1
Exhibit 10.18
================================================================================
HOMEMAX, INC. GROUP
---------------------------
$33,920,000
FLOOR PLAN AGREEMENT
dated as of February 19, 1998
---------------------------
NATIONSBANK, N.A.,
as Agent
================================================================================
2
SECTION 1. DEFINITIONS........................................................1
1.1 Defined Terms...................................................1
1.2 Other Definitional Provisions..................................13
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS...................................13
2.1 Commitments....................................................13
2.2 Procedure for Borrowing........................................14
2.3 Curtailment of Advances........................................14
2.4 Overline Commitment............................................14
2.5 Third Party Payments...........................................15
2.6 Use of Proceeds of Advances....................................16
SECTION 3. PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT; FEES AND
PAYMENTS .........................................................16
3.1 Repayment of Advances; Evidence of Indebtedness................16
3.2 Facility Fee...................................................17
3.3 Agent's Fees...................................................17
3.4 Optional Prepayments...........................................17
3.5 Optional Termination or Reduction of Commitments...............17
3.6 Mandatory Reduction of Commitments and Prepayments.............17
3.7 Application of Prepayments.....................................18
3.8 Continuation Options...........................................19
3.9 Interest Rates and Payment Dates...............................19
3.10 Computation of Interest and Fees...............................20
3.11 Inability to Determine Interest Rate...........................20
3.12 Pro Rata Treatment and Payments................................20
3.13 Illegality.....................................................21
3.14 Requirements of Law............................................22
3.15 Taxes..........................................................23
3.16 Indemnity......................................................25
3.17 Change of Lending Office.......................................25
SECTION 4. REPRESENTATIONS AND WARRANTIES....................................26
4.1 Financial Condition............................................26
4.2 No Change......................................................26
-i-
3
4.3 Disclosure.....................................................26
4.4 Corporate Existence; Compliance with Law.......................26
4.5 Corporate Power, Authorization, Enforceable Obligations........27
4.6 No Legal Bar...................................................27
4.7 No Material Litigation.........................................27
4.8 No Default.....................................................27
4.9 Ownership of Property; Liens...................................28
4.10 Title Documents................................................28
4.11 No Burdensome Restrictions.....................................28
4.12 Intellectual Property..........................................28
4.13 Taxes..........................................................28
4.14 Federal Regulations............................................28
4.15 ERISA..........................................................29
4.16 Investment Company Act; Other Regulations......................29
4.17 Subsidiaries...................................................29
4.l8 Environmental Matters..........................................29
4.19 Guarantees.....................................................31
4.20 Joinder Agreements.............................................31
4.21 Security Agreements............................................31
4.22 Solvency.......................................................31
4.23 HM Services Subordination Agreement............................31
4.24 ZN Letter Agreement............................................32
4.25 ZN Net Worth Maintenance Agreement.............................32
SECTION 5. CONDITIONS PRECEDENT..............................................32
5.1 Conditions to Initial Extensions of Credit.....................32
5.2 Conditions to Each Extension of Credit.........................34
SECTION 6. AFFIRMATIVE COVENANTS.............................................35
6.1 Financial Statements...........................................35
6.2 Certificates; Other Information................................36
6.3 Payment of Obligations.........................................37
6.4 Conduct of Business and Maintenance of Existence...............37
6.5 Maintenance of Property; Insurance.............................37
-ii-
4
6.6 Title Documents................................................38
6.7 Inspection of Inventory........................................38
6.8 Inspection of Property; Books and Records; Discussions.........38
6.9 Notices........................................................38
6.10 Environmental Laws.............................................39
6.11 Further Assurances; Additional Collateral......................40
6.12 Additional Subsidiaries........................................40
SECTION 7. NEGATIVE COVENANTS................................................41
7.1 Financial Condition Covenant: Indebtedness to Net Worth........41
7.2 Limitation on Indebtedness and Preferred Stock.................41
7.3 Limitation on Liens............................................42
7.4 Limitation on Guarantee Obligations............................42
7.5 Limitation on Fundamental Changes..............................42
7.6 Limitation on Sale of Assets...................................43
7.7 Limitation on Dividends........................................43
7.8 Limitation on Investments, Loans and Advances..................43
7.9 Limitation on Transactions with Affiliates.....................44
7.10 Limitation on Sales and Leasebacks.............................44
7.11 Limitation on Changes in Fiscal Year...........................44
7.12 Limitation on Negative Pledge Clauses..........................44
7.13 Limitation on Lines of Business................................44
SECTION 8. EVENTS OF DEFAULT.................................................44
SECTION 9. THE AGENT.........................................................47
9.1 Appointment....................................................47
9.2 Delegation of Duties...........................................47
9.3 Exculpatory Provisions.........................................48
9.4 Reliance by Agent..............................................48
9.5 Notice of Default..............................................48
9.6 Non-Reliance on Agent and Other Lenders........................49
9.7 Indemnification................................................49
9.8 Agent in its Individual Capacity...............................50
9.9 Successor Agent................................................50
-iii-
5
SECTION 10. MISCELLANEOUS.....................................................50
10.1 Amendments and Waivers.........................................50
10.2 Releases of Collateral Security and Guarantee Obligations......51
10.3 Notices........................................................52
10.4 No Waiver; Cumulative Remedies.................................53
10.5 Survival of Representations and Warranties.....................53
10.6 Payment of Expenses and Taxes..................................53
10.7 Termination....................................................54
10.8 Successors and Assigns; Participations and Assignments.........54
10.9 Adjustments; Set-off...........................................56
10.10 Joint and Several Liability....................................57
10.11 Maximum Amount of Joint and Several Liability..................57
10.12 Counterparts...................................................57
10.13 Severability...................................................58
10.14 Integration....................................................58
10.15 Governing Law..................................................58
10.16 Submission To Jurisdiction; Waivers............................58
10.17 Acknowledgments................................................59
10.18 Waivers of Jury Trial..........................................59
-iv-
6
SCHEDULES
---------
Schedule I Addresses for Notices
Schedule II Commitments and Commitment Percentages
Schedule III Subsidiaries
Schedule IV Indebtedness
Schedule V U.C.C. Financing Statements
Schedule VI Liens
Schedule VII Guarantees
Schedule VIII Existing Investments
EXHIBITS
--------
Exhibit A Form of Note
Exhibit B Form of Borrowers Guarantee
Exhibit C Form of Subsidiaries Guarantee
Exhibit D Form of Borrowers Joinder Agreement
Exhibit E Form of Subsidiaries Joinder Agreement
Exhibit F Form of Borrowers Security Agreement
Exhibit G Form of Subsidiaries Security Agreement
Exhibit H Form of HM Services Subordination Agreement
Exhibit I Form of ZN Letter Agreement
Exhibit J Form of ZN Net Worth Agreement
Exhibit K Form of Notice of Borrowing
Exhibit L Form of Officer's Compliance Certificate
Exhibit M Form of Opinion of Frost & ▇▇▇▇▇▇, LLP.
Exhibit N Form of Assignment and Acceptance
- v -
7
FLOOR PLAN AGREEMENT, dated as of February 19, 1998, among:
(a) HOMEMAX, INC., (the "PARENT BORROWER");
(b) HOMEMAX INDIANA, LLC, HOMEMAX KENTUCKY, LLC, HOMEMAX NORTH
CAROLINA, INC., HOMEMAX OHIO, INC., HOMEMAX SOUTH
CAROLINA, INC. AND HOMEMAX TENNESSEE, INC. (together
with any other Person that becomes a borrower
hereunder as provided herein, collectively, the
"SUBSIDIARY BORROWERS" and together with the Parent
Borrower, the "BORROWERS");
(c) the banks and other financial institutions from time to time
parties to this Agreement, (the "LENDERS"); and
(d) NATIONSBANK, N.A., as agent (in such capacity, the "AGENT")
for the Lenders hereunder.
WITNESSETH:
-----------
WHEREAS, the Borrowers have requested that the Lenders make available
to them credit facilities of up to $33,920,000.00 in the aggregate upon the
terms, and subject to the conditions, set forth herein to finance inventory
consisting of new or used manufactured housing units to be acquired for use as
show models or retail sale units as permitted by this Agreement;
WHEREAS, the Agent and the Lenders are willing to provide such
financing to the Borrowers only upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
SECTION 1: DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greater of (i) the Prime Rate in effect on
such day and (ii) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that the Agent is
unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms thereof, the ABR shall be determined
without regard to clause (ii) of the first sentence of this definition, until
the circumstances giving rise to such inability no longer exist. Any change
in the ABR due to a
8
change in the Prime Rate or Federal Funds Effective Rate shall be effective
on the effective date of such change in the Prime Rate or Federal Funds
Effective Rate, respectively.
"ABR ADVANCES": Advances the rate of interest applicable to which is
based upon the ABR.
"ADVANCES": as defined in subsection 2.1.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 5% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"AGENT": as defined in the preamble to this Agreement.
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT": as to any Lender at any
time, an amount equal to the aggregate principal amount of all Advances
made by such Lender then outstanding.
"AGREEMENT": this Floor Plan Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE MARGIN": for each Type of Advance outstanding, the rate
per annum set forth below:
ABR Eurodollar Rate
--- ---------------
.0% 2.35%
"ASSIGNEE": as defined in subsection 10.8(c).
"AVAILABLE COMMITMENT": as to any Lender, an amount equal to the
excess, if any, of (a) the Commitment over (b) the Aggregate Outstanding
Extensions of Credit of such Lender.
"BANK DEFAULT": means (i) the refusal (which has not been retracted)
of a Lender to make available an amount equal to its Lender's Commitment
Percentage of any Advance or (ii) a Lender having notified the Agent and or
the Borrowers that such Lender does not intend to comply with such Lender's
obligations under Section 2, in the case of either (i) or (ii) above
including as a result of the appointment of a receiver or conservator with
respect to such Lender at the direction or request of any regulatory agency
or authority.
"BORROWERS": as defined in the preamble to this Agreement.
"BORROWERS GUARANTEE": the Guarantee to be executed and delivered by
each of the Borrowers, substantially in the form of EXHIBIT B, as the same
may be amended, supplemented or otherwise modified from time to time.
-2-
9
"BORROWERS JOINDER AGREEMENT": the Joinder Agreement to be executed
and delivered by each Person that subsequent to the Closing Date becomes a
Subsidiary Borrower, substantially in the form of EXHIBIT D, as the same
may be amended, supplemented or otherwise modified from time to time.
"BORROWERS SECURITY AGREEMENT": the Security Agreement to be executed
and delivered by each of the Borrowers, substantially in the form of
EXHIBIT F, as the same may be amended, supplemented or otherwise modified
from time to time.
"BORROWING DATE": for each Advance, the date of a requested borrowing
PROVIDED that if such date is not a Business Day then the next succeeding
Business Day.
"BUSINESS": as defined in subsection 4.18(b).
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in Charlotte, North Carolina are authorized or
required by law to close; PROVIDED that, with respect to matters relating
to Eurodollar Advances, the term "BUSINESS DAY" shall mean a day other than
a Saturday, Sunday or other day on which commercial banks in Charlotte,
North Carolina or London, England, are authorized or required by law to
close.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the
date of acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $100,000,000, (c)
repurchase obligations of any Lender or of any commercial bank or
investment bank satisfying the requirements of clause (b) of this
definition, having a term of not more than thirty (30) days with respect to
securities issued or fully guaranteed or insured by the United States
Government or any agency thereof, (d) commercial paper issued in the United
States which is rated at least A-1 by S&P or P-1 by ▇▇▇▇▇'▇, (e) securities
with maturities of one (1) year or less from the date of acquisition issued
or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision, taxing
authority or foreign government are rated at least A by S&P or A by
▇▇▇▇▇'▇, (f) securities with maturities of one year or less from the date
of acquisition backed by standby letters of credit issued by any Lender or
any commercial bank satisfying the requirements of clause (b) of this
definition or (g) shares of money market mutual or similar funds which
invest substantially exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
CHANGE IN CONTROL": any transaction or group of transactions after
which (A)(i) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III (together with his executors,
administrators or heirs in the event of his death) shall
-3-
10
directly or indirectly own less than twenty-five percent (25%) of ▇▇▇▇▇▇
National's issued and outstanding common stock, or (ii) another Person has
acquired beneficial ownership of ▇▇▇▇▇▇ National's issued and outstanding
common stock in an amount greater than the amount owned directly or
indirectly in the aggregate by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III (together with his
executors, administrators or heirs in the event of his death) or (B) ▇▇▇▇▇▇
National shall cease to own ninety-five percent (95%) of all classes of
stock of the Parent Borrower or (C) the Parent Borrower shall cease to own,
directly or indirectly, one hundred percent (100%) of all classes of stock
of the Subsidiary Borrowers.
"CLOSING DATE": the date on which the conditions precedent set forth
in subsection 5.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": as defined in the Borrowers Security Agreement.
"COMMITMENT": as to any Lender, the obligation of such Lender to make
Advances to the Borrowers hereunder in an aggregate principal amount at any
one time outstanding not to exceed the amount set forth opposite such
Lender's name on SCHEDULE II; as the same may be reduced from time to time
pursuant to subsections 3.4, 3.5 and 3.6; as to all Lenders collectively,
the "COMMITMENTS."
"COMMITMENT PERCENTAGE": as to any Lender at any date, the percentage
which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the Aggregate Outstanding Extensions of
Credit of such Lender then constitutes of the Aggregate Outstanding
Extensions of Credit of all Lenders).
"COMMITMENT PERIOD": the period from and including the date hereof to
but not including the Maturity Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes any Borrower and
which is treated as a single employer under Section 414 of the Code.
"CONSOLIDATED NET WORTH": for any fiscal period, the sum of (a)
Capital Stock and additional paid-in capital plus (b) retained earnings (or
minus accumulated deficits) of the Parent Borrower and its Subsidiaries
determined on a consolidated basis.
"CONSOLIDATED TANGIBLE NET WORTH": for any fiscal period, the sum of
(a) Consolidated Net Worth MINUS (b) any amounts which would be considered
intangible assets on a consolidated balance sheet of the Parent Borrower
and its Subsidiaries (including without limitation, copyrights, patents,
trademarks, contract rights, development costs and goodwill) PLUS (c) all
Subordinated Indebtedness.
-4-
11
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CREDIT DOCUMENTS": this Agreement, the Notes, the Security Documents,
the Guarantees, and any other instruments, certificates, agreements or
documents delivered or contemplated to be delivered hereunder or thereunder
or in connection herewith or therewith, as the same may be amended,
supplemented or otherwise modified from time to time.
"CREDIT PARTIES": the Parent Borrower and any of its Subsidiaries.
"DEFAULT": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DEFAULTING LENDER": any Lender with respect to which a Bank Default
is in effect.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
pollution or protection of the environment (including protection of human
health from environmental hazards), as now or may at any time hereafter be
in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EURODOLLAR ADVANCES": Advances the rate of interest applicable to
which is based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Advance, the rate per annum determined
for such day by the Agent to be the average of the respective rates per
annum posted by each of the principal London office of banks posting rates
as displayed on the Telerate screen, page 3750 or such other page as may
replace such page on such service for the purpose of displaying the London
interbank offered rate of major banks for deposits in U.S. dollars, as
announced from time to time by the Agent at its principal office as the
eurodollar rate for such Interest Period in effect for its commercial loans
and advances. Each change in the Eurodollar Rate as determined by the Agent
shall be effective for the immediately succeeding Interest Period following
the date such change is announced.
"EVENT OF DEFAULT": any of the events specified in Section 8, PROVIDED
that any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"FACILITY": as provided for in Section 2 hereof.
-5-
12
"FACILITY FEE": a fee of 1/10 of one percent (1%) on the amount of
such Lender's Commitment on the Closing Date and on each date that is the
annual anniversary thereof until the Maturity Date.
"FEDERAL FUNDS EFFECTIVE RATE": for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Agent from three Federal funds brokers of recognized standing selected
by it.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"GAAP": generally accepted accounting principles in the United States
of America as in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE": the collective reference to the Borrowers Guarantee, the
Subsidiaries Guarantee and each other guarantee from time to time made in
favor of the Agent to secure all or any part of the obligations of any of
the Borrowers hereunder as amended, supplemented or otherwise modified from
time to time; collectively, the "GUARANTEES".
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of the guaranteeing person or another Person (including,
without limitation, any bank under any letter of credit) to induce the
creation of which the guaranteeing person has issued a reimbursement,
counter indemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness, leases, dividends or other
obligations (the "PRIMARY OBLIGATIONS") of any other third Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person
incurred for the purpose of providing credit support, whether or not
contingent, including, without limiting the generality of the foregoing,
any agreement to indemnify or hold harmless any other Person, any
performance bond or other suretyship arrangement and any form of assurance
against loss, except endorsement of negotiable instruments or other
instruments for deposit or collection in the ordinary course of business.
"GUARANTOR": any Person delivering a Guarantee.
"HM FACILITY": the $12,000,000 credit facility described in the Credit
Agreement dated as of February 23, 1998 (as amended, supplemented or
otherwise modified from time to time the "HM CREDIT AGREEMENT") by and
among HomeMax, Inc., as borrower, the Lenders from time to time party to
thereto and NationsBank, N.A. as agent for such lenders.
-6-
13
"HM SERVICES SUBORDINATION AGREEMENT": the Subordination Agreement,
dated as of the date hereof, by and among the Borrowers hereunder, HM
Services, Inc., and NationsBank, N.A., substantially in the form of EXHIBIT
H, as the same may be amended modified or supplemented from time to time.
"INDEBTEDNESS": of any Person, at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) the deferred
purchase price of property or services (payable more than six months after
the original purchase date of such property or services), (c) any other
indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (d) all obligations of such Person under Financing
Leases, (e) all obligations of such Person in respect of letters of credit
and acceptances and letters of credit issued or created for the account of
such Person (including without limitation all issued and outstanding
Letters of Credit), (f) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise
become liable for the payment thereof, and (g) all Indebtedness of the
types referred to in clauses (a) through (g) above which is guaranteed
directly or indirectly by such Person.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": as to any Advance, the tenth (10th) day (or
if such day is not a Business Day, on the immediately preceding Business
Day) of the immediately following calendar month.
"INTEREST PERIOD": initially, the period commencing on the Borrowing
Date and ending on the last day of the same calendar month and each period
commencing on the last day of the next preceding Interest Period and ending
one month thereafter; PROVIDED that, the foregoing provisions relating to
Interest Periods are subject to the following:
(1) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date; and
(2) any Interest Period pertaining to an Advance that begins on the
last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall
end on the last Business Day of a calendar month.
"INVENTORY": all Show Models and Retail Units, including all parts and
accessories thereto, located in approved Operating Locations as more fully
described in the Borrowers Security Agreement.
"JOINDER AGREEMENTS": the collective reference to the Borrowers
Joinder Agreement and the Subsidiaries Joinder Agreement.
-7-
14
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
"MAJORITY LENDERS": at any time Lenders having Commitments (or if
Commitments have terminated, Aggregate Outstanding Extensions of Credit)
which aggregate more than 51% of the sum of the amount of the Commitments
of the Non-Defaulting Lenders (or Aggregate Outstanding Extensions of
Credit of the Non-Defaulting Lenders as the case may be) then in effect,
PROVIDED that, if at any time, there are two or more Lenders hereunder, any
action required by Majority Lenders shall require the consent of not less
than two Lenders.
"MANUFACTURER'S INVOICE AMOUNT": the actual cost to a Borrower or its
Subsidiaries of each item of new Inventory as designated on a
manufacturer's invoice or ▇▇▇▇ of sale for such item of Inventory.
"MATERIAL ADVERSE AMOUNT": an amount payable by the Parent Borrower
and/or its Subsidiaries in excess of $100,000 for remedial costs,
non-routine compliance costs, compensatory damages, punitive damages,
fines, penalties or any combination thereof.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, financial condition or prospects of the
Parent Borrower and its Subsidiaries taken as a whole, (b) the validity or
enforceability of this or any of the other Credit Documents or (c) the
rights or remedies of the Agent or the Lenders hereunder or under any of
the other Credit Documents.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MATURITY DATE": the last Business Day of the calendar month in the
month that is thirty-six (36) months following the Closing Date.
"MOODY'S": ▇▇▇▇▇'▇ Investors Service, Inc.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NADA BOOK VALUE": the value as established by the most recent
National Edition of the N.A.D.A. Manufactured Housing Appraisal Guide based
on and limited to the following parameters: (i) manufacturer's name, (ii)
trade/model name, (iii) width and length, (iv) year and (v) location.
"NON-DEFAULTING LENDER": any Lender other than a Defaulting Lender.
-8-
15
"NON-EXCLUDED TAXES": as defined in subsection 3.15(a).
"NOTE": as defined in subsection 3.1(e).
"NOTICE OF BORROWING": means with respect to a request for a borrowing
hereunder, a request in the form of EXHIBIT K hereto, as delivered to the
Agent by a Responsible Officer of a Borrower.
"OPERATING LOCATIONS": the sites as acquired from time to time by a
Borrower or its Subsidiaries, where Inventory is displayed in connection
with its sale by such Borrower or any of its Subsidiaries in the ordinary
course of business.
"OVERLINE:" as described in subsection 2.4(a).
"OVERLINE FACILITY": as described in subsection 2.4.
"OVERLINE ADVANCES": as defined in subsection 2.4(a).
"PARENT BORROWER": as defined in the preamble to this Agreement.
"PARTICIPANTS": as defined in subsection 10.8(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other legal entity.
"PLAN": at a particular time, any employee benefit plan or other plan
established, maintained or contributed to by any Borrower or a Commonly
Controlled Entity that is covered by Title IV of ERISA.
"PRIME RATE": the rate of interest per annum announced from time to
time by the Agent at its principal office as its prime rate on a particular
day in effect for domestic (United States) commercial loans and advances;
such rate is not necessarily intended to be the lowest rate of interest
charged by the Lenders in connection with extensions of credit. Each change
in the Prime Rate shall be effective on the date such change is announced.
"PRINCIPAL PAYMENT DATE": as to any Advance, the tenth (10th) day (or
if such day is not a Business Day on the immediately preceding Business
Day) of the immediately following calendar month.
"PROCEEDS": with respect to any Proceeds Event, the gross cash
consideration, and all cash proceeds (as and when received) of non-cash
consideration (including, without limitation, any such cash proceeds in the
nature of principal and interest payments on account of promissory notes or
similar obligations), received by a Borrower and its Subsidiaries in
connection with such
-9-
16
Proceeds Event which is required to be repaid at the time or as a result of
such Proceeds Event out of the proceeds thereof.
"PROCEEDS EVENT":
(a) the sale, transfer or other disposition by a Borrower or any of its
Subsidiaries of any Inventory (including, without limitation, any
Inventory sold, transferred or otherwise disposed of in the ordinary
course of business) of such Borrower or such Subsidiary to any Person
(other than to the Parent Borrower or any of its Subsidiary Borrowers);
(b) the recovery by a Borrower of amounts owing to it under insurance policies
with respect to any item of Inventory; and
(c) the receipt by the Parent Borrower or any of its Subsidiaries of a
reimbursement, refund or other recovery of amounts owing to the Parent
Borrower or such Subsidiary because of the receipt of damaged Inventory
from any Person (including any manufacturer) from whom any Credit Party
purchased or otherwise acquired Inventory.
"PROPERTIES": as defined in subsection 4.18(a).
"REGULATION G": Regulation G of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty (30) day notice
period is waived under subsections .22, .25, .27 or .28 of PBGC Reg.
sec. 4043.
"REQUIREMENT OF LAW": as to any Person, the Articles or Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, the president, an
executive vice president, the chief financial officer or the treasurer of a
Borrower.
"RESTRICTED PAYMENTS": as defined in subsection 7.7.
"RETAIL UNITS": new or used manufactured housing units acquired by a
Borrower or its Subsidiaries from a manufacturer of such units or as a
result of a rescinded sales transaction as acquired from time to time by a
Borrower or its Subsidiaries.
-10-
17
"RETAIL UNIT ADVANCE": any Advance made in connection with a Retail
Unit.
"S&P": Standard and Poor's Ratings Group, a division of McGraw Hill
Companies Inc.
"SEC": means the United States Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its principal functions.
"SECURED OBLIGATIONS": shall be the collective reference to the unpaid
principal of and interest on the Notes and all other obligations and
liabilities (including, without limitation, interest accruing at the then
applicable rate provided in this Agreement after the maturity of the
Advances and interest accruing at the then applicable rate provided in this
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Borrowers, on a joint and several basis, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), of
the Borrowers, on a joint and several basis, to the Agent and the Lenders,
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, the Notes and the other Credit Documents
or any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all reasonable fees and disbursements of counsel to the
Agent or to the Lenders that are required jointly and severally to be paid
by the Borrowers pursuant to the terms of this Agreement or any other
Credit Document).
"SECURITY AGREEMENT": the collective reference to the Borrowers
Security Agreement, the Subsidiaries Security Agreement and each other
security agreement from time to time made in favor of the Agent to secure
all or part of the Secured Obligations as amended, supplemented or
otherwise modified from time to time.
"SECURITY DOCUMENTS": the collective reference to the Security
Agreements, the Joinder Agreements and all other security documents
hereafter delivered to the Lender granting a Lien on any asset or assets of
any Person to secure the obligations and liabilities of any Borrower
hereunder and under any of the other Credit Documents or to secure any
guarantee of any such obligations and liabilities.
"SHOW MODELS": new manufactured housing units maintained as permanent
displays and subsequently sold and replaced with new models as acquired
from time to time by a Borrower or its Subsidiaries.
"SHOW MODEL ADVANCE": any Advance made in connection with a Show
Model.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SUBORDINATED INDEBTEDNESS": any Indebtedness for any Borrower is
liable that is subordinated to the obligations of the Credit Parties
hereunder on terms pursuant to
-11-
18
documentation containing terms other terms (including interest,
amortization, covenants and events of default) in form and substance
satisfactory to the Agent.
"SUBSIDIARIES GUARANTEE": each Guarantee to be executed and delivered
by one or more Subsidiaries (including without limitation HM Services, Inc.
and HomeMax Properties, Inc. but other than the Subsidiary Borrowers), each
substantially in the form of EXHIBIT C, as the same may be amended,
supplemented or otherwise modified from time to time.
"SUBSIDIARIES JOINDER AGREEMENT": the Joinder Agreement to be executed
and delivered by each Person that subsequent to the Closing Date becomes a
Subsidiary, substantially in the form of EXHIBIT E, as the same may be
amended, supplemented or otherwise modified from time to time PROVIDED that
if such Person also becomes a Subsidiary Borrower hereto then such Person
shall instead execute and deliver a Borrowers Joinder Agreement as provided
herein.
"SUBSIDIARIES SECURITY AGREEMENT": each Security Agreement to be
executed and delivered by a Subsidiary, substantially in the form of
EXHIBIT G, as the same may be amended, supplemented or otherwise modified
from time to time.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrowers.
"TITLE DOCUMENTS": the collective reference to the manufacturers'
certificate of origin, manufacturer's statement of origin, certificates of
title or any and all other title documents for each item of Inventory.
"TRANSFEREE": as defined in subsection 10.8(f).
"TYPE": as to any Advance, as the context requires, its nature as a
Eurodollar Advance or an ABR Advance.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"▇▇▇▇▇▇ NATIONAL": ▇▇▇▇▇▇ National Corporation, an Ohio corporation of
which the Parent Borrower is a ninety-five percent (95%) owned Subsidiary.
"ZN FACILITY": the $15,000,000 credit facility described in the credit
agreement dated as of February 23, 1998, (as amended, supplemented or
otherwise modified from time to time, the
-12-
19
"ZN CREDIT AGREEMENT") by and among ▇▇▇▇▇▇ National Corporation, as
borrower, the banks from time to time party thereto and NationsBank, N.A.,
as agent for such banks.
"ZN LETTER AGREEMENT": the side letter agreement to be executed and
delivered by ▇▇▇▇▇▇ National substantially in the form of EXHIBIT I, as the
same may be amended, supplemented or otherwise modified from time to time.
"ZN NET WORTH AGREEMENT": the Net Worth Maintenance Agreement to be
executed and delivered by ▇▇▇▇▇▇ National, substantially in the form of
EXHIBIT J, as the same may be amended, supplemented or otherwise modified
from time to time.
1.2 OTHER DEFINITIONAL PROVISIONS:
(a) Unless otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in any Notes or any
certificate or other document made or delivered pursuant hereto.
(b) Unless otherwise specified herein, all accounting terms used herein (and in
any other Credit Document and any certificate or other document made or
delivered pursuant hereto or thereto) shall be interpreted, all
accounting determinations shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance
with GAAP as in effect from time to time.
(c) The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(d) In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding". Periods of days
referred to in this Agreement shall be counted in calendar days unless
Business Days are expressly prescribed. Any period determined hereunder
by reference to a month or months or year or years shall end on the day
in the relevant calendar month in the relevant year, if applicable,
immediately preceding the date numerically corresponding to the first
day of such period, PROVIDED, that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to
end), such period shall, unless otherwise expressly required by the
other provisions of this Agreement, end on the last day of the calendar
month.
(e) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.
SECTION 2: AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS.
-13-
20
(a) Subject to the terms and conditions hereof, each Lender, at the reasonable
discretion of the Agent severally agrees to make advances ("ADVANCES")
available to the Borrowers from time to time during the Commitment
Period in an aggregate principal amount at any one time outstanding
which does not exceed such Lender's Commitment (excluding Overline
Advances), PROVIDED, that no additional advance (other than Overline
Advances) will exceed the Available Commitment. During the Commitment
Period the Borrowers may use the Commitments by borrowing, prepaying
the Advances in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof.
(b) Except as provided in subsection 3.11 or subsection 3.13, the Advances will
be Eurodollar Advances, PROVIDED that no Advance shall be made after
the day that is one month prior to the Maturity Date.
(c) Anything to the contrary notwithstanding contained in this Agreement or any
other Credit Document, no Lender has any obligation to make any Advance
(including Overline Advances under subsection 2.4 or third party
payments under subsection 2.5) unless the Agent in its sole discretion
determines that such Advance shall be made. Accordingly, each Advance
is at the sole reasonable discretion of the Agent which has no
obligation to approve any such Advance.
2.2 PROCEDURE FOR BORROWING. A Borrower shall deliver to the Agent such
Borrower's Notice of Borrowing, specifying the amount of such Advance,
which notice must be in writing or by telephone promptly confirmed in
writing prior to 2:00 P.M., Charlotte, North Carolina time, on the
requested Borrowing Date. Upon receipt of any such Notice of Borrowing
from a Borrower, the Agent shall promptly notify each Lender thereof.
Each Lender will make the amount of its pro rata share of each
borrowing available to the Agent for the account of such Borrower at
the office of the Agent specified in subsection 10.3 prior to 3:00
P.M., Charlotte, North Carolina time on the Borrowing Date, in funds
immediately available to the Agent. Such borrowing will then be made
available to such Borrower by the Agent transferring to an account
(which shall be maintained for such purpose by the Agent) with the
aggregate of the amounts made available to the Agent by the Lenders and
in like funds as received by the Agent.
2.3 CURTAILMENT OF ADVANCES. Each Borrower shall make (a) a payment of ten
percent (10%) of the original outstanding principal of each Show Model
Advance on the Principal Payment Date of the date that is twelve (12)
months from the applicable Borrowing Date with a balloon payment of any
then-outstanding principal amount of such Show Model Advance on the
Principal Payment Date of the date that is twenty-four (24) months from
the applicable Borrowing Date and (b) a payment of ten percent (10%) of
the original outstanding principal of each Retail Unit Advance on the
Principal Payment Date of the date that is six (6) months from the
applicable Borrowing Date with a balloon payment of any
then-outstanding principal amount of such Retail Unit Advance on the
Principal Payment Date of the date that is nine (9) months from the
applicable Borrowing Date.
2.4 OVERLINE COMMITMENT.
-14-
21
(a) If at any one time, (i) the aggregate principal amount of the Advances
outstanding exceeds the aggregate Commitment of the Lenders, or (ii)
any Advance exceeds the amount permitted with respect to such Advance
pursuant to subsection 2.6, the amount equal to such excess (the
"OVERLINE") shall be payable on demand. In the event that no such
demand is made, subject to the terms and conditions hereof, the Lenders
severally agree to make additional advances (the "OVERLINE ADVANCES")
to the Borrowers on a pro rata basis according to the respective
relevant Commitment Percentages of the Lenders for an aggregate amount
equal to such Overline.
(b) The Borrowers may use the Overline Advances during the time period
specified by the Agent, in its sole discretion, in a written notice to
the Borrowers on the date any such Overline Advance is made available
to the Borrowers.
(c) The Overline Advances shall be subject to each of the terms and provisions
of this Agreement and any other Credit Document and shall be secured by
all Collateral provided for herein or therein.
(d) Anything else to the contrary notwithstanding, the Agent shall be under no
obligation to permit any Overline at anytime.
2.5 THIRD PARTY PAYMENTS.
(a) Subject to the terms and conditions hereof, from time to time, at the
Agent's discretion, each Lender severally agrees to make Advances
(including Overline Advances) in the form of direct payments to any
Person (including any manufacturer) from whom any Credit Party
purchased or otherwise acquired an item of Inventory.
(b) Invoices submitted by any such Person (as described in paragraph (a) of
this subsection) shall be (i) considered the Borrowers' irrevocable
Notice of Borrowing with respect to any such Advance and (ii) together
with any drafts paid by the Lenders to such Person, evidence of the
Advances made by the Lenders under this Facility. Accordingly, the date
on which any such Advance is made by the Lenders to such Person shall
be the Borrowing Date for such Advance.
(c) Neither the Agent nor the Lenders shall have any obligation to inspect any
item of Inventory prior to making an Advance to any such Person (as
described in paragraph (a) of this subsection). If the Lenders have
made such an Advance with respect to an item of Inventory determined by
the Agent in its sole discretion to be damaged, the Borrowers shall
direct such Person to refund the respective Advance to the Agent for
ratable distribution to the Lenders.
(d) The Borrowers hereby, jointly and severally, authorize the Agent and the
Lenders to pay all such invoices and drafts upon presentation by any
such Person (as described in paragraph (a) of this subsection).
-15-
22
2.6 USE OF PROCEEDS OF ADVANCES; Limitation on Advances. (a) The proceeds of
the Advances shall be utilized by the Borrowers exclusively to provide
financing for the acquisition of items of Inventory.
(b) Notwithstanding anything herein to the contrary, each and any such
Advance (i) made in connection with a new item of Inventory shall not
exceed the Manufacturer's Invoice Amount for such item and (ii) each and
any such Advance made in connection with a used item of Inventory shall not
exceed the NADA Book Value applicable to such item, PROVIDED that the Agent
in its sole discretion, based on its analysis of any item of Inventory may
dilute the value of such Inventory that shall be used to determine the
amount of the Advance that may be made with respect to such item of
Inventory.
SECTION 3: PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT; FEES AND PAYMENTS
3.1: REPAYMENT OF ADVANCES; EVIDENCE OF INDEBTEDNESS.
(a) The Borrowers hereby unconditionally, jointly and severally, promise to pay
to the Agent for the account of each applicable Lender the principal
amount of each Advance on the dates and in the amounts set forth in
subsection 2.3 and any then unpaid principal amount of each Advance on
the Maturity Date (or such earlier date on which the Advances become
due and payable pursuant to Section 8). The Borrowers hereby, jointly
and severally, further agree to pay interest on the unpaid principal
amount of the Advances from time to time outstanding from the date
hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 3.9.
(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing Indebtedness of the Borrowers to the Lender
resulting from each Advance of such Lender from time to time, including
the amounts of principal and interest payable and paid to such Lender
from time to time under this Agreement.
(c) The Agent shall maintain the Register pursuant to subsection 10.8(d) and a
subaccount therein for each Lender, in which shall be recorded (i) the
amount of each Advance made hereunder, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the
Borrowers to the Lenders hereunder and (iii) the amount and date of any
sum received by the Agent hereunder from the Borrowers.
(d) The entries made in the Register and the accounts of each Lender maintained
pursuant to subsection 10.8(d) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of
the obligations of the Borrowers therein recorded; PROVIDED, HOWEVER,
that the failure of the Agent or any Lender to maintain the Register or
any such account, or any error therein, shall not in any manner affect
the joint and several obligation of the Borrowers to repay (with
applicable interest) the Advances made to such Borrowers by the Lenders
in accordance with the terms of this Agreement.
-16-
23
(e) The Borrowers, jointly and severally, agree that, upon request of any
Lender through the Agent, the Borrowers will execute and deliver to
such Lender a promissory note of the Borrowers evidencing the Advances
of such Lender, substantially in the form of EXHIBIT A with appropriate
insertions as to date and principal amount (a "NOTE").
3.2 FACILITY FEE.
(a) The Borrowers, jointly and severally, agree to pay the Facility Fee.
(b) Such Facility Fee shall be calculated on the basis of a 365- or a 366-day
year, as the case may be.
(c) Such Facility Fee shall be payable annually, in advance, on the date that
is the anniversary of the Closing Date (or if such day is not a
Business Day on the next succeeding Business Day) until the Maturity
Date or such earlier date as the Commitments shall terminate as
provided herein, commencing on the first such anniversary to occur
after the date hereof.
3.3 AGENT'S FEES. The Borrowers, jointly and severally, agree to pay to the
Agent, for its own account, such fees as may be agreed from time to
time between the Borrowers and the Agent, when and as due.
3.4 OPTIONAL PREPAYMENTS. The Borrowers may at any time and from time to time
prepay the Advances, in whole or in part, without premium or penalty
(subject to the provisions of subsection 3.16), by providing notice to
the Agent (which notice must be received by the Agent prior to 2:00
P.M., Charlotte, North Carolina time, on the date on which such
prepayment is scheduled to be made) specifying the amount of such
prepayment. Upon receipt of such notice, the Agent shall promptly
notify each Lender thereof. Partial prepayments shall be in an
aggregate principal; amount of $500,000, or a whole multiple in excess
thereof.
3.5 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The Borrowers shall have
the right, upon not less than three (3) Business Days' notice to the
Agent, to terminate the Commitments or, from time to time, to reduce
the amount of the Commitments; PROVIDED that no such termination or
reduction shall be permitted with respect to the Commitments (i) to the
extent that after giving effect thereto and to any repayments or
prepayments of the Advances made on the effective date thereof, the
aggregate principal amount of the Advances then outstanding would
exceed the Commitments then in effect and (ii) after the date that is
three (3) Business Days prior to the Maturity Date. Any such reduction
shall be in an amount equal to $500,000 or a whole multiple in excess
thereof and shall reduce permanently the affected Commitments then in
effect.
3.6 MANDATORY REDUCTION OF COMMITMENTS AND PREPAYMENTS.
(a) If at any time during the Commitment Period the Aggregate Extensions of
Credit of any Lender exceeds such Lender's available Commitment (other
than under the Overline
-17-
24
Facility pursuant to the terms and conditions of subsection 2.4), the
Borrowers, jointly and severally, shall immediately repay the Advances,
such repayment to be in an aggregate amount equal to such excess.
(b) If at any time during the Commitment Period, the Lenders shall make an
Advance under subsection 2.5 to a Person (including any manufacturer)
from whom any Credit Party purchased or otherwise acquired an item of
damaged Inventory and neither such Person nor any of the Borrowers
refunded or repaid such Advance promptly upon receipt of the Agent's
written request for such refund or repayment, the Borrowers shall
jointly and severally repay such Advance and permanently reduce the
Commitments by the amount equal to such Advance.
(c) The Borrowers shall, jointly and severally, repay the Advances by the
amount equal to the aggregate amount of Proceeds received from any
Proceeds Event thereof as promptly as is practicable PROVIDED that in
any event, (i) with respect to paragraph (a) of the definition of
Proceeds Event, such repayment and reduction shall be made (A) within
twenty-four (24) hours of the receipt of Proceeds from such Proceeds
Event or (B) within three (3) Business days of the sale, transfer or
other disposition that triggered such Proceeds Event (whichever of (A)
or (B) is the first to occur) and (ii) with respect to paragraphs (b)
and (c) of such definition, such repayment and reduction shall be made
within (1) Business Day following the receipt of the Proceeds from such
Proceeds Event; FURTHER PROVIDED that no such repayment and reduction
shall be due pursuant to this subsection 3.6(b) with respect to any
Proceeds Event on account of:
(i) the sale or other disposition of obsolete, inoperative,
surplus or worn out real or personal, tangible or
intangible, property (other than Inventory but including
without limitation, any property which is no longer used
or useful in the business of a Borrower or its
Subsidiaries) in the ordinary course of business and for
fair market value; or
(ii) the sale, transfer or other disposition by a Borrower or any
of its Subsidiaries of any real or personal, tangible or
intangible, property of a Borrower and its Subsidiaries
(other than Inventory), to the extent that the Proceeds
from such sale, transfer or other disposition (in the
aggregate with the Proceeds from all other sales,
transfers and other dispositions occurring during the
fiscal year in which such sale, transfer or other
disposition occurred other than those described in
paragraph (i)) is less than $500,000.
3.7 APPLICATION OF PREPAYMENTS.
(a) Any payments of the Advances and reductions of the Commitments made
pursuant to subsections 3.4, 3.5 or 3.6 shall be applied in inverse
order of Maturity to the then outstanding installments thereof, FURTHER
PROVIDED that, notwithstanding the foregoing,
-18-
25
any prepayment made pursuant to subsection 3.6(b) as a result of any sale,
transfer or disposition of any Retail Unit or any Show Model shall be
applied (i) FIRST to the Advance relating to such Retail Unit or such Show
Model and (ii) SECOND to any other outstanding Advances hereunder as
selected by the Agent in its sole discretion.
(b) Any payments of the Advances and reductions of the Commitments made pursuant
to subsections 3.4, 3.5 or 3.6 shall not be applied to the prepayment
of the Advances of a Defaulting Lender at any time under the Facility
when the aggregate amount of Advances of any Non-Defaulting Lender
exceeds such Non-Defaulting Lender's Commitment Percentage of all
Advances then outstanding.
3.8 CONTINUATION OPTIONS. Any Advances may be continued as Eurodollar Advances
upon the expiration of the then current Interest Period with respect
thereto, PROVIDED that:
(a) no Eurodollar Advance may be continued as such when any Event of Default
has occurred and is continuing and the Agent has or the Majority
Lenders have determined that such a continuation is not appropriate;
and
(b) no Advance may be continued as such after the date that is one month prior
to the Maturity Date.
3.9 INTEREST RATES AND PAYMENT DATES.
(a) Each Advance shall bear interest for each day during each Interest Period
with respect thereto at a rate per annum equal to the Eurodollar Rate
determined for such day plus the Applicable Margin in effect for such
day.
(b) If the Advance is converted to an ABR Advance pursuant to subsection 3.11
or subsection 3.13, the ABR Advance shall bear interest at a rate per
annum equal to the ABR plus the Applicable Margin.
(c) If all or a portion of any principal of any Advance, any interest payable
thereon or any other amount payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), the
principal of the Advances and any such overdue interest or other amount
shall bear interest at the lesser rate of (i) eighteen percent (18%) or
(ii) the maximum rate of interest that may be lawfully charged with
respect to such principal, interest or other amount, in each case from
the date of such non-payment until such overdue principal, interest or
other amount is paid in full (as well after as before judgment).
(d) Interest on each Advance shall be payable in arrears on each Interest
Payment Date and shall accrue from and including the Borrowing Date but
excluding the date of repayment thereof, PROVIDED that interest
accruing pursuant to paragraph (d) of this subsection shall be payable
from time to time on demand.
-19-
26
(e) Notwithstanding anything to the contrary contained herein, in no event
shall the Borrowers be obligated to pay interest in excess of the
maximum amount which is chargeable under applicable law.
3.10 COMPUTATION OF INTEREST AND FEES.
(a) The Facility Fee shall be calculated in accordance with subsection 3.2.
(b) Interest shall be calculated on the basis of a 360-day year for the actual
days elapsed. The Agent shall as soon as practicable notify the
Borrowers and the Lenders of each determination of the Eurodollar Rate.
Any change in the interest rate on an Advance resulting from a change
in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change
becomes effective.
(c) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the
Borrowers and the Lenders in the absence of manifest error. The Agent
shall, at the request of the Borrowers, deliver to the Borrowers a
statement showing the quotations used by the Agent in determining any
interest rate pursuant to subsection 3.9(a).
3.11 INABILITY TO DETERMINE INTEREST RATE.
(a) If prior to the first day of any Interest Period:
(i) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrowers in the absence
of manifest error) that, by reason of circumstances
affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
(ii) the Agent shall have received notice from the Majority
Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately
and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or
maintaining their affected Advances during such Interest
Period;
The Agent shall give telecopy or telephonic notice thereof to the Borrowers and
the Lenders as soon as possible thereafter. If such notice is given, (i) any
Advances requested to be made on the first day of such Interest Period shall be
made as ABR Advances, and (ii) any outstanding Advances shall be converted, on
the first day of such Interest Period, to ABR Advances. Until such notice has
been withdrawn by the Agent, no further Advances shall be made or continued as
Eurodollar Advances.
3.12 PRO RATA TREATMENT AND PAYMENTS.
-20-
27
(a) Each borrowing by a Borrower from the Lenders hereunder, each payment by a
Borrower on account of any Facility Fee hereunder and any reduction of
the Commitments of the Lenders shall be made pro rata according to the
respective relevant Commitment Percentages of the Lenders holding
obligations in respect of which such amounts were paid. Each payment
(including each prepayment) by a Borrower on account of principal of
and (subject to the provisions of subsections 3.4, 3.6 and 3.7)
interest on the Advances shall be made pro rata according to the
respective outstanding principal amounts of such Advances then held by
the Lenders. Except as otherwise set forth herein, all payments
(including prepayments) to be made by the Borrowers hereunder, whether
on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made prior to 2:00 P.M.,
Charlotte, North Carolina time, on the due date thereof to the Agent,
for the account of the applicable Lenders, at the Agent's office
specified in subsection 10.3, in Dollars and in immediately available
funds. The Agent shall distribute such payments to the Lenders holding
obligations on account of which such amounts were paid promptly upon
receipt in like funds as received. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment shall be
extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) All such payments shall be applied FIRST to accrued and unpaid fees and
expenses payable hereunder, SECOND to accrued and unpaid interest on
the applicable Advance and THIRD, in accordance with subsection 3.7(a),
to reduce the outstanding principal balance of such Advance.
(c) Unless the Agent shall have been notified in writing by any Lender prior to
a borrowing that such Lender will not make the amount that would
constitute its relevant Commitment Percentage of such borrowing
available to the Agent, the Agent may assume that such Lender is making
such amount available to the Agent, and the Agent may, in reliance upon
such assumption, make available to the Borrowers a corresponding
amount. If such amount is not made available to the Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to
the Agent, on demand, such amount with interest thereon at a rate equal
to the daily average Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the Agent. A
certificate of the Agent submitted to any Lender shall, to the extent
permitted by applicable law, be prima facie evidence of any amounts
owing under this subsection 3.12. If such Lender's relevant Commitment
Percentage of such borrowing is not made available to the Agent by such
Lender within three (3) Business Days of such Borrowing Date, the Agent
shall also be entitled to recover such amount with interest thereon at
the rate per annum applicable to ABR Advances hereunder, on demand,
jointly and severally, from the Borrowers.
3.13 ILLEGALITY. Notwithstanding any other provision herein, if the adoption of
or any change in any Requirement of Law or in the interpretation or
application thereof, in each case after the Closing Date, shall make it
unlawful for any Lender to make or maintain Eurodollar Advances, as the
case may be, as contemplated by this Agreement, (a) the commitment of
-21-
28
such Lender hereunder to make Eurodollar Advances or continue Eurodollar
Advances as such, as the case may be, shall forthwith be suspended to the
extent unlawful and (b) to the extent unlawful the Lenders' Advances then
outstanding shall be converted automatically to ABR Advances on the last
day of the current Interest Period with respect to such Advances or within
such earlier period as required by law. If any such conversion of a
Eurodollar Advance occurs on a day which is not the last day of the current
Interest Period, the Borrowers, on a joint and several basis, shall pay to
such Lender such amounts, if any, as may be required pursuant to subsection
3.16.
3.14 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any applicable Requirement of Law or in
the interpretation or application thereof or compliance by any Lender
with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority charged with the
interpretation or administration thereof made subsequent to the date
hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, or any
Eurodollar Advance made by it, or change the basis of
taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 3.15
and changes in the rate of net income taxes or franchise
taxes (imposed in lieu of net income taxes) of such
Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory Advance or similar requirement
against assets held by, deposits or other liabilities in
or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of
funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar
Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into (with respect to Eurodollar Advances), continuing or
maintaining Eurodollar Advances or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrowers,
jointly and severally, shall promptly pay such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any change in
any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by any corporation
controlling such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law, if compliance
-22-
29
therewith is a customary banking practice) from any Governmental Authority
made subsequent to the date hereof shall have the effect of reducing the
rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such
Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the
Borrowers, jointly and severally, shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts pursuant to
this subsection 3.14, it shall promptly notify the Borrowers (with a
copy to the Agent) of the event by reason of which it has become so
entitled. A certificate submitted by such Lender to the Borrowers (with
a copy to the Agent) shall, to the extent permitted by applicable law,
be prima facie evidence of any additional amounts payable pursuant to
this subsection 3.14. The agreements in this subsection 3.14 shall
survive the termination of this Agreement and the payment of the
Advances and all other amounts payable hereunder.
3.15 TAXES.
(a) All payments made by each of the Borrowers under this Agreement and any
Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on the
Agent or any Lender as a result of a present or former connection
between the Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision
or taxing authority thereof or therein (other than any such connection
arising solely from the Lenders having executed, delivered or performed
its obligations or received a payment under, or enforced, this
Agreement or any Note). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings
("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to Agent or any Lender hereunder or under any Note, the amounts
so payable to the Agent or such Lender shall be increased to the extent
necessary to yield to the Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement.
Whenever any Non-Excluded Taxes are payable by any Borrower, as
promptly as possible thereafter the Borrowers shall send to the Agent
for its own account or for the account of such Lender, as the case may
be, a certified copy of an original official receipt received by the
Borrowers showing payment thereof. If any Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrowers, jointly and severally, shall
indemnify the Agent and the Lenders for any incremental increased
taxes, interest or penalties that may become payable by the Agent or
any Lender as a result of any such failure. The
-23-
30
agreements in this subsection 3.15 shall survive the termination of this
Agreement and the payment of the Advances and all other amounts payable
hereunder.
(b)Each Lender that is not incorporated under the laws of the United States of
America or a state thereof shall:
(i) deliver to the Borrowers and the Agent (A) two duly completed
copies of the United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case
may be, and (B) an Internal Revenue Service Form W-8 or
W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrowers and the Agent two further copies of
any such form or certification on or before the date that
any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring
a change in the most recent form previously delivered by
it to the Borrowers; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by
the Borrowers or the Agent;
unless in any such case an event (including, without limitation, any change
in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrowers and the Agent. Such Lender shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes and (ii) in the case of Form W-8 or W-9, that it is entitled
to an exemption from United States backup withholding tax. Each Person that
shall become a Lender or a Participant pursuant to subsection 10.8 shall,
upon the effectiveness of the related transfer, be required to provide all
of the forms and statements required pursuant to this subsection 3.15,
provided that in the case of a Participant such Participant shall furnish
all such required forms and statements to the Lender from which the related
participation shall have been purchased.
(c) If any Lender shall receive a credit or refund from a taxing authority with
respect to, and actually resulting from, an amount of Non-Excluded
Taxes actually paid to or on behalf of such Lender by the Borrowers (a
"TAX CREDIT"), such Lender shall promptly notify the Borrowers of such
Tax Credit. If such Tax Credit is received by such Lender in the form
of cash, such Lender shall promptly pay to the Borrowers the amount so
received with respect to the Tax Credit. If such Tax Credit is not
received by such Lender in the form of cash, such Lender shall pay the
amount of such Tax Credit not later than the time prescribed by
applicable Law for filing the return (including extensions of time) for
such Lender's taxable period which includes the period in which such
Lender receives the economic benefit of such Tax Credit. In any event,
the amount of any Tax Credit payable
-24-
31
by a Lender to the Borrowers pursuant to this clause (c) shall not exceed
the actual amount of cash refunded to, or credits received and usable (in
accordance with the actual practices then in use by such Lender) by, such
Lender from a taxing authority. In determining the amount of any Tax
Credit, a Lender may use such apportionment and attribution rules as such
Lender customarily employs in allocating taxes among its various operations
and income sources and such determination shall be conclusive absent
manifest error. The Borrowers, jointly and severally, further agree
promptly to return to a Lender an amount paid to any of the Borrowers with
respect to a Tax Credit by such Lender if such Lender is required to repay,
or is determined to be ineligible for, a Tax Credit for such amount.
Notwithstanding anything to the contrary contained herein, the Borrowers
hereby acknowledge and agree that (i) neither the Agent nor any Lender
shall be obligated to provide the Borrowers with details of the tax
position of the Agent or such Lender (as the case may be) and (ii) the
Borrowers shall have no right to inspect any records (including tax
returns) of the Agent or such Lender (as the case may be).
3.16 INDEMNITY. The Borrowers, jointly and severally, agree to indemnify each
Lender and to hold each Lender harmless from any loss or expense which such
Lender may sustain or incur as a consequence of (a) failure by a Borrower
to make a borrowing of, conversion into or continuation of Eurodollar
Advances after such Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement; (b) failure by a Borrower
to make any prepayment after such Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Advances on a day which is not the last day of an
Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest which
would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure in each case at the applicable rate
of interest for such Advances provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) with respect to
Eurodollar Advances, the amount of interest (as reasonably determined by
such Lender) which would have accrued to such Lender on such amount by
placing such amount on deposit for a comparable period with leading banks
in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Advances and all other
amounts payable hereunder.
3.17 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any demand
for payment under subsection 3.14 or 3.15(a), or if any adoption or change
of the type described in subsection 3.13 shall occur with respect to it, it
will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its good faith discretion) to
designate a different lending office if the making of such a designation
would reduce or obviate the need for the Borrowers to make payments under
subsection 3.14 or 3.15(a), or would eliminate or reduce the effect of any
adoption or change described in subsection 3.13.
-25-
32
SECTION 4: REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Advances, the Borrowers hereby represent and warrant to the Agent and each
Lender that:
4.1 FINANCIAL CONDITION. The consolidated balance sheets of each Borrower and
its consolidated Subsidiaries as at September 30, 1997 and the related
consolidated statements of income and cash flows for the fiscal period
ended on such date, copies of which have heretofore been furnished to the
Agent, are complete and correct and present fairly in all material respects
the consolidated financial condition of such Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the fiscal period then
ended. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). Except to the extent permitted under this Agreement or as
disclosed to the Agent prior to the date hereof, neither such Borrower nor
any of its consolidated Subsidiaries had, at the date of the most recent
balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or
unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is
not reflected in the foregoing statements or in the notes thereto. Except
to the extent permitted under this Agreement or as disclosed to the Agent
prior to the date hereof, or as otherwise separately disclosed to the Agent
in writing prior to the date hereof, there has been no sale, transfer or
other disposition by such Borrower or any of its consolidated Subsidiaries
of any material part of its business or property (including any capital
stock of any other Person) material in relation to the consolidated
financial condition of such Borrower and its consolidated Subsidiaries at
September 30, 1997 during the period from September 30, 1997 to and
including the date hereof.
4.2 NO CHANGE. Since September 30, 1997 there has been no development or event
which has had a Material Adverse Effect.
4.3 DISCLOSURE. No information, schedule, exhibit or report or other document
furnished by each Borrower or any of its Subsidiaries to the Agent or any
Lender in connection with the negotiation of this Agreement or any other
Credit Document (or pursuant to the terms hereof or thereof), as such
information, schedule, exhibit or report or other document has been
amended, supplemented or superseded by any other information, schedule,
exhibit or report or other document later delivered to the same parties
receiving such information, schedule, exhibit or report or other document,
contained any material misstatement of fact or omitted to state a material
fact or any fact necessary to make the statements contained therein, in
light of the circumstances when made, not materially misleading.
4.4 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrowers and its
Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of
-26-
33
its organization, (b) has the corporate power and authority, and the legal
right, to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently engaged, (c)
is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
to the extent that all failures to be so qualified could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect and (d)
is in compliance with all Requirements of Law except to the extent that all
failures to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.5 CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. Each Borrower has
the corporate power and authority, and the legal right, to make, deliver
and perform the Credit Documents to which it is a party and to borrow
hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and any Notes and
to authorize the execution, delivery and performance of the Credit
Documents to which it is a party. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of the Credit Documents to which such Borrower is a party.
This Agreement has been, and each other Credit Document to which it is a
party will be, duly executed and delivered on behalf of each Borrower. This
Agreement constitutes, and each other Credit Document to which it is a
party when executed and delivered will constitute, a legal, valid and
binding obligation of each Borrower enforceable against such Borrower in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
4.6 NO LEGAL BAR. The execution, delivery and performance of the Credit
Documents to which each Borrower is a party, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of such Borrower or any of its Subsidiaries and will
not result in, or require, the creation or imposition of any Lien on any of
its or their respective properties or revenues pursuant to any such
Requirement of Law or Contractual Obligation.
4.7 NO MATERIAL LITIGATION. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the
knowledge of any Borrower, threatened by or against any Borrower or any of
its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Credit Documents or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect.
4.8 NO DEFAULT. Neither any Borrower nor any of its Subsidiaries is in default
under or with respect to any of its Contractual Obligations in any respect
which could reasonably be
-27-
34
expected to have a Material Adverse Effect. No Default or Event of Default
has occurred and is continuing.
4.9 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrowers and its Subsidiaries
has good record and marketable title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to, or a valid leasehold
interest in, all its other property, which is material to the operations of
the business of, such Borrower and its Subsidiaries, taken as a whole and
none of such property is subject to any Lien except as permitted by
subsection 7.3.
4.10 TITLE DOCUMENTS. Each of the Borrowers and its Subsidiaries has possession
of the applicable Title Documents to each item of Inventory owned by such
entity unless otherwise held by the Agent for the benefit of the Lenders
hereunder pursuant to the terms and conditions of the Credit Documents.
4.11 NO BURDENSOME RESTRICTIONS. No Requirements of Law applicable to any
Borrower or any of its Subsidiaries could reasonably be expected to have a
Material Adverse Effect.
4.12 INTELLECTUAL PROPERTY. Each of the Borrowers and each of its Subsidiaries
owns, or is licensed to use, all trademarks, trade names, copyrights,
technology, know-how and processes necessary for the conduct of its
business as currently conducted, except for those for which the failure to
own or license could not reasonably be expected to have a Material Adverse
Effect (the "INTELLECTUAL PROPERTY"). No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such
Intellectual Property which could reasonably be expected to have a Material
Adverse Effect, nor does any Borrower know of any valid basis for any such
claim. To the best knowledge of each Borrower, the use of such Intellectual
Property by each Borrower and its Subsidiaries does not infringe on the
rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
4.13 TAXES. Each of the Borrowers and its Subsidiaries has filed or caused to be
filed all material tax returns which, to the knowledge of such Borrower,
are required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of
its property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity
with GAAP have been provided on the books of each Borrower or its
Subsidiaries, as the case may be); no tax Lien has been filed, other than
Liens permitted by subsection 7.3, and, to the knowledge of each Borrower,
no claim is being asserted, with respect to any such tax, fee or other
charge.
4.14 FEDERAL REGULATIONS. No part of the proceeds of any Advances will be used
in any manner which would violate, or result in the violation of,
Regulation D, Regulation G or Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. If
requested by any Lender or the Agent, the Borrowers will furnish to the
Agent and each Lender a statement to the foregoing effect in
-28-
35
conformity with the requirements of FR Form G-3 or FR Form U-1 referred to
in said Regulation G or Regulation U, as the case may be.
4.15 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each
Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has
occurred, and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans)
did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets
of such Plan allocable to such accrued benefits. No Borrower and no
Commonly Controlled Entity has had a complete or partial withdrawal from
any Multiemployer Plan, and no Borrower and no Commonly Controlled Entity
would become subject to any liability under ERISA if any Borrower or any
such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made. No such
Multiemployer Plan is in Reorganization or Insolvent. The present value
(determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the Borrowers and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees
under Plans which are welfare benefit plans (as defined in Section 3(l) of
ERISA) does not, in the aggregate, exceed the assets under all such Plans
allocable to such benefits by an amount in excess of $100,000.
4.16 INVESTMENT COMPANY ACT; OTHER REGULATIONS. No Borrower is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended. None of the
Borrowers are subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the
Federal Reserve System) which limits its ability to incur Indebtedness
under this Agreement or other Credit Documents.
4.17 SUBSIDIARIES. SCHEDULE III hereto sets forth all of the Subsidiaries of
each of the Borrowers at the date hereof, together with the ownership and
jurisdiction of incorporation of each.
4.18 ENVIRONMENTAL MATTERS.
(a) The facilities and properties owned, leased or operated by any Borrower or
any of its Subsidiaries (the "PROPERTIES") do not contain, and have not
previously contained, any Materials of Environmental Concern in amounts or
concentrations which (i) constitute or constituted a violation of, or (ii)
could reasonably be expected to give rise to liability under, any
Environmental Law except insofar as such violation or liability or any
-29-
36
aggregation thereof, is not reasonably likely to result in the payment of a
Material Adverse Amount;
(b) the Properties and all operations at the Properties are in compliance in all
respects with all applicable Environmental Laws, and there is no
contamination at or under (or, to the knowledge of such Borrower, about)
the Properties or violation of any Environmental Law with respect to the
Properties or the business operated by any Borrower or any of its
Subsidiaries (the "BUSINESS") except insofar as such violation or failure
to be in compliance or contamination, or any aggregation thereof, is not
reasonably likely to result in the payment of a Material Adverse Amount;
(c) no Borrower and none of its Subsidiaries have received any notice of
violation, alleged violation, non-compliance, liability or potential
liability regarding compliance with Environmental Laws with regard to any
of the Properties or the Business, nor does any Borrower have knowledge
that any such notice will be received or is being threatened, except
insofar as such notice or threatened notice, or any aggregation thereof,
does not involve a matter or matters that is or are reasonably likely to
result in the payment of a Material Adverse Amount;
(d) Materials of Environmental Concern have not been transported or disposed of
from the Properties in violation of, or in a manner or to a location which
could reasonably be expected to give rise to liability under, any
Environmental Law, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could reasonably be
expected to give rise to liability under, any applicable Environmental Law,
except insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, is not reasonably likely to result
in the payment of a Material Adverse Amount;
(e) no judicial proceeding or governmental or administrative action is pending
or, to the knowledge of any Borrower, threatened, under any Environmental
Law to which any Borrower, any of its Subsidiaries is or will be named as a
party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding
under any Environmental Law which are binding upon any Borrower or any of
its Subsidiaries with respect to the Properties or the Business, except
insofar as such proceeding, action, decree, order or other requirement, or
any aggregation thereof, is not reasonably likely to result in the payment
of a Material Adverse Amount; and
(f) there has been no release or threat of release of Materials of Environmental
Concern at or from the Properties, or arising from or related to the
operations of any Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability
under Environmental Laws, except insofar as any such violation or liability
-30-
37
referred to in this paragraph, or any aggregation thereof, is not
reasonably likely to result in a payment of a Material Adverse Amount.
4.19 GUARANTEES. The provisions of each Guarantee are effective to create a
legal, valid, binding and enforceable guarantee of the obligations
described therein, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
4.20 JOINDER AGREEMENTS. Each Joinder Agreement constitutes a legal, valid and
binding obligation of the Credit Party who is a party thereto, enforceable
against it in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
4.21 SECURITY AGREEMENTS.
(a) Each Security Agreement constitutes a legal, valid, binding and enforceable
obligation of the Credit Parties thereto, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles; and
(b) Upon filing of the financing statements listed on SCHEDULE V hereto (and,
after the Closing Date, any additional filings required to be made pursuant
to the Credit Documents) will constitute a valid, first priority security
interest, enforceable as such against all creditors of any grantor and any
Persons purporting to purchase any such Collateral from the Credit Party
who is the grantor with respect thereto.
4.22 SOLVENCY. The aggregate value of all of the tangible and intangible assets
of each of the Borrowers and its Subsidiaries on a consolidated basis, at a
fair valuation, exceeds the total liabilities of such Borrower and its
Subsidiaries on a consolidated basis (including contingent, subordinated,
unmatured and unliquidated liabilities). Each Borrower and each of its
Subsidiaries have the ability to pay their respective debts as they mature
and do not have unreasonably small capital with which to conduct their
respective businesses. For purposes of this subsection 4.22, the "fair
valuation" of such assets is the price at which the assets would change
hands between a willing buyer and a willing seller, both being adequately
informed of the relevant facts, and neither being under any compulsion to
buy or to sell.
4.23 HM SERVICES SUBORDINATION AGREEMENT. The HM Services Subordination
Agreement constitutes a legal, valid, binding and enforceable obligation of
the third parties thereto, enforceable against each such party in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
-31-
38
4.24 ZN LETTER AGREEMENT. The ZN Letter Agreement constitutes a legal, valid,
binding and enforceable obligation of the third parties thereto,
enforceable against each such party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
4.25 ZN NET WORTH MAINTENANCE AGREEMENT. The ZN Net Worth Agreement constitutes
a legal, valid, binding and enforceable obligation of ▇▇▇▇▇▇ National,
enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
SECTION 5: CONDITIONS PRECEDENT
5.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT. The agreement of each Lender to
make the initial extension of credit requested to be made by it is subject
to the satisfaction, immediately prior to or concurrently with the making
of such extension of credit on the Closing Date, of the following
conditions precedent:
(a) CREDIT DOCUMENTS. The Agent shall have received (i) this Agreement, executed
and delivered by a duly authorized officer of each of the Borrowers, (ii)
the Notes (to the extent so requested by any Lender), executed and
delivered by a duly authorized officer of each of the Borrowers, (iii) each
Security Agreement, executed and delivered by a duly authorized officer of
the party thereto, (iv) each Guarantee, executed and delivered by a duly
authorized representative of each party thereto, (v) the HM Services
Subordination Agreement, executed and delivered by a duly authorized
representative of each party thereto, (vi) the ZN Letter Agreement,
executed and delivered by a duly authorized officer of ▇▇▇▇▇▇ National and
(vii) the ZN Net Worth Agreement, executed and delivered by a duly
authorized officer of ▇▇▇▇▇▇ National.
(b) AGREEMENTS. The Agent shall have received true and correct copies, certified
as to authenticity by the Borrowers, of such documents or instruments as
may be reasonably requested by the Agent.
(c) CLOSING CERTIFICATE OF BORROWERS. The Agent shall have received a
certificate of the President or any Vice President and the Secretary or an
Assistant Secretary of each Borrower, dated the Closing Date, (i) attaching
the Charter and By-Laws of such Borrower, (ii) attaching the resolutions of
the Board of Directors of such Borrower with respect to the transactions
contemplated hereby, (iii) certifying that such resolutions have not been
amended, modified, revoked or rescinded as of the date of such certificate
and (iv) certifying as to the incumbency and signature of the officers of
such Borrower executing any Credit Document; such certificate (and the
attachments thereto) shall be in form and substance satisfactory to the
Agent.
(d) CLOSING CERTIFICATE OF CREDIT PARTIES. The Agent shall have received a
certificate of the President or any Vice President and the Secretary or an
Assistant Secretary of each Credit
-32-
39
Party (other than the Borrowers), dated the Closing Date, (i) attaching the
Charter and By-Laws of such Credit Party, (ii) attaching the resolutions of
the Board of Directors of such Credit Party with respect to the
transactions contemplated hereby to which it is a party, (iii) certifying
that the such resolutions have not been amended, modified, revoked or
rescinded as of the date of such certificate and (iv) certifying as to the
incumbency and signature of the officers of such Credit Party executing any
Credit Document; such certificate (and the attachments thereto) shall be in
form and substance satisfactory to the Agent.
(e) CORPORATE STRUCTURE. The Agent shall be satisfied with the corporate and
legal structure and capitalization of the Credit Parties, including the
terms and conditions of the charter, bylaws and each class of Capital Stock
of the Credit Parties and of each agreement or instrument relating to such
structure or capitalization.
(f) FEES. The Borrowers shall have paid the accrued fees and expenses owing
hereunder or in connection herewith (including, without limitation, accrued
fees and disbursements of counsel to the Agent), to the extent that such
fees and expenses have been presented for payment a reasonable time prior
to the Closing Date.
(g) LEGAL OPINION. The Agent shall have received, with a counterpart for each
Lender, the executed legal opinion of Frost & ▇▇▇▇▇▇, LLP., counsel to the
Borrowers and the other Credit Parties, substantially in the form of
EXHIBIT M. Such legal opinion shall cover such other matters incident to
the transactions contemplated by this Agreement as the Agent may reasonably
require.
(h) ACTIONS TO PERFECT LIENS. The Agent shall have received such duly executed
financing statements on form UCC-1 as may be necessary or, in the
reasonable opinion of the Agent, desirable to perfect the Liens created by
the Security Agreements.
(i) LIEN SEARCHES. The Agent shall have received the results of a recent search
by a Person reasonably satisfactory to the Agent, of the Uniform Commercial
Code, judgment and tax lien filings which may have been filed with respect
to personal property of the Borrowers, and the results of such search shall
be reasonably satisfactory to the Agent.
(j) MINIMUM CAPITALIZATION. The Agent shall have received evidence in form and
substance satisfactory to the Agent that as of the Closing Date, the sum of
Consolidated Net Worth plus Subordinated Indebtedness equals an aggregate
amount not less than $10,000,000.
(k) REVIEW OF OPERATIONS. The Agent shall have completed a review of the
operations of the Credit Parties (including, without limitation, an on-site
review of the financial statements, financial reporting and computer
systems and inventory, receivables, and equipment by the Agent), each in
scope, and with results, satisfactory to the Agent; without limiting the
generality of the foregoing, the Agent shall have been given such access to
the management, records, books of account, schedules, projections,
contracts and properties of each Credit Party as it shall have requested.
-33-
40
(l) INSURANCE. The Agent shall have received evidence in form and substance
satisfactory to the Agent of the existence of the insurance required under
subsection 6.5.
(m) BUSINESS PLAN AND PROJECTIONS. The Agent shall have received a business plan
with projections in scope and form satisfactory to the Agent.
(n) ADDITIONAL ITEMS. The Agent shall have received such other opinions or
documents as the Agent or the Majority Lenders through the Agent may
reasonably request.
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each Lender to
make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit ) is
subject to the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties
made by each of the Borrowers and each other Credit Party in or pursuant to
the Credit Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extensions of credit
requested to be made on such date.
(c) CREDIT LIMITS. The Lenders' Aggregate Outstanding Extensions of Credit after
giving effect to the extensions of credit requested to be made on such date
shall not exceed the aggregate amount of $640,000 for each Operating
Location, allocated as follows: (i) $540,000 for Show Units and (ii)
$100,000 for Retail Units.
(d) MANUFACTURER'S INVOICE AMOUNT. The Agent shall have received invoices or
bills of sale representing the Manufacturer's Invoice Amount of each item
of new Inventory to be acquired with the proceeds of the Advances to be
made on the requested Borrowing Date in form and substance satisfactory to
the Agent.
(e) NADA BOOK VALUE. The Agent shall have received evidence representing the
NADA Book Value of each item of used Inventory to be acquired with the
proceeds of the Advances to be made on the requested Borrowing Date in form
and substance satisfactory to the Agent.
(f) PRO FORMA FINANCIAL STATEMENTS. The Agent shall have received unaudited pro
forma financial statements reflecting the acquisition of each and every
Operating Location by each Borrower or its Subsidiaries as of the Closing
Date and thereafter in form and substance satisfactory to the Agent.
(g) WAIVERS. The Agent shall have received a waiver from any landlord, mortgagee
or owner to each Operating Location, executed and delivered by a duly
authorized officer of the parties thereto, in form and substance
satisfactory to the Agent.
-34-
41
(h) INSURANCE. The Agent shall have received evidence in form and substance
satisfactory to the Agent of the existence of insurance required under
subsection 6.5 for each additional item of Inventory.
(i) ADDITIONAL ITEMS. The Agent shall have received such other approvals,
opinions or documents as the Agent or the Majority Lenders through the
Agent may reasonably request.
Each borrowing by each Borrower hereunder shall constitute a joint
and several representation and warranty by the Borrowers as of the date
thereof that the applicable conditions contained in this subsection 5.2
have been satisfied.
SECTION 6: AFFIRMATIVE COVENANTS
The Borrowers hereby agree that, so long as the Commitments remain
in effect or any amount is owing to any Lender or the Agent hereunder or
under any other Credit Document, the Borrowers shall and (except in the
case of delivery of financial information and reports and notices) shall
cause each of their Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to the Agent:
(a) as soon as available, but in any event within one hundred twenty (120) days
after the end of each fiscal year of the Borrowers, a copy of the
consolidated and consolidating balance sheets of each Borrower and its
consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income and retained earnings and of cash flows
for such year, setting forth in each case in comparative form the figures
for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by independent certified public accountants of nationally
recognized standing; as soon as available, but in any event within one
hundred twenty (120) days after the end of each fiscal year of the
Borrowers, a copy of the unaudited consolidating balance sheets of each
Borrower and its consolidated Subsidiaries as at the end of such year as
customarily prepared by the Borrower for internal use;
(b) as soon as available, but in any event not later than twenty (20) days after
the end of each month, (i) the unaudited consolidated balance sheets of
each Borrower and its consolidated Subsidiaries as at the end of such month
and the related unaudited consolidated statements of income and retained
earnings and of cash flows of each Borrower and its consolidated
Subsidiaries for such month and the portion of each Borrower's fiscal year
through the end of such month, setting forth in each case in comparative
form the figures for the previous year, certified by a Responsible Officer
as being fairly stated in all material respects (subject to normal year-end
audit adjustments);
(c) as soon as available, but in any event not later than thirty (30) days after
the end of each month, the unaudited balance sheets with respect to each
Operating Location as at the end of such month and the related unaudited
consolidated statements of income and retained earnings and of cash flows
with respect to each Operating Location for such month and
-35-
42
the portion of the respective Borrower's fiscal year through the end of
such month, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such accountants or officer, as the
case may be, and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Agent:
(a) concurrently with the delivery of the financial statements referred to in
subsection 6.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating whether in the
course of conducting its annual audit they became aware of any Default or
Event of Default pertaining to accounting matters and, if so, the nature of
such Default or Event of Default;
(b) as soon as available, but in any event not later than forty-five (45) days
after the end of each fiscal quarter of the Borrowers, a certificate of a
Responsible Officer of each Borrower substantially in the form of EXHIBIT L
hereto (i) stating that, to the best of such Officer's knowledge, during
such period (A) no Subsidiary has been formed or acquired without complying
with this Agreement and the requirements of subsection 6.12 with respect
thereto, (B) neither such Borrower nor any of its Subsidiaries has changed
its name, its principal place of business, its chief executive office or
the location of any material item of tangible Collateral without complying
with the requirements of this Agreement with respect thereto, and (C) such
Borrower has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement and
the other Credit Documents to be observed, performed or satisfied by it,
and that such Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and (ii) setting forth the
computations used by such Borrower in determining (as of the end of such
fiscal period) compliance with the covenant contained in subsection 7.1;
(c) not later than one hundred twenty (120) days after the end of each fiscal
year of the Borrowers, a copy of the projections by each Borrower of the
operating budget and cash flow budget of such Borrower and its Subsidiaries
for the succeeding fiscal year as adopted by the Board of Directors of such
Borrower, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been prepared
on the basis of assumptions believed by such Borrower to be reasonable;
(d) concurrently with the delivery of the accountants' certificates referred to
in subsection 6.2(a), any comment letter submitted by such accountants to
management as of that date;
-36-
43
(e) concurrently with the delivery of the projections referred to in subsection
6.2(c), the consolidated financial plan and financial forecasts as
customarily prepared by the management of each Borrower for internal use;
(f) as soon as available, but in any event (i) not later than one hundred twenty
(120) days after the end of each fiscal year of the Borrowers, a copy of
all financial statements and regular, periodical or special reports that
such Borrower may make to, or file with, the SEC on an annual basis and
(ii) not later than forty-five (45) days after the end of each fiscal
quarter of the Borrowers, a copy of all financial statements and regular,
periodical or special reports that each Borrower may make to, or file with,
the SEC on a quarterly basis; and
(g) promptly, such additional financial and other information as any Lender may
from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or before
maturity in accordance with customary
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to engage in
business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take
all reasonable action to maintain all rights, privileges and franchises
necessary or (in the reasonable judgment of a Borrower) desirable in the
normal conduct of its business except as otherwise permitted pursuant to
subsection 7.13; comply with all Contractual Obligations and Requirements
of Law except to the extent that failure to comply therewith could not, in
the aggregate, be reasonably expected to have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Keep all material property useful and necessary in its business, including
Inventory, in good working order and condition; maintain with financially
sound and reputable insurance companies insurance policies insuring all its
material property against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Agent such policies to
be in at least such form amounts and having coverage against at least such
risks as are customarily insured against in the same general area by
companies of similar size engaged in the same or a similar business as may
be reasonably satisfactory to the Agent with losses payable to the
Borrowers and the Agent as their respective interests may appear, PROVIDED
that the aggregate amount of insurance with respect to Inventory shall be
no less than the aggregate Commitment of the Lenders;
(b) Each insurance policy described in subsection 6.5(a) shall (i) contain
endorsements, in form satisfactory to each Lender, (ii) name the Agent, as
an insured party, (iii) provide that no cancellation, material reduction in
amount or material change in coverage thereof shall be effective until at
least thirty (30) days after receipt by the Agent of written notice thereof
and (iv) be reasonably satisfactory in all other respect to the Agent. In
the event of any termination or notice of non-payment by any insurer with
respect to any policy or any
-37-
44
lapse in the coverage thereunder, the Borrowers shall cause such insurer to
give prompt written notice to each Lender of the occurrence of such
termination, nonpayment or lapse.
(c) The Borrowers shall deliver to the Agent a report of a reputable insurance
broker with respect to such insurance in each calendar year and such
supplemental reports with respect thereto as the Agent may from time to
time reasonably request.
6.6 TITLE DOCUMENTS. Keep possession of Title Documents with respect to each
item of Inventory owned by each Borrower or any of its Subsidiaries and at
the Agent's request provide either the original Title Documents or copies
of such Title Documents to the Agent.
6.7 INSPECTION OF INVENTORY. Permit representatives of the Agent or the
representatives of any Lender who accompany the representatives of the
Agent to visit any Operating Location and inspect the Inventory located
thereon at any reasonable time (upon reasonable advance notice when no
Default or Event of Default has occurred and is continuing), approximately
every thirty (30) days from the date of the first such visit PROVIDED that
such visits may occur more or less frequently as the Agent in its
discretion may reasonably desire (including without limitation, when an
Event of Default has occurred and is continuing).
6.8 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper books
of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities;
permit representatives of the Agent or any Lender to visit and inspect any
of its properties and examine and make abstracts from any of its books and
records at any reasonable time (upon reasonable advance notice when no
Default or Event of Default has occurred and is continuing) and, with
respect to the Agent, as often as may reasonably be desired, or, with
respect to any Lender other than the Agent, not more than once per calendar
year at the expense of such Lender (or if an Event of Default has occurred
and is continuing, at any reasonable time and as often as may be desired,
at the expense of the Borrowers), and to discuss the Business, operations,
properties and financial and other condition of each Borrower and its
Subsidiaries with officers and employees of each Borrower and its
Subsidiaries and with its independent certified public accountants.
6.9 NOTICES. Promptly give notice to the Agent (who shall give prompt notice
thereof to the Lenders) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual Obligation of any
Borrower or any of its Subsidiaries or (ii) litigation, investigation or
proceeding which may exist at any time between any Borrower or any of its
Subsidiaries and any Governmental Authority, which in either case, if not
cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
-38-
45
(c) any litigation or proceeding affecting any Borrower or any of its
Subsidiaries in which the amount involved is $500,000 or more and not
covered by insurance or in which injunctive or similar relief is sought
which could have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event within thirty
(30) days after any Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan that is an employee pension benefit plan (as defined in Section
3(2) of ERISA), a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan that is an employee
pension benefit plan (as defined in Section 3(2) of ERISA) or any
withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or any Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of, any Plan that is an
employee pension benefit plan (as defined in Section 3(2) of ERISA);
(e) the acquisition or creation of any Subsidiary which has Capital Stock that
is directly or indirectly owned by a Borrower or any of its Subsidiaries;
(f) any Lien (other than any Liens permitted under this Agreement) or other
event that could reasonably be expected to have a Material Adverse Effect
on the aggregate value of the Collateral or on the security interest
created by this Agreement or any other Credit Document; and
each notice pursuant to this subsection 6.9 shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Borrowers propose to take
with respect thereto.
6.10 ENVIRONMENTAL LAWS.
(a) Comply with, and use reasonable efforts to ensure compliance by all tenants
and subtenants, if any, with, all applicable Environmental Laws and obtain
and comply with and maintain, and use reasonable efforts to ensure that all
tenants and subtenants obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, except to the extent that failure to do so
could not be reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws,
except to the extent that failure to so conduct, complete or comply could
not reasonably be expected to have a Material Adverse Effect and except to
the extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not reasonably be
expected to have a Material Adverse Effect.
-39-
46
6.11 FURTHER ASSURANCES; ADDITIONAL COLLATERAL.
(a) The Agent shall have received the results of a search to be performed within
thirty (30) days of the Closing Date by a Person reasonably satisfactory to
the Agent, of the Uniform Commercial Code lien filings showing the filing
of UCC-1 financing statements in favor of the Agent for the benefit of the
Lenders and confirming the first priority position of liens of the Agent in
the Collateral under this Agreement and the other Credit Documents.
(b) Upon the request of the Agent, promptly perform or cause to be performed any
and all acts and execute or cause to be executed any and all documents
(including, without limitation, financing statements and continuation
statements) for filing under the provisions of the Uniform Commercial Code
or any Requirement of Law which are necessary or reasonably advisable to
maintain in favor of the Agent, for the benefit of the Lenders, Liens on
the Collateral that are duly perfected in accordance with all applicable
Requirements of Law.
(c) Upon request of the Agent, promptly provide such documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby as the Agent shall reasonably request.
6.12 ADDITIONAL SUBSIDIARIES. (a) With respect to any Subsidiary (including,
without limitation, a Subsidiary Borrower) created or acquired after the
Closing Date by any Borrower, promptly (i) cause such new Subsidiary to
become a party to the relevant Security Agreement and the relevant
Guarantee and the HM Services Subordination Agreement pursuant to
documentation which is in form and substance satisfactory to the Agent,
(ii) execute and deliver such amendments to this Agreement and the other
Loan Documents requested by the Agent to reflect the existence of such new
Subsidiary and (iii) if so requested by the Agent, deliver to the Agent
legal opinions relating to the matters described in clauses (i) and (ii)
immediately preceding, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary (including a Subsidiary Borrower), promptly cause such
new Subsidiary to (i) take all actions necessary or advisable to cause the
Lien created by the relevant Security Document, to be duly perfected in
accordance with all applicable Requirements of Law, including, without
limitation, the filing of recording requirements in such jurisdictions as
may be requested by the Agent and (ii) deliver to the Agent legal opinions.
(c) With respect to any Subsidiary created or acquired after the
Closing Date by any Borrower, the Borrowers may from time to time, with the
prior written consent of the Agent (which shall not be unreasonably
withheld) (i) designate such Subsidiary as a Subsidiary Borrower hereunder,
(ii) cause such additional Subsidiary Borrower to promptly become a party
to this Agreement pursuant to the documentation which is in form and
substance reasonably satisfactory to the Agent, (iii) execute and deliver
such amendments to this Agreement or other Loan Documents requested by the
agent to reflect the existence of such additional Subsidiary Borrower, (iv)
execute and deliver the Notes evidencing the Advances of each Lender to the
-40-
47
additional Subsidiary Borrower, (v) execute and deliver such other
approvals, certificates or documents requested by the Agent in its
reasonable discretion, in form and substance reasonably satisfactory to the
Agent and (vi) if so requested by the Agent, deliver to the Agent legal
opinions relating to the matters described in clauses (i), (ii), (iii),
(iv) and (v) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Agent.
SECTION 7: NEGATIVE COVENANTS
The Borrowers hereby agree that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Agent hereunder or under
any other Credit Document, the Borrowers shall not, and (except with
respect to subsection 7.1) shall not permit any of the other Credit Parties
to, directly or indirectly:
7.1 FINANCIAL CONDITION COVENANT: INDEBTEDNESS TO NET WORTH. Permit on the last
day of any fiscal quarter of the Parent Borrower, the ratio of
Indebtedness of the Parent Borrower and its Subsidiaries on a
consolidated basis on such date to Consolidated Tangible Net Worth on
such date to be greater than 3.00 to 1.00.
7.2 LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK. Create, incur, assume or
suffer to exist any Indebtedness or preferred stock (other than
preferred stock which, by its terms, does not require the payment of
any cash dividends thereon or redemption/reimbursement obligations or
impose any cash penalties (other than accrual of dividends on unpaid
dividends) for the failure to declare cash dividends thereon), except:
(a) Indebtedness of the Borrowers under this Agreement;
(b) current trade liabilities incurred in the ordinary course of business;
(c) Indebtedness of any Credit Party to the Borrowers or any other Credit Party
which has executed a Subsidiaries Guarantee and a Subsidiaries Security
Agreement;
(d) Indebtedness outstanding on the date hereof and listed on SCHEDULE IV and
any refinancings, refundings, renewals or extensions thereof in an
amount not to exceed the then current principal amount thereof;
(e) Indebtedness of a corporation which becomes a Subsidiary after the date
hereof PROVIDED that (i) such Indebtedness existed at the time such
corporation became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such corporation by any Borrower no Default or Event of Default shall
have occurred and be continuing;
(f) additional Indebtedness not exceeding in aggregate principal amount at any
one time outstanding: $500,000; and
(g) Guarantee Obligations permitted pursuant to subsection 7.4.
-41-
48
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any Lien
upon any of its property, inventory, assets or revenues, whether now
owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good faith by
appropriate proceedings, PROVIDED that adequate reserves with respect
thereto are maintained on the books of such Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialsmen's, repairmen's or other
like Liens arising in the ordinary course of business for sums which
are not overdue for a period of more than ninety (90) days or which are
being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security legislation and deposits securing
liability to insurance carriers under insurance or self-insurance
arrangements;
(d) Liens in existence on the date hereof listed on SCHEDULE VI, securing
Indebtedness permitted by subsection 7.2(d), PROVIDED that no such Lien
is spread to cover any additional property after the date hereof and
that the amount of Indebtedness secured thereby is not increased; and
(e) Liens on the property or assets of a corporation which becomes a Subsidiary
after the date hereof securing Indebtedness permitted by subsection
7.2(e), PROVIDED that (i) such Liens existed at the time such
corporation became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any additional
property or assets of such corporation after the time such corporation
becomes a Subsidiary, and (iii) the amount of Indebtedness secured
thereby is not increased.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or suffer to
exist any Guarantee Obligation, except:
(a) Guarantee Obligations in existence on the date hereof and listed on
SCHEDULE VII;
(b) guarantees made by a Borrower of obligations of any of its Subsidiaries,
which obligations are otherwise permitted under this Agreement; and
(c) guarantees made by Subsidiaries of any Borrower of obligations of any
Borrower or any of its Subsidiaries, which obligations are otherwise
permitted under this Agreement.
7.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property,
business or assets, except:
-42-
49
(a) any Subsidiary of any Borrower may be merged or consolidated with or into
any Borrower (PROVIDED that such Borrower shall be the continuing or
surviving corporation) or with or into any one or more Subsidiaries
wholly owned by any Borrower (PROVIDED that the wholly owned Subsidiary
or Subsidiaries shall be the continuing or surviving corporation);
(b) any wholly owned Subsidiary by of any Borrower may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to any Borrower or any other wholly owned
Subsidiary of any Borrower; and
(c) any Subsidiary of any Borrower may enter into any transaction permitted by
this subsection 7.5 or subsection 7.6.
7.6 LIMITATION ON SALE OF ASSETS.Convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, to any Person other than any
Borrower or any wholly owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out property (including,
without limitation, any property which is no longer used or useful in
the business of a Borrower and its Subsidiaries) in the ordinary course
of business; and
(b) the sale or transfer of inventory (including, without limitation,
"out-of-date" and "less than first quality" inventory) in the ordinary
course of business.
7.7 LIMITATION ON DIVIDENDS. Declare or pay any dividend on, or make any
payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of Capital Stock of any
Borrower or any warrants or options to purchase any such Stock, whether
now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or
in obligations of the Borrower or any Subsidiary (such declarations,
payments, setting apart, purchases, redemptions, defeasances,
retirements, acquisitions and distributions being herein called
"RESTRICTED PAYMENTS").
7.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance, loan,
extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any
Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of a Borrower or its Subsidiaries for
travel, entertainment and relocation expenses in the ordinary course of
business;
-43-
50
(d) investments in existence on the date hereof which are described on
SCHEDULE VIII hereof;
(e) the Borrowers may make intercompany loans and advances to wholly owned
Subsidiaries which have executed a Subsidiaries Guarantee and
Subsidiaries Security Agreement; and
(f) other advances, loans and extensions of credit in an aggregate amount not
to exceed $500,000.
7.9 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b)
in the ordinary course of such Borrower's or such Subsidiary's business
and (c) upon fair and reasonable terms no less favorable to such
Borrower or such Subsidiary, as the case may be, than it would obtain
in a comparable arm's length transaction with a Person which is not an
Affiliate.
7.10 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement with any
Person providing for the leasing by any Borrower or any Subsidiary of
real or personal property which has been or is to be sold or
transferred by such Borrower or such Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such
Person on the security of such property or rental obligations of such
Borrower or such Subsidiary.
7.11 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of any of the
Borrowers to end on a day other than December 31.
7.12 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any Person any
agreement, other than this Agreement, purchase money mortgages,
Financing Leases and other similar fixed asset financings permitted by
this Agreement (in which cases, any prohibition or limitation shall
only be effective against the assets financed thereby), which prohibits
or limits the ability of each of the Borrowers or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired.
7.13 LIMITATION ON LINES OF BUSINESS. Enter into any business, either directly
or through any Subsidiary, except for (a) the businesses and businesses
of a similar type in which any Borrower and any Subsidiaries are
engaged on the date hereof and (b) other activities relating thereto.
SECTION 8: EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Advance when due in
accordance with the terms hereof or any other Credit Document, or any
Borrower shall fail to pay any interest on any Advance, or any other
amount payable hereunder or any other Credit
-44-
51
Document, within five (5) Business Days after any such interest or
other amount becomes due in accordance with the terms thereof or
hereof; or
(b) Any representation or warranty made or deemed made by any Borrower or any
other Credit Party herein or in any other Credit Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement
or any such other Credit Document shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or
(c) Any Borrower or any other Credit Party shall default in the observance or
performance of any agreement contained in Section 7 or any negative
covenant contained in any other Credit Document; or
(d) Any Borrower or any other Credit Party shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Credit Document (other than as provided in paragraphs (a) through
(c) of this Section 8), and such default shall continue unremedied for
a period of thirty (30) days from the earlier of the date on which (i)
the Agent provides notice to the Borrowers thereof or (ii) a
Responsible Officer of any Borrower has knowledge of such default; or
(e) Any Borrower or any of the other Credit Parties shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Advances) or in the payment of any Guarantee Obligation, beyond the
period of grace, (not to exceed sixty (60) days), if any, provided in
the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or Agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice or
the passage of time if required, such Indebtedness to become due prior
to its stated maturity or such Guarantee Obligation to become payable;
PROVIDED, HOWEVER, that no Default or Event of Default shall exist
under this paragraph unless the aggregate amount of Indebtedness and/or
Guarantee Obligations in respect of which any default or other event or
condition referred to in this paragraph shall have occurred shall be
equal to at least $500,000; or
(f) An Event of Default shall have occurred and be continuing under, and as
defined in, the HM Facility or the ZN Facility regardless of whether or
not such facility has terminated; or
(g) Any Borrower or any other Credit Party shall commence any case, proceeding
or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
-45-
52
dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any
substantial part of its assets, or any Borrower or any Subsidiary shall
make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against any Borrower or any Subsidiary any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of thirty (30) days; or (iii) there shall be
commenced against any Borrower or any Subsidiary any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within thirty (30) days from the entry thereof, or (iv) any
Borrower or any Subsidiary shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) any Borrower
or any Subsidiary shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(h) (i) Any Person shall engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of
any Borrower or any Commonly Controlled Entity, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in
the reasonable opinion of the Majority Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) any Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Majority Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other adverse event
or condition shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could
reasonably be expected to involve an aggregate amount of liability to
any Borrower or any Subsidiary in excess of $500,000; or
(i) One or more judgments or decrees shall be entered against any Borrower or
any Credit Party involving in the aggregate a liability (not paid or
fully covered by insurance) of $500,000 or more, and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within thirty (30) days from the entry thereof; or
(j) (i) any of the Security Documents shall cease, for any reason (other than a
partial or full release in accordance with the terms hereof or
thereof), to be in full force and effect or any Borrower or any other
Credit Party which is a party to the Security Documents shall
-46-
53
so assert, (ii) the Lien created by any of the Security Documents shall
cease to be enforceable and of the same effect and priority purported to be
created thereby, (iii) any Guarantee shall cease, for any reason, to be in
full force and effect or any Guarantor shall so assert, (iv) the HM
Services Subordination Agreement shall cease, for any reason, to be in
force and effect or any party thereto shall so assert, (v) the ZN Letter
Agreement shall cease, for any reason, to be in full force and effect or
any party thereto shall so assert or (vi) the ZN Net Worth Agreement shall
cease, for any reason, to be in full force and effect or any party thereto
shall so assert;
(k) Any Change in Control shall occur;
then, and in any such event, (i) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (g) of this Section 8 with
respect to the Borrowers, automatically the Commitments shall immediately
terminate and the Advances hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement shall immediately become due
and payable, and (ii) if such event is any other Event of Default, either
or both of the following actions may be taken: (A) with the consent of the
Majority Lenders, the Agent may, or upon the request of the Majority
Lenders, the Agent shall, by notice to the Borrowers declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (B) with the consent of the Majority Lenders,
the Agent may, or upon the request of the Majority Lenders, the Agent
shall, by notice to the Borrowers, declare the Advances hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Section
8, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
SECTION 9: THE AGENT
9.1 APPOINTMENT. (a) Each Lender hereby irrevocably designates and appoints
NationsBank, N.A., as the Agent of such Lender under this Agreement and
the other Credit Documents, and each such Lender irrevocably authorizes
the Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Credit Document or otherwise
exist against the Agent.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this
Agreement and the other Credit Documents by or through administrative
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The
-47-
54
Agent shall not be responsible for the negligence or misconduct of any
administrative agents or attorneys-in-fact selected by it with reasonable
care.
9.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers,
directors, employees, administrative agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted
to be taken by it or such Person under or in connection with this
Agreement or any other Credit Document (except for its or such Person's
own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Borrowers or any officer
thereof contained in this Agreement or any other Credit Document or in
any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with,
this Agreement or any other Credit Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Credit Document or for any failure of any
Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Credit
Document, or to inspect the properties, books or records of the
Borrowers.
9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to any Borrower),
independent accountants and other experts selected by the Agent.
Without limiting the foregoing or the obligation of the Borrowers to
confirm in writing any telephonic notice permitted to be given
hereunder, the Agent may prior to receipt of written confirmation act
without liability upon the basis of such telephonic notice, believed by
the Agent in good faith to be from a Responsible Officer of any
Borrower or Subsidiary. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with
the Agent. The Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Credit Document
unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking
or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Agreement and the other Credit Documents in accordance with a request
of the Majority Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Advances.
9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder
unless the Agent has received notice from a Lender or a Borrower
referring to this Agreement, describing such Default
-48-
55
or Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice, the Agent
shall give notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Lenders; PROVIDED that unless and
until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly acknowledges
that neither the Agent nor any of its officers, directors, employees,
administrative agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the
Borrowers, shall be deemed to constitute any representation or warranty
by the Agent to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrowers and made its own decision to make its
Advances hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Credit Documents, and to make
such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrowers. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the
Borrowers which may come into the possession of the Agent or any of its
officers, directors, employees, administrative agents,
attorneys-in-fact or Affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its capacity
as such (to the extent not reimbursed by the Borrowers and without
limiting the joint and several obligation of the Borrowers to do so),
ratably according to their respective Commitment Percentages in effect
on the date on which indemnification is sought (such Commitment
Percentage to be determined as if there are not Defaulting Lenders),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Advances) be
imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of
the other Credit Documents or any documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by the Agent under or in connection with
any of the foregoing; PROVIDED that no Lender shall be liable for the
payment of any portion of
-49-
56
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely
from the Agent's gross negligence or willful misconduct. To the extent
that any Lender would be required to indemnify the Agent pursuant to
this subsection 9.7 but for the fact that it is a Defaulting Lender,
such Defaulting Lender shall not be entitled to receive any portion of
any payment or other distribution hereunder until each other Lender
shall have been reimbursed for the excess, if any, of the aggregate
amount paid by such Lender under this subsection 9.7 over the aggregate
amount that such Lender would have been obligated to pay had such first
Lender not been a Defaulting Lender. The agreements in this subsection
9.7 shall survive the payment of the Advances and all other amounts
payable hereunder.
9.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and each of its respective
Affiliates may make Advances to, accept deposits from and generally
engage in any kind of business with the Borrowers as though the Agent
were not the Agent hereunder and under the other Credit Documents. With
respect to its Advances made or renewed by it and any Note issued to
it, the Agent shall have the same rights and powers under this
Agreement and the other Credit Documents as any Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its respective individual
capacity.
9.9 SUCCESSOR AGENT. The Agent may resign as Agent upon ten (10) days' notice
to the Lenders and Borrowers. If the Agent shall resign as Agent under
this Agreement and the other Credit Documents, then the Majority
Lenders shall appoint from among the Lenders a successor Agent for the
Lenders, which successor Agent (PROVIDED that it shall have been
approved by the Borrowers), shall succeed to the rights, powers and
duties of the Agent hereunder. Effective upon such appointment and
approval, the term "Agent" shall mean such successor Agent, and the
former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holders of the
Advances. After any retiring Agent's resignation as Agent, the
provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Credit Documents.
SECTION 10: MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Credit
Document, nor any terms hereof or thereof, may be amended, supplemented
or modified except in accordance with the provisions of this subsection
10.1. The Majority Lenders may, or, with the written consent of the
Majority Lenders, the Agent may, from time to time, (a) enter into with
the Borrowers written amendments, supplements or modifications hereto
and to the other Credit Documents for the purpose of adding any
provisions to this Agreement or the other Credit Documents or changing
in any manner the rights of the Lenders or of the Borrowers hereunder
or thereunder or (b) waive, on such terms and conditions as the
Majority Lenders or the Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other
Credit Documents or
-50-
57
any Default or Event of Default and its consequences; PROVIDED,
HOWEVER, that no such waiver and no such amendment, supplement or
modification shall:
(i) reduce the amount or extend the scheduled date of maturity
of any Advance or of any installment thereof, or reduce
the stated rate of any interest or fee payable hereunder
or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any
Lenders' Commitments, in each case without the consent of
each Non-Defaulting Lender directly affected thereby;
(ii) amend, modify or waive any provision of this subsection 10.1
or reduce the percentage specified in the definition of
Majority Lenders, or consent to the assignment or
transfer by any Borrower of any rights and obligations
under this Agreement and the other Credit Documents, in
each case without the written consent of all the
Non-Defaulting Lenders;
(iii) consent to the assignment or transfer by any Borrower of
any rights and obligations under this Agreement and the
other Credit Documents, in each case without the written
consent of all the Non-Defaulting Lenders;
(iv) take any action having the effect of releasing any of the
material collateral or material guarantee obligations
provided for in any Guarantee, or any Security Document
in each case without the written consent of the
Non-Defaulting Lenders;
(v) amend, modify or waive any provision of Section 10 without
the written consent of the then Agent.
Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders (including Defaulting
Lenders) and shall be binding upon each Borrower, the Lenders
(including Defaulting Lenders) , the Agent and all future holders of
the Advances. In the case of any waiver, the Borrowers, the Lenders
(including Defaulting Lenders) and the Agent shall be restored to their
former positions and rights hereunder and under the other Credit
Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right
consequent thereon.
10.2 RELEASES OF COLLATERAL SECURITY AND GUARANTEE OBLIGATIONS. Notwithstanding
anything to the contrary contained herein or in any Security Document,
upon request of the Borrowers, the Agent shall (without any notice to
or vote or consent of any Lender) take any action which has the effect
of releasing any collateral security and/or guarantee obligations
provided for in any Credit Document to the extent necessary to permit
the consummation of any Proceeds Event or any asset dispositions
permitted by subsection 7.6; PROVIDED
-51-
58
that (unless the Majority Lenders shall otherwise consent) the Proceeds
of any Proceeds Event are applied in the manner contemplated by
subsection 3.6 (if so required).
10.3 NOTICES. Unless otherwise expressly provided herein, all notices, requests
and demands to or upon the respective parties hereto to be effective
shall be in writing (including by facsimile transmission) and, unless
otherwise expressly provided herein, shall be deemed to have been duly
given or made (a) in the case of delivery by hand, when delivered, (b)
in the case of delivery by mail, three (3) days after being deposited
in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed,
addressed as follows in the case of the Borrowers and the Agent, and as
set forth in SCHEDULE I in the case of the other parties hereto, or to
such other address as may be hereafter notified by the respective
parties hereto:
The Borrowers:
HomeMax, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Vice President and Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
---------------
Frost & ▇▇▇▇▇▇, LLP.
2500 PNC Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
The Agent:
NationsBank, N.A.,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇, Vice President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
---------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
-52-
59
Attention: M. ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
PROVIDED that any notice, request or demand to or upon the Agent pursuant
to subsection 2.2, 3.4 or 3.5 shall not be effective until received.
10.4 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in
exercising on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Credit Documents shall
operate as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this
Agreement and the making of the Advances hereunder.
10.6 PAYMENT OF EXPENSES AND TAXES. The Borrowers, jointly and severally, agree
(a) to pay or reimburse the Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of any amendment, supplement or
modification to, this Agreement and the other Credit Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Agent, (b) to pay or reimburse each
Lender and the Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under
this Agreement, the other Credit Documents and any such other
documents, including, without limitation, the reasonable fees and
disbursements of counsel to each Lender and of counsel to the Agent,
(c) to pay, indemnify, and hold each Lender and the Agent harmless
from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise
and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated
by, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement, the other Credit
Documents and any such other documents, and (d) to pay, indemnify, and
hold each Lender and the Agent harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Credit
Documents or the use of the proceeds of the Advances and any such other
documents, including, without limitation, any of the foregoing relating
to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the
-53-
60
operations of any Borrower, any of its Subsidiaries or any of the
Properties (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"), PROVIDED that the Borrowers shall have no
obligation hereunder to the Agent or any Lender with respect to
indemnified liabilities to the extent arising from the gross negligence
or willful misconduct of the Agent or such Lender. The agreements in
this subsection 10.6 shall survive repayment of the Advances and all
other amounts payable hereunder.
10.7 TERMINATION. This Agreement shall terminate upon the termination of all
Commitments and the irrevocable repayment in full of the aggregate
outstanding principal amount of the Advances, accrued interest thereon,
and all fees and expenses and other amounts due and payable at such
time under any of the Credit documents; provided that all indemnities
set forth herein including, without limitation, in subsections 3.13,
3.14, 3.15, 3.16, 9.7 and 10.6 shall survive such termination.
10.8 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Agent and their respective successors and
assigns, except that no Borrower may assign or transfer any of its
rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking business
and in accordance with applicable law, at any time sell to one or more
banks or other financial institutions ("PARTICIPANTS") participating
interests in any Advance owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the
other Credit Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations
under this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall
remain the holder of any such Advance for all purposes under this
Agreement and the other Credit Documents, and the Borrowers and the
Agent 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 Credit Documents. No Lender shall be entitled
to create in favor of any Participant, in the participation agreement
pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any
matter relating to this Agreement or any other Credit Document except
for those specified in clauses (a) and (b) of the proviso to subsection
10.1. The Borrowers agree that if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law,
be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if
the amount of its participating interest were owing directly to it as a
Lender under this Agreement, PROVIDED that, in purchasing such
participating interest, such Participant shall be deemed to have agreed
to share with the Lenders the proceeds thereof as fully as if it were a
Lender hereunder. The Borrowers also agree that each Participant shall
be entitled
-54-
61
to the benefits of subsections 3.14, 3.15 and 3.16 with respect to its
participation in the Commitments and the Advances outstanding from time
to time as if it was a Lender; PROVIDED that, in the case of subsection
3.15, such Participant shall have complied with the requirements of
said subsection and PROVIDED, FURTHER, that no Participant shall be
entitled to receive any greater amount pursuant to any such subsection
than the Lenders would have been entitled to receive in respect of the
amount of the participation transferred by such Lender to such
Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking business
and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent
of the Borrowers and the Agent (which in each case shall not be
unreasonably withheld), to an additional bank or financial institution
(an "ASSIGNEE") all or any part of its rights and obligations under
this Agreement and the other Credit Documents pursuant to an Assignment
and Acceptance, substantially in the form of EXHIBIT N, executed by
such Assignee, such assigning Lender (and, in the case of an Assignee
that is not then a Lender or an affiliate thereof, by the Borrowers and
the Agent) and delivered to the Agent for its acceptance and recording,
PROVIDED that, in the case of any such assignment to an additional bank
or financial institution, (x) the aggregate principal amount of the
Advance (or, prior to the Closing Date, Commitment) being assigned is
not less than $3,000,000 (or such lesser amount as may be agreed to by
the Borrowers and the Agent) and (y) if such assignment is of less than
all of the rights and obligations of the assigning Lender, the
aggregate principal amount of the Advance (or, prior to the Closing
Date, Commitment) remaining with the assigning Lender is not less than
$3,000,000 (or such lesser amount as may be agreed to by the Borrowers
and the Agent). Upon such execution, delivery, acceptance and recording
(and the payment of the registration and processing fee described in
clause (e) below), from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder
shall be a party hereto and, to the extent provided in such Assignment
and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and,
in the case of an Assignment and Acceptance covering all or the
remaining portion of the Lenders' rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this paragraph (c) of this subsection,
the consent of the Borrowers shall not be required for any assignment
which occurs at any time when any of the events described in subsection
8(g) shall have occurred and be continuing.
(d) The Agent, on behalf of the Borrowers, shall maintain at the address of the
Agent referred to in subsection 10.3 a copy of each Assignment and
Acceptance delivered to it and a register (the "REGISTER") for the
recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Advances owing to, each
Lender from time to time. The entries in the Register shall, to the
extent permitted by applicable law, be prima facie evidence of the
existence and amounts of the obligations therein recorded. The
Borrowers, the Agent and the Lenders may (and, in the case of any
Advance or other
-55-
62
obligation hereunder not evidenced by a Note, shall) treat each Person
whose name is recorded in the Register as the owner of an Advance or
other obligation hereunder as the owner thereof for all purposes of
this Agreement and the other Credit Documents, notwithstanding any
notice to the contrary. Any assignment of any Advance or other
obligation hereunder not evidenced by a Note shall be effective only
upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by any
Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an assigning
Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrowers and the Agent),
together with payment to the Agent of a registration and processing fee
of $2,500, the Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto
record the information contained therein in the Register and give
notice of such acceptance and recordation to the Lenders and the
Borrowers; PROVIDED that no such fee shall be payable with respect to
any assignment from an assigning Lender to an affiliate thereof.
(f) The Borrowers authorize each Lender to disclose to any Participant or
Assignee (each, a "TRANSFEREE") and any prospective Transferee any and
all financial information in such Lenders' possession concerning any
Borrower and any Affiliate of a Borrower which has been delivered to
such Lender by or on behalf of such Borrower pursuant to this Agreement
or which has been delivered to such Lender by or on behalf of the
Borrowers in connection with such Lenders' credit evaluation of any
such Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge that the
provisions of this subsection 10.8 concerning assignments of Advances
and Notes relate only to absolute assignments and that such provisions
do not prohibit assignments creating security interests, including,
without limitation, any pledge or assignment by a Lender of any Advance
or Note to any Federal Reserve Bank in accordance with applicable law.
10.9 ADJUSTMENTS; SET-OFF.
(a) If any Lender (a "BENEFITED LENDER") at any time shall receive any payment
of all or part of its Advances or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
subsection 8(g), or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if any, in
respect of such other Lenders' Advances or interest thereon, such
benefited Lender shall purchase for cash from the other Lenders such
portion of each such other Lenders' Advances, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefited Lender to share
the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders, and if after taking into account such sharing
the benefited Lender continues to have access to addition funds of
-56-
63
or collateral granted by any Borrower for application on account of its
debt, then the benefited Lender shall use such funds or collateral to
reduce debt of any Borrower held by it and share such payments and the
benefits of such collateral with the other Lenders; PROVIDED, HOWEVER,
that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Borrowers, jointly and
severally, agree that each Lender so purchasing a portion of another
Lenders' Advances may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as
fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by law, each
Lender shall have the right, without prior notice to any Borrower, any
such notice being expressly waived by each Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable
by any Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against
such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch, agency or (to the extent
permitted by applicable law) banking affiliate thereof to or for the
credit or the account of any Borrower. Each Lender agrees promptly to
notify the Borrowers and the Agent or any Lender after any such set-off
and application made by such Lender, PROVIDED that the failure to give
such notice shall not affect the validity of the set-off and
application.
10.10 JOINT AND SEVERAL LIABILITY. WHETHER OR NOT EXPRESSLY STATED HEREIN OR IN
ANY OTHER CREDIT DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY
BORROWER) HEREUNDER AND UNDER EACH OTHER CREDIT DOCUMENT (WHETHER IN
CONNECTION WITH ADVANCES OR OTHER OBLIGATIONS) ARE JOINT AND SEVERAL
OBLIGATIONS OF ALL BORROWERS.
10.11 MAXIMUM AMOUNT OF JOINT AND SEVERAL LIABILITY. To the extent that
applicable Law otherwise would render the full amount of the joint and
several obligations of any Subsidiary Borrower hereunder and under the
other Credit Documents invalid or unenforceable, such Subsidiary
Borrower's obligations hereunder and under the Credit Documents shall
be limited to the maximum amount which does not result in such
invalidity or unenforceability, PROVIDED, HOWEVER, that each Borrower's
obligations hereunder and under the other Credit Documents shall be
presumptively valid and enforceable to their fullest extend in
accordance with the terms hereof or thereof, as if this subsection
10.11 were not a part of this Agreement.
10.12 COUNTERPARTS. This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together
shall be deemed to constitute one and the same
-57-
64
instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrowers and the Agent.
10.13 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
10.14 INTEGRATION. This Agreement and the other Credit Documents represent the
agreement of the Borrowers, the Agent and the Lenders with respect to
the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Lender relative to
subject matter hereof not expressly set forth or referred to herein or
in the other Credit Documents.
10.15 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA.
10.16 SUBMISSION TO JURISDICTION; WAIVERS. Each Borrower hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Credit Documents to which it
is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of North Carolina, the courts of the United States
of America for the 4th Circuit, and appellate courts from any thereof,
(b) consent that any such action or proceeding may be brought in such courts and
waive any objection that it may now or hereafter have to the venue of
any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agree not to plead
or claim the same;
(c) agree that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to a Borrower
at its address set forth in subsection 10.3 or at such other address of
which the Lenders shall have been notified pursuant thereto;
(d) agree that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right
to ▇▇▇ in any other jurisdiction; and
(e) waive, except in the case of extreme bad faith (and otherwise to the maximum
extent not prohibited by law), any right it may have to claim or
recover in any legal action or proceeding referred to in this
subsection 10.16 any special, exemplary, punitive or consequential
damages.
-58-
65
10.17 ACKNOWLEDGMENTS. The Borrowers hereby acknowledge that:
(a) each Borrower has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Credit Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship with or
duty to any of the Borrowers arising out of or in connection with this
Agreement or any of the other Credit Documents, and the relationship
between Agent and Lenders, on the one hand, and the Borrowers, on the
other hand, in connection herewith is solely that of debtors and
creditors; and
(c) no joint venture is created hereby or by the other Credit Documents or
otherwise exists by virtue of the transactions contemplated hereby
among the Borrowers and the Lenders.
10.18 WAIVERS OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
THE BORROWERS, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
-59-
66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
NATIONSBANK, N.A.,
AS AGENT AND LENDER
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇
Vice President
HOMEMAX, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President
HOMEMAX NORTH CAROLINA, INC.
HOMEMAX OHIO, INC.
HOMEMAX SOUTH CAROLINA, INC.
HOMEMAX TENNESSEE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
-60-
67
HOMEMAX INDIANA, LLC
By: HOMEMAX, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President
By: HOMEMAX NORTH CAROLINA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
HOMEMAX KENTUCKY, LLC
By: HOMEMAX, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President
By: HOMEMAX NORTH CAROLINA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President
-61-
68
SCHEDULE I
----------
LENDERS; ADDRESSES FOR NOTICES
------------------------------
1. NATIONSBANK, N.A.,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇, Vice President
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
69
SCHEDULE II
-----------
COMMITMENTS AND COMMITMENT PERCENTAGES
--------------------------------------
Lender Commitment Commitment Percentage
------ ---------- ---------------------
NATIONSBANK, N.A. $33,920,000 100%
70
SCHEDULE III
------------
HOMEMAX, INC. GROUP
SUBSIDIARIES:
-------------------
NAME STATUS JURISDICTION OF INCORPORATION OWNERSHIP PERCENTAGE
----------------------------------------------------------------------------------------------------------------
HomeMax Indiana, LLC Subsidiary Borrower Indiana 99%*
HomeMax Kentucky LLC Subsidiary Borrower Kentucky 99%*
HomeMax North Carolina, Inc. Subsidiary Borrower North Carolina 100%
HomeMax Ohio, Inc. Subsidiary Borrower Ohio 100%
HomeMax South Carolina, Inc. Subsidiary Borrower South Carolina 100%
HomeMax Tennessee, Inc. Subsidiary Borrower Tennessee 100%
HM Services, Inc. Guarantor Delaware 100%
HM Properties, Inc. Guarantor Delaware 100%
* Remaining 1% ownership by HomeMax North Carolina, Inc.
71
SCHEDULE IV
-----------
HOMEMAX, INC. GROUP
INDEBTEDNESS
------------
LONG TERM INDEBTEDNESS
As Of February 19, 1998
ENTITY ISSUE TYPE BANK ISSUE MATURITY RATE AMOUNT
DATE DATE
------------------------------------------------------------------------------------------------------------------------------------
HomeMax, Inc. 2/23/98 2/23/2003 Greater of $12,000,000
Promissory Note Prime Rate or the
NationsBank, N.A. Federal
Funds Effective Rate
(Agent)
HomeMax, Inc.
HomeMax Indiana, LLC
HomeMax Kentucky LLC
HomeMax North Carolina, Inc.
HomeMax Ohio, Inc.
HomeMax South Carolina, Inc.
HomeMax Tennessee, Inc.
72
SCHEDULE V
----------
HOMEMAX, INC. GROUP
U.C.C. Financing Statements
---------------------------
HomeMax, Inc.
1- Indiana Secretary of State
1- Kentucky Secretary of State
1- North Carolina Secretary of ▇▇▇▇▇
▇- ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇- ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ Recorder
1- South Carolina Secretary of State
1- Tennessee Secretary of State
HomeMax Indiana, LLC
1- Indiana Secretary of State
HomeMax Kentucky, LLC
1- Kentucky Secretary of State
HomeMax North Carolina, Inc.
1- North Carolina ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇- ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ Recorder
1- Forsyth County, NC Recorder
1- Person County, NC Recorder
1- Wake County, NC Recorder
HomeMax Ohio, Inc.
1- Ohio ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇- ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ Recorder
HomeMax ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇.
▇- ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Secretary of State
HomeMax Tennessee, Inc.
1- Tennessee Secretary of State
73
HM Services, Inc.
1- Ohio Secretary of State
1- North Carolina Secretary of State
HM Properties (None)
74
SCHEDULE VI
-----------
HOMEMAX, INC. GROUP
LIENS
-----
HomeMax, Inc. UCC-1 filings for furniture and computer
equipment leased from CLG, Inc. and
Colonial Pacific Leasing Corporation*
HomeMax Indiana, LLC N/A
HomeMax Kentucky LLC N/A
HomeMax North Carolina, Inc. N/A
HomeMax Ohio, Inc. N/A
HomeMax South Carolina, Inc. N/A
HomeMax Tennessee, Inc. N/A
HM Properties, Inc. N/A
HM Services, Inc. N/A
*See Attachment 1 to Schedule VI
75
Attachment 1 to Schedule VI
---------------------------
LESSOR NATURE OF LEASE ITEMS LEASED UCC FILING
CLG Inc. Equipment Lease Agreement Misc. computer equipment Yes
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ dated 8/22/97 Modular Office Furniture
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and Supplements
Colonial Pacific Leasing Company Master Equipment Lease Modular Office Furniture Yes
▇.▇. ▇▇▇ ▇▇▇▇▇▇ dated 9/22/97
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and Addendums
76
SCHEDULE VII
------------
HOMEMAX, INC. GROUP
GUARANTEES
----------
HomeMax, Inc.
HomeMax Indiana, LLC
HomeMax Kentucky, LLC
HomeMax North Carolina, Inc.
HomeMax Ohio, Inc.
HomeMax South Carolina, Inc.
HomeMax Tennessee, Inc.
EACH OF THE ENTITIES LISTED ABOVE HAS DELIVERED THE FOLLOWING
GUARANTEES:
(1) Guarantee of $15,000,000 loan dated February 23, 1998 delivered
to NationsBank, as agent for itself and the other lenders (collectively,
"Lenders"), under the Credit Agreement between ▇▇▇▇▇▇ National Corporation and
Lenders dated February 23, 1998.
(2) Guarantee of $12,000,000 loan dated February 23, 1998 delivered
to NationsBank, as agent for itself and the other lenders (collectively,
"Lenders"), under the Credit Agreement between HomeMax, Inc. and Lenders dated
February 23, 1998.
77
SCHEDULE VIII
-------------
HOMEMAX, INC. GROUP
EXISTING INVESTMENTS
--------------------
Entity Investment
------ ----------
HomeMax, Inc. Subsidiaries
HomeMax Indiana, LLC N/A
HomeMax Kentucky, LLC N/A
HomeMax North Carolina, Inc. N/A
HomeMax Ohio, Inc. N/A
HomeMax South Carolina, Inc. N/A
HomeMax Tennessee, Inc. N/A