and in furtherance thereof, whether of omission or commission, except as a
result of a Lender's own gross negligence or wilful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
7.6 BILLS OF LADING AND OTHER DOCUMENTS OF TITLE. In the event that any
Inventory which would otherwise be Eligible Inventory located outside the United
States of America which is in transit to premises of a Customs Broker in the
United States or premises of a Borrower or a Borrower's customer in the United
States of America as described in the definition of Eligible Inventory,
constitutes Eligible Inventory then (a) each Borrower shall cause all bills of
lading and other documents of title relating to goods being purchased by it
which are outside the United States and in transit to such premises to name such
Borrower as consignee, unless and until Agent may direct otherwise; (b) at such
time and from time to time as Agent may direct, such Borrower shall cause 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, such Borrower any ▇▇▇▇ of lading or other document
of title with respect to such goods naming such Borrower as consignee to Agent;
(d) there shall be three (3) originals of each of such ▇▇▇▇ of lading or other
document of title which unless and until Agent shall direct otherwise, shall be
delivered as follows: (i) one (1) original to such Customs Broker as such
Borrower may specify (so long as Agent has received a Collateral Access
Agreement duly authorized, executed and delivered by such Customs Broker), and
(ii) two (2) originals to Agent or to such other person as Agent may designate
for such purpose; (e) such Borrower shall obtain a copy (but not the originals)
of such ▇▇▇▇ of lading or other documents of title from the Customs Broker and
(f) such Borrower shall cause all bills of lading or other documents of title
relating to goods purchased by such Borrower which are outside the United States
and in transit to the premises of such Borrower or the premises of a Customs
Broker in the United States to be issued in a form so as to constitute
negotiable documents as such term is defined in the Uniform Commercial Code.
7.7 RIGHT TO CURE. Agent may, at its option, (a) upon three (3)
Business Days prior notice to Huffy, cure any default by such Borrower under any
material agreement with a third party which affects any Collateral, the value of
such Collateral or the ability of Agent or any Lender to collect, sell or
otherwise dispose of such Collateral or the rights and remedies of Agent or any
Lender hereunder or under any of the other Financing Agreements, (b) pay or bond
on appeal any judgment entered against any Borrower or Guarantor, (c) upon three
(3) Business Days prior notice to Huffy, discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (d) pay any amount, incur any expense or perform any act
which, in Agent's good faith judgment, is reasonably necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Agent and
Lenders with respect thereto. Agent and Lenders may add any amounts so expended
to the Obligations and charge any loan account with respect to a Borrower
maintained by Agent so as to increase the amount of Loans outstanding. Agent and
Lenders shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any
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obligation or liability of Borrowers. Any payment made or other action taken by
Agent or any Lender under this Section shall be without prejudice to any right
to assert an Event of Default hereunder and to proceed accordingly.
7.8 ACCESS TO PREMISES. From time to time as reasonably requested by
Agent, at the cost and expense of Borrowers, (a) Agent or its designee shall
have complete access to all of each Borrower's and Guarantor's premises during
normal business hours and after notice to Huffy, or at any time and without
notice to Huffy if an Event of Default exists or has occurred and is continuing,
for the purposes of inspecting, verifying and auditing the Collateral and all of
each Borrower's books and records, including, without limitation, the Records,
and (b) each Borrower shall promptly furnish to such Agent such copies of such
books and records or extracts therefrom as such Agent may request, and (c) Agent
and any Lender, or a designee, may use during normal business hours such of any
Borrower's or Guarantor's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Accounts and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower and Guarantor hereby jointly and severally represents and
warrants to Agent and Lenders the following (which shall survive the execution
and delivery of this Agreement), the truth and accuracy of which are a
continuing condition of the making of Loans and providing Letter of Credit
Accommodations to Borrowers:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES. Each
Borrower, Guarantor and their Subsidiaries is a corporation duly organized and
in good standing under the laws of its state of incorporation and is duly
qualified as a foreign corporation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, where the failure to
so qualify would have a Material Adverse Effect. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder are all within the corporate
powers of each Borrower and Guarantor, have been duly authorized and are not in
contravention of law or the terms of the certificate or articles of
incorporation, regulations, by-laws, or other organizational documentation of
each Borrower or Guarantor, or any material indenture, agreement or undertaking
to which any Borrower or Guarantor is a party or by which any Borrower or
Guarantor or its property are bound. This Agreement and the other Financing
Agreements to which it is a party constitute legal, valid and binding
obligations of each Borrower and Guarantor enforceable in accordance with their
respective terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium, or similar law affecting
creditors' rights generally and by general principles of equity. Borrowers and
Guarantors do not have any Subsidiaries except as set forth on Schedule 8.1
hereof.
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8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All consolidated
financial statements relating to Borrowers and Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Agent or Lenders have
been prepared in accordance with GAAP and fairly present the consolidated
financial condition and the consolidated results of operation of Borrowers and
Guarantors as at the dates and for the periods set forth therein (PROVIDED,
THAT, monthly or quarterly statements are subject to normal year-end adjustments
and may not contain footnotes required by GAAP). Except as disclosed in Schedule
8.2 hereto, there has been no act, condition or event which has had or is
reasonably likely to have a Material Adverse Effect, since the date of the most
recent audited financial statements of Borrowers and Guarantor, furnished by any
Borrower or Guarantor to Agent prior to the date of this Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief executive
office of each Borrower and Guarantor and each Borrower's and Guarantor's
Records concerning Accounts and Inventory are located only at the address set
forth on the signature page hereto and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
Schedule 8.3 hereto or as to Inventory, the locations permitted under Section
7.3(d) hereof and as to Equipment, the locations permitted under Section 7.4(e)
hereof, subject to the right of each Borrower and Guarantor to establish new
locations in accordance with Section 9.2 hereof. Schedule 8.3 hereto correctly
identifies any of such locations which are not owned by Borrowers and Guarantors
and sets forth the owners and/or operators thereof.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Agent, for itself and the ratable benefit of Lenders, under
this Agreement and the other Financing Agreements constitute valid and perfected
first priority liens and security interests in and upon the Collateral (other
than as to specific items of Collateral as to which the security interest of
Agent is not required as of the date hereof to be perfected consisting of the
Excluded Property). Each Borrower and Guarantor has good and marketable title to
all of its properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted to
Agent, for itself and the ratable benefit of Lenders, and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.
8.5 TAX RETURNS. Each Borrower and Guarantor has filed, or caused to be
filed, in a timely manner all material tax returns, reports and declarations
which are required to be filed by it. All information in such tax returns,
reports and declarations is complete and accurate in all material respects.
Except as set forth on Schedule 8.5 hereto, each Borrower or Guarantor, as the
case may be, has paid or caused to be paid all taxes due and payable or claimed
due and payable in any assessment received by it, and has collected, deposited
and remitted in accordance with all applicable laws, all excise taxes and all
sales and/or use taxes applicable to the conduct of its business, except taxes
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or Guarantor, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Adequate provision has been made for the payment of all accrued
and unpaid Federal, State, county, local, foreign and other taxes whether or not
yet due and payable and whether or not disputed. Each Borrower and Guarantor has
collected and remitted to the appropriate tax authority all excise taxes and
sales and/or use taxes applicable to its business required to be collected and
remitted
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under the laws of the United States and each possession or territory thereof,
and each State or political subdivision thereof, including any State in which
such Borrower or Guarantor owns any Inventory or owns or leases any other
property.
8.6 LITIGATION. Except as set forth on Schedule 8.6 hereto, there is no
present investigation by any Governmental Authority pending, or to the best of
the knowledge of any Borrower or Guarantor threatened, against or affecting any
Borrower or Guarantor or its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of the knowledge of
any Borrower or Guarantor threatened, against any Borrower or Guarantor or its
assets or will, or against or affecting any transactions contemplated by this
Agreement, which if adversely determined against a Borrower or Guarantor would
have a Material Adverse Effect.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.
(a) Except as set forth in Schedule 8.7 hereto, each Borrower,
Guarantor and their Subsidiaries is not in default in any respect under, or in
violation in any respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound with respect to which the default or violation of
which would have a Material Adverse Effect. Each Borrower, Guarantor and their
Subsidiaries is in compliance with the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority relating to its
business, including, without limitation, those set forth in or promulgated
pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the
rules and regulations thereunder, and all Environmental Laws with respect to
which the failure to comply would have a Material Adverse Effect.
(b) Each Borrower, Guarantor and their Subsidiaries has obtained
all permits, licenses, approvals, consents, certificates, orders or
authorizations of any Governmental Authority (the "Permits") required for the
lawful conduct of its business where the failure to obtain such Permit would
have a Material Adverse Effect. The Permits constitute all permits, licenses,
approvals, consents, certificates, orders or authorizations necessary for each
Borrower, Guarantor and their Subsidiaries to own and operate its business as
presently conducted or proposed to be conducted where the failure to have such
Permits would have a Material Adverse Effect. All of the Permits are valid and
subsisting and in full force and effect. There are no actions, claims or
proceedings pending or to the best of each Borrower's knowledge, threatened that
seek the revocation, cancellation, suspension or modification of any of the
Permits which would have a Material Adverse Effect.
8.8 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on Schedule 8.8 hereto, no Borrower,
Guarantor or any of their Subsidiaries has generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law where the violation
would have a Material Adverse Effect, or violates any license, permit,
certificate,
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approval or similar authorization issued to any Borrower, Guarantor or such
Subsidiary thereunder where the violation thereof would have a Material Adverse
Effect. Except as set forth on Schedule 8.8 hereto, the operations of each
Borrower, Guarantor and their Subsidiaries comply in all respects with all
applicable Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder where the failure to comply therewith or
the violation thereof would have a Material Adverse Effect.
(b) Except as set forth on Schedule 8.8 hereto, (i) there is no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other person pending or, to the best
of the knowledge of any Borrower and Guarantor threatened, with respect to any
non-compliance with or violation of the requirements of any applicable
Environmental Law by any Borrower, Guarantor and their Subsidiaries which would
have a Material Adverse Effect, (ii) there has not been any release, spill or
discharge of any Hazardous Material on any properties of any Borrower, Guarantor
or such Subsidiary, or to the best of the knowledge of any Borrower and
Guarantor, releases, spills or discharges from any properties at which any
Borrower, Guarantor or such Subsidiary has transported, stored or disposed of
any Hazardous Materials which would have a Material Adverse Effect, and (iii)
there has not been any generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental matter which affects any Borrower or Guarantor or its
business, operations or assets in any manner which would have a Material Adverse
Effect.
(c) Except as set forth on Schedule 8.8 hereto, no Borrower,
Guarantor or any of their Subsidiaries has any liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials which would have a Material Adverse Effect.
(d) Except as set forth on Schedule 8.8 hereto, each Borrower,
Guarantor and their Subsidiaries has all licenses, certificates, approvals,
similar authorizations and other Permits required to be obtained or filed in
connection with the operations of such Borrower, Guarantor and Subsidiary under
any Environmental Law and all of such licenses, permits, certificates, approvals
or similar authorizations and other Permits are valid and in full force and
effect in each case where the failure to obtain or maintain such licenses,
permits, certificates, approvals or similar authorizations would have a Material
Adverse Effect.
8.9 EMPLOYEE BENEFITS.
(a) No Borrower or Guarantor has engaged in any transaction in
connection with which any Borrower or Guarantor or any of its ERISA Affiliates
could be subject to either a civil penalty assessed pursuant to ERISA or a tax
imposed by the Code, including any accumulated funding deficiency described in
Section 8.9(c) hereof and any deficiency with respect to vested accrued benefits
described in Section 8.9(d) hereof.
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(b) Except for the payment of premium obligations in the
ordinary course of business consistent with the current practices of Borrowers
and Guarantors, no liability to the Pension Benefit Guaranty Corporation has
been or is expected by any Borrower or Guarantor to be incurred with respect to
any employee benefit plan of any Borrower or Guarantor or any of its ERISA
Affiliates. Except as set forth on Schedule 8.9 hereto, there has been no
reportable event (within the meaning of ERISA) or any other event or condition
with respect to any employee benefit plan of any Borrower or Guarantor or any of
its ERISA Affiliates which presents a risk of termination of any such plan by
the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which any Borrower
or Guarantor or any of its ERISA Affiliates is required under ERISA and the Code
to have paid under the terms of each employee benefit plan as contributions to
such plan as of the last day of the most recent fiscal year of such plan ended
prior to the date hereof, and no accumulated funding deficiency (as defined in
ERISA and the Code), whether or not waived, exists with respect to any employee
pension benefit plan, including any penalty or tax described in Section 8.9(a)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof.
(d) Except as set forth in Schedule 8.9 hereto, the current
value of all vested accrued benefits under all employee pension benefit plans
maintained by any Borrower or Guarantor that are subject to Title IV of ERISA
does not exceed the current value of the assets of such plans allocable to such
vested accrued benefits, including any penalty or tax described in Section
8.9(a) hereof and any accumulated funding deficiency described in Section 8.9(c)
hereof. The terms "current value" and "accrued benefit" have the meanings
specified in ERISA.
(e) Except as set forth on Schedule 8.9 hereto, no Borrower,
Guarantor or any of its ERISA Affiliates is or has ever been obligated to
contribute to any "multiemployer plan" (as such term is defined in ERISA) that
is subject to Title IV of ERISA.
8.10 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 hereto,
subject to the right of each Borrower and Guarantor to establish new accounts in
accordance with Section 9.16 below.
8.11 INTELLECTUAL PROPERTY. Except as set forth in Schedule 8.11
hereto, each Borrower and Guarantor owns or licenses or otherwise has the right
to use all Intellectual Property necessary for the operation of its business as
presently conducted or proposed to be conducted. As of the date hereof, each
Borrower does not have any Intellectual Property registered, or subject to
pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 8.11 hereto. No event has occurred which permits
or would permit after notice or passage of time or both, the revocation,
suspension or termination of such rights. To the best of the knowledge of each
Borrower and Guarantor, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated
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to be sold by or employed by any Borrower infringes any patent, trademark,
servicemark, tradename, copyright, license or other Intellectual Property owned
by any other Person presently and no claim or litigation is pending or
threatened against or affecting any Borrower contesting its right to sell or use
any such Intellectual Property which, if adversely determined, could have a
Material Adverse Effect. Schedule 8.11 lists all of the agreements or other
arrangements of each Borrower pursuant to which such Borrower has a license or
other right to use any trademarks, logos, designs, representations or other
Intellectual Property owned by another person as in effect on the date hereof
and the dates of the expiration of such agreements or other arrangements of each
Borrower as in effect on the date hereof. As of the date hereof, all material
license and other material rights are in full force and effect, no default or
event of default exists with respect thereto and the Borrower party thereto is
in compliance with the terms thereof in all material respects and no party
thereto has sent any notice of termination or of its intention to terminate such
license or rights, except as set forth on Schedule 8.11 hereto. No trademark,
servicemark or other Intellectual Property at any time used by any Borrower
which is owned by another person, or owned by any Borrower subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Agent, is affixed to any Eligible Inventory,
except to the extent permitted under the term of the license agreements listed
on Schedule 8.11 hereto.
8.12 FINANCIAL STATEMENTS.
(a) None of the financial statements, reports and other
information furnished or to be furnished by any Borrower or Guarantor to Agent
or any Lender with respect to Huffy and its Subsidiaries contain, as of their
respective dates, any untrue statement of material fact or omit to state any
material fact necessary to make the information therein not misleading. Such
financial statements and reports were and will be prepared in accordance with
GAAP consistently applied (other than those unaudited financial statements and
reports and other than consolidating financial statements provided to Agent
which will be prepared consistent with the current practices of Huffy), and all
financial statements shall fairly present the consolidated and consolidating
financial condition and results of operations of the applicable Persons, as of
the dates and for the periods indicated thereon.
(b) The pro forma balance sheets and future cash flow
projections attached as Schedule 8.12 for Huffy and its Subsidiaries (together
with the summaries of assumptions and projected assumptions, based on historical
performance with respect thereto) furnished by any Borrower or Guarantor to
Agent or any Lender prior to the date of this Agreement represent the
reasonable, good faith opinion of Borrowers and their management as to the
subject matter thereof, PROVIDED, THAT, such projections exclude (i) certain
non-recurring reorganization and restructuring charges as described therein,
including refinancing charges and professional fees incurred in connection with
the transactions contemplated hereunder to the extent not amortized as prepaid
interest expenses and (ii) certain intercompany accounting entries affecting the
intercompany balances and shareholders' equity of Huffy Service and Huffy, but
not Huffy's shareholders' equity on a consolidated basis.
8.13 DISCLOSURE.
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(a) The information contained in the representations and
warranties of each Borrower and Guarantor set forth in this Agreement, the other
Financing Agreements, or in any other instrument, document, list, certificate,
statement, schedule or exhibit heretofore delivered or to be delivered to Agent
or any Lender, as contemplated in this Agreement or in the other Financing
Agreements, does not contain and will not contain any untrue statement of a
material fact and does not omit and will not omit to state a material fact
necessary in order to make the information contained herein or therein not
misleading.
(b) After giving effect to the transactions contemplated by this
Agreement, the other Financing Agreements, and the other instruments or
documents delivered in connection herewith and therewith, there does not exist
and there has not occurred any act, condition or event which constitutes an
Event of Default or which, with notice or passage of time or both would
constitute an Event of Default.
8.14 GOVERNMENTAL AUTHORITY. No consent, approval or other action of,
or filing with, or notice to any Governmental Authority is required in
connection with the execution, delivery and performance of this Agreement, the
other Financing Agreements or any of the instruments or documents to be
delivered pursuant hereto or thereto, EXCEPT for those consents or approvals
already obtained by Borrowers and Guarantor which are in full force and effect
as of the date hereof, the filing of UCC financing statements and the
disclosures and filing required under applicable securities laws and by
securities exchanges (which disclosures and filing have been done or shall be
done in accordance with such laws).
8.15 CAPITALIZATION. All of the issued and outstanding shares of
Capital Stock of Huffy Brands, Hufco-Delaware, Huffy Sports, Royce and American
are directly and beneficially owned and held by Huffy and all of such shares
have been duly authorized and are fully paid and non- assessable, free and clear
of all claims, liens, pledges and encumbrances of any kind, except in favor of
Agent, for itself and the ratable benefit of Lenders, and as permitted
hereunder. All of the issued and outstanding shares of Capital Stock of Huffy
Service and HCAC are directly and beneficially owned and held by Huffy Brands
and all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind except in favor of Agent, for itself and the ratable benefit of Lenders
and as permitted herein. Ninety-nine and one-half (99 1/2%) percent of all of
the issued and outstanding shares of Class A common stock of Huffy Risk
Management, Inc. are owned by Huffy Service, one-half (1/2%) percent of all of
the issued and outstanding shares of the Class A common stock of Huffy Risk
Management, Inc. are owned by Huffy and one hundred (100%) percent of all of the
issued and outstanding shares of the Class B common stock of Huffy Risk
Management, Inc. are owned by ▇.▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇.
8.16 LABOR DISPUTES.
(a) Set forth on Schedule 8.16 hereto is a list (including dates
of termination) of all collective bargaining or similar agreements between or
applicable to any Borrower or Guarantor and any union, labor organization or
other bargaining agent in respect of the employees of any Borrower or Guarantor
on the date hereof.
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(b) There is (i) no unfair labor practice complaint pending
against any Borrower or Guarantor or, to the best of the knowledge of any
Borrower or Guarantor, threatened against it, before the National Labor
Relations Board, and no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or Guarantor or, to best of the knowledge of any Borrower or
Guarantor, threatened against it where such complaint, grievance or arbitration
would have a Material Adverse Effect, and (ii) no strike, labor dispute,
slowdown or stoppage is pending against any Borrower or Guarantor or, to the
best of the knowledge of any Borrower or Guarantor, threatened against any
Borrower or Guarantor where such strike, labor dispute, slowdown or stoppage
would have a Material Adverse Effect.
8.17 CORPORATE NAME; PRIOR TRANSACTIONS. Each Borrower and Guarantor
has not, during the past five (5) years, been known by or used any other
corporate or fictitious name or been a party to any merger or consolidation, or
acquired all or substantially all of the assets of any Person, or acquired any
of its property or assets out of the ordinary course of business, except as set
forth on Schedule 8.17 hereto.
8.18 RESTRICTIONS ON SUBSIDIARIES. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof, there
are no contractual or consensual restrictions on any Borrower or Guarantor or
any of its respective Subsidiaries which prohibit or otherwise restrict (a) the
transfer of cash or other assets (i) between any Borrower or Guarantor and any
of its respective Subsidiaries or (ii) between any Subsidiaries of any Borrower
or Guarantor or (b) the ability of any Borrower or Guarantor or any of its
respective Subsidiaries to incur Indebtedness or grant security interests to
Agent or any Lender in the Collateral.
8.19 ACCURACY AND COMPLETENESS OF INFORMATION. All information
furnished by or on behalf of any Borrower or Guarantor in writing to Agent or
Lenders in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, is true and
correct in all material respects on the date as of which such information is
dated or certified and does not omit any material fact necessary in order to
make such information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a Material Adverse Effect,
which has not been fully and accurately disclosed to Agent or Lenders in
writing.
8.20 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent and Lenders. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent and
Lenders.
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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 MAINTENANCE OF EXISTENCE. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, at all times preserve, renew and keep in full
force and effect its corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all licenses, trademarks,
tradenames, approvals, authorizations, leases, contracts and Permits necessary
to carry on the business as presently or proposed to be conducted, where the
failure to preserve, renew, or keep in full force and effect any of the
foregoing would have a Material Adverse Effect. Each Borrower and Guarantor
shall, and shall cause any Subsidiary to, give Agent thirty (30) days prior
written notice of any proposed change in its corporate name, which notice shall
set forth the new name and each Borrower and Guarantor shall deliver to Agent a
copy of the amendment to the Certificate of Incorporation of such Borrower,
Guarantor or such Subsidiary providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation of such Borrower,
Guarantor or such Subsidiary as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. Each Borrower and Guarantor may open any
new location within the United States and such of its territories as may have
adopted the Uniform Commercial Code, provided such Borrower or Guarantor (a)
gives Agent ten (10) days prior written notice of the intended opening of any
such new location and (b) executes and delivers, or causes to be executed and
delivered to Agent such agreements, documents, and instruments as Agent may deem
reasonably necessary or desirable to protect the interest of Agent, for itself
and the ratable benefit of Lenders, in the Collateral at such location,
including UCC financing statements with respect to the Collateral.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, to comply in all respects with all laws, rules,
regulations, licenses, approvals, orders and Permits applicable to it and duly
observe all requirements of any Federal, State or local Governmental Authority
(including the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, ERISA, the Code and all statutes,
rules, regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws) in each case where the failure to so comply has or would have a Material
Adverse Effect.
(b) Each Borrower and Guarantor shall give both oral and written
notice to Agent promptly after the receipt by any Borrower or Guarantor of any
notice of, or any Borrower's or Guarantor's otherwise obtaining knowledge of,
(i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material in violation of any
Environmental Law where such violation has or would have a Material Adverse
Effect or (ii) any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to: (A) any non-compliance with or
violation of any Environmental Law by any Borrower or Guarantor where such
non-compliance or violation has or would have a Material Adverse Effect or (B)
the release, spill or discharge, threatened or actual, of any Hazardous Material
where the release, spill or discharge thereof has or would have a Material
Adverse Effect or (C) any other
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environmental, health or safety matter involving a violation of any
Environmental Law where such violation has or would have a Material Adverse
Effect.
(c) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is any non-compliance, or any condition
which requires any action by or on behalf of Borrower or Guarantor in order to
avoid any non-compliance with any Environmental Law where such non-compliance
has or would have a Material Adverse Effect, Borrowers and Guarantor shall, at
Agent's reasonable request and Borrowers' expense: (i) cause an independent
environmental engineer reasonably acceptable to such Agent to conduct such tests
of the site where such Borrower's or Guarantor's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Agent a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower's or
Guarantor's response thereto or the estimated costs thereof, shall change in any
material respect.
(d) Each Borrower and Guarantor shall indemnify and hold
harmless Agent, Lenders, their directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and legal expenses) arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, threatened release,
spill, discharge, disposal or presence of a Hazardous Material on any of the
Real Property, including the costs of any repair, cleanup or other remedial work
required under any Environmental Law or by any governmental authority with
respect to such property of such Borrower or Guarantor and the preparation and
implementation of any closure, remedial or other required plans except for such
losses, claims, damages, liabilities, costs or expenses as a result of the gross
negligence or wilful misconduct of Agent or such Lender as determined pursuant
to a final non-appealable order of a court of competent jurisdiction. All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination of this
Agreement.
9.4 PAYMENT OF TAXES AND CLAIMS. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or such Subsidiary, as the case may be, and with respect to which
adequate reserves have been set aside on its books. Each Borrower and Guarantor
shall be liable for any tax or penalties imposed on Agent or any Lender as a
result of the financing arrangements provided for herein and each Borrower and
Guarantor agrees to indemnify and hold Agent and Lenders harmless with respect
to the foregoing, and to repay to Agent and Lenders on demand the amount
thereof, and until paid by Borrowers such amount shall be added and deemed part
of the Loans. The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement.
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9.5 INSURANCE. Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Such policies of insurance shall be
reasonably satisfactory to Agent as to form, amount and insurer. Agent and
Lenders acknowledge that the policies of insurance maintained by Borrowers and
Guarantors as disclosed to Agent are satisfactory as of the date hereof based on
the circumstances of Borrowers and Guarantors as of the date hereof. If such
policies are cancelled or expire, Borrowers and Guarantors may obtain new
policies from different insurance companies so long as such policies and
insurance company are comparable to the insurance policies and insurance company
existing on the date hereof regarding form, amount and insurer. Borrowers shall
furnish certificates, policies or endorsements to Agent as Agent shall
reasonably require as proof of such insurance, and, if any Borrower fails to do
so, Agent is authorized, but not required after notice to Huffy, to obtain such
insurance at the expense of Borrowers. All policies shall provide for at least
thirty (30) days prior written notice to Agent of any cancellation or reduction
of coverage (other than as a result of the failure to pay premiums, and ten (10)
days prior written notice to Agent of any cancellation or reduction of coverage
as the result of the failure to pay premiums) and that Agent may act as attorney
for each Borrower, Guarantors or such Subsidiary in obtaining, and at any time
an Event of Default exists or has occurred and is continuing, adjusting,
settling, amending and canceling such insurance. Borrowers and Guarantors shall
cause Agent to be named as a loss payee and an additional insured (but without
any liability for any premiums) under such insurance policies and Borrowers and
Guarantor shall obtain non-contributory lender's loss payable endorsements to
all insurance policies in form and substance satisfactory to Agent. Such
lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Agent, for the benefit of Lenders, as its
interests may appear and further specify that Agent shall be paid regardless of
any act or omission by any Borrower, Guarantor or any of its Affiliates. At its
option, Agent may apply any insurance proceeds received by Agent at any time to
the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Agent
may determine or hold such proceeds as cash collateral for the Obligations.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Each Borrower and Guarantor shall, and shall cause its
Subsidiaries to, keep proper books and records in which true and complete
entries shall be made of all dealings or transactions of or in relation to the
Collateral and the businesses of Borrowers, Guarantors and their Subsidiaries
(if any) in accordance with GAAP and Borrowers and Guarantors shall furnish or
cause to be furnished to Agent: (i) within thirty (30) days after the end of
each fiscal month, monthly unaudited consolidated financial statements of Huffy
and its Subsidiaries (including in each case, balance sheets, statements of
income and loss, and statements of cash flow) and monthly unaudited
consolidating financial statements of Huffy and its Subsidiaries (including in
each case, balance sheets, statements of income and loss, and statements of cash
flow), in each case, all in reasonable detail, fairly presenting the financial
position and the results of the operations of Huffy and its Subsidiaries as of
the end of and through such fiscal month, certified
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to be correct by the chief financial officer of Huffy, subject to normal
year-end adjustments, and accompanied by a compliance certificate substantially
in the form of Exhibit B hereto, along with a schedule in form reasonably
satisfactory to Agent of the calculations used in determining, as of the end of
such month, whether Borrowers were in compliance with the covenants set forth in
Sections 9.22 of this Agreement for such month (PROVIDED, THAT, such monthly
unaudited consolidating financial statements may not be prepared in accordance
with GAAP, but shall in each case be prepared consistent with the current
practices of Huffy and its Subsidiaries as of the date hereof), (ii) within
forty-five (45) days after the end of each fiscal quarter, quarterly unaudited
consolidated financial statements of Huffy and its Subsidiaries (including in
each case, balance sheets, statements of income and loss and statements of cash
flow) and unaudited consolidating financial statements of Huffy and its
Subsidiaries (including in each case, balance sheets, statements of income and
loss and statements of cash flow), in each case all in reasonable detail, fairly
presenting the financial position and the results of operations of Huffy and its
Subsidiaries as of the end of and through such fiscal quarter (PROVIDED, THAT,
such quarterly unaudited consolidating financial statements may not be prepared
in accordance with GAAP, but shall in each case be prepared consistent with the
current practices of Huffy and its Subsidiaries as of the date hereof), and
(iii) within one hundred twenty (120) days after the end of each fiscal year,
audited consolidated financial statements of Huffy and its Subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, and unaudited consolidating financial statements of
Huffy and its Subsidiaries (including in each case, balance sheets, statements
of income and loss and statements of cash flow), in each case all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Huffy and its Subsidiaries as of the end of and for such fiscal
year (PROVIDED, THAT, such annual unaudited consolidating financial statements
may not be prepared in accordance with GAAP, but shall in each case be prepared
consistent with the current practices of Huffy and its Subsidiaries as of the
date hereof), together with, as to the consolidated financial statements, the
unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Huffy and
reasonably acceptable to Agent, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Huffy and its Subsidiaries as of the end of and for
the fiscal year then ended. Agent acknowledges that as of the date hereof KPMG
Peat Marwick is an independent accounting firm acceptable to Agent for this
purpose.
(b) Borrowers and Guarantors shall promptly notify Agent in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to the Collateral having a value of $250,000 in any
one case or $500,000 in the aggregate or which would have a Material Adverse
Effect and (ii) the occurrence of any Event of Default or act, condition or
event which, with the passage of time or giving of notice or both, would
constitute an Event of Default.
(c) Borrowers and Guarantors shall promptly after the sending or
filing thereof furnish or cause to be furnished to Agent copies of all reports
which any Borrower or Guarantor sends to its stockholders generally and copies
of all reports and registration statements which any Borrower or Guarantor files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
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(d) Borrowers and Guarantors shall furnish or cause to be
furnished to Agent such budgets, forecasts, projections and other information
respecting the Collateral and the business of any Borrower or Guarantor, as
Agent may, from time to time, reasonably request. Agent and Lenders are hereby
authorized to deliver a copy of any financial statement or any other information
relating to the business of any Borrower or Guarantor to any court or other
Governmental Authority requiring a copy or to any Participant or assignee or
prospective Participant or assignee, subject to Section 11.4 hereof. In the
event that Borrowers or Guarantors shall fail to promptly deliver any copies of
financial statements or any reports or management letters prepared by
accountants and auditors on behalf of any Borrower, Agent may request such items
directly from such accountants and auditors. Each Borrower and Guarantor hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Agent, at Borrowers' expense, copies of the financial statements of Borrowers
and Guarantor and any reports or management letters prepared by such accountants
or auditors on behalf of any Borrower. Any documents, schedules, invoices or
other papers delivered to Agent may be destroyed or otherwise disposed of by
such Agent one (1) year after the same are delivered to such Agent, except as
otherwise designated by Borrower to such Agent in writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly:
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or
(b) sell, assign, lease, transfer, abandon or otherwise dispose
of any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, EXCEPT FOR:
(i) sales of Inventory in the ordinary course of
business;
(ii) the disposition of worn-out or obsolete Equipment so
long as (A) such sales do not involve Equipment having an aggregate fair market
value in excess of $500,000 for all such Equipment disposed of in any fiscal
year and (B) all proceeds are paid to Agent for application to the Obligations
in such order and manner as Agent may determine;
(iii) Asset Sales, except as otherwise provided herein, by
any Borrower or Guarantor after the date hereof to the extent consented to in
writing by Agent and Lenders;
(iv) sales or other dispositions by Huffy of the Celina
Property or the sale or other disposition by HCAC of the Harrisburg Property,
PROVIDED, THAT, as to each and all such sales,
(A) Agent shall have received not less than ten (10)
Business Days prior written notice of such sale, which notice shall set forth in
reasonable detail satisfactory to Agent, the parties to such sale or other
disposition, the assets to be sold or otherwise disposed of, the purchase price
and the manner of payment thereof and such other information with respect
thereto as Agent may request,
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(B) as of the date of such sale or other disposition
and after giving effect thereto, no Event of Default, or act, condition or event
which with notice or passage of time would constitute an Event of Default, shall
exist or have occurred,
(C) such sale shall be on commercially reasonable
prices and terms in a BONA FIDE arm's length transaction, and
(D) any and all Net Available Proceeds payable or
delivered to any Borrower or Guarantor in respect of such sale or other
disposition shall be paid or delivered, or caused to be paid or delivered, to
Agent for application to the Obligations in such order and manner as Agent may
determine,
(v) the issuance and sale by any Borrower or Guarantor of
Capital Stock of such Borrower or Guarantor after the date hereof; PROVIDED,
THAT, (A) Agent shall have received not less than three (3) Business Days prior
written notice of such issuance and sale, which notice shall specify the party
selling such Capital Stock, the parties to whom such shares are to be sold, the
terms of such sale, the total amount which it is anticipated will be realized
from the issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by such Borrower or Guarantor from such sale, (B)
such Borrower or Guarantor shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, EXCEPT THAT such Borrower or Guarantor may pay cash dividends in
respect of such Capital Stock on terms and conditions and in amounts acceptable
to Agent so long as Agent shall have received, in form and substance
satisfactory to Agent, an agreement in writing from the holders of such shares
of Capital Stock with respect to the rights to payment and other rights of the
holder of such shares, (C) the terms of such Capital Stock, and the terms and
conditions of the purchase and sale thereof, shall not include any terms that
include any limitation on the right of any Borrower or Guarantor to request or
receive Loans or Letter of Credit Accommodations or the right of any Borrower or
Guarantor to amend or modify any of the terms and conditions of this Agreement
or any of the other Financing Agreements or otherwise in any way relate to or
affect the arrangements of any Borrower or Guarantor with Agent and Lenders or
are more restrictive or burdensome to any Borrower or Guarantor than the terms
of any Capital Stock of such Borrower or Guarantor in effect on the date hereof,
and (D) as of the date of such issuance and sale and after giving effect
thereto, no Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default shall exist or have
occurred;
(vi) the licensing by Huffy Brands of Intellectual
Property owned by it to any Borrower, PROVIDED, THAT, as to any such license:
(A) any rights of such Borrower shall be subject to the rights of Agent and
Lenders in such Intellectual Property (including the rights of Agent and Lenders
to use such Intellectual Property as provided in Section 10.2 hereof), (B) such
license shall not impair, hinder or otherwise adversely affect the rights of
Agent and Lenders with respect to such Intellectual Property, (C) such license
as to any Borrower shall be consistent with the reasonable requirements of such
Borrower in the ordinary course of its business and on terms no less favorable
to such Borrower then such Borrower would otherwise be able to obtain from any
person which is not an Affiliate (assuming for this purpose that such other
person were
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the owner of the Intellectual Property subject to such license), (D) no Borrower
shall make or be required to make any payments in cash or other immediately
available funds or other property to Huffy Brands pursuant to such license
arrangements and (E) all Indebtedness and other obligations of any Borrower to
Huffy Brands arising in connection with such licensing arrangements shall be
subject and subordinate in right of payment to the prior indefeasible payment
and satisfaction in full of the Obligation;
(vii) the issuance of Capital Stock of any Borrower or
Guarantor consisting of common stock pursuant to a stock option plan (including,
without limitation, the Amended and Restated 1989 Employee Stock Option Purchase
Plan which became effective as of January 1, 1999) or 401(k) plans of such
Borrower or Guarantor for the benefit of its employees, directors and
consultants, PROVIDED, THAT, in no event shall such Borrower or Guarantor be
required to issue, or shall such Borrower or Guarantor issue, Capital Stock
pursuant to such stock option plans or 401(k) plans which would result in a
Change of Control or other Event of Default;
(viii) the transfer by Huffy Brands of the Intellectual
Property owned by Huffy Brands to the Borrower that licenses such Intellectual
Property as of the date hereof from Huffy Brands on or about the date of a
Business Unit Sale of the assets of such Borrower, so long as such Business Unit
Sale has been consented to by Agent and the Intellectual Property so transferred
shall remain subject to the security interest and lien of Agent (such that the
security interest and lien of Agent shall continue in the Intellectual Property
as so transferred and owned by such Borrower until such security interest and
lien may be released pursuant to such Business Unit Sale subject to such terms
and conditions as Agent may agree);
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8 ENCUMBRANCES. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including, without limitation,
the Collateral, EXCEPT:
(a) liens and security interests of Agent for itself and the
benefit of Lenders;
(b) liens securing the payment of taxes, either not yet overdue
or the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to any Borrower, Guarantor or such
Subsidiary, as the case may be, and with respect to which adequate reserves have
been set aside on its books;
(c) non-consensual statutory liens (other than liens securing
the payment of taxes) arising in the ordinary course of the business of any
Borrower, Guarantor or such Subsidiary, as the case may be, to the extent: (i)
such liens secure Indebtedness which is not overdue or (ii) such liens secure
Indebtedness relating to claims or liabilities which are fully insured and being
defended at the sole cost and expense and at the sole risk of the insurer or
being contested in
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good faith by appropriate proceedings diligently pursued and available to such
Borrower, Guarantor or such Subsidiary, as the case may be, in each case prior
to the commencement of foreclosure or other similar proceedings and with respect
to which adequate reserves have been set aside on its books;
(d) liens arising from (i) operating leases and the
precautionary UCC financing statement filings in respect thereof and (ii)
equipment or other materials which are not owned by a Borrower located on the
premises of such Borrower (but not in connection with, or as part of, the
financing thereof) from time to time in the ordinary course of business and
consistent with current practices of Borrowers and the precautionary UCC
financing statement filings in respect thereof;
(e) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of Real Property which do not interfere in
any material respect with the use of such Real Property or ordinary conduct of
the business of any Borrower, Guarantor or such Subsidiary, as the case may be,
as presently conducted thereon or materially impair the value of the Real
Property which may be subject thereto;
(f) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property arising after the
date hereof to secure Indebtedness of any Borrower permitted under Section 9.9
hereof so long as such security interests and mortgages do not apply to any
property of such Borrower other than the Equipment or Real Property so acquired,
and the Indebtedness secured thereby does not exceed the cost of the Equipment
or Real Property so acquired, as the case may be;
(g) deposits of cash with the owner or lessor of premises leased
and operated by any Borrower in the ordinary course of the business of such
Borrower to secure the performance by such Borrower of its obligations under the
terms of the lease for such premises; and
(h) the liens and security interests set forth on Schedule 8.4
hereto.
9.9 INDEBTEDNESS. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, except:
(a) the Obligations;
(b) Indebtedness arising in the ordinary course of the business
of such Borrower, Guarantor or Subsidiary in connection with worker's
compensation, unemployment insurance or other types of social security benefits
in each case consistent with the current practices of such Borrower, Guarantor
or Subsidiary as of the date hereof;
(c) Hedging Obligations of Borrower consisting of interest rate
protection obligations entered into by Borrower in the ordinary course of the
business of Borrower consistent with the current practices of Borrower as of the
date hereof; PROVIDED, THAT, such
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arrangements are with banks or other financial institutions that have combined
capital and surplus and undivided profits of not less than $250,000,000, are not
for speculative purposes and such Indebtedness shall be unsecured;
(d) unsecured Indebtedness of any Borrower to any other Borrower
on or arising after the date hereof pursuant to loans or advances by such
Borrower to such other Borrower, PROVIDED, THAT, as to any such loan, (i) each
month Borrowers shall provide to Agent a report in form and substance
satisfactory to Agent of any change in the outstanding amount of such loans from
the amount set forth in the most recent report thereof previously provided to
Agent under this clause (g)(i), (ii) the Indebtedness arising pursuant to any
such loan shall not be evidenced by a promissory note or other instrument,
unless the single original of such note or other instrument is delivered to
Agent to hold as part of the Collateral, with such endorsement and/or assignment
by the payee of such note or other instrument as Agent may require, (iii) as of
the date of the making of such loan and after giving effect thereto, the
Borrower making such loan shall be Solvent; (iv) as of the date of each such
loan and after giving effect thereto, no Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred, and (v) as of the date of any such loan
and after giving effect thereto, the Excess Availability of the Borrower making
such loan shall be not less than $15,000,000 as to loans or advances made by
Huffy, $1,500,000 as to loans or advances made by Royce, $1,000,000 as to loans
or advances made by Huffy Service and $100,000 as to loans or advances made by
American;
(e) unsecured Indebtedness of any Borrower to any Guarantor or
any Subsidiary of any Borrower or Guarantor (other than Borrowers) arising on or
after the date hereof pursuant to loans by such Guarantor or Subsidiary thereof
to such Borrower, PROVIDED, THAT, as to any such loan (i) the Indebtedness
arising pursuant to such loan is subject to, and subordinate in right of payment
to, the right of Agent and Lenders to receive the prior final payment and
satisfaction in full of all of the Obligations on terms and conditions
acceptable to Agent, (ii) Agent shall have received, in form and substance
satisfactory to Agent, a subordination agreement providing for the terms of the
subordination in right of payment of such Indebtedness of such Borrower to the
prior final payment and satisfaction in full of all of the Obligations, duly
authorized, executed and delivered by such Guarantor or Subsidiary (as the case
may be) and Borrower, (iii) such Borrower shall not, directly or indirectly
make, or be required to make, any payments in respect of such Indebtedness, (iv)
each month Borrowers shall provide to Agent a report in form and substance
satisfactory to Agent of any change in the outstanding amount of such loans from
the amount set forth in the most recent report thereof previously provided to
Agent under this clause (h)(iv), and (v) such Indebtedness shall not be
evidenced by a promissory note or other instrument, unless the single original
of such note or other instrument is delivered to Agent to hold as part of the
Collateral, with such endorsement and/or assignment by the payee of such note or
other instrument as Agent may require;
(f) unsecured Indebtedness of any Guarantor to any other
Guarantor arising on or after the date hereof pursuant to loans by such
Guarantor to such other Guarantor, PROVIDED, THAT, as to any such loan, (i) each
month Borrowers shall provide to Agent a report in form and substance
satisfactory to Agent of any change in the outstanding amount of such loans from
the
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amount set forth in the most recent report thereof previously provided to Agent,
(ii) the Indebtedness arising pursuant to any such loan shall not be evidenced
by a promissory note or other instrument, unless the single original of such
note or other instrument is delivered to Agent to hold as part of the
Collateral, with such endorsement and/or assignment by the payee of such note or
other instrument as Agent may require, and (iii) as of the date of the making of
such loan and after giving effect thereto, the Guarantor making such loan shall
be Solvent;
(g) Indebtedness of any Subsidiary of Huffy, other than
Borrowers and Guarantors, PROVIDED, THAT, (i) as to any such Indebtedness
Borrowers and Guarantors shall not be directly or indirectly liable (by virtue
of such Borrower or Guarantor being the primary obligor on, guarantor of, or
otherwise liable in any respect of such Indebtedness), (ii) the occurrence of a
default with respect thereto shall not result in, or permit any holder of any
Indebtedness of any Borrower or Guarantor to declare a default on Indebtedness
of any Borrower or Guarantor or cause the payment thereof to be accelerated or
payable prior to its stated maturity, and (iii) the aggregate amount of all of
such Indebtedness shall not exceed $250,000 at any time outstanding;
(h) unsecured Indebtedness of any Borrower or Guarantor arising
after the date hereof owing to any Person (other than any other Borrower or
Guarantor); PROVIDED, THAT, as to any such Indebtedness, each of the following
conditions is satisfied as determined by Agent: (i) Agent shall have received
not less than ten (10) Business Days prior written notice of the intention to
incur such Indebtedness, which notice shall set forth in reasonable detail
satisfactory to Agent, the amount of such Indebtedness, the person to whom such
Indebtedness will be owed, the interest rate and fees, the schedule of
repayments and maturity date with respect thereto and such other information
with respect thereto as Agent may request, (ii) Agent shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, as duly authorized,
executed and delivered by the parties thereof, (iii) such Indebtedness shall be
incurred by such Borrower or Guarantor at commercially reasonable rates and
terms in a BONA FIDE arm's length transaction, (iv) such Indebtedness shall not
be owed to any shareholder, officer, director, agent, employee or other
Affiliate of any Borrower or Guarantor, unless such Indebtedness is subordinated
in right of payment to the indefeasible payment and satisfaction in full of the
Obligations and Agent shall have received a subordination agreement, in form and
substance satisfactory to Agent, providing for such subordination and related
matters, duly authorized, executed and delivered by the person to whom such
Indebtedness is owed, such Borrower and Guarantor, (v) as of the date of
incurring such Indebtedness, and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default, shall exist or have occurred, (vi) the
aggregate principal amount of all such Indebtedness outstanding at any time
shall not exceed $10,000,000, (vii) such Indebtedness shall not at any time
include terms and conditions which in any manner adversely affect Agent or
Lenders or any rights of Agent or Lenders as determined in good faith by Agent
or which are more restrictive or burdensome than the terms or conditions of any
other Indebtedness of any Borrower (taken as a whole) as in effect on the date
hereof, (viii) Borrowers shall be in compliance with Section 9.22 hereof after
giving effect to such Indebtedness on a pro forma basis, (ix) such Borrower or
Guarantor may only make regularly scheduled payments of principal and interest
in respect of such Indebtedness, (x) such Borrower or Guarantor shall not,
directly or indirectly, (A) amend, modify, alter or
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change the terms of the agreements with respect to such Indebtedness, except as
consented to in writing by Agent, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (xi) Borrowers and Guarantor shall furnish to
Agent all notices or demands in connection with such Indebtedness either
received by any Borrower or Guarantor or on its behalf promptly after the
receipt thereof, or sent by any Borrower and Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be;
(i) unsecured Indebtedness of any Borrower to any senior
management employees of a Borrower arising pursuant to retention agreements
(including the non-complete provisions thereof) of such Borrower with such
employee and unsecured Indebtedness of any Borrower to any non-senior management
employees of such Borrower arising pursuant to the severance policies of such
Borrower, in each case in connection with a proposed Business Unit Sale,
PROVIDED, THAT, (i) promptly upon Agent's request, Borrowers shall provide to
Agent a copy of such severance policies and retention agreements and non-compete
agreements and the terms of such arrangements and other information with respect
thereto as may be requested by Agent and (ii) the amounts which such Borrower is
obligated to pay pursuant to such severance obligations and retention agreements
and non-compete agreements shall only be payable to the employees upon the
effectiveness of the Business Unit Sale;
(j) Indebtedness existing as of the date hereof set forth on
Schedule 9.9 hereto, PROVIDED, THAT, (i) the Borrower obligated in respect of
such Indebtedness or Guarantor (as the case may be) may only make regularly
scheduled payments or mandatory prepayments of principal and interest in respect
of such Indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such Indebtedness as in effect on the date hereof,
EXCEPT, THAT, any Borrower or Guarantor may make payments or prepayments of
principal or interest with respect thereto provided that, as of the date of any
such payment or prepayment and after giving effect thereto (A) no Event of
Default or act, event or condition which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred and be
continuing and (B) the aggregate Excess Availability of Borrowers shall be not
less than $25,000,000, (ii) such Borrower or Guarantor shall not, directly or
indirectly, amend, modify, alter or change the terms of the agreements,
documents and instruments entered into in connection therewith, EXCEPT, THAT,
such Borrower or Guarantor may, after prior written notice to Agent, amend,
modify, alter or change the terms thereof so as to extend the maturity thereof
or defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness (other than pursuant to payments thereof), or
to reduce the interest rate or any fees in connection therewith, (iii) such
Borrower or Guarantor shall not, directly or indirectly redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose any Borrower or Guarantor, as the
case may be, obligated with respect of any such Indebtedness may redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or invest
sums for such purpose; EXCEPT, THAT, any such Borrower or Guarantor may take any
of the actions listed in this clause (iii), PROVIDED, THAT, as of the date
thereof and after giving effect thereto (A) no Event of Default or act, event or
condition which with notice or passage of time or both would constitute an Event
of Default shall exist or have occurred and be continuing and (B) the aggregate
Excess Availability of Borrowers shall be not
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less than $25,000,000 and (iv) such Borrowers and Guarantor shall furnish to
Agent all notices or demands in connection with such Indebtedness either
received by any Borrower or Guarantor or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be.
9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. Each Borrower and Guarantor
shall not, and shall not permit any Subsidiary to, directly or indirectly, make
any loans or advance money or property to any Person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the Capital Stock
or Indebtedness or all or a substantial part of the assets or property of any
Person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the Indebtedness, performance, obligations or dividends
of any Person or hold any cash or Cash Equivalents. or form or acquire any
Subsidiaries, or agree to do any of the foregoing, EXCEPT:
(a) guarantees by any Borrower or Guarantor of the Obligations
in favor of Agent and Lenders;
(b) the endorsement of instruments for collection or deposit
in the ordinary course of business;
(c) investments in cash or Cash Equivalents so long as there are
no Loans outstanding and such investments are pledged and delivered to Agent
upon Agent's request; except that Borrowers shall not be required to pledge and
deliver such investments to Agent at any time that all of the following
conditions are satisfied: (i) the aggregate Excess Availability of Borrowers is
not less than $25,000,000, and (ii) no Event of Default or act, condition or
event which with notice or passage of time or both would constitute in Event of
Default, shall exist or have occurred and be continuing;
(d) the existing equity investments of each Borrower and
Guarantor as of the date hereof in its respective Subsidiaries as of the date
hereof;
(e) stock or obligations issued to a Borrower by any Person
(or the representative of such Person) in respect of Indebtedness of such Person
owing to such Borrower in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person; PROVIDED, THAT, the original of any such stock or
instrument evidencing such obligations shall be promptly delivered to Agent,
upon Agent's request, together with such stock power, assignment or endorsement
by such Borrower as Agent may request;
(f) obligations or account debtors to a Borrower arising from
Accounts which are past due evidenced by a promissory note made by such account
debtor payable to such Borrower; PROVIDED, THAT, promptly upon the receipt of
the original of any such promissory note by such Borrower, such promissory note
shall be endorsed to the order of Agent, for itself and the ratable benefit of
Lenders, by such Borrower and promptly delivered to Agent as so endorsed;
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(g) loans and advances by any Borrower, Guarantor or any
Subsidiary to employees of such Borrower, Guarantor or Subsidiary not to exceed
the principal amount of $1,000,000 in the aggregate at any time outstanding for:
(i) reasonably and necessary work- related travel or other ordinary business
expenses to be incurred by such employee in connection with their work for such
Borrower, Guarantor or Subsidiary and (ii) reasonable and necessary relocation
expenses of such employees (including home mortgage financing for relocated
employees);
(h) loans by any Borrower to any other Borrower to the extent
the Indebtedness of such Borrower arising pursuant to such loans are permitted
under Section 9.9(d);
(i) unsecured guarantees by any Borrower, Guarantor or any of
their respective Subsidiaries of the obligations of any Borrower, Guarantor or
other Subsidiary of any Borrower or Guarantor to any third party with respect to
leases of real property or personal property in the ordinary course of business
and other such unsecured guarantees, PROVIDED, THAT, (i) the aggregate amount of
the liability of all Borrowers pursuant to such other unsecured guarantees shall
not exceed $500,000 in the aggregate and (ii) as to all such guarantees, no
Borrower shall guarantee any obligations of any Subsidiary of any Borrower or
Guarantor which is not a Borrower or Guarantor;
(j) loans by any Borrower to senior management employees of such
Borrower in connection with a proposed Business Unit Sale of the assets or
Capital Stock of such Borrower, PROVIDED, THAT, promptly upon Agent's request,
Borrowers shall provide to Agent a copy or the original of all agreements
evidencing or relating to such arrangements, including the original of any note
evidencing the Indebtedness arising pursuant to such loans, and such other
information with respect thereto as Agent may request;
(k) the existing loans, advances and guarantees by any
Borrower and Guarantor outstanding as of the date hereof as set forth on
Schedule 9.10 hereto; PROVIDED, THAT, as to such loans, advances and guarantees,
(i) such Borrower and Guarantor shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such loans, advances or guarantees or any
agreement, document or instrument related thereto, or (B) as to such guarantees,
redeem, retire, defease, purchase or otherwise acquire such guarantee or set
aside or otherwise deposit or invest any sums for such purpose and (ii)
Borrowers and Guarantor shall furnish to Agent all notices or demands in
connection with such loans, advances or guarantees either received by any
Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be; and
(l) loans of money or property (other than Collateral) to any
Person, or investment by capital contribution in any Person (other than as
otherwise permitted above); PROVIDED, THAT, as to any such loans or investments,
each of the following conditions is satisfied: (i) the Person receiving such
loan or investment is engaged in a business related, ancillary or complimentary
to the business of Borrowers and Guarantors as conducted on the date hereof,
(ii) the total amount of any such loans or investments shall not exceed
$10,000,000 in the aggregate, (iii) as of the date of any such loan or
investment and after giving effect thereto, no Event of Default or act,
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condition or event which with notice or passage of time or both would constitute
in Event of Default, shall exist or have occurred and be continuing, (iv) in the
case of an investment by capital contribution, at Agent's option, the original
of any stock or other instrument evidencing such capital contribution shall be
promptly delivered to Agent, for the benefit of Lenders, together with such
stock power, assignment or endorsement as Agent may request, (v) in the case of
loans of money or property, the original of any promissory note or other
instrument evidencing the Indebtedness arising pursuant to such loans shall be
delivered, or caused to be delivered, to Agent, for the benefit of Lenders, at
Agent's option, together with an appropriate endorsement and with full recourse
to the payee thereof, (vi) as of the date of any loan or investment and after
giving thereto, the aggregate Excess Availability of Borrowers shall be not less
than $25,000,000, (vii) as of the date of any loan or investment and after
giving effect thereto, the combined Net Worth of Borrowers shall be not less
than $50,000,000 and (viii) Agent shall have received (A) not less than five (5)
Business Days prior written notice thereof setting forth in reasonable detail
the nature and terms thereof, (B) true, correct and complete copies of all
agreements, documents and instruments relating thereto and (C) such other
information with respect thereto as Agent may request.
9.11 DIVIDENDS AND REDEMPTIONS. Each Borrower and Guarantor shall not,
directly or indirectly, declare or pay any dividends on account of any shares of
class of any Capital Stock of such Borrower or Guarantor now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing,
EXCEPT THAT:
(a) any Subsidiary of a Borrower may pay dividends to such
Borrower;
(b) any Borrower or Guarantor may pay dividends to the extent
permitted in Section 9.12 below;
(c) any Borrower, Guarantor or any of their respective
Subsidiaries may repurchase Capital Stock consisting of common stock held by
employees pursuant to any employee stock ownership plan thereof upon the
termination, retirement or death of any such employee in accordance with the
provisions of such plan, PROVIDED, THAT, as to any such repurchase, each of the
following conditions is satisfied: (i) as of the date of the payment for such
repurchase and after giving effect thereto, no Event of Default shall exist or
have occurred and be continuing, (ii) such repurchase shall be paid with funds
legally available therefor, (iii) such repurchase shall not violate any law or
regulation or the terms of any indenture, agreement or undertaking to which any
Borrower or Guarantor is a party or by which any Borrower or Guarantor or its
property are bound, and (iv) the aggregate amount of all payments for such
repurchases in any calendar year shall not exceed $250,000; and
(d) any Borrower or Guarantor may declare and pay dividends in
respect of any Capital Stock of such Borrower or Guarantor or redeem, retire,
defease or repurchase or acquire
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any shares of Capital Stock of any Borrower or Guarantor; PROVIDED, THAT, as to
any such payment, each of the following conditions is satisfied: (i) in no event
shall the aggregate amount of all of such payments in any fiscal year exceed
$5,000,000, (ii) as of the date that such Borrower or Guarantor may and after
giving effect thereto, the aggregate Excess Availability of Borrowers shall be
not less than $25,000,000, (iii) as of the date that such Borrower or Guarantor
may make such payment and after giving effect thereto, no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default, shall exist or have occurred and be continuing.
9.12 TRANSACTIONS WITH AFFILIATES. Each Borrower and Guarantor shall
not, and shall not permit any Subsidiary to, directly or indirectly:
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or render or obtain any services to or from,
any officer, employee, shareholder, director, agent or any other Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
such Borrower's, Guarantor's or Subsidiary's (as the case may be) business and
upon fair and reasonable terms no less favorable to such Borrower, Guarantor or
Subsidiary than it would obtain in a comparable arm's length transaction with a
person who is not an Affiliate; or
(b) make any payments of management, consulting or other fees
for management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or any other Affiliate of any Borrower or
Guarantor EXCEPT (i) reasonable compensation to officers, employees and
directors for services rendered to such Borrower, Guarantor or Subsidiary, as
the case may be, in the ordinary course of business, (ii) payments by a Borrower
to any other Borrower in respect of Indebtedness arising pursuant to loans made
by such Borrower or Guarantor to the extent such Indebtedness permitted under
Section 9.9 hereof, (iii) payments by a Borrower or Guarantor to Huffy for
actual and necessary reasonable out-of-pocket legal and accounting, insurance,
marketing, payroll and similar types of services paid for by Huffy on behalf of
the other Borrowers or Guarantor in the ordinary course of their respective
businesses or as the same may be directly attributable to the other Borrowers or
Guarantors and (iv) payments by a Borrower in respect of severance arrangements
and retention agreements with senior management employees permitted under
Section 9.9 hereof in connection with a proposed Business Unit Sale upon the
effectiveness of the transfer of assets to such Business Unit Sale, subject to
the limitation on the amount of such payments set forth in Section 9.9 hereof.
9.13 CHANGES IN BUSINESS. Each Borrower, Guarantor and their
Subsidiaries shall not engage in any business other than the businesses of such
Borrower, Guarantor or Subsidiary on the date hereof and any businesses
reasonably related, ancillary or complimentary to the businesses in which such
Borrower, Guarantor or Subsidiary are engaged on the date hereof.
9.14 SALE AND LEASEBACKS. Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby such Borrower, Guarantor or Subsidiary, as
the case may be, shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and
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thereafter rent or lease such property which it intends to use for substantially
the same purpose or purposes as the property being sold or transferred (except
to the extent of Capital Leases permitted under Section 9.9 hereof).
9.15 COMPLIANCE WITH ERISA.
(a) Each Borrower and Guarantor shall not, and shall not permit
any Subsidiary to, with respect to any "employee benefit plans" maintained by
any Borrower or Guarantor or any of its ERISA Affiliates: (i) terminate any of
such employee pension plans so as to incur any liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to
exist any prohibited transaction involving any of such employee benefit plans or
any trust created thereunder which would subject any Borrower, Guarantor or such
ERISA Affiliate to a tax or penalty or other liability on prohibited
transactions imposed under the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under ERISA,
the Code or the terms of such plan, (iv) allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any such
employee benefit plan, (v) allow or suffer to exist any occurrence of a
reportable event (except as disclosed in Schedule 8.9 hereof, but subject to the
representation with respect thereto set forth in Section 8.9 hereof) or any
other event or condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such employee benefit plan that is a
single employer plan, which termination could result in any liability to the
Pension Benefit Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.15, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA.
9.16 ADDITIONAL BANK ACCOUNTS. Each Borrower and Guarantor shall not,
directly or indirectly, open, establish or maintain any deposit account,
investment account or any other account with any bank or other financial
institution, other than the Blocked Accounts and the accounts set forth in
Schedule 8.10 hereto, except: (a) as to any new or additional Blocked Accounts
and other such new or additional accounts which contain any Collateral or
proceeds thereof, with the prior written consent of Agent and subject to such
conditions thereto as Agent may establish and (b) as to any accounts used by any
Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Agent.
9.17 END OF FISCAL YEARS; FISCAL QUARTERS. Huffy shall, for financial
reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to
end on December 31 of each year and (b) fiscal quarters to end on or around
March 31, June 30, September 30 and December 31 of each year.
9.18 CAPITAL EXPENDITURES. Huffy and its Subsidiaries shall not,
directly or indirectly, make any Capital Expenditures in excess of $7,500,000 in
any fiscal year; PROVIDED, HOWEVER,
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that Huffy and its Subsidiaries may make Capital Expenditures in excess of
$7,500,000 in any fiscal year if, as of the date on which each such Capital
Expenditure is made, and after giving effect thereto, the aggregate Excess
Availability of Borrowers shall be not less than $25,000,000.
9.19 YEAR 2000 COMPLIANCE. Each Borrower and Guarantor shall take all
action which may be required so that its computer-based information systems,
including, without limitation, all of its proprietary computer hardware and
software (and whether supplied by others or with which Borrowers' or Guarantors'
systems interface) are able to operate effectively and correctly process data
using dates on or after January 1, 2000. Compliance with the foregoing shall
mean that the systems will operate and correctly process data without human
intervention such that (a) there is correct century recognition, (b)
calculations properly accommodate same century and multi-century formulas and
date values, and (c) all leap years shall be calculated correctly. Upon Agent's
request, Borrowers and Guarantors shall certify to Agent in writing that its
information systems have been modified, updated and programmed as required by
this Section, PROVIDED, THAT, Borrowers and Guarantors have received any
certification from Agent and Lenders required in order for Borrowers and
Guarantors to provide such certification to Agent. On and after January 1, 2000,
the computer-based information systems of Borrowers and Guarantors shall be, and
with ordinary course upgrading and maintenance, will continue to be sufficient
to permit Borrowers and Guarantors to conduct their businesses without any
adverse effect as a result of the year 2000.
9.20 COSTS AND EXPENSES. Each Borrower and Guarantor shall pay to
Agent, for itself and the benefit of Lenders, all costs, expenses, filing fees
and taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, the rights of Agent and Lenders, in
the Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes and intangibles taxes, if
applicable); (b) all insurance premiums, appraisal fees and search fees; (c)
costs and expenses of remitting loan proceeds, collecting checks and other items
of payment, and establishing and maintaining the Blocked Accounts, together with
Agent's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of Agent,
for the ratable benefit of Lenders, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Agent and/or Lenders arising out of the transactions contemplated hereby and
thereby (including preparations for and consultations concerning any such
matters); (g) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Agent or any Lender during the course of periodic
field examinations of the Collateral and any Borrower's or Guarantor's
operations, plus a per diem charge at the rate of $650 per person per day for
Agent's
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or any Lender's examiners in the field and office; and (h) the fees and
disbursements of counsel (including legal assistants) to Agent and Lenders in
connection with any of the foregoing.
9.21 FURTHER ASSURANCES. At the request of Agent or any Lender at any
time and from time to time, each Borrower and Guarantor shall, at its expense,
duly execute and deliver, or cause to be duly executed and delivered, such
further agreements, documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect, maintain and
enforce the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Agent may at any time and from time to time request
a certificate from an officer of Huffy representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such a request, Agent and
Lenders may, at the option of Agent, cease to make any further Loans or provide
any further Letter of Credit Accommodations until Agent has received such
certificate. Where permitted by law, each Borrower hereby authorizes Agent to
execute and file one or more UCC financing statements signed only by Agent.
9.22 NET WORTH. Borrowers shall at all times maintain aggregate Net
Worth of not less than $50,000,000; PROVIDED, THAT, Borrowers shall not be
required to comply with the Net Worth covenant set forth in this Section 9.22 at
any time that the aggregate Excess Availability of Borrowers is greater than
$25,000,000.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay any of the Obligations within
three (3) days after the due date thereof or (ii) any Borrower or Obligor fails
to perform any of the covenants contained in Sections 9.3, 9.4, 9.6, 9.14, 9.15,
9.16, 9.17, 9.20 or 9.22 of this Agreement and such failure shall continue for
ten (10) days; PROVIDED, THAT, such ten (10) day period shall not apply in the
case of: (A) any failure to observe any such covenant which is not capable of
being cured at all or within such ten (10) day period or which has been the
subject of a prior failure within a six (6) month period or (B) an intentional
breach by any Borrower or Obligor of any such covenant or (iii) any Borrower or
Obligor fails to perform any of the terms, covenants, conditions or provisions
contained in this Agreement or any of the other Financing Agreements other than
those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower or any Obligor to any Agent or Lender in this Agreement, the other
Financing Agreements or any other agreement, schedule, confirmatory assignment
or otherwise shall when made or deemed made be false or misleading in any
material respect;
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(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Agent or any Lender;
(d) any judgment for the payment of money is rendered against
any Borrower or Obligor in excess of $1,000,000 in any one case or in excess of
$2,000,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or Obligor or any of the Collateral
having a value in excess of $1,000,000;
(e) any Borrower or Obligor dissolves or suspends or
discontinues doing business;
(f) any Borrower or Obligor makes an assignment for the benefit
of creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors in connection with a moratorium or adjustment
of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property; or
(i) any default by any Borrower or Obligor under any agreement,
document or instrument relating to any Indebtedness for borrowed money owing to
any person other than Agent or any Lender, or any Capital Leases, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Agent or any
Lender, in any case in an amount in excess of $2,000,000, which default
continues for more than the applicable cure period, if any, with respect
thereto;
(j) any Change of Control;
(k) the indictment by any Governmental Authority, or as Agent
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of which any Borrower, Obligor or Agent or any Lender
receives notice, of any Borrower or Obligor under
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any criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against any Borrower or Obligor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral or (ii) any other property of such Borrower which is
necessary or material to the conduct of its business;
(l) there shall be an act, condition or event which has a
Material Adverse Effect after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 REMEDIES.
(a) At any time an Event of Default exists or has occurred and
is continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by any Borrower or Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Agent and Lenders hereunder, under any of
the other Financing Agreements, the Uniform Commercial Code or other applicable
law, are cumulative, not exclusive and enforceable, in Agent's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower or
Obligor of this Agreement or any of the other Financing Agreements. Subject to
Section 12 hereof, Agent shall, upon the direction of the Required Lenders, at
any time or times an Event of Default exists or has occurred and is continuing,
proceed directly against any Borrower or Obligor to collect the Obligations
without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Agent may, and upon the
direction of the Required Lenders, Agent shall, (i) upon notice to Huffy,
accelerate the payment of all Obligations and demand immediate payment thereof
to Agent, for the ratable benefit of Lenders (PROVIDED, THAT, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
all Obligations shall automatically become immediately due and payable), (ii)
with or without judicial process or the aid or assistance of others, enter upon
any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral, (iii) require Borrowers, at Borrowers'
expense, to assemble and make available to Agent any part or all of the
Collateral at any place and time designated by Agent, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v) remove
any or all of the Collateral from any premises on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other disposition
thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Agent or elsewhere) at such prices or
terms as Agent may deem reasonable, for cash, upon credit or for future
delivery, with Agent or any Lender having the right to purchase the whole or any
part of the Collateral at any such public
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sale, all of the foregoing being free from any right or equity of redemption of
Borrowers, which right or equity of redemption is hereby expressly waived and
released by Borrowers and/or (vii) upon notice to Huffy, terminate this
Agreement. If any of the Collateral is sold or leased by Agent upon credit terms
or for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Agent, for the ratable benefit of
Lenders. If notice of disposition of Collateral is required by law, ten (10)
days prior notice by Agent to Huffy designating the time and place of any public
sale or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
each Borrower waives any other notice. In the event Agent institutes an action
to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, each Borrower waives the posting of any bond which might
otherwise be required.
(c) For the purpose of enabling Agent and Lenders to exercise
the rights and remedies hereunder, each Borrower and Guarantor hereby grants to
Agent, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Borrowers or
Guarantors) to use, assign, license or sublicense any of the trademarks,
service-marks, trade names, business names, trade styles, designs, logos and
other source of business identifiers and other Intellectual Property now owned
or hereafter acquired by any Borrower or Guarantor, wherever the same may be
located, including in such license reasonable access to all media in which any
of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof.
(d) Agent may apply the cash proceeds of Collateral actually
received by it from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as it may elect, whether or not then due. Borrowers shall remain liable to Agent
and Lenders for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(e) Without limiting the foregoing, upon the occurrence of an
Event of Default or an act, condition or event which with notice or passage of
time or both would constitute an Event of Default, Agent may and, upon the
direction of the Required Lenders, Agent shall, without notice, (i) cease making
Loans or arranging for Letter of Credit Accommodations or reduce the lending
formulas or amounts of Loans and Letter of Credit Accommodations available to
Borrowers and/or (ii) terminate any provision of this Agreement providing for
any future Loans or Letter of Credit Accommodations to be made by Agent or
Lenders to Borrowers.
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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
---------------------------
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Illinois
(without giving effect to principles of conflicts of law).
(b) Borrowers, Guarantors, Agent and Lenders irrevocably
consent and submit to the non-exclusive jurisdiction of the Circuit Court of
▇▇▇▇ County, Illinois and the United States District Court for the Northern
District of Illinois and waive any objection based on venue or FORUM NON
CONVENIENS with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent or any Lender shall have the right to bring
any action or proceeding against any Borrower or its property in the courts of
any other jurisdiction which Agent deems necessary or appropriate in order to
realize on the Collateral or to otherwise enforce its rights against such
Borrower or its property).
(c) Each Borrower and Guarantor hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof, attention: Secretary and, in each case in
which Huffy is not the addressee, with a copy to Huffy at the address of Huffy
set forth on the signature pages hereof and service so made shall be deemed to
be completed ten (10) days after the same shall have been so deposited in the
U.S. mails, or, at Agent or any Lender's option, by service upon such Borrower
or Guarantor in any other manner provided under the rules of any such courts.
Within thirty (30) days after such service, such Borrower or Guarantor, as the
case may be, shall appear in answer to such process, failing which such Borrower
or Guarantor, as the case may be, shall be deemed in default and judgment may be
entered by Agent or any Lender against such Borrower or Guarantor for the amount
of the claim and other relief requested.
(d) BORROWERS, GUARANTORS AGENT AND LENDERS EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
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OR OTHERWISE. BORROWERS, GUARANTOR, AGENT AND LENDERS EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT BORROWERS, AGENT OR LENDERS MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to Borrowers
or Guarantors (whether in tort, contract, equity or otherwise) for losses
suffered by any Borrower or Guarantor in connection with, arising out of, or in
any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on Agent and such Lender, that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct. In any such
litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
11.2 WAIVER OF NOTICES. Each Borrower and Guarantor hereby expressly
waives demand, presentment, notice of intent to accelerate, notice of
acceleration, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower or Guarantor which Agent may elect to give shall
entitle any Borrower or Guarantor to any other or further notice or demand in
the same, similar or other circumstances.
11.3 AMENDMENTS AND WAIVERS.
(a) Neither this Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but only
by a written agreement signed as provided in Section 11.3(b) hereof. Agent and
Lenders shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its or their rights, powers and/or remedies
unless such waiver shall be in writing and signed as provided in Section 11.3(b)
hereof. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Agent or any Lender of any right, power and/or remedy
on any one occasion shall not be construed as a bar to or waiver of any such
right, power/and or remedy which Agent or any Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
(b) Neither this Agreement nor any other Financing Agreement nor
any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by
Agent and the Required Lenders, and as to amendments to any of the Financing
Agreements, by Borrowers; EXCEPT, THAT, any change, waiver, discharge or
termination with respect to the following shall require the consent of Agent and
all Lenders:
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(i) the extension of the Final Maturity Date,
(ii) reduction in the interest rate or any fees or the
extension of the time of payment of interest or any fees or reduction in the
principal amount of any Loan or Letter of Credit Accommodations,
(iii) increase in the Commitment of any Lender over the
amount thereof then in effect or provided hereunder (it being understood that a
waiver of any Event of Default shall not constitute a change in the terms of any
Commitment of any Lender),
(iv) the release of any Collateral (except as expressly
required by the Financing Agreements and except as permitted under Section
12.11(b) hereof),
(v) the amendment, modification or waiver of: (A) the
terms of the following definitions or any provisions relating thereto: Eligible
Accounts, Eligible Inventory, Excess Availability, Final Maturity Date, Maximum
Credit, or (B) any provision of this Section 11.3,
(vi) the reduction of any percentage specified in the
definition of Required Lenders,
(vii) the consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement, or
(viii) the increase in the advance rates constituting part
of the Borrowing Base.
(c) Notwithstanding anything to the contrary contained in
Section 11.3(b) above, in the event that any Borrower requests that this
Agreement or any other Financing Agreements be amended or otherwise modified in
a manner which would require the unanimous consent of all of the Lenders and
such amendment or other modification is agreed to by the Required Lenders, then,
with the consent of Borrower and the Required Lenders, Borrower and the Required
Lenders may amend this Agreement without the consent of the Lender or Lenders
which did not agree to such amendment or other modification (collectively, the
"Minority Lenders") to provide for (i) the termination of the Commitment of each
of the Minority Lenders, (ii) the addition to this Agreement of one or more
other Lenders, or an increase in the Commitment of one or more of the Required
Lenders, so that the Commitments, after giving effect to such amendment, shall
be in the same aggregate amount as the Commitments immediately before giving
effect to such amendment, (iii) if any Loans are outstanding at the time of such
amendment, the making of such additional Loans by such new Lenders or Required
Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (iv) the payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and such other modifications
to this Agreement as Borrowers and the Required Lenders may determine to be
appropriate.
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(d) The consent of Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of Agent hereunder or under any
of the other Financing Agreements, in addition to the consent of the Lenders
otherwise required by this Section.
11.4 CONFIDENTIALITY.
(a) Each Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrowers and Guarantors pursuant to this
Agreement which is marked as confidential at the time such information is
furnished by Borrowers and Guarantors to such Lender, PROVIDED, THAT, nothing
contained herein shall limit the disclosure of any such information: (i) to the
extent required by statute, rule, regulation, subpoena or court order, (ii) to
bank examiners and other regulators, auditors and/or accountants, (iii) in
connection with any litigation to which such Lender is a party, (iv) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) shall have been
instructed to treat such information as confidential in accordance with this
Section 11.4 and shall have acknowledged such instructions and agreed to comply
therewith or (v) to counsel for Agent or any Lender or any participant or
assignee (or prospective participant or assignee). In the event that any Lender
receives a request or demand to disclose any confidential information pursuant
to any subpoena or court order, such Lender agrees (A) to the extent permitted
by applicable law of if permitted by applicable law, statute, rule or regulation
to the extent such Lender determines in good faith that it will not create any
risk of liability to such Lender, that such Lender will promptly notify Huffy of
such request so that Huffy may seek a protective order or other appropriate
relief or remedy and (B) if disclosure of such information is required, disclose
such information and, subject to reimbursement by Borrowers of such Lender's
reasonable expenses, cooperate with Borrowers and Guarantors in their efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such portion of the disclosed information which Borrowers or
Guarantors so designate, to the extent permitted by applicable law or if
permitted by applicable law, to the extent such Lender determines in good faith
that it will not create any risk of liability to such Lender.
(b) In no event shall this Section 11.4 or any other provision
of this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by any Borrower or
Guarantor or any third party without breach of this Section 11.4 or otherwise
become generally available to the public other than as a result of a disclosure
in violation hereof, or in violation of any other confidentiality agreement in
favor of a Borrower or Guarantor to the extent Agent has actual knowledge of
such agreement and the violation thereof at the time it receives such
information, (ii) to apply to or restrict disclosure of information that was or
becomes available to Agent or any Lender on a non-confidential basis from a
person other than Borrowers and Guarantors other than in violation of a
confidentiality agreement in favor of a Borrower or Guarantor by such person to
the extent Agent has actual knowledge of such agreement and the violation
thereof at the time it receives such information, (iii) require Agent or any
Lender to return any materials furnished by Borrowers and Guarantors to Agent or
any Lender or (iv) prevent Agent or any Lender from responding to routine
informational requests in
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accordance with the CODE OF ETHICS FOR THE EXCHANGE OF CREDIT INFORMATION
promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Agent and Lenders under this Section 11.4 shall supersede and replace the
obligations of Agent and any Lender under any confidentiality letter signed
prior to the date hereof.
11.5 WAIVER OF COUNTERCLAIMS. Each Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.6 INDEMNIFICATION. Each Borrower and Guarantor shall indemnify and
hold Agent and each Lender, and its directors, agents, employees and counsel,
harmless from and against any and all losses, claims, damages, liabilities,
costs or expenses imposed on, incurred by or asserted against any of them in
connection with any litigation, investigation, claim or proceeding commenced or
threatened related to the negotiation, preparation, execution, delivery,
enforcement, performance or administration of this Agreement, any of the other
Financing Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the reasonable fees and expenses of counsel, except
for such losses, claims, damages, liabilities, costs or expenses resulting from
the gross negligence or wilful misconduct of a Lender, its directors, agents,
employees or counsel as determined pursuant to a final, non-appealable order of
a court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers shall pay the maximum
portion which it is permitted to pay under applicable law to Agent and Lenders
in satisfaction of indemnified matters under this Section. The foregoing
indemnity shall survive the payment of the Obligations and the termination of
this Agreement.
SECTION 12. THE AGENT
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12.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Lender; (b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
other Financing Agreement, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement or any
other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any
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Borrower or Obligor or any other Person to perform any of its obligations
hereunder or thereunder; and (c) shall not be responsible to Lenders for any
action taken or omitted to be taken by it hereunder or under any other Financing
Agreement or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct as determined by a final non- appealable
judgment of a court of competent jurisdiction. Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. Agent may
deem and treat the payee of any note as the holder thereof for all purposes
hereof unless and until the assignment thereof pursuant to an agreement (if and
to the extent permitted herein) in form and substance satisfactory to Agent
shall have been delivered to and acknowledged by Agent.
12.2 RELIANCE BY AGENT. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Lenders and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
12.3 EVENTS OF DEFAULT.
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, or any Borrower or Guarantor
specifying such Event of Default or any unfulfilled condition precedent, and
stating that such notice is a "Notice of Default or Failure of Condition". In
the event that Agent receives such a Notice of Default or Failure of Condition,
Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to
Section 12.7) take such action with respect to any such Event of Default or
failure of condition precedent as shall be directed by the Required Lenders;
PROVIDED, THAT, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to or by reason of such Event of Default or
failure of condition precedent, as it shall deem advisable in the best interest
of Lenders. Without limiting the foregoing, and notwithstanding the existence or
occurrence and continuance of an Event of Default or any other failure to
satisfy any of the conditions precedent set forth in Section 4 of this Agreement
to the contrary, Agent may, but shall have no obligation to, continue to make
Loans and issue or cause to be issued Letter of Credit Accommodations for the
ratable account and risk of Lenders from time to time if Agent believes making
such Loans or issuing or causing to be issued such Letter of Credit
Accommodations is in the best interests of Lenders.
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(b) Except with the prior written consent of Agent, no Lender
may assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
Obligor or any of the Collateral or other property of any Borrower or Obligor.
12.4 CONGRESS IN ITS INDIVIDUAL CAPACITY. With respect to its
Commitment and the Loans made and Letter of Credit Accommodations issued or
caused to be issued by it (and any successor acting as Agent), so long as
Congress shall be a Lender hereunder, it shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Congress in its individual capacity as Lender
hereunder. Congress (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) lend money to, make
investments in and generally engage in any kind of business with any Borrower
and Guarantor (and any of their Subsidiaries or Affiliates) as if it were not
acting as Agent, and Congress and its Affiliates may accept fees and other
consideration from any Borrower and Guarantor for services in connection with
this Agreement or otherwise without having to account for the same to Lenders.
12.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers hereunder and without limiting the Obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, PROVIDED, THAT, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction.
12.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that
it has, independently and without reliance on Agent or other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of each Borrower and Guarantor and has made its own decision to
enter into this Agreement and that it will, independently and without reliance
upon Agent or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements. Agent shall not be required to keep itself informed
as to the performance or observance by any Borrower or Guarantor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of any Borrower or Guarantor. Agent will use reasonable
efforts to provide Lenders with any information received by Agent from any
Borrower or Guarantor which is required to be provided to Lenders hereunder and
with a copy of any Notice of Default or Failure of Condition received by Agent
from any Borrower or any
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Lender; PROVIDED, THAT, Agent shall not be liable to any Lender for any failure
to do so, except to the extent that such failure is attributable to Agent's own
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Except for notices, reports and
other documents expressly required to be furnished to Lenders by Agent
hereunder, Agent shall not have any duty or responsibility to provide any Lender
with any other credit or other information concerning the affairs, financial
condition or business of any Borrower or Guarantor that may come into the
possession of Agent.
12.7 FAILURE TO ACT. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 ADDITIONAL LOANS. Agent shall not make any Loans or provide any
Letter of Credit Accommodations to a Borrower on behalf of Lenders intentionally
and with actual knowledge that such Loans or Letter of Credit Accommodations
would cause the aggregate amount of the total outstanding Loans and Letter of
Credit Accommodations to such Borrower to exceed the Borrowing Base of such
Borrower, without the prior consent of all Lenders, EXCEPT, THAT, Agent may make
such additional Loans or provide such additional Letter of Credit Accommodations
on behalf of Lenders, intentionally and with actual knowledge that such Loans or
Letter of Credit Accommodations will cause the total outstanding Loans and
Letter of Credit Accommodations to any Borrower exceed the Borrowing Base of
such Borrower as such Agent may deem necessary or advisable in its discretion,
PROVIDED, THAT: (a) the total principal amount of the additional Loans or
additional Letter of Credit Accommodations to such Borrower which Agent may make
or provide after obtaining such actual knowledge that the aggregate principal
amount of the Loans equal or exceed the Borrowing Base of such Borrower shall
not exceed the amount equal to ten (10%) percent of the Borrowing Base of such
Borrower at the time and shall not cause the total principal amount of the Loans
and Letter of Credit Accommodations to exceed the Maximum Credit and (b) without
the consent of all Lenders, Agent shall not make any such additional Loans or
Letter of Credit Accommodations more than ninety (90) days from the date of the
first such additional Loans or Letter of Credit Accommodations. Each Lender
shall be obligated to pay Agent the amount of its Pro Rata Share of any such
additional Loans or Letter of Credit Accommodations provided that Agent is
acting in accordance with the terms of this Section 12.8.
12.9 CONCERNING THE COLLATERAL AND THE RELATED FINANCING AGREEMENTS.
Each Lender authorizes and directs Agent to enter into this Agreement and the
other Financing Agreements relating to the Collateral, for the ratable benefit
of Lenders and Agent. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements relating to the Collateral, and the exercise by Agent or
Required Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.
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12.10 FIELD AUDIT, EXAMINATION REPORTS AND OTHER INFORMATION;
DISCLAIMER BY LENDERS. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish Lender,
promptly after it becomes available, a copy of each field audit or examination
report and a weekly report with respect to the Borrowing Base prepared by Agent
(each field audit or examination report and weekly report with respect to the
Borrowing Base being referred to herein as a "Report" and collectively,
"Reports");
(b) expressly agrees and acknowledges that Agent (A) does not
make any representation or warranty as to the accuracy of any Report, or (B)
shall not be liable for any information contained in any Report; PROVIDED, THAT,
nothing contained in this Section 12.10 shall be construed to limit the
liability of Agent under Section 12.1(c) hereof in the event of the gross
negligence or wilful misconduct of Agent as determined pursuant to a final
non-appealable order of a court of competent jurisdiction;
(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 any
Borrower and Guarantor and will rely significantly upon Borrowers' books and
records, as well as on representations of Borrowers' personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 11.4 hereof, and not to
distribute or use any Report in any other manner.
12.11 COLLATERAL MATTERS.
(a) Agent may, at its option, from time to time, at any
time on or after an Event of Default and for so long as the same is continuing
or upon any other failure of a condition precedent to the Loans and Letter of
Credit Accommodations hereunder, make such disbursements and advances ("Special
Agent Advances") which Agent, in its sole discretion, deems necessary or
desirable either (i) to preserve or protect the Collateral or any portion
thereof (provided that in no event shall Special Agent Advances for such purpose
exceed $5,000,000 in the aggregate outstanding at any time) or (ii) to pay any
other amount chargeable to any Borrower pursuant to the terms of this Agreement
consisting of costs, fees and expenses and payments to any issuer of Letter of
Credit Accommodations. Special Agent Advances shall be repayable on demand and
be secured by the Collateral. Special Agent Advances shall not constitute Loans
but shall otherwise constitute Obligations hereunder. Agent shall notify each
Lender and Huffy in writing of each such Special Agent Advance, which notice
shall include a description of the purpose of such Special Agent Advance.
Without limitation of its obligations pursuant to Section 6.9, each Lender
agrees that it shall make available to Agent, upon Agent's demand, in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
each such Special Agent Advance. If such funds are not made available to Agent
by such Lender, Agent shall be entitled to recover such funds, on demand from
such Lender together with
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interest thereon, for each day from the date such payment was due until the date
such amount is paid to Agent at the interest rate then payable by Borrowers in
respect of the Loans as set forth in Section 3.1(a) hereof.
(b) Lenders hereby irrevocably authorize Agent, at its option
and in its discretion to release any security interest in, mortgage or lien
upon, any of the Collateral (i) upon termination of the Commitments and payment
and satisfaction of all of the Obligations and delivery of cash collateral to
the extent required under Section 13.1 below, or (ii) constituting property
being sold or disposed of if Huffy certifies to Agent that the sale or
disposition is made in compliance with Section 9.7 hereof (and Agent may rely
conclusively on any such certificate, without further inquiry), or (iii)
constituting property in which any Borrower or Guarantor did not own an interest
at the time the security interest, mortgage or lien was granted or at any time
thereafter, or (iv) having a value of less than $2,000,000, or (v) if approved,
authorized or ratified in writing by all of Lenders. Except as provided above,
Agent will not release any security interest in, mortgage or lien upon, any of
the Collateral without the prior written authorization of all of Lenders (and
any Lender may require that the proceeds from any sale or other disposition of
the Collateral to be so released be applied to the Obligations in a manner
satisfactory to such Lender). Upon request by Agent at any time, Lenders will
promptly confirm in writing Agent's authority to release particular types or
items of Collateral pursuant to this Section.
(c) Without any manner limiting Agent's authority to act without
any specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent for itself and the benefit of the Lenders upon any Collateral
to the extent set forth above; PROVIDED, THAT, (i) Agent shall not be required
to execute any such document on terms which, in Agent's opinion, would expose
Agent to liability or create any obligations or entail any consequence other
than the release of such security interest, mortgage or liens without recourse
or warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any security interest, mortgage or lien upon (or
obligations of Borrower in respect of) the Collateral retained by Borrower.
(d) Agent shall have no obligation whatsoever to any Lender or
any other Person to investigate, confirm or assure that the Collateral exists or
is owned by any Borrower or Guarantor or is cared for, protected or insured or
has been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the Loans or Letter of Credit
Accommodations hereunder, or whether any particular reserves are appropriate, or
that the liens and security interests granted to Agent herein or pursuant hereto
or otherwise 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 the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, 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 discretion, given Agent's
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own interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender.
12.12 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints each
Lender as agent for the purpose of perfecting the security interests in and
liens upon the Collateral of Agent for itself and the ratable benefit of Lenders
in assets which, in accordance with Article 9 of the UCC can be perfected only
by possession. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
13.1 TERM.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the Final Maturity Date,
unless sooner terminated pursuant to the terms hereof. Upon the effective date
of termination of the Financing Agreements, Borrowers shall pay to Agent, for
the ratable benefit of Lenders, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Agent, for the ratable benefit of Lenders,
in such amounts as Agent determines are reasonably necessary to secure Agent and
Lenders from loss, cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Agent and Lenders
have not yet received final and indefeasible payment. Such payments in respect
of the Obligations and cash collateral shall be remitted by wire transfer in
Federal funds to such bank account of Agent, as Agent may, in its discretion,
designate in writing to Huffy for such purpose. Interest shall be due until and
including the next business day, if the amounts so paid by Borrowers to the bank
account designated by Agent are received in such bank account later than 12:00
noon, Chicago time.
(b) In consideration of the payment herewith by Borrowers to
Agent of the sum of $187,500, the Final Maturity Date has been extended to
December 31, 2002. In the event this Agreement is terminated prior to the end of
the then current term hereof for any reason, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Agent's and Lenders' lost profits as a
result thereof, Borrowers agree to pay to Agent for the account of Lenders, upon
the effective date of such termination, an early termination fee in the amount
of one-quarter (1/4%) percent of the Maximum Credit.
(c) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all Obligations have been fully and finally
discharged and paid, and the continuing security interest of Agent, for
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itself and the ratable benefit of Lenders, in the Collateral and the rights and
remedies of Agent and Lenders hereunder, under the other Financing Agreements
and applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
13.2 INTERPRETATIVE PROVISIONS.
(a) All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code shall have the meanings given therein
unless otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to any Borrower, Guarantor and Lender
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall
mean "including, without limitation".
(f) An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 11.3
or is cured in a manner satisfactory to Agent, if such Event of Default is
capable of being cured as determined by Agent.
(g) Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Agent prior to the date hereof.
(h) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including", the
words "to" and "until" each mean "to but excluding" and the word "through" means
"to and including".
(i) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
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including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(j) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(k) This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(l) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Agent and
Lenders and the other parties, and are the products of all parties. Accordingly,
this Agreement and the other Financing Agreements shall not be construed against
Agent or Lenders merely because of Agent's or any Lender's involvement in their
preparation.
13.3 NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to Agent and Lenders at their addresses set forth below and
to any Borrower and Guarantor at their chief executive office set forth below,
or to such other address as either party may designate by written notice to the
other in accordance with this provision, and (b) deemed to have been given or
made: if delivered in person, immediately upon delivery; if by telex, telegram
or facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next Business Day, one (1) Business Day after sending; and if by
certified mail, return receipt requested, ten (10) days after mailing.
13.4 PARTIAL INVALIDITY. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.5 SUCCESSORS. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lenders, Agent, Borrowers and Guarantor and
their respective successors and assigns, except that Borrowers and Guarantor may
not assign its rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the prior written
consent of Agent and Lenders. No Lender may assign its rights and obligations
under this Agreement (or any part thereof) without the prior written consent of
all Lenders and Agent, except as permitted under Section 13.6 hereof. Any
purported assignment by a Lender without such prior express consent or
compliance with Section 13.6 where applicable, shall be void. The terms and
provisions of this Agreement and the other Financing Agreements are for the
purpose of defining the relative rights and obligations of any Borrower,
Guarantor, Agent and Lenders with respect to the transactions contemplated
hereby and there shall be no third party
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beneficiaries of any of the terms and provisions of this Agreement or any of the
other Financing Agreements.
13.6 ASSIGNMENTS; PARTICIPATIONS.
(a) Each Lender may (i) assign all or a portion of its rights
and obligations under this Agreement (including, without limitation, a portion
of its Commitment, the Loans owing to it and its rights and obligations as a
Lender with respect to Letters of Credit Accommodations) and the other Financing
Agreements; to its parent company and/or any Affiliate of such Lender which is
at least fifty (50%) percent owned by such Lender or its parent company or to
one or more Lenders or (ii) assign all, or if less than all a portion equal to
at least $5,000,000 in the aggregate for the assigning Lender or assigning
Lenders, of such rights and obligations under this Agreement to one or more
Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Lender by execution of an Assignment and Acceptance; PROVIDED,
THAT, (A) the consent of Agent shall be required in connection with any
assignment to an Eligible Transferee pursuant to clause (ii) above, (B) if such
Eligible Transferee is not a bank, Agent shall receive a representation in
writing by such Eligible Transferee that either (1) no part of its acquisition
of its Loans is made out of assets of any employee benefit plan, or (2) after
consultation, in good faith, with Borrowers and provision by Borrowers of such
information as may be reasonably requested by such Eligible Transferee, the
acquisition and holding of such Commitments and Loans does not constitute a
non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of
the Code, or (3) such assignment is an "insurance company general account," as
such term is defined in the Department of Labor Prohibited Transaction Class
Exemption 95.60 (issued July 12, 1995) ("PTCE 95-60), and, as of the date of the
assignment, there is no "employee benefit plan" with respect to which the
aggregate amount of such general account's reserves and liabilities for the
contracts held by or on behalf of such "employee benefit plan" and all other
"employee benefit plans" maintained by the same employer (and affiliates thereof
as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of PTCE
95-60) exceeds ten (10%) percent of the total reserves and liabilities of such
general account (as determined under PTCE 95-60) (exclusive of separate account
liabilities) plus surplus as set forth in the National Association of Insurance
Commissioners Annual Statement filed with the state of domicile of such Eligible
Transferee and (C) such transfer or assignment will not be effective until
recorded by the Agent on the Register. As used in this Section, the term
"employee benefit plan" shall have the meaning assigned to it in Title I of
ERISA and shall also include a "plan" as defined in Section 4975(e)(1) of the
Code.
(b) Agent shall maintain a register of the names and addresses
of Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Administrative Agent shall also maintain a copy of each Assignment
and Acceptance delivered to and accepted by it and shall modify the Register to
give effect to each Assignment and Acceptance. Upon its receipt of each
Assignment and Acceptance, Agent will give prompt notice thereof to Lenders and
deliver to each of them a copy of the executed Assignment and Acceptance. The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and Borrowers, Guarantor, Agent and Lenders may treat each
Person whose name is recorded in the
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Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Borrowers, Guarantor and any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
(i) the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance,
the assignor and assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrowers, Guarantor or any of their
Subsidiaries or the performance or observance by Borrowers or Guarantor of any
of the Obligations; (iii) such assignee confirms that it has received a copy of
this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance, (iv) such
assignee will, independently and without reliance upon the assigning Lender,
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Financing
Agreements, (v) such assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the
other Financing Agreements as are delegated to Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto, and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement and the other
Financing Agreements are required to be performed by it as a Lender. Agent and
Lenders may furnish any information concerning Borrowers, Guarantor or their
Subsidiaries in the possession of Agent or any Lender from time to time to
assignees and Participants.
(e) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Accommodations, without the consent of
Agent or the other Lenders); PROVIDED, THAT, (i) such Lender's obligations under
this Agreement
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(including, without limitation, its Commitment hereunder) and the other
Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantor, Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Financing
Agreements, (iii) the Participant shall not have any rights under this Agreement
or any of the other Financing Agreements (the Participant's rights against such
Lender in respect of such participation to be those set forth in the agreement
executed by such Lender in favor of the Participant relating thereto) and all
amounts payable by any Borrower or Obligor hereunder shall be determined as if
such Lender had not sold such participation, and (iv) if such Participant is not
a bank, represent that either (A) no part of its acquisition of its
participation is made out of assets of any employee benefit plan, or (B) after
consultation, in good faith, with Huffy and provision by Huffy of such
information as may be reasonably requested by the Participant, the acquisition
and holding of such participation does not constitute a non-exempt prohibited
transaction under Section 406 of ERISA and Section 4975 of the Code, or (C) such
participation is an "insurance company general account, " as such term is
defined in the "PTCE 95-60", and, as of the date of the transfer there is no
"employee benefit plan" with respect to which the aggregate amount of such
general account's reserves and liabilities for the contracts held by or on
behalf of such "employee benefit plan" and all other "employee benefit plans"
maintained by the same employer (and affiliates thereof as defined in Section
V(a)(1) of PTCE 95-60) or by the same employee organization (in each case
determined in accordance with the provisions of PTCE 95-60) exceeds ten (10%)
percent of the total reserves and liabilities of such general account (as
determined under PTCE 95-60) (exclusive of separate account liabilities) plus
surplus as set forth in the National Association of Insurance Commissioners
Annual Statement filed with the state of domicile of the Participant. As used in
this Section, the term "employee benefit plan" shall have the meaning assigned
to it in Title I of ERISA and shall also include a "plan" as defined in Section
4975(e)(1) of the Code.
(f) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank.
(g) Borrowers shall assist Agent or any Lender permitted to
sell assignments or participations under this Section 13.6 in whatever manner
reasonably necessary in order to enable or effect any such assignment or
participation, including (but not limited to) the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential assignees or Participants. Borrowers shall
certify the correctness, completeness and accuracy of all descriptions of each
Borrower and its affairs provided, prepared or reviewed by Borrowers that are
contained in any selling materials and all other information provided by it and
included in such materials.
13.7 PARTICIPANT'S SECURITY INTERESTS. If a Participant shall at any
time participate with any Lender in the Loans and Letter of Credit
Accommodations, each Borrower hereby grants to such Participant and such
Participant shall have and is hereby given, a continuing lien on and
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security interest in any money, securities and other property of such Borrower
in the custody or possession of the Participant, including the right of setoff,
to the extent of the Participant's participation in the Obligations, and such
Participant shall be deemed to have the same right of setoff to the extent of
its participation in the Obligations, as it would have if it were a direct
Lender.
13.8 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
SECTION 14. ACKNOWLEDGMENT AND RESTATEMENT
------------------------------
14.1 EXISTING OBLIGATIONS. Each Borrower and Guarantor hereby
acknowledges, confirms and agrees Borrowers are indebted to Agent and Lenders
for Loans and advances to Borrowers under the Existing Agreement, as of the
close of business on January 31, 2001, in the aggregate principal amount of $
2,041,380.90 and the aggregate amount of $ 9,829,000.00 in respect of Letter of
Credit Accommodations (as defined in the Existing Agreement), together with all
interest accrued and accruing thereon (to the extent applicable), and all fees,
costs, expenses and other charges relating thereto, all of which are
unconditionally owing by Borrowers to Agent and Lenders, without offset, defense
or counterclaim of any kind, nature or description whatsoever.
14.2 ACKNOWLEDGMENT OF SECURITY INTERESTS.
(a) Each Borrower and Guarantor hereby acknowledges, confirms
and agrees that Agent, for itself and the ratable benefit of Lenders, has and
shall continue to have a security interest in and lien upon the Collateral
heretofore granted to Agent pursuant to the Existing Agreement to secured the
Obligations, as well as any Collateral granted under this Agreement or under any
of the other Financing Agreements or otherwise granted to or held by Agent or
any Lender.
(b) The liens and security interests of Agent, for itself and
the ratable benefit of Lenders, in the Collateral shall be deemed to be
continuously granted and perfected from the earliest date of the granting and
perfection of such liens and security interests, whether under the Existing
Agreement, this Agreement or any other Financing Agreements.
14.3 EXISTING AGREEMENT. Each Borrower and Guarantor hereby
acknowledges, confirms and agrees that : (a) the Existing Agreement has been
duly executed and delivered by each Borrower and Guarantor and is in full force
and effect as of the date hereof and (b) the agreements and obligations of each
Borrower and Guarantor contained in the Existing Agreement constitute the legal,
valid and binding obligations of each Borrower and Guarantor
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enforceable against it in accordance with their respect terms and each Borrower
and Guarantor has no valid defense to the enforcement of such obligations and
(c) Agent and Lenders are entitled to all of the rights and remedies provided
for in the Existing Agreement.
14.4 RESTATEMENT.
(a) Except as otherwise stated in Section 14.2 hereof and this
Section 14.4, as of the date hereof, the terms, conditions, agreements,
covenants, representations and warranties set forth in the Existing Agreement
are hereby amended and restated in their entirety, and as so amended and
restated, replaced and superseded, by the terms, conditions, agreements,
covenants, representations and warranties set forth in this Agreement and the
other Financing Agreements, EXCEPT that nothing herein or in the other Financing
Agreements shall impair or adversely affect the continuation of the liability of
any Borrower or Guarantor for the Obligations heretofore granted, pledge and/or
assigned to Agent or any Lender. The amendment and restatement contained herein
shall not, in any manner, be construed to constitute payment of, or impair,
limit, cancel or extinguish, or constitute a novation in respect of, the
Indebtedness and other obligations and liabilities of any Borrower or Guarantor
evidenced by or arising under the Existing Agreement, and the liens and security
interests securing such Indebtedness and other obligations and liabilities,
which shall not in any manner be impaired, limited, terminated, waived or
released.
(b) The principal amount of the Loans and Letters of Credit
Accommodations outstanding as of the date hereof under the Existing Agreement
shall be allocated to the Loans and Letter of Credit Accommodations hereunder in
such manner and in such amounts as Agent shall determine.
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IN WITNESS WHEREOF, Agents, Lenders, Borrowers and Guarantors have
caused these presents to be duly executed as of the day and year first above
written.
BORROWERS
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ROYCE UNION BICYCLE COMPANY HUFFY CORPORATION
By:______________________________ By:________________________________
Title:_____________________________ Title:______________________________
Chief Executive Office: Chief Executive Office:
---------------------- ----------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
AMERICAN SPORTS DESIGN
COMPANY
HUFFY SERVICE FIRST, INC.
By:________________________________ By:________________________________
Title:______________________________ Title:______________________________
Chief Executive Office: Chief Executive Office:
---------------------- ----------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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GUARANTORS
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HUFFY BRANDS COMPANY HUFCO-DELAWARE COMPANY
By:________________________________ By:_______________________________
Title:______________________________ Title:______________________________
Chief Executive Office: Chief Executive Office:
---------------------- ----------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
HUFFY RISK MANAGEMENT, INC. HUFFY SPORTS, INC.
By:________________________________ By:_______________________________
Title:______________________________ Title:______________________________
Chief Executive Office: Chief Executive Office:
---------------------- ----------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
HCAC, INC.
By:_______________________________
Title:______________________________
Chief Executive Office:
----------------------
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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AGENT
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CONGRESS FINANCIAL CORPORATION,
(CENTRAL), as Agent
By:________________________________
Title:_______________________________
Address:
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LENDER
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CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By:_____________________________
Title:___________________________
Address:
-------
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Commitment:
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$75,000,000
84002-5
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