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WEC COMPANY
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LOAN AND SECURITY AGREEMENT
Dated: February 7, 2001
$50,000,000
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FLEET CAPITAL CORPORATION
Individually and as Agent for any Lender which is
or becomes a Party hereto
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TABLE OF CONTENTS
Page
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SECTION 1. CREDIT FACILITY................................................ 1
1.1. Loans.......................................................... 1
1.2. Letters of Credit; LC Guaranties............................... 2
SECTION 2. INTEREST, FEES AND CHARGES..................................... 3
2.1. Interest....................................................... 3
2.2. Computation of Interest and Fees............................... 3
2.3. LIBOR Option................................................... 3
2.4. Fee Letter..................................................... 5
2.5. Letter of Credit and LC Guaranty Fees.......................... 5
2.6. Unused Line Fee................................................ 5
2.7. Prepayment Fee................................................. 6
2.8. Capital Adequacy............................................... 6
2.9. Audit Fees..................................................... 6
2.10. Reimbursement of Expenses...................................... 7
2.11. Bank Charges................................................... 7
2.12. Collateral Protection Expenses; Appraisals..................... 8
2.13. Payment of Charges............................................. 8
2.14. No Deductions.................................................. 8
2.15. Fees Relating to Dealer Financing Arrangement.................. 9
SECTION 3. LOAN ADMINISTRATION............................................ 9
3.1. Manner of Borrowing Revolving Credit Loans..................... 9
3.2. Payments....................................................... 11
3.3. Mandatory and Optional Prepayments............................. 12
3.4. Application of Payments and Collections........................ 13
3.5. All Loans to Constitute One Obligation......................... 14
3.6. Loan Account................................................... 14
3.7. Statements of Account.......................................... 14
3.8. Sharing of Payments, Etc....................................... 14
SECTION 4. TERM AND TERMINATION........................................... 15
4.1. Term of Agreement.............................................. 15
4.2. Termination.................................................... 15
SECTION 5. SECURITY INTERESTS............................................. 16
5.1. Security Interest in Collateral................................ 16
5.2. Lien Perfection; Further Assurances............................ 16
5.3. Lien on Realty................................................. ▇▇
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▇▇▇▇▇▇▇ ▇. COLLATERAL ADMINISTRATION...................................... 17
6.1. General........................................................ 17
6.2. Administration of Accounts..................................... 18
6.3. Records and Reports of Inventory............................... 20
6.4. Administration of Equipment.................................... 20
SECTION 7. REPRESENTATIONS AND WARRANTIES................................. 21
7.1. General Representations and Warranties......................... 21
7.2. Continuous Nature of Representations and Warranties............ 28
7.3. Survival of Representations and Warranties..................... 28
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS............................ 28
8.1. Affirmative Covenants.......................................... 28
8.2. Negative Covenants............................................. 32
8.3. Specific Financial Covenants................................... 40
SECTION 9. CONDITIONS PRECEDENT........................................... 40
9.1. Documentation.................................................. 40
9.2. No Default..................................................... 40
9.3. Other Conditions............................................... 40
9.4. Excess Availability............................................ 41
9.5. No Litigation.................................................. 41
9.6. Material Adverse Effect........................................ 41
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT............. 41
10.1. Events of Default.............................................. 41
10.2. Acceleration of the Obligations................................ 44
10.3. Other Remedies................................................. 44
10.4. Set Off and Sharing of Payments................................ 46
10.5. Remedies Cumulative; No Waiver................................. 46
SECTION 11. THE AGENT..................................................... 47
11.1. Authorization and Action....................................... 47
11.2. Agent's Reliance, Etc.......................................... 47
11.3. Fleet and Affiliates........................................... 48
11.4. Lender Credit Decision......................................... 48
11.5. Indemnification................................................ 49
11.6. Rights and Remedies to be Exercised by Agent Only.............. 49
11.7. Agency Provisions Relating to Collateral....................... 49
11.8. Agent's Right to Purchase Commitments.......................... 50
11.9. Right of Sale, Assignment, Participations...................... 50
11.10. Amendment...................................................... 52
11.11. Resignation of Agent; Appointment of Successor................. 52
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SECTION 12. MISCELLANEOUS................................................. 53
12.1. Power of Attorney.............................................. 53
12.2. Indemnity...................................................... 54
12.3. Sale of Interest............................................... 54
12.4. Severability................................................... 55
12.5. Successors and Assigns......................................... 55
12.6. Cumulative Effect; Conflict of Terms........................... 55
12.7. Execution in Counterparts...................................... 55
12.8. Notice......................................................... 55
12.9. Consent........................................................ 56
12.10. Credit Inquiries............................................... 56
12.11. Time of Essence................................................ 56
12.12. Entire Agreement............................................... 57
12.13. Interpretation................................................. 57
12.14. Confidentiality................................................ 57
12.15. GOVERNING LAW; CONSENT TO FORUM................................ 57
12.16. WAIVERS BY BORROWER............................................ 58
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 7/th/ day of February,
2001, by and among FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island
corporation with an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, individually as a Lender and as Agent ("Agent") for itself and
any other financial institution which is or becomes a party hereto (each such
financial institution, including Fleet, is referred to hereinafter individually
as a "Lender" and collectively as the "Lenders"), the LENDERS and WEC COMPANY, a
Delaware corporation with its chief executive office and principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Borrower").
Capitalized terms used in this Agreement have the meanings assigned to them in
Appendix A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to $50,000,000
available upon Borrower's request therefor, as follows:
1.1. Loans.
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1.1.1. Revolving Credit Loans. Each Lender agrees, severally and not
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jointly, for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Borrower from time to time during the period from
the date hereof to but not including the last day of the Term, as requested
by Borrower in the manner set forth in subsection 3.1.1 hereof, up to a
maximum principal amount at any time outstanding equal to the lesser of (i)
such Lender's Revolving Loan Commitment minus the LC Amount minus reserves,
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if any and (ii) the product of such Lender's Revolving Loan Percentage and
an amount equal to the Borrowing Base at such time minus the LC amount
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minus reserves, if any. Agent shall have the right to establish reserves in
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such amounts, and with respect to such matters, as Agent shall deem
necessary or appropriate in its reasonable credit judgment, against the
Borrowing Base with respect to (i) price adjustments, damages, unearned
discounts, returned products or other matters for which credit memoranda
are issued in the ordinary course of Borrower's business; (ii) shrinkage,
spoilage and obsolescence of Borrower's Inventory; (iii) slow moving
Inventory; (iv) other sums chargeable against Borrower's Loan Account as
Revolving Credit Loans under any section of this Agreement; (v) accrued and
unpaid interest in respect of the Senior Notes; and (vi) such other
specific events, conditions or contingencies as to which Agent, in its
reasonable credit judgment, determines reserves should be established from
time to time hereunder. In particular, on the date hereof, Agent has
established reserves in the amount of $1,000,000 in respect of matters that
might require remediation or correction and that are disclosed in the
environmental audits to be delivered pursuant to subsection 8.1.10. Such
reserve may
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be reduced or increased by Agent, in its reasonable credit judgment, based
on Agent's review of such environmental audits. Notwithstanding the
foregoing, Agent shall not establish any reserves in respect of any matters
relating to any items of Collateral that have been taken into account in
determining Eligible Inventory or Eligible Accounts, as applicable. The
Revolving Credit Loans shall be repayable in accordance with the terms of
the Revolving Notes and shall be secured by all of the Collateral.
1.1.2. Use of Proceeds. The Revolving Credit Loans shall be used
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solely for (i) the satisfaction of certain existing Indebtedness of
Borrower, (ii) for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable laws,
and (iii) for other purposes permitted under this Agreement, including
without limitation to pay interest in respect of the Senior Notes if
permitted pursuant to the terms of subsection 8.2.6(ii).
1.2. Letters of Credit; LC Guaranties.
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Agent agrees, for so long as no Default or Event of Default exists and
if requested by Borrower, to (i) issue its, or cause to be issued by Bank
or another Affiliate of Agent, on the date requested by Borrower, Letters
of Credit for the account of Borrower or (ii) execute LC Guaranties by
which Bank, or another Affiliate of Lender, on the date requested by
Borrower, shall guaranty the payment or performance by Borrower of its
reimbursement obligations with respect to letters of credit, provided that
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the LC Amount shall not exceed $4,000,000 at any time. No trade Letter of
Credit or LC Guaranty may have an expiration date that is more than 180
days after the date of issuance thereof; and no standby Letter of Credit or
LC Guaranty may have an expiration date that is more than one year from the
date of issuance thereof, which expiration date may be extended for
additional periods of up to one year, subject to the immediately following
sentence. No Letter of Credit or LC Guaranty may have an expiration date
that is after 30 days prior to the last day of the Term. Notwithstanding
anything to the contrary contained herein, Borrower, Agent and Lenders
hereby agree that all LC Obligations and all obligations of Borrower
relating thereto shall be satisfied by the prompt issuance of one or more
Revolving Credit Loans that are Base Rate Portions, which Borrower hereby
acknowledges are requested and Lenders hereby agree to fund. In the event
that Revolving Credit Loans are not, for any reason, promptly made to
satisfy all then existing LC Obligations, each Lender hereby agrees to pay
to Agent, on demand, an amount equal to such LC Obligations multiplied by
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such Lender's Revolving Loan Percentage, and until so paid, such amount
shall be secured by the Collateral and shall bear interest and be payable
at the same rate and in the same manner as Base Rate Portions. Immediately
upon the issuance of a Letter of Credit or an LC Guaranty under this
Agreement, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from Agent, without recourse or
warranty, an undivided interest and participation therein equal to such LC
Obligations multiplied by such Lender's Revolving Loan Percentage.
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SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
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2.1.1. Rates of Interest. Interest shall accrue on the principal
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amount of the Base Rate Portion outstanding at the end of each day at a
fluctuating rate per annum equal to Applicable Margin then in effect plus
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the Base Rate. Said rate of interest shall increase or decrease by an
amount equal to any increase or decrease in the Base Rate, effective as of
the opening of business on the day that any such change in the Base Rate
occurs. If Borrower properly exercises its LIBOR Option as provided in
Section 2.3, interest shall accrue on the principal amount of the LIBOR
Portions outstanding at the end of each day at a rate per annum equal to
the Applicable Margin then in effect plus the LIBOR Rate applicable to each
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LIBOR Portion for the corresponding LIBOR Period.
2.1.2. Default Rate of Interest. At the option of Agent or the
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Majority Lenders, upon and after the occurrence of an Event of Default, and
during the continuation thereof, the principal amount of all Loans shall
bear interest at a rate per annum equal to 2.0% plus the interest rate
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otherwise applicable thereto (the "Default Rate").
2.1.3. Maximum Interest. In no event whatsoever shall the aggregate
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of all amounts deemed interest hereunder and under the Notes and charged or
collected pursuant to the terms of this Agreement or the terms of any Note
exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto. If any provisions of this Agreement are in contravention of any
such law, such provisions shall be deemed amended to conform thereto.
2.2. Computation of Interest and Fees.
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Interest, Letter of Credit and LC Guaranty fees and unused line fees
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of 360 days.
2.3. LIBOR Option.
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(i) Upon the conditions that: (1) Agent shall have received a
LIBOR Request from Borrower at least 3 Business Days prior to the
first day of the LIBOR Period requested, (2) there shall have occurred
no change in applicable law which would make it unlawful for Lenders
to obtain deposits of U.S. dollars in the London interbank foreign
currency deposits market, (3) as of the date of the LIBOR Request and
the first day of the LIBOR Period, there shall exist no Default or
Event of Default, (4) Agent is able to determine the LIBOR Rate in
respect of the requested LIBOR Period, (5) Agent is able to obtain
deposits of U.S. dollars in the London interbank foreign currency
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deposits market in the applicable amounts and for the requested LIBOR
Period, and (6) as of the first date of the LIBOR Period, there are no
more than 4 outstanding LIBOR Portions including the LIBOR Portion
being requested; then interest on the LIBOR Portion requested during
the LIBOR Period requested will be based on the applicable LIBOR Rate.
(ii) Each LIBOR Request shall be irrevocable and binding on
Borrower. Borrower shall indemnify each Lender for any loss, penalty
or expense incurred by such Lender due to failure on the part of
Borrower to fulfill, on or before the date specified in any LIBOR
Request, the applicable conditions set forth in this Agreement or due
to the prepayment of the applicable LIBOR Portion prior to the last
day of the applicable LIBOR Period, including, without limitation, any
loss (including loss of anticipated profits) or expense incurred by
reason of the liquidation or redeployment of deposits or other funds
acquired by any Lender to fund or maintain the requested LIBOR
Portion.
(iii) If any Legal Requirement shall (1) make it unlawful for
any Lender to fund through the purchase of U.S. dollar deposits any
LIBOR Portion or otherwise give effect to its obligations as
contemplated under this Section 2.3, or (2) shall impose on any Lender
any costs based on or measured by the excess above a specified level
of the amount of a category of deposits or other liabilities of any
Lender which includes deposits by reference to which the LIBOR Rate is
determined as provided herein or a category of extensions of credit or
other assets of any Lender which includes any LIBOR Portion or (3)
shall impose on any Lender any restrictions (not already taken into
account under statutory reserves) on the amount of such a category of
liabilities or assets which any Lender may hold, then, in each such
case, each affected Lender may (A) in the case of (1) and (3) above,
by written notice thereof to Borrower, describing the Legal
Requirement in reasonable detail, terminate such Lender's obligation
to make Loans available to Borrower under the LIBOR Option and (B) in
the case of (2) above by written notice thereof to Borrower,
describing the Legal Requirements in reasonable detail, require
Borrower to pay such Lender such additional amount or amounts as will
compensate such Lender for such additional actual costs which are
properly allocable to the applicable LIBOR Portion. Any LIBOR Portion
subject thereto shall immediately bear interest thereafter at the rate
and in the manner provided for the Base Rate Portion pursuant to
subsection 2.1.1. Borrower shall indemnify each Lender against any
loss, penalty or expense actually incurred by such Lender due to
liquidation or redeployment of deposits or other funds acquired by
such Lender to fund or maintain any LIBOR Portion that is terminated
under this paragraph.
(iv) Each Lender shall receive payments of amounts of principal
of, and interest with respect to, the LIBOR Portions free and clear
of, and without deduction for, any Taxes. If (1) any Lender shall be
subject to any Tax in
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respect of any LIBOR Portion or any part thereof or, (2) Borrower
shall be required to withhold or deduct any Tax from any such amount,
such Lender shall provide written notice to Borrower and Agent of the
fact that it is subject to such Tax or the withholding or deduction
requirements and the LIBOR Rate applicable to such LIBOR Portion shall
be adjusted by Agent on behalf of the affected Lender to reflect all
additional costs incurred by such Lender in connection with the
payment by such Lender or the withholding by Borrower of such Tax and
Borrower shall provide such Lender with a statement detailing the
amount of any such Tax actually paid by such Borrower. Determination
by Agent on behalf of a Lender of the amount of such costs shall, in
the absence of manifest error, be conclusive. If after any such
adjustment any part of any Tax paid by any Lender is subsequently
recovered by such Lender, such Lender shall reimburse Borrower to the
extent of the amount so recovered. A certificate of an officer of any
Lender setting forth the amount of such recovery and the basis
therefor shall, in the absence of manifest error, be conclusive.
2.4. Fee Letter.
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Borrower shall pay to Agent certain fees and other amounts in
accordance with the terms of the fee letter between Borrower and Agent (the "Fee
Letter").
2.5. Letter of Credit and LC Guaranty Fees.
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Borrower shall pay to Agent, for the ratable benefit of the Lenders, a
fee equal to 1.50% per annum multiplied by the aggregate face amount of all
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standby Letters of Credit and LC Guaranties for standby Letters of Credit
outstanding from time to time during the term of this Agreement, which fees
shall be payable monthly in arrears on the first day of each month hereafter,
and, in the case of standby and documentary Letters of Credit (and the related
LC Guaranties), all normal and customary charges associated with the issuance of
such Letters of Credit and LC Guaranties, which fees and charges shall be deemed
fully earned and shall be due and payable upon issuance of each such Letter of
Credit or LC Guaranty and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason. Attached as Exhibit 2.5 is a
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current list of such charges. In addition to the foregoing, Borrower shall pay
to Agent, for its own account, fronting fees in accordance with the terms of the
Fee Letter.
2.6. Unused Line Fee.
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Borrower shall pay to Agent, for the ratable benefit of the Lenders, a
per annum fee (the "Unused Line Fee") equal to the Applicable Margin then in
effect for Unused Line Fees, multiplied by the average daily amount by which the
Total Credit Facility exceeds the sum of the outstanding principal balance of
the Revolving Credit Loans plus the LC Amount. The Unused Line Fee shall be
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payable monthly in arrears on the first day of each month hereafter.
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2.7. Prepayment Fee.
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Borrower shall pay to Agent, for the ratable benefit of the Lenders, a
fee in the event that prior to the third anniversary of the Closing Date,
Borrower elects to repay the Loans in full and terminate all Revolving Loan
Commitments. Such fee shall be payable upon repayment of the Loans and shall be
in the amount of $500,000 if the Loans are repaid and the Revolving Loan
Commitments are terminated on or before the first anniversary of the Closing
Date, $250,000 if the Loans are repaid and the Revolving Loan Commitments are
terminated after the first anniversary of the Closing Date and on or before the
second anniversary of the Closing Date and $125,000 if the Loans are repaid and
the Revolving Loan Commitments are terminated after the second anniversary of
the Closing Date and on or before the third anniversary of the Closing Date. No
such prepayment fee shall be payable upon a partial prepayment of the
Obligations (including without limitation any partial prepayment made under
subsection 3.3.1) or a partial reduction of the Revolving Loan Commitments under
subsection 3.3.3.
2.8. Capital Adequacy.
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If any Lender shall have determined that the adoption after the date
of this Agreement of any law, rule or regulation regarding capital adequacy, or
any change after the date of this Agreement therein or in the interpretation or
application thereof or compliance by any Lender with any request or directive
after the date of this Agreement regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority, does
or shall have the effect of reducing the rate of return on such Lender's capital
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender, in its sole discretion, to be material, then
from time to time, after submission by such Lender to Borrower of a written
demand therefor, Borrower shall pay to such Lender, within 30 days of such
demand, such additional amount or amounts as will compensate such Lender for
such reduction. A certificate of such Lender claiming entitlement to payment as
set forth above shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to such
payment, the additional amount or amounts to be paid to such Lender, and the
method by which such amounts were determined. In determining such amount, such
Lender may use any reasonable averaging and attribution method.
2.9. Audit Fees.
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Borrower shall pay to Agent, in connection with audits of the books
and records and Properties of Borrower and its Subsidiaries and such other
matters as Agent shall deem appropriate in its reasonable credit judgment, (1)
if such audits are conducted by employees of Agent, all out-of-pocket expenses
actually incurred by Agent, so long as each individual expense item is
reasonable and (2) if such audits are conducted by third parties hired by Agent,
all out-of-pocket expenses actually incurred by Agent. Agent agrees to attempt
to minimize such third party out-of-pocket expenses with respect to each
individual audit to the extent reasonably practicable and so long as the same is
consistent with Agent's evaluation and
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perception of (a) the business and financial condition of Borrower and its
Subsidiaries and (b) the need for such audits; provided, however, that Borrower
will remain liable for payment of such third party out-of-pocket expenses
regardless of the amount thereof. All out-of-pocket expenses shall be payable on
the first day of the month following the date of issuance by Agent of a request
for payment thereof to Borrower.
2.10. Reimbursement of Expenses.
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If, at any time or times regardless of whether or not an Event of
Default then exists, (i) Agent actually incurs legal or accounting expenses or
any other costs or out-of-pocket expenses in connection with (1) the negotiation
and preparation of this Agreement or any of the other Loan Documents, any
amendment of or modification of this Agreement or any of the other Loan
Documents, or any sale or attempted sale of any interest herein to any assignee
(including, without limitation, printing and distribution of materials to
prospective Lenders and all costs associated with bank meetings, but excluding
any closing fees paid to Lenders in connection therewith); provided, that Agent
agrees to attempt to minimize costs and expenses incurred in connection with the
sale or attempted sale of interests herein (but Borrower will remain liable for
payment of all such costs and expenses regardless of the amount thereof); or (2)
the administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; provided, that unless a Default or
an Event of Default is in existence, Borrower shall only be liable for
reasonable expenses and costs incurred by Agent under clause (1) and (2) hereof;
or (ii) Agent or any Lender actually incurs legal or accounting expenses or any
other costs or out-of-pocket expenses in connection with (1) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by Agent, any
Lender, Borrower or any other Person) relating to the Collateral, this Agreement
or any of the other Loan Documents or Borrower's, any of its Subsidiaries' or
any Guarantor's affairs, other than any such matter brought by or against
Borrower, any of its Subsidiaries or any Guarantor in which Borrower, such
Subsidiary or such Guarantor prevails as against Agent or such Lender; (2) any
attempt to enforce any rights of Agent or any Lender against Borrower or any
other Person which may be obligated to Agent or any Lender by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; or (3) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such actual legal and accounting expenses, other costs and
out of pocket expenses of Agent or any Lender, as applicable, shall be charged
to Borrower; provided, that Borrower shall not be responsible for such costs and
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out-of-pocket expenses to the extent incurred because of the gross negligence or
willful misconduct of Agent or any Lender. Borrower shall also reimburse Agent
for expenses actually incurred by Agent in its administration of the Collateral
to the extent and in the manner provided in Section 2.11 hereof.
2.11. Bank Charges.
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Borrower shall pay to Agent any and all fees, costs or expenses which
Agent pays to a bank or other similar institution arising out of or in
connection with (i) the forwarding to Borrower or any other Person on behalf of
Borrower, by Agent, of proceeds of Loans made to Borrower pursuant to this
Agreement and (ii) the depositing for collection by Agent of any check or item
of payment received or delivered to Agent on account of the Obligations.
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2.12. Collateral Protection Expenses; Appraisals.
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All out-of-pocket expenses actually incurred in protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrower. If Borrower fails to promptly pay any portion
thereof when due, Agent may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Additionally, Agent shall be entitled to
obtain appraisals of the real Property, Equipment and other personal Property of
Borrower and its Subsidiaries, from appraisers satisfactory to Agent and at
Borrower's expense, (i) at any time, if such appraisers are personnel of Agent
("Inhouse Appraisers"), (ii) once in each 12 month period, if such appraisers
are not personnel of Agent ("Outside Appraisers"); provided, that reviews by
Outside Appraisers of appraisals conducted by Inhouse Appraisers shall be deemed
to be subject to clause (i) hereof, rather than to this clause (ii), (iii) at
any time that Agent or any Lender determines that obtaining appraisals is
necessary in order for it to comply with applicable laws or regulations, and
(iv) at any time if a Default or an Event of Default shall have occurred and be
continuing.
2.13. Payment of Charges.
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All amounts chargeable to Borrower under this Agreement shall be
Obligations secured by all of the Collateral, shall be, unless specifically
otherwise provided, payable on demand and shall bear interest from the date
demand was made or such amount is due, as applicable, until paid in full at the
rate applicable to Base Rate Portions from time to time.
2.14. No Deductions.
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Any and all payments or reimbursements made hereunder shall be made
free and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto;
excluding, however, the following: taxes imposed on the income of Agent or any
Lender or franchise taxes by the jurisdiction under the laws of which Agent or
any Lender is organized or doing business or any political subdivision thereof
and taxes imposed on its income by the jurisdiction of Agent's or such Lender's
applicable lending office or any political subdivision thereof or franchise
taxes (all such taxes, levies, imposts, deductions, charges or withholdings and
all liabilities with respect thereto excluding such taxes imposed on net income,
herein "Tax Liabilities"). If Borrower shall be required by law to deduct any
such Tax Liabilities from or in respect of any sum payable hereunder to Agent or
any Lender (other than payments of principal and interest with respect to LIBOR
Portions, which shall be governed by subsection 2.3 (iv)), then the sum payable
hereunder shall be increased as may be necessary so that, after all required
deductions are made, such Lender receives an amount equal to the sum it would
have received had no such deductions been made.
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2.15. Fees Relating to Dealer Financing Arrangement.
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Borrower shall pay to Agent, for Agent's account, all out of pocket
expenses incurred by Agent in connection with the administration of, and audits
relating to, the Dealer Financing Arrangements and any similar arrangements
hereafter approved by Majority Lenders, as well as such fees as Agent may
determine to be applicable in connection therewith. Such fees will include,
without limitation, a per diem charge equal to $750 per man day for each of
Agent's employees who conduct audits and reviews associated with the Dealer
Financing Arrangements and any similar arrangements hereafter approved by
Majority Lenders. All of such fees and expenses shall be paid by Borrower on
the first day of the month following the date of issuance by Agent of a request
for payment thereof to Borrower.
SECTION 3. LOAN ADMINISTRATION.
3.1. Manner of Borrowing Revolving Credit Loans.
------------------------------------------
Borrowings under the credit facility established pursuant to Section 1
hereof shall be as follows:
3.1.1. Loan Requests. A request for a Revolving Credit Loan shall be
-------------
made, or shall be deemed to be made, in the following manner: (i) Borrower
may give Agent notice of its intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing (which shall be no less
than $100,000 and integral multiples of $25,000 in excess thereof in the
case of Base Rate Portions) and the proposed borrowing date, no later than
11:00 a.m. Chicago, Illinois, time on the proposed borrowing date (or in
accordance with Section 2.3 in the case of a request for a LIBOR Portion),
provided, however, that no such request may be made at a time when there
--------
exists a Default or an Event of Default; and (ii) the becoming due of any
amount required to be paid under this Agreement, whether as interest or for
any other Obligation, shall be deemed irrevocably to be a request for a
Revolving Credit Loan on the due date in the amount required to pay such
interest or other Obligation.
3.1.2. Disbursement. Borrower hereby irrevocably authorizes Lender to
------------
disburse the proceeds of each Revolving Credit Loan requested, or deemed to
be requested, pursuant to subsection 3.1.1 as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(i) shall be
disbursed by Agent in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrower,
and in the case of each subsequent borrowing, by wire transfer to such bank
account as may be agreed upon by Borrower and Agent from time to time or
elsewhere if pursuant to a written direction from Borrower; and (ii) the
proceeds of each Revolving Credit Loan deemed requested under subsection
3.1.1(ii) shall be disbursed by Agent by way of direct payment of the
relevant interest or other Obligation.
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3.1.3. Payment by Lenders. Agent shall give to each Lender prompt
------------------
written notice by facsimile, telex or cable of the receipt by Agent from
Borrower of any request for a Revolving Credit Loan. Each such notice shall
specify the requested date and amount of such Revolving Credit Loan,
whether such Revolving Credit Loan shall be subject to the LIBOR Option,
and the amount of each Lender's advance thereunder (in accordance with its
applicable Revolving Loan Percentage). Each Lender shall, not later than
12:00 p.m. (Chicago time) on such requested date, wire to a bank designated
by Agent the amount of that Lender's Revolving Loan Percentage of the
requested Revolving Credit Loan. The failure of any Lender to make the
Revolving Credit Loans to be made by it shall not release any other Lender
of its obligations hereunder to make its Revolving Credit Loan. Neither
Agent nor any other Lender shall be responsible for the failure of any
other Lender to make the Revolving Credit Loan to be made by such other
Lender. The foregoing notwithstanding, Agent, in its sole discretion, may
from its own funds make a Revolving Credit Loan on behalf of any Lender. In
such event, the Lender on behalf of whom Agent made the Revolving Credit
Loan shall reimburse Agent for the amount of such Revolving Credit Loan
made on its behalf, on a weekly (or more frequent, as determined by Agent
in its sole discretion) basis. The entire amount of interest attributable
to such Revolving Credit Loan for the period from the date on which such
Revolving Credit Loan was made by Agent on such Lender's behalf until Agent
is reimbursed by such Lender, shall be paid to Agent for its own account.
3.1.4. Authorization. Borrower hereby irrevocably authorizes Agent
-------------
to advance to Borrower, and to charge to Borrower's Loan Account hereunder
as a Revolving Credit Loan, a sum sufficient to pay all interest accrued on
the Obligations during the immediately preceding month and to pay all fees,
costs and expenses and other Obligations at any time owed by Borrower to
Agent or any Lender hereunder.
3.1.5. Letter of Credit and LC Guaranty Requests. A request for a
-----------------------------------------
Letter of Credit or LC Guaranty shall be made in the following manner:
Borrower may give Agent and Bank a written notice of its request for the
issuance of a Letter of Credit or LC Guaranty, not later than 11:00 a.m.
Chicago, Illinois, time, one Business Day before the proposed issuance date
thereof, in which notice Borrower shall specify the proposed issuer,
issuance date and format and wording for the Letter of Credit or LC
Guaranty being requested (which shall be satisfactory to Agent and the
Person being asked to issue such Letter of Credit or LC Guaranty);
provided, that no such request may be made at a time when there exists a
--------
Default or Event of Default. Such request shall be accompanied by an
executed application and reimbursement agreement in form and substance
satisfactory to Agent and the Person being asked to issue the Letter of
Credit or LC Guaranty, as well as any required corporate resolutions.
3.1.6. Method of Making Requests. As an accommodation to Borrower,
-------------------------
unless a Default or an Event of Default is then in existence, (i) Agent
shall permit telephonic requests for Revolving Credit Loans to Agent, (ii)
Agent and Bank may, in their discretion, permit electronic transmittal of
requests for Letters of Credit and LC Guaranties to them, and (iii) Agent
may, in Agent's discretion, permit electronic
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transmittal of instructions, authorizations, agreements or reports to Agent.
Unless Borrower specifically directs Agent or Bank in writing not to accept or
act upon telephonic or electronic communications from Borrower, neither Agent
nor Bank shall have any liability to Borrower for any loss or damage suffered by
Borrower as a result of Agent's or Bank's honoring of any requests, execution of
any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Agent or Bank by an authorized officer of Borrower, and neither Agent
nor Bank shall have any duty to verify the origin of any such communication or
the authority of the person sending it. Each telephonic request for a Revolving
Credit Loan, Letter of Credit or LC Guaranty accepted by Agent and Bank, if
applicable, hereunder shall be promptly followed by a written confirmation of
such request from Borrower to Lender and Bank, if applicable.
3.2. Payments.
--------
Except where evidenced by notes or other instruments issued or made by
Borrower to any Lender and accepted by such Lender specifically containing
payment instructions that are in conflict with this Section 3.2 (in which case
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
3.2.1. Principal. Principal payable on account of Revolving Credit
---------
Loans shall be payable by Borrower to Agent for the ratable benefit of
Lenders immediately upon the earliest of (i) the receipt by Agent or
Borrower of any proceeds of any of the Collateral (except as otherwise
provided herein), including without limitation pursuant to subsections
3.3.1 and 6.2.4, to the extent of said proceeds, subject to Borrower's
rights to reborrow such amounts in compliance with subsection 1.1.1 hereof;
(ii) the receipt by Borrower of any proceeds of the Dealer Financing
Arrangement, (iii) the occurrence of an Event of Default in consequence of
which Agent or Majority Lenders elect to accelerate the maturity and
payment of the Obligations, or (iv) termination of this Agreement pursuant
to Section 4 hereof; provided, however, that if an Overadvance shall exist
at any time, Borrower shall, on demand, repay the Overadvance.
3.2.2. Interest.
--------
(i) Base Rate Portion. Interest accrued on Base Rate
-----------------
Portions shall be due and payable on the earliest of (1) the first
calendar day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month, (2) the
occurrence of an Event of Default in consequence of which Agent or
Majority Lenders elect to accelerate the maturity and payment of the
Obligations or (3) termination of this Agreement pursuant to Section 4
hereof.
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(ii) LIBOR Portion. Interest accrued on each LIBOR Portion
-------------
shall be due and payable on each LIBOR Interest Payment Date and on
the earlier of (1) the occurrence of an Event of Default in
consequence of which Agent or Majority Lenders elect to accelerate the
maturity and payment of the Obligations or (2) termination of this
Agreement pursuant to Section 4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges payable
-----------------------
pursuant to this Agreement shall be payable by Borrower to Agent, as and
when provided in Section 2 hereof or to any other Person designated by
Agent in writing.
3.2.4. Other Obligations. The balance of the Obligations requiring
-----------------
the payment of money, if any, shall be payable by Borrower to Agent for
distribution to Lenders, as appropriate, as and when provided in this
Agreement, the Other Agreements or the Security Documents, or on demand,
whichever is later.
3.3. Mandatory and Optional Prepayments.
----------------------------------
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of
------------------------------------------------------
Collateral. If any Equipment, real Property or other Property of Borrower
----------
or any Subsidiary of Borrower is subject to a sale or other Asset
Disposition, or if any of the Collateral is lost, damaged or destroyed or
taken by condemnation, Borrower shall pay to Agent as and when received by
Borrower or such Subsidiary and as a mandatory prepayment of the Loans, as
herein provided, a sum equal to the proceeds (including insurance payments)
received by Borrower or such Subsidiary from such sale or other Asset
Disposition, loss, damage, destruction or condemnation. In each case, the
applicable prepayments shall be applied to reduce the outstanding principal
balance of the Revolving Credit Loans (without effecting a permanent
reduction thereof), and, if the Collateral subject to a sale or other Asset
Disposition or that was lost, damaged, destroyed or condemned consists of
Eligible Accounts, Eligible Inventory, Eligible Equipment or Eligible Real
Property, such prepayment shall be specifically applied against the portion
of the Borrowing Base predicated on such Collateral. Notwithstanding the
foregoing, (i) at all times after the Asset Disposition Threshold has been
satisfied, the Fixed Asset Sublimit of the Borrowing Base shall be
permanently reduced by an amount equal to the greater of (a) the amount of
Net Available Cash from each subsequent Asset Disposition of Eligible
Equipment or Eligible Real Property and (b) the loanable value under the
Borrowing Base of the Eligible Equipment or the Eligible Real Property that
was the subject of such Asset Disposition and (ii) if the Net Available
Cash from any Asset Disposition in excess of the Asset Disposition
Threshold is not used within one year of the later of the date of such
Asset Disposition or the receipt of such Net Available Cash by Borrower or
its Subsidiaries, to (a) purchase Property (other than Indebtedness or
Securities) in a business related, ancillary or complementary to the
businesses conducted by Borrower and its Subsidiaries as of July 28, 1999
or (b) Securities of a Person constituting "Additional Assets" under the
Senior Notes Indenture, as evidenced by a written certificate of the
principal financial officer of Borrower to that effect received by Agent
prior to the expiration of such one year period, then the Revolving Credit
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Maximum Amount and the Total Credit Facility shall each be reduced by the
amount of Net Available Cash from such Asset Disposition (and the Revolving
Loan Commitments shall be reduced in a corresponding amount, in accordance
with each Lender's Revolving Loan Percentage).
3.3.2. Proceeds from Issuance of Additional Indebtedness or Equity.
-----------------------------------------------------------
If Borrower issues any additional Indebtedness or obtains any additional
equity in a manner permitted under this Agreement, Borrower shall pay to
Agent for the ratable benefit of Lenders, when and as received by any
Borrower and as a mandatory prepayment of the Obligations, a sum equal to
twenty five percent (25%) of the net proceeds to Borrower of the issuance
of such Indebtedness or equity. Any such prepayment shall be applied as to
reduce the outstanding principal balance of the Revolving Credit Loans
until payment thereof in full and shall permanently reduce the Total Credit
Facility, the Revolving Credit Maximum Amount and the Revolving Loan
Commitments in a corresponding amount.
3.3.3. Optional Reductions of Revolving Loan Commitments. Borrower
-------------------------------------------------
may, at its option from time to time upon not less than 3 Business Days'
prior written notice to Agent, terminate in whole or permanently reduce
ratably in part, the unused portion of the Revolving Loan Commitments (and
effect a permanent reduction of the Revolving Credit Maximum Amount and the
Total Credit Facility by a corresponding amount); provided, however, that
(i) each such partial reduction shall be in an amount of $2,000,000 or an
integral multiple of $1,000,000 in excess thereof and (ii) the aggregate of
all optional reductions to the Revolving Credit Commitments (and the Total
Credit Facility) may not exceed $5,000,000 during any 12 month period or
$10,000,000 during the Term. Except for charges under Section 2.3(ii)
applicable to prepayments of LIBOR Portions and except for charges under
Section 2.7 applicable to termination of the Revolving Loan Commitments,
such prepayments shall be without premium or penalty.
3.4. Application of Payments and Collections.
---------------------------------------
Except as otherwise provided in this Agreement or any other Loan
Document, all items of payment received by Agent by 12:00 noon, Chicago,
Illinois, time, on any Business Day shall be deemed received on that Business
Day. All items of payment received after 12:00 noon, Chicago, Illinois, time,
on any Business Day shall be deemed received on the following Business Day.
Borrower irrevocably waives the right to direct the application of any and all
payments and collections at any time or times hereafter received by Agent from
or on behalf of Borrower, and Borrower does hereby irrevocably agree that Agent
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Agent or its
agent against the Obligations, in such manner as Agent may deem advisable,
notwithstanding any entry by Agent or any Lender upon any of its books and
records. If as the result of collections of Accounts as authorized by
subsection 6.2.4 hereof or otherwise, a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower, but
shall be disbursed to Borrower or otherwise at Borrower's direction in the
manner set forth in subsection 3.1.2, upon Borrower's request at any time, so
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long as no Default or Event of Default then exists. Agent may at its option,
offset such credit balance against any of the Obligations upon and during the
continuance of an Event of Default.
3.5. All Loans to Constitute One Obligation.
--------------------------------------
The Loans shall constitute one general Obligation of Borrower, and
shall be secured by Lender's Lien upon all of the Collateral.
3.6. Loan Account.
------------
Agent shall enter all Loans as debits to a loan account (the "Loan
Account") and shall also record in the Loan Account all payments made by
Borrower on any Obligations and all proceeds of Collateral which are finally
paid to Agent, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower pursuant to this Agreement or any other
Loan Document.
3.7. Statements of Account.
---------------------
Agent will account to Borrower monthly with a statement of Loans,
charges and payments made pursuant to this Agreement during the immediately
preceding month, and such account rendered by Agent shall be deemed final,
binding and conclusive upon Borrower absent demonstrable error unless Agent is
notified by Borrower in writing to the contrary within 30 days of the date each
accounting is received by Borrower. Such notice shall only be deemed an
objection to those items specifically objected to therein.
3.8. Sharing of Payments, Etc.
------------------------
If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any Loan made by it in excess of its ratable share of payments on
account of Loans made by all Lenders, such Lender shall forthwith purchase from
each other Lender such participation in such Loan as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each other
Lender; provided, that if all or any portion of such excess payment is
--------
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lenders the
purchase price to the extent of such recovery, together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section 3.8 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation. Notwithstanding anything to the contrary
contained herein, all purchases and repayments to be made under this Section 3.8
shall be made through Agent.
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SECTION 4. TERM AND TERMINATION
4.1. Term of Agreement.
-----------------
Subject to the right of Lenders to cease making Loans to Borrower
during the continuance of any Default or Event of Default, this Agreement shall
be in effect for a period of 3 years from the date hereof, through and including
February 7, 2004 (the "Term"), unless terminated as provided in Section 4.2
hereof.
4.2. Termination.
-----------
4.2.1. Termination by Lenders. Agent may, and at the direction of
----------------------
Majority Lenders shall, terminate this Agreement without notice upon or
after the occurrence and during the continuance of an Event of Default.
4.2.2. Termination by Borrower. Upon at least 30 days prior written
-----------------------
notice to Agent and Lenders, Borrower may, at its option, terminate this
Agreement; provided, however, no such termination shall be effective until
-------- -------
Borrower has paid or collateralized to Agent's satisfaction all of the
Obligations in immediately available funds, all Letters of Credit and LC
Guaranties have expired, terminated or have been cash collateralized to
Agent's satisfaction and Borrower has complied with Sections 2.3(ii) and
2.7. Any notice of termination given by Borrower shall be irrevocable
unless all Lenders otherwise agree in writing, no Lender shall have any
obligation to make any Loans or issue or procure any Letters of Credit or
LC Guaranties on or after the termination date stated in such notice.
Borrower may elect to terminate this Agreement in its entirety only. No
section of this Agreement or type of Loan available hereunder may be
terminated singly.
4.2.3. Effect of Termination. All of the Obligations shall be
---------------------
immediately due and payable upon the termination date stated in any notice
of termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents
shall survive any such termination and Agent shall retain its Liens in the
Collateral and Agent and each Lender shall retain all of its rights and
remedies under the Loan Documents notwithstanding such termination until
all Obligations have been discharged or paid, in full, in immediately
available funds, including, without limitation, all Obligations under
Section 2.3(ii) resulting from such termination. Notwithstanding the
foregoing or the payment in full of the Obligations, Agent shall not be
required to terminate its Liens in the Collateral unless, with respect to
any loss or damage Agent may incur as a result of dishonored checks or
other items of payment received by Agent from Borrower or any Account
Debtor and applied to the Obligations, Agent shall, at its option, (i) have
received a written agreement satisfactory to Agent, executed by Borrower
and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations, indemnifying Agent and each
Lender from any such loss or damage or (ii) have retained cash Collateral
for such period of time as Agent, in its
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discretion, may deem necessary to protect Agent and each Lender from any
such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral.
-------------------------------
To secure the prompt payment and performance to Agent and each Lender
of the Obligations, Borrower hereby grants to Agent for the benefit of itself
and each Lender a continuing Lien upon all of Borrower's assets, including all
of the following Property and interests in Property of Borrower, whether now
owned or existing or hereafter created, acquired or arising and wheresoever
located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles, other than leases, license
agreements, permits and other contracts which are not, by their terms,
assignable without the consent of the other Person party thereto
(unless such consent has been obtained);
(v) Investment Property;
(vi) Deposit Accounts;
(vii) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of
Agent or a bailee or Affiliate of Agent;
(viii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through
(vii) above, including, without limitation, proceeds of and unearned
premiums with respect to insurance policies insuring any of the
Collateral; and
(ix) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i)
through (viii) above.
5.2. Lien Perfection; Further Assurances.
-----------------------------------
Borrower shall execute such UCC-1 financing statements as are required
by the Code and such other instruments, assignments or documents as are
necessary to perfect Agent's Lien upon any of the Collateral and shall take such
other action as may be required to perfect or to continue the perfection of
Agent's Lien upon the Collateral. Unless prohibited by applicable
-16-
law, Borrower hereby authorizes Agent to execute and file any such financing
statement on Borrower's behalf if Borrower fails to promptly do so after written
demand by Agent. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof. At Agent's request,
Borrower shall also promptly execute or cause to be executed and shall deliver
to Agent any and all documents, instruments and agreements deemed necessary by
Agent, to give effect to or carry out the terms or intent of the Loan Documents.
5.3. Lien on Realty.
--------------
The due and punctual payment and performance of the Obligations shall
also be secured by the Lien created by Mortgages upon all real Property of
Borrower now or hereafter owned. Each Mortgage shall be executed by Borrower in
favor of Agent. Each Mortgage shall be duly recorded, at Borrower's expense, in
each office where such recording is required to constitute a fully perfected
first Lien on the real Property covered thereby, other than with respect to
Borrower's real Property located in La Mirada, California, which Mortgage shall
constitute a second Lien on such real Property, junior only to the Lien securing
the Seller Secured Debt. Borrower shall deliver to Agent, at Borrower's
expense, mortgagee title insurance policies issued by a title insurance company
reasonably satisfactory to Agent, which policies shall be in form and substance
reasonably satisfactory to Agent and shall insure a valid first Lien in favor of
Agent, for the benefit of itself and the Lenders, on the Property covered by
each Mortgage, other than with respect to Borrower's real Property in La Mirada,
California, which Mortgage shall constitute a second Lien on such real Property,
junior only to the Lien securing the Seller Secured Debt, subject only to those
exceptions reasonably acceptable to Agent and its counsel. Borrower shall
deliver to Agent such other documents, including, without limitation, as-built
survey prints of the real Property, as Agent and its counsel may reasonably
request relating to the real Property subject to the Mortgages.
SECTION 6. COLLATERAL ADMINISTRATION
6.1. General.
-------
6.1.1. Location of Collateral. All Collateral, other than Inventory
----------------------
in transit and motor vehicles, will at all times be kept by Borrower and
its Subsidiaries at one or more business locations set forth in Exhibit
-------
6.1.1 hereto, as updated pursuant to Section 6.3 hereof.
-----
6.1.2. Insurance of Collateral. Borrower shall maintain and pay for
-----------------------
insurance upon all Collateral wherever located and with respect to the
business of Borrower and each of its Subsidiaries, covering casualty,
hazard, public liability, worker's compensation and such other risks in
such amounts and with such insurance companies as are reasonably
satisfactory to Agent. Borrower shall deliver certified copies of such
policies to Agent as promptly as practicable, with satisfactory lender's
loss payable endorsements, naming Agent as a loss payee, assignee or
additional insured, as appropriate, as its interest may appear, and showing
only such other loss
-17-
payees, assignees and additional insureds as are satisfactory to Agent.
Each policy of insurance or endorsement shall contain a clause requiring
the insurer to give not less than 10 days' prior written notice to Agent in
the event of cancellation of the policy for nonpayment of premium and not
less than 30 days' prior written notice to Agent in the event of
cancellation of the policy for any other reason whatsoever and a clause
specifying that the interest of Agent shall not be impaired or invalidated
by any act or neglect of Borrower, any of its Subsidiaries or the owner of
the Property or by the occupation of the premises for purposes more
hazardous than are permitted by said policy. Borrower agrees to deliver to
Agent, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies. All proceeds of business
interruption insurance (if any) of Borrower and its Subsidiaries shall be
remitted to Agent for application to the outstanding balance of the
Revolving Credit Loans.
Unless Borrower provides Agent with evidence of the insurance coverage
required by this Agreement, Agent may purchase insurance at Borrower's
expense to protect Agent's interests in the Properties of Borrower and its
Subsidiaries. This insurance may, but need not, protect the interests of
Borrower and its Subsidiaries. The coverage that Agent purchases may not
pay any claim that Borrower or any Subsidiary makes or any claim that is
made against Borrower or any such Subsidiary in connection with said
Property. Borrower may later cancel any insurance purchased by Agent, but
only after providing Agent with evidence that Borrower and its Subsidiaries
have obtained insurance as required by this Agreement. If Agent purchases
insurance, Borrower will be responsible for the costs of that insurance,
including interest and any other charges Agent may impose in connection
with the placement of insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance
may be added to the Obligations. The costs of the insurance may be more
than the cost of insurance that Borrower and its Subsidiaries may be able
to obtain on their own.
6.1.3. Protection of Collateral. Lender shall not be liable or
------------------------
responsible in any way for the safekeeping of any of the Collateral or for
any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Agent's or any Lender's actual
possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrower's sole risk.
6.2. Administration of Accounts.
--------------------------
6.2.1. Records, Schedules and Assignments of Accounts. Borrower shall
----------------------------------------------
keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Agent on such periodic basis as
Agent shall request a sales and collections report for the preceding
period, in form consistent with the reports currently prepared by Borrower
with respect to such information. Concurrently with the delivery of each
borrowing base certificate described in subsection 8.1.4, or more
frequently, if required by Agent, Borrower shall deliver to
-18-
Agent (i) a detailed aged trial balance of all of its Accounts and upon
Agent's request therefor, copies of proof of delivery and the original copy
of all documents, including, without limitation, repayment histories and
present status reports relating to the Accounts so scheduled and such other
matters and information relating to the status of its then existing
Accounts as Agent shall reasonably request and (ii) a report listing each
Account Debtor whose Accounts are subject to the Dealer Financing
Arrangement, the aggregate outstanding amount of such Account Debtor's
Accounts that are subject to such Dealer Financing Arrangement and the
total amount of such Account Debtor's Accounts, whether or not subject to
such Dealer Financing Arrangement.
6.2.2. Taxes. If an Account includes a charge for any tax payable to
-----
any governmental taxing authority, Agent is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for
the account of Borrower and to charge Borrower therefor, except for taxes
that (i) are being actively contested in good faith and by appropriate
proceedings and with respect to which Borrower maintains reasonable
reserves on its books therefor and (ii) would not reasonably be expected to
result in any Lien other than a Permitted Lien. In no event shall Agent or
any Lender be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
6.2.3. Account Verification. Any of Agent's officers, employees or
--------------------
agents shall have the right, at any time or times hereafter, in the name of
Agent, any designee of Agent or Borrower, to verify the validity, amount or
any other matter relating to any Accounts by mail, telephone, telegraph or
otherwise; provided, that unless a Default or an Event of Default is then
--------
in existence, prior to conducting each set of verifications, Agent shall
generally consult with Borrower about the verification process, including
without limitation a discussion of the names in which such verifications
will be conducted, the frequency of verifications and the nature of
questions to be asked during such process. Borrower shall cooperate fully
with Agent in an effort to facilitate and promptly conclude any such
verification process.
6.2.4. Maintenance of Dominion Account. Borrower shall maintain
-------------------------------
lockbox and blocked account arrangements acceptable to Agent with such
banks as may be selected by Borrower and be acceptable to Agent, for direct
deposit of payments and other remittances. Borrower shall also maintain a
Dominion Account or Accounts pursuant to arrangements acceptable to Agent
with such banks as may be selected by Borrower and be acceptable to Agent.
Borrower shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances received
in the lockbox and blocked accounts to the Dominion Account for application
on account of the Obligations. All funds deposited in any Dominion Account
shall immediately become the property of Agent, for the ratable benefit of
Lenders, and Borrower shall obtain the agreement by such banks in favor of
Agent to waive any offset rights against the funds so deposited. Agent
assumes no responsibility for such lockbox and blocked account
arrangements, including, without
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limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder.
6.2.5. Collection of Accounts, Proceeds of Collateral. To expedite
----------------------------------------------
collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Agent. All remittances received by Borrower
on account of its Accounts including proceeds from any Accounts subject to
the Dealer Financing Arrangement, together with the proceeds of any other
Collateral, shall be held as Agent's property, for its benefit and the
benefit of Lenders, by Borrower as trustee of an express trust for Agent's
benefit and Borrower shall immediately deposit same in kind in the
lockboxes or Dominion Account. Agent retains the right at all times after
the occurrence and during the continuance of a Default or an Event of
Default to notify Account Debtors that Borrower's Accounts have been
assigned to Agent and to collect Borrower's Accounts directly in its own
name and to charge the collection costs and expenses, including attorneys'
fees, to Borrower.
6.3. Records and Reports of Inventory.
--------------------------------
Borrower shall keep records of its Inventory which records shall be
complete and accurate in all material respects. Borrower shall furnish to Agent
Inventory reports concurrently with the delivery of each borrowing base
certificate described in subsection 8.1.4, or more frequently as requested by
Agent, which reports will be in such other format and detail as Agent shall
request and shall include a current list of all locations of Borrower's
Inventory. Borrower shall conduct a physical inventory no less frequently than
annually and shall provide to Agent a report based on each such physical
inventory promptly thereafter, together with such supporting information as
Agent shall reasonably request. Borrower has requested that Agent and Lenders
agree to accept cycle counts instead of physical inventories for certain types
of Borrower's Inventory. Agent agrees to annually review with Borrower the need
for conducting physical inventories and, after any such review, Agent may, in
its sole discretion agree to accept cycle counts instead of physical inventories
for any type or types of Borrower's Inventory.
6.4. Administration of Equipment.
---------------------------
Borrower shall keep records of its Equipment which shall be complete
and accurate in all material respects itemizing and describing the kind, type,
quantity and book value of its Equipment and all dispositions made in accordance
with subsection 8.2.9 hereof, and Borrower shall, and shall cause each of its
Subsidiaries to, furnish Agent with a current schedule containing the foregoing
information on at least an annual basis and more often if reasonably requested
by Agent. Promptly after the request therefor by Agent, Borrower shall deliver
to Agent any and all evidence of ownership, if any, of any of its Equipment.
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SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties.
--------------------------------------
To induce Agent and each Lender to enter into this Agreement and to
make advances hereunder, Borrower warrants, represents and covenants to Agent
and each Lender that:
7.1.1. Organization and Qualification. Borrower is a corporation
------------------------------
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware. Each of Borrower's Subsidiaries is a corporation,
limited partnership or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each of Borrower and each of its
Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign limited liability company, limited partnership
or corporation, as applicable, in each state or jurisdiction listed on
Exhibit 7.1.1 hereto and in all other states and jurisdictions in which the
-------------
failure of Borrower or any of its Subsidiaries to be so qualified would
reasonably be expected to have a Material Adverse Effect.
7.1.2. Corporate Power and Authority. Borrower and each of its
-----------------------------
Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly authorized by
all necessary corporate or other relevant action and do not and will not
(i) require any consent or approval of the shareholders of Borrower or any
of the shareholders, partners or members, as the case may be, of any
Subsidiary of Borrower; (ii) contravene Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation,
partnership agreement, certificate of formation, by-laws, limited liability
agreement, operating agreement or other organizational documents (as the
case may be); (iii) violate, or cause Borrower or any of its Subsidiaries
to be in default under, any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award in effect having
applicability to Borrower or any of its Subsidiaries, the violation of
which would reasonably be expected to have a Material Adverse Effect; (iv)
result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which
Borrower or any of its Subsidiaries is a party or by which it or its
Properties may be bound or affected, the breach of or default under which
would reasonably be expected to have a Material Adverse Effect; or (v)
result in, or require, the creation or imposition of any Lien (other than
Permitted Liens) upon or with respect to any of the Properties now owned or
hereafter acquired by Borrower or any of its Subsidiaries.
7.1.3. Legally Enforceable Agreement. This Agreement is, and each of
-----------------------------
the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each of Borrower and each of its
Subsidiaries party thereto,
-21-
enforceable against it in accordance with its respective terms, except as
limited by applicable bankruptcy or insolvency laws, and by general
principles of equity.
7.1.4. Capital Structure. Exhibit 7.1.4 hereto states, as of the
----------------- -------------
date hereof, (i) the correct name of each of the Subsidiaries of Borrower,
its jurisdiction of incorporation or organization and the percentage of its
Voting Stock owned by Borrower, (ii) the name of each of Borrower's and
each of its Subsidiaries' corporate or joint venture relationships and the
nature of the relationship, (iii) the number, nature and holder of all
outstanding Securities of Borrower and the holder of Securities of each
Subsidiary of Borrower and (iv) the number of issued and treasury
Securities of Borrower. Borrower has good title to all of the Securities it
purports to own of each of such Subsidiaries, free and clear in each case
of any Lien other than Permitted Liens. All such Securities have been duly
issued and are fully paid and non-assessable. As of the date hereof, there
are no outstanding options to purchase, or any rights or warrants to
subscribe for, or any commitments or agreements to issue or sell any
Securities or obligations convertible into, or any powers of attorney
relating to any Securities of Borrower or any of its Subsidiaries. Except
as set forth on Exhibit 7.1.4, as of the date hereof, there are no
-------------
outstanding agreements or instruments binding upon any of Borrower's or any
of its Subsidiaries' partners, members or shareholders, as the case may be,
relating to the ownership of its Securities.
7.1.5. Corporate Names. Neither Borrower nor any of its Subsidiaries
---------------
has been known as or has used any legal, fictitious or trade names except
those listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit 7.1.5,
------------- -------------
neither Borrower nor any of its Subsidiaries has been the surviving
corporation, limited liability company or other entity of a merger or
consolidation or has acquired all or substantially all of the assets of any
Person.
7.1.6. Business Locations; Agent for Process. Each of Borrower's and
-------------------------------------
each of its Subsidiary's chief executive office and other places of
business as of the date hereof are as listed on Exhibit 6.1.1 hereto, as
-------------
updated from time to time by Borrower. During the preceding one-year
period, neither Borrower nor any of its Subsidiaries has had an office or
place of business other than as listed on Exhibit 6.1.1. All tangible
-------------
Collateral is and will at all times be kept by Borrower and its
Subsidiaries in accordance with subsection 6.1.1. Except as shown on
Exhibit 6.1.1, as of the date hereof, no Inventory is stored with a bailee,
-------------
distributor, warehouseman or similar party, nor is any Inventory consigned
to any Person.
7.1.7. Title to Properties; Priority of Liens. Borrower and each of
--------------------------------------
its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its
other Property, in each case, free and clear of all Liens except Permitted
Liens. Each of Borrower and each of its Subsidiaries has paid or discharged
all lawful claims which, if unpaid, might become a Lien against any of
Borrower's or such Subsidiary's Properties that is not a Permitted Lien.
The Liens
-22-
granted to Agent under Section 5 hereof are first priority Liens, subject
only to Permitted Liens.
7.1.8. Accounts. Agent may rely, in determining which of Borrower's
--------
Accounts are Eligible Accounts, on all statements and representations made
by Borrower with respect to any Account or Accounts. With respect to each
of Borrower's Accounts, whether or not such Account is an Eligible Account,
unless otherwise disclosed to Agent in writing:
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
---- ----
delivery of goods or rendition of services by Borrower, in the
ordinary course of its business and in accordance with the terms and
conditions of all purchase orders, contracts or other documents
relating thereto and forming a part of the contract between Borrower
and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Agent;
(iv) There are no facts, events or occurrences which in any
way impair the validity or enforceability of any Accounts or tend to
reduce the amount payable thereunder from the face amount of the
invoice and statements delivered or made available to Agent with
respect thereto;
(v) To the best of Borrower's knowledge, the Account Debtor
thereunder had the capacity to contract at the time any contract or
other document giving rise to the Account was executed; and
(vi) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against the
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectibility of such Account.
7.1.9. Equipment. The Equipment of Borrower and its Subsidiaries is
---------
in good operating condition and repair, and all necessary replacements of
and repairs thereto shall be made so that the operating efficiency thereof
shall be maintained and preserved, reasonable wear and tear excepted,
except where the failure to so maintain the same would not reasonably be
expected to have a Material Adverse Effect. Borrower will not permit any
Equipment to become affixed to any real Property leased to Borrower or any
of its Subsidiaries so that an interest arises therein under the real
estate laws of the applicable jurisdiction unless the landlord of such real
Property has executed a landlord waiver or leasehold mortgage in favor of
and in form reasonably acceptable to Agent, and Borrower will not permit
any of the
-23-
Equipment of Borrower or any of its Subsidiaries to become an accession to
any personal Property other than Equipment that is subject to first
priority (except for Permitted Liens) Liens in favor of Agent.
7.1.10. Financial Statements; Fiscal Year. The Consolidated balance
---------------------------------
sheets of Borrower and its Subsidiaries (including the accounts of all
Subsidiaries of Borrower and their respective Subsidiaries for the
respective periods during which a Subsidiary relationship existed) as of
October 31, 2000, and the related statements of income for the periods
ended on such dates, except for the absence of footnote disclosures and
normal year-end adjustments, have been prepared in accordance with GAAP,
and present fairly in all material respects the financial positions of
Borrower and such Persons, taken as a whole, at such dates and the results
of Borrower's and such Persons' operations, taken as a whole, for such
periods. Except as disclosed on Exhibit 7.1.10 hereto, as of the date
--------------
hereof, since October 31, 2000, there has been no material adverse change
in the financial position of Borrower and such other Persons, taken as a
whole, as reflected in the Consolidated balance sheet as of such date. As
of the date hereof, the fiscal year of Borrower and each of its
Subsidiaries ends on the Saturday closest to December 31 of each year.
7.1.11. Full Disclosure. The financial statements referred to in
---------------
subsection 7.1.10 hereof do not, nor does this Agreement or any other
written statement of Borrower to Agent or any Lender contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact
which Borrower has failed to disclose to Agent or any Lender in writing
which would reasonably be expected to have a Material Adverse Effect.
7.1.12. Solvent Financial Condition. Each of Borrower and each of
---------------------------
its Subsidiaries, is now and, after giving effect to the initial Loans to
be made and the initial Letters of Credit and LC Guaranties to be issued
hereunder and all related transactions, will be, Solvent.
7.1.13. Surety Obligations. Except as set forth on Exhibit 7.1.13,
------------------ --------------
as of the date hereof, neither Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract issued or entered into to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
7.1.14. Taxes. Borrower's federal tax identification number is 38-
-----
3868249. The federal tax identification number of each Subsidiary of
Borrower is shown on Exhibit 7.1.14 hereto. Borrower and each of its
--------------
Subsidiaries has filed all federal, state and local tax returns and other
reports relating to taxes it is required by law to file, except where the
failure to so file would not reasonably be expected to have a Material
Adverse Effect, and has paid, or made provision for the payment of, all
taxes, assessments, fees, levies and other governmental charges upon it,
its income and Properties as and when such taxes, assessments, fees, levies
and charges are due
-24-
and payable, unless and to the extent any thereof are being actively
contested in good faith and by appropriate proceedings and Borrower and
each of its Subsidiaries maintains reasonable reserves on its books
therefor. The provision for taxes on the books of Borrower and its
Subsidiaries is adequate for all years not closed by applicable statutes,
and for the current fiscal year.
7.1.15. Brokers. Except as shown on Exhibit 7.1.15 hereto, there are
------- --------------
no claims for brokerage commissions, finder's fees or investment banking
fees in connection with the transactions contemplated by this Agreement.
7.1.16. Patents, Trademarks, Copyrights and Licenses. Borrower and
--------------------------------------------
each of its Subsidiaries owns, possesses or licenses or has the right to
use all the patents, trademarks, service marks, trade names, copyrights,
licenses and other Intellectual Property necessary for the present conduct
of its existing business without any known conflict with the rights of
others, except for such conflicts as would not reasonably be expected to
have a Material Adverse Effect. All such patents, trademarks, service
marks, tradenames, copyrights, material licenses, and Intellectual Property
are listed on Exhibit 7.1.16 hereto. To the knowledge of Borrower, no claim
--------------
has been asserted to Borrower or any of its Subsidiaries which is currently
pending that their use of their Intellectual Property or the conduct of
their business does or may infringe upon the Intellectual Property rights
of any third party. To the knowledge of Borrower and except as set forth on
Exhibit 7.1.16 hereto, as of the date hereof, no Person is engaging in any
--------------
activity that infringes in any material respect upon Borrower's or any of
its Subsidiaries' material Intellectual Property. Except as set forth on
Exhibit 7.1.16, each of Borrower's and each of its Subsidiaries' (i)
--------------
material trademarks, service marks, and copyrights are registered with the
U.S. Patent and Trademark Office or in the U.S. Copyright Office, as
applicable and (ii) material license agreements and similar arrangements
relating to its Inventory (1) permits, and does not restrict, the
assignment by Borrower or any of its Subsidiaries to Agent, or any other
Person designated by Agent, of all of Borrower's or such Subsidiary's, as
applicable, rights, title and interest pertaining to such license agreement
or such similar arrangement and (2) would permit the continued use by
Borrower or such Subsidiary, or Agent or its assignee, of such license
agreement or such similar arrangement and the right to sell Inventory
subject to such license agreement for a period of no less than 6 months
after a default or breach of such agreement or arrangement. The
consummation and performance of the transactions and actions contemplated
by this Agreement and the other Loan Document, including without
limitation, the exercise by Agent of any of its rights or remedies under
Section 10, will not result in the termination or impairment of any of
Borrower's or any of its Subsidiaries' ownership or rights relating to its
Intellectual Property, except for such Intellectual Property rights the
loss or impairment of which would not reasonably be expected to have a
Material Adverse Effect. Except as listed on Exhibit 7.1.16 and except as
--------------
would not reasonably be expected to have a Material Adverse Effect, (i)
neither Borrower nor any of its Subsidiaries is in breach of, or default
under, any term of any license or sublicense with respect to any of its
Intellectual Property and (ii) to
-25-
the knowledge of Borrower, no other party to such license or sublicense is
in breach thereof or default thereunder, and such license is valid and
enforceable.
7.1.17. Governmental Consents. Borrower and each of its Subsidiaries
---------------------
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it, except where the failure to
possess or so maintain such rights would not reasonably be expected to have
a Material Adverse Effect.
7.1.18. Compliance with Laws. Except as set forth on Exhibit 7.1.18
-------------------- --------------
attached hereto, Borrower and each of its Subsidiaries has duly complied in
all material respects with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions
of all federal, state and local laws, rules and regulations applicable to
Borrower or such Subsidiary, as applicable, its Properties or the conduct
of its business, except for such non-compliance as would not reasonably be
expected to have a Material Adverse Effect, and to the knowledge of
Borrower, there have been no citations, notices or orders of noncompliance
issued to Borrower or any of its Subsidiaries under any such law, rule or
regulation, except where such noncompliance would not reasonably be
expected to have a Material Adverse Effect. Borrower acknowledges that
notwithstanding the disclosure contained in Exhibit 7.1.18 attached hereto,
--------------
it shall constitute a breach of this subsection 7.1.18 if the events and
facts so disclosed could at any time reasonably be expected to have a
Material Adverse Effect. Borrower and each of its Subsidiaries has
established and maintains an adequate monitoring system to insure that it
remains in compliance in all material respects with all federal, state and
local rules, laws and regulations applicable to it. No Inventory has been
produced in violation of the Fair Labor Standards Act (29 U.S.C. (S)201 et
--
seq.), as amended.
---
7.1.19. Restrictions. Neither Borrower nor any of its Subsidiaries
------------
is a party or subject to any contract or agreement which restricts its
right or ability to incur Indebtedness, other than as set forth on Exhibit
-------
7.1.19 hereto, none of which prohibit the execution of or compliance with
------
this Agreement or the other Loan Documents by Borrower or any of its
Subsidiaries, as applicable. In particular, although the Senior Notes
Indenture and the Parent Debentures Indenture restrict the ability of
Borrower and its Subsidiaries to incur Indebtedness generally, such
restrictions do not restrict the ability of Borrower and its Subsidiaries
(or Parent) to incur the Obligations or to enter into this Agreement
because (i) Borrower may incur up to $50,000,000 of the Obligations under
this Agreement under each of (a) Section 4.13(b)(i) and Section
4.13(b)(xvii) of the Senor Notes Indenture, when taken together and (b)
Section 4.13(b)(i) and Section 4.13(b)(xvii) of the Parent Debentures
Indenture, when taken together and (ii) the encumbrances and restrictions
existing under or arising pursuant to this Agreement on the ability of
Borrower and its Subsidiaries to take the actions described in Section 4.11
of the Senior Notes Indenture and Section 4.11 of the Parent Debentures
Indenture are not materially more restrictive than the limitations
-26-
contained in the Existing Credit Agreement as of July 28, 1999. As of the
date hereof, (x) no principal payments have been required to be applied or
have been applied to the Indebtedness under the Existing Credit Agreement
under Section 4.16(a)(ii)(A) of the Senior Notes Indenture or Section
4.16(a)(ii)(A) of the Parent Debenture Indenture and (y) none of Parent,
Borrower or any of their Subsidiaries has any Indebtedness outstanding,
other than Indebtedness permitted under either Section 4.13(a) of the
Senior Notes Indenture and Section 4.13(a) of the Parent Debentures
Indenture or Sections 4.13(b)(i)-(xvi) of the Senior Notes Indenture and
Sections 4.13(b)(i)-(xvi) of the Parent Debentures Indenture.
7.1.20. Litigation. Except as set forth on Exhibit 7.1.20 hereto,
---------- --------------
there are no actions, suits, proceedings or investigations pending, or to
the knowledge of Borrower, threatened, against or involving Borrower or any
of its Subsidiaries, or the business, operations, Properties, prospects,
profits or condition of Borrower or any of its Subsidiaries which, singly
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect. Neither Borrower nor any of its Subsidiaries is in default
with respect to any order, writ, injunction, judgment, decree or rule of
any court, governmental authority or arbitration board or tribunal, which,
singly or in the aggregate, would reasonably be expected to have a Material
Adverse Effect.
7.1.21. No Defaults. Except as set forth on Exhibit 7.1.21, no event
----------- --------------
has occurred and no condition exists which would, upon or after the
execution and delivery of this Agreement or Borrower's performance
hereunder, constitute a Default or an Event of Default. Except as set forth
on Exhibit 7.1.21, neither Borrower nor any of its Subsidiaries is in
--------------
default in (and no event has occurred and no condition exists which
constitutes, or which the passage of time or the giving of notice or both
would constitute, a default in) the payment of any Indebtedness to any
Person for Money Borrowed in excess of $25,000.
7.1.22. Leases. Exhibit 7.1.22 hereto is a complete listing as of
------ --------------
the date hereof of all capitalized and operating personal property leases
of Borrower and its Subsidiaries and all real property leases of Borrower
and its Subsidiaries. Borrower and each of its Subsidiaries is in full
compliance with all of the terms of each of its respective capitalized and
operating leases, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect.
7.1.23. Pension Plans. Except as disclosed on Exhibit 7.1.23 hereto,
------------- --------------
neither Borrower nor any of its Subsidiaries has any Plan. Borrower and
each of its Subsidiaries is in compliance with the requirements of ERISA
and the regulations promulgated thereunder with respect to each Plan,
except where the failure to so comply would not reasonably be expected to
have a Material Adverse Effect. No fact or situation that would reasonably
be expected to result in a material adverse change in the financial
condition of Borrower and its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries has any material
withdrawal liability in connection with a Multiemployer Plan.
-27-
7.1.24. Trade Relations. Except as set forth on Exhibit 7.1.24, there
--------------- --------------
exists no actual or, to Borrower's knowledge, threatened termination,
cancellation or limitation of, or any modification or change in, the
business relationship between Borrower or any of its Subsidiaries and any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower and its Subsidiaries, or
with any material supplier, except in each case, where the same would not
reasonably be expected to have a Material Adverse Effect, and there exists
no present condition or state of facts or circumstances which would prevent
Borrower or any of its Subsidiaries from conducting such business after the
consummation of the transaction contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted.
7.1.25. Labor Relations. Except as described on Exhibit 7.1.25
--------------- --------------
hereto, as of the date hereof, neither Borrower nor any of its Subsidiaries
is a party to any collective bargaining agreement. There are no material
grievances, disputes or controversies with any union or any other
organization of Borrower's or any of its Subsidiaries' employees, or
threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organization, except those that would
not reasonably be expected to have a Material Adverse Effect.
7.2. Continuous Nature of Representations and Warranties.
---------------------------------------------------
Each representation and warranty contained in this Agreement and the
other Loan Documents shall be continuous in nature and shall remain accurate,
complete and not misleading at all times during the term of this Agreement,
except for changes in the nature of the business or operations of Borrower or
any of its Subsidiaries that would render the information in any exhibit
attached hereto or to any other Loan Document either inaccurate, incomplete or
misleading, so long as Majority Lenders have consented to such changes or such
changes are expressly permitted by this Agreement.
7.3. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties of Borrower contained in this
Agreement or any of the other Loan Documents shall survive the execution,
delivery and acceptance thereof by Agent and each Lender and the parties thereto
and the closing of the transactions described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants.
---------------------
During the term of this Agreement, and thereafter for so long as there
are any Obligations outstanding, Borrower covenants that, unless otherwise
consented to by Majority Lenders, in writing, it shall:
8.1.1. Visits and Inspections; Lender Meeting. Permit representatives
--------------------------------------
of Agent, and during the continuation of any Default or Event of Default
any Lender,
-28-
from time to time, as often as may be reasonably requested, but only during
normal business hours, to visit and inspect the Properties of Borrower and
each of its Subsidiaries, inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its
independent accountants, Borrower's and each of its Subsidiaries' business,
assets, liabilities, financial condition, business prospects and results of
operations. Agent, if no Default or Event of Default then exists, shall
give Borrower reasonable prior notice of any such inspection or audit.
Without limiting the foregoing, Borrower will participate and will cause
its key management personnel to participate in periodic meetings with Agent
and Lenders, which meetings shall be held after reasonable notice at such
time and such place as may be reasonably requested by Agent.
8.1.2. Notices. Promptly notify Agent in writing of the occurrence
-------
of any event or the existence of any fact which renders any representation
or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading in any material respect as of the date
made or remade. In addition, Borrower agrees to provide Agent with (i) 10
Business Days' prior written notice of (1) any change in the legal name of
Borrower or any of its Subsidiaries, (2) the adoption by Borrower or any of
its Subsidiaries of any new fictitious name or tradename and (3) any change
in the chief executive office of Borrower or any of its Subsidiaries, and
(ii) prompt written notice of any change in the information disclosed in
any Exhibit hereto, in each case after giving effect to the materiality
limits and Material Adverse Effect qualifications contained therein.
8.1.3. Financial Statements. Keep, and cause each of its Subsidiaries
--------------------
to keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with customary
accounting practices reflecting all its financial transactions; and cause
to be prepared and furnished to Agent and each Lender, the following, all
to be prepared in accordance with GAAP applied on a consistent basis,
unless Borrower's certified public accountants concur in any change therein
and such change is disclosed to Agent and is consistent with GAAP:
(i) not later than 90 days after the close of each fiscal
year of Borrower, unqualified (except for a qualification for a change
in accounting principles with which the accountant concurs) audited
financial statements of Borrower and its Subsidiaries as of the end of
such year, on a Consolidated basis, certified by Price Waterhouse
Coopers (or another firm of independent certified public accountants
of recognized standing selected by Borrower but acceptable to Agent)
and, within a reasonable time thereafter a copy of any management
letter issued in connection therewith;
(ii) not later than 30 days after the end of each month
hereafter, other than the last month of Borrower's fiscal year, and
not later than 40 days after the end of the last month of Borrower's
fiscal year, unaudited interim financial statements of Borrower and
its Subsidiaries as of the end of such
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month and of the portion of the fiscal year then elapsed, on a
Consolidated and consolidating basis, certified by the principal
financial officer or Vice President-Finance of Borrower as prepared in
accordance with GAAP and fairly presenting in all material respects
the financial position and results of operations of Borrower and its
Subsidiaries for such month and period subject only to changes from
audit and year-end adjustments and except that such statements need
not contain notes;
(iii) together with each delivery of financial statements
pursuant to clauses (i) and (ii) of this subsection 8.1.3, a
management report (1) setting forth in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the most recent
Projections for the current fiscal year delivered pursuant to
subsection 8.1.7 and (2) identifying the reasons for any significant
variations. The information above shall be presented in reasonable
detail and shall be certified by the principal financial officer or
Vice President-Finance of Borrower to the effect that such information
fairly presents in all material respects the results of operation and
financial condition of Borrower and its Subsidiaries as of the dates
and for the periods indicated;
(iv) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements or financial statements
which Borrower has made available to its Securities holders and copies
of any regular, periodic and special reports or registration
statements which Parent, Borrower or any of its Subsidiaries files
with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national
securities exchange;
(v) upon request of Agent, copies of any annual report to be
filed with ERISA in connection with each Plan; and
(vi) such other data and information (financial and
otherwise) as Agent or any Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or Borrower's or
any of its Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements
described in paragraph (i) of this subsection 8.1.3, Borrower shall forward
to Agent a copy of the accountants' letter to Borrower's management that is
prepared in connection with such financial statements and also shall cause
to be prepared and shall furnish to Agent a certificate of the aforesaid
certified public accountants certifying to Agent that, based upon their
examination of the financial statements of Borrower and its Subsidiaries
performed in connection with their examination of said financial
statements, they are not aware of any Default or Event of Default, or, if
they are aware of such Default or Event of Default, specifying the nature
thereof. Concurrently with the delivery of the financial statements
described in paragraph (i) and (ii) of this subsection 8.1.3, or more
frequently
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if reasonably requested by Agent, Borrower shall cause to be prepared and
furnished to Agent a Compliance Certificate in the form of Exhibit 8.1.3
-------------
hereto executed by the principal financial officer or Vice President-
Finance of Borrower.
8.1.4. Borrowing Base Certificates. On or before the 15/th/ day of
---------------------------
each month from and after the date hereof, Borrower shall deliver to Agent,
in form acceptable to Agent, a borrowing base certificate executed by an
officer identified in writing by Borrower to Agent as being authorized to
execute borrowing base certificates hereunder, relating to Eligible
Accounts and Eligible Inventory as of the last day of the immediately
preceding month, with such supporting materials as Agent shall reasonably
request. If requested by Agent, or if Borrower deems it advisable, Borrower
shall execute and deliver to Agent borrowing base certificates more
frequently than monthly.
8.1.5. Landlord, Processor and Storage Agreements. Provide Agent
------------------------------------------
with copies of all agreements between Borrower or any of its Subsidiaries
and any landlord, processor, distributor, warehouseman or consignee which
owns any premises at which any Collateral may, from time to time, be kept.
8.1.6. Guarantor Financial Statements. Deliver or cause to be
------------------------------
delivered to Agent financial statements, if any, for each Guarantor (to the
extent not consolidated with the financial statements delivered to Agent
under subsection 8.1.3) in form and substance satisfactory to Agent at such
intervals and covering such time periods as Agent may request.
8.1.7. Projections. No later than the end of each fiscal year of
-----------
Borrower, deliver to Agent Projections of Borrower and each of its
Subsidiaries for the forthcoming fiscal year, month by month.
8.1.8. Subsidiaries. Cause each Subsidiary of Borrower, whether now
------------
or hereafter in existence, promptly upon Lender's request, to execute and
deliver to Lender a Guaranty Agreement and a security agreement pursuant to
which such Subsidiary guaranties the payment of all Obligations and grants
to Lender a first priority Lien (subject only to Permitted Liens) on all of
its Properties of the types described in subsection 5.1. Additionally,
Borrower shall execute and deliver to Lender a pledge agreement pursuant to
which Borrower grants to Lender a first priority Lien (subject only to
Permitted Liens) with respect to all of the issued and outstanding
Securities of each such Subsidiary and the Securities of ▇▇▇▇▇▇▇ owned by
Borrower.
8.1.9. Certain Notices. Promptly provide Agent with copies of each
---------------
notice given or received by Borrower or Parent, as applicable, under (a)
Section 4.06 of the Senior Notes Indenture, as well as each other written
notice given or received by Borrower or Parent under the Senior Notes
Indenture and (b) Section 4.06 of the Parent Debentures Indenture, as well
as each other written notice given or received by Borrower or Parent under
the Parent Debentures Indenture.
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8.1.10. Environmental Matters.
---------------------
(i) Deliver or cause to be delivered to Agent (a) within 75
days after the Closing Date, phase I environmental reports relating to
Borrower's real property located in La Mirada, California; Oregon,
Illinois; and Sioux Falls, South Dakota and (b) on or before June 1,
2001, phase II and III environmental reports relating to Borrower's
real property located in Hubbardston, Massachusetts, in each case in
form and substance, and issued by a consultant, satisfactory to Agent.
Unless otherwise agreed by Majority Lenders, Borrower shall promptly
take such remedial and other actions as such reports recommend in
respect of any material issues raised in such reports.
(ii) Promptly provide to Agent copies of all correspondence,
filings, notices and other writings received and sent by Borrower will
respect to the events described in Exhibit 7.1.18, and keep Agent
--------------
informed on a current basis with respect to all material developments
related thereto.
8.1.11. Dealers. Obtain and maintain from each Account Debtor that
-------
is a dealer of Borrower's Inventory, a security agreement granting to
Borrower a purchase money security interest in the Inventory sold to such
Account Debtor and the proceeds thereof in order to secure amounts owing
from such Account Debtor to Borrower, obtain from such Account Debtor (and
appropriately file) UCC financing statements necessary and sufficient to
perfect such security interest and take such additional steps as are
necessary to perfect such security interest as a purchase money security
interest in such Inventory. Upon request by Agent, Borrower shall promptly
provide Agent with copies of the foregoing agreements and documents with
respect to any Account Debtor.
8.2. Negative Covenants.
------------------
During the Term, and thereafter for so long as there are any
Obligations outstanding, Borrower covenants that, unless otherwise consented to
by Majority Lenders, in writing, it shall not:
8.2.1. Mergers; Consolidations; Acquisitions. Merge or consolidate,
-------------------------------------
or permit any Subsidiary of Borrower to merge or consolidate, with any
Person; or acquire, or permit any of their respective Subsidiaries to
acquire, all or any substantial part of the Properties of any Person,
except for:
(i) mergers of any Subsidiary of Borrower into Borrower or
another Subsidiary of Borrower; and
(ii) acquisitions of assets consisting of fixed assets or
real property that constitute Capital Expenditures permitted under
subsection 8.2.8.
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Notwithstanding the foregoing, in no event shall any such merger or
consolidation take place unless the same would be permitted under the terms
of Section 5.01 of the Senior Notes Indenture and Section 5.01 of the
Parent Debentures Indenture.
8.2.2. Loans. Except as disclosed on Exhibit 8.2.2, make, or permit
----- -------------
any Subsidiary of Borrower to make, any loans or other advances of money to
any Person, other than (i) for salary, travel advances, advances against
commissions and other similar advances to employees and extensions of trade
credit in the ordinary course of business, (ii) deposits with financial
institutions permitted under this Agreement, (iii) prepaid expenses and
(iv) loans by Borrower to any Subsidiary of Borrower that is also a
Guarantor, and loans by any Subsidiary of Borrower that is also a Guarantor
to Borrower, so long as (a) the same are evidenced by promissory notes
pledged by Borrower or such Subsidiary, as applicable, to Agent as part of
the Collateral for the Obligations, (b) such loans are subordinated to the
Obligations pursuant to the terms of the applicable promissory note or
subordination agreement and (c) any payment by any such Subsidiary in
respect of its Guaranty Agreement shall result in a reduction of the
applicable loan by a like amount.
8.2.3. Total Indebtedness. Create, incur, assume, or suffer to
------------------
exist, or permit any Subsidiary of Borrower to create, incur or suffer to
exist, any Indebtedness, except:
(i) Obligations owing to Agent or any Lender under this
Agreement;
(ii) Indebtedness existing on the date of this Agreement and
listed on Exhibit 8.2.3;
-------------
(iii) Permitted Purchase Money Indebtedness;
(iv) Senior Notes Debt of up to $130,000,000, as reduced by
any payments made in respect thereof;
(v) Seller Secured Debt of up to $5,000,000, as reduced by
any payments made in respect thereof;
(vi) Indebtedness in respect of intercompany loans permitted
under subsection 8.2.2(iv);
(vii) Guaranties of any Indebtedness permitted hereunder;
(viii) Contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
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(ix) To the extent not mentioned above, trade payables,
accruals and accounts payable in the ordinary course of business (in
each case to the extent not overdue) not for Money Borrowed; and
(x) Indebtedness not included in paragraphs (i) through (ix)
above which does not exceed at any time, in the aggregate, the sum of
$250,000.
Notwithstanding the foregoing, in no event shall Borrower or any Subsidiary
of Borrower incur, assume or suffer to exist (a) any Indebtedness
(including any Indebtedness listed in clauses (i) - (xii) above), unless
the same would be permitted under either Section 4.13(a) of the Senior
Notes Indenture and Section 4.13(a) of the Parent Debentures Indenture or
Sections 4.13(b)(i) - (xvi) of the Senior Notes Indenture and Sections
4.13(b)(i) - (xvi) of the Parent Debentures Indenture, (b) any Indebtedness
in respect of any "Additional Notes" (as defined in the Senior Notes
Indenture) or (c) any Indebtedness in respect of the Parent Debentures
Debt, which shall remain solely an obligation of Parent.
8.2.4. Affiliate Transactions. Enter into, or be a party to, or
----------------------
permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or any holder of any Securities
of Borrower or any Subsidiary of Borrower, including without limitation any
management, consulting or similar fees, except (i) in the ordinary course
of and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to Borrower than would be
obtained in a comparable arms-length transaction with a Person not an
Affiliate or Security holder of Borrower, (ii) for the Dealer Financing
Arrangement with Capital Source and the sale to Capital Source of Accounts
in connection therewith and pursuant to the terms of the Capital Source
Agreements and (iii) for transactions otherwise permitted under this
Agreement.
Notwithstanding the foregoing, (i) in no event shall any management,
consulting or similar fees be paid to any Affiliate of Borrower or any
holder of Securities of Borrower or any Subsidiary of Borrower and (b) no
transaction with an Affiliate or Security holder may be consummated unless
the same is permitted under Section 4.12 of the Senior Notes Indenture and
Section 4.12 of the Parent Debentures Indenture.
8.2.5. Limitation on Liens. Create or suffer to exist, or permit
-------------------
any Subsidiary of Borrower to create or suffer to exist, any Lien upon any
of its Property, income or profits, whether now owned or hereafter
acquired, except:
(i) Liens at any time granted in favor of Agent for the
benefit of Lenders;
(ii) Liens for taxes, assessments or governmental charges
(excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due, or being contested in the manner described in
subsection 7.1.14
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hereto, but only if such Lien would not reasonably be expected to have
a Material Adverse Effect;
(iii) Liens arising in the ordinary course of the business of
Borrower or any of its Subsidiaries by operation of law or regulation,
but only if payment in respect of any such Lien is not at the time
required and such Liens do not, in the aggregate, materially detract
from the value of the Property of Borrower or any of its Subsidiaries
or materially impair the use thereof in the operation of the business
of Borrower or any of its Subsidiaries;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Such other Liens as appear on Exhibit 8.2.5 hereto;
-------------
(vi) Liens incurred or deposits made in the ordinary course
of business in connection with (1) worker's compensation, social
security, unemployment insurance and other like laws or (2) sales
contracts, leases, statutory obligations, work in progress advances
and other similar obligations not incurred in connection with the
borrowing of money or the payment of the deferred purchase price of
property;
(vii) Reservations, covenants, zoning and other land use
regulations, title exceptions or encumbrances granted in the ordinary
course of business, affecting real Property owned or leased by
Borrower or one of its Subsidiaries; provided that such exceptions do
--------
not in the aggregate materially interfere with the use of such
Property in the ordinary course of Borrower's or such Subsidiary's
business;
(viii) Judgment Liens that do not give rise to an Event of
Default under subsection 10.1.15;
(ix) A Lien on the real Property of Borrower located in La
Mirada, California that secures the Seller Secured Debt; and
(x) Such other Liens as Majority Lenders may hereafter
approve in writing.
8.2.6. Payments and Amendments of Certain Debt.
---------------------------------------
(i) Make or permit any Subsidiary of Borrower to make any
payment of any part or all of any Subordinated Debt or take any other
action or omit to take any other action in respect of any Subordinated
Debt, except in accordance with the subordination agreement relative
thereto or the subordination provisions thereof;
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(ii) Make or permit any Subsidiary of Borrower to make any
complete or partial payment (including any payment or mandatory or
optional prepayment of principal of, premium, if any, or interest on,
or redemption, purchase, retirement, defeasance (including in-
substance or legal defeasance), sinking fund or similar payment) with
respect to, any of the Parent Debentures Debt, the Senior Notes Debt
or the Seller Secured Debt, including without limitation any optional
redemption of the Senior Notes pursuant to Section 3.07 of the Senior
Notes Indenture, any mandatory repurchase of Senior Notes after a
"Change of Control" under Section 4.15 of the Senior Notes Indenture,
any mandatory repurchase of Senior Notes under Section 4.16 of the
Senior Notes Indenture, any optional redemption of the Parent
Debentures under Section 3.07 of the Parent Debentures Indenture, any
mandatory repurchase of Parent Debentures after a "Change of Control"
under Section 4.15 of the Parent Debentures Indenture or any mandatory
repurchase of Parent Debentures under Section 4.16 of the Parent
Debentures Indenture; provided that so long as no Event of Default or
Default shall have occurred and be continuing or shall be caused
thereby (a) Borrower may make regularly scheduled payments of
principal and interest in respect of the Seller Secured Debt in
accordance with the terms of, and to the extent required by, the
Seller Secured Note, (b) Borrower may make regularly scheduled
payments of interest in respect of the Senior Notes in accordance with
the terms of, and only to the extent required by the Senior Notes
Indenture, (c) Borrower may make the Distributions described in
subsection 8.2.7(iv) hereof, and (d) Borrower may repurchase Senior
Notes in an aggregate amount not to exceed $10,000,000 during the
Term; however, (1) no such repurchases shall be permitted prior to the
delivery by Borrower to Agent of the financial statements required to
be delivered pursuant to subsection 8.1.3(ii) for the period ending
June 30, 2001, (2) at the time of each such repurchase, and
immediately thereafter, Borrower shall be in compliance with Section
8.3 hereof, (3) no Event of Default shall have occurred at any time
during the two calendar quarters immediately preceding such
repurchase, (4) the Interest Coverage Ratio as of the last day of the
calendar quarter immediately preceding such repurchase shall be at
least 1.25 to 1.00 and (5) no more than three separate repurchases of
Senior Notes shall be made during the Term;
(iii) Amend or modify any agreement, instrument or document
evidencing or relating to any Subordinated Debt; or
(iv) Amend or modify in any material fashion, or waive any
material rights under, or suffer Parent to do any of the same, any
agreement, instrument or document evidencing the Seller Secured Debt
(including without limitation the Seller Secured Note), the Senior
Notes Debt (including without limitation the Senior Notes and the
Senior Notes Indenture) or the Parent Debentures Debt (including
without limitation the Parent Debentures and the Parent Debentures
Indenture); or amend or change any of the foregoing (or make any
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payment consistent with an amendment thereof or a change thereto), if
the effect of such amendment or change is to increase the interest
rate thereon, change (to earlier dates) any dates upon which payments
of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other then
to eliminate any such event of default or increase any grace period
related thereto), change the prepayment or defeasance provisions
thereof, change any subordination provisions thereof (or of any
guaranty thereof), or change any collateral therefor (other than to
release such collateral), or if the effect of such amendment or
change, together with all other amendments or changes made, is to
increase materially the obligations of any obligor thereunder or to
confer any additional rights on the holders thereof which would be
adverse to Parent, Borrower, Agent or Lenders.
Notwithstanding the foregoing, no payment under clause (i) or (ii) above
shall be permitted to be made unless the same is permitted under Section
4.10 of the Senior Notes Indenture and Section 4.10 of the Parent
Debentures Indenture.
8.2.7. Distributions. Declare or make, or permit any Subsidiary of
-------------
Borrower to declare or make, any Distributions, except for:
(i) Distributions by any Subsidiary of Borrower to Borrower;
(ii) Distributions paid solely in shares of Securities of
Borrower or any of its Subsidiaries;
(iii) Distributions by Borrower in an amount sufficient to
permit Parent to make payments of interest commencing on July 15, 2004
on account of Parent Debentures Debt in the amount and on the due date
of each such payment in accordance with the terms of, and only to the
extent required by, the Parent Debentures, so long as Parent applies
the amount of such Distribution for such purpose;
(iv) Distributions by Borrower in an amount necessary and
sufficient to enable Parent to pay administrative costs and expenses
related to the business of Borrower and its Subsidiaries, not to
exceed $250,000 in any fiscal year of Borrower, so long as Parent
applies the amount of such Distributions for such purpose; and
(v) Distributions by Borrower to the extent necessary to
enable Parent to discharge the Consolidated tax liabilities of Parent
and its Subsidiaries, so long as Parent applies the amount of such
Distributions for such purpose.
provided, however, that no Distribution otherwise permitted (x) by clauses
(iii) and (iv) above shall be permitted to be made if, immediately before
or after giving effect thereto,
-37-
a Default or Event of Default shall exist or (y) hereunder shall be
permitted to be made unless the same is permitted under Section 4.10 of the
Senior Notes Indenture and Section 4.10 of the Parent Debentures Indenture.
8.2.8. Capital Expenditures. Make Capital Expenditures (including,
--------------------
without limitation, by way of capitalized leases) which, in the aggregate,
as to Borrower and all of its Subsidiaries, exceed (i) $2,600,000 during
the 2001 fiscal year, (ii) $3,000,000 during the 2002 fiscal year;
provided, that if the Fixed Charge Coverage Ratio for the 2001 fiscal year
is greater than 1.05 to 1.00, such amount shall be increased to $4,000,000
and (iii) $3,300,000 during the 2003 fiscal year; provided, that if the
Fixed Charge Coverage Ratio for the 2002 fiscal year is greater than 1.10
to 1.00, such amount shall be increased to $5,000,000; provided, that
$1,000,000 of the unused Capital Expenditure allowance for any fiscal year
may be carried over to the next succeeding fiscal year only, to be used
after the full Capital Expenditure allowance for such succeeding fiscal
year has been fully used.
8.2.9. Disposition of Assets. Borrower shall not, and shall not
---------------------
permit any of its Subsidiaries to, consummate any Asset Disposition or
other sale, lease, transfer or other disposition of any of its Property
(including without limitation as part of a sale and leaseback transaction)
without the prior written consent of Majority Lenders, other than (i) so
long as no Default or Event of Default has occurred and is continuing,
sales of Inventory in the ordinary course of business; (ii) transfers of
Property to Borrower by a Subsidiary of Borrower; (iii) dispositions of
investments described in paragraphs (iv), (v), (vi) and (vii) of the
definition of the term Restricted Investments; (iv) so long as no Default
----------------------
or Event of Default has occurred and is continuing, any such individual
transaction (and not any such transaction constituting one of a series of
related transactions) involving Property that does not constitute all or
substantially all of the assets of or business unit or a product line and
that has a book value of $500,000 or less; provided, that if the aggregate
value of all Property sold or otherwise disposed of under this clause (iv)
in any fiscal year of Borrower exceeds $1,000,000, then each subsequent
sale or other disposition during such fiscal year will require the consent
of Majority Lenders unless the subject Property has a book value of
$100,000 or less; (v) sale of Accounts to Capital Source in connection with
the Dealer Financing Arrangement, pursuant to the terms of the Capital
Source Agreements; and (vi) other such transactions so long as (a) no Event
of Default or Default is then in existence or would be caused thereby, (b)
either such transaction does not constitute an Asset Disposition or, if
such transaction does constitute an Asset Disposition, the Asset
Disposition Threshold has not previously been exceeded and will not be
exceeded by such Asset Disposition, (c) if such transaction involves the
sale, lease, transfer or other disposition of any Eligible Account,
Eligible Inventory, Eligible Equipment or Eligible Real Property, the net
cash proceeds of such transaction are at least equal to the amount of the
Revolving Credit Loans predicated on the value of such Property, (d) the
Property subject to such transaction is not necessary or useful to the
ongoing business operations of Borrower or its Subsidiaries and (e) such
transaction would be permitted pursuant to Sections 4.16
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and 4.20 of the Senior Notes Indenture and Sections 4.16 and 4.18 of the
Parent Debentures Indenture. Borrower shall deliver to Agent, at least 10
days prior to the consummation of each transaction described in subsection
8.2.9(vi), whether or not such transaction requires the consent of Majority
Lenders, a written certificate of the principal financial officer of
Borrower, attesting to the satisfaction of the conditions described in
clauses (a) - (e) above, and showing all applicable calculations, including
without limitation a calculation demonstrating whether the Asset
Disposition Threshold has been exceeded. The proceeds of each transaction
permitted under this subsection 8.2.9 or otherwise consented to by Majority
Lenders under this subsection 8.2.9 shall be applied to the Obligations as
set forth in subsection 3.3.1.
8.2.10. Securities of Subsidiaries. Permit any of its Subsidiaries
--------------------------
to issue any additional Securities except director's qualifying Securities.
8.2.11. ▇▇▇▇-and-Hold Sales, Etc. Make, or permit any Subsidiary of
------------------------
Borrower to make, a sale to any customer on a ▇▇▇▇-and-hold or consignment
basis, except for ▇▇▇▇ and hold sales made by Borrower from time to time in
a manner consistent with Borrower's past practices and involving Inventory
with an aggregate value not in excess of $1,000,000 at any time.
8.2.12. Restricted Investment. Make or have, or permit any
---------------------
Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.13. Subsidiaries and Joint Ventures. Create, acquire or
-------------------------------
otherwise suffer to exist any Subsidiary or joint venture arrangement not
in existence as of the date hereof and not described on Schedule 8.2.12.
---------------
8.2.14. Tax Consolidation. File or consent to the filing of any
-----------------
consolidated income tax return with any Person other than Parent.
8.2.15. Organizational Documents. Agree to, or suffer to occur, any
------------------------
amendment, supplement or addition to its or any of its Subsidiaries'
charter, articles or certificate of incorporation, certificate of
formation, limited partnership agreement, bylaws, limited liability
agreement, operating agreement or other organizational documents (as the
case may be), that would reasonably be expected to have a Material Adverse
Effect.
8.2.16. Fiscal Year End. Change, or permit any Subsidiary of
----------------
Borrower to change, its fiscal year end.
8.2.17. Capital Source Agreements. Once the Capital Source
-------------------------
Agreements have been executed, amend or modify any Capital Source Agreement
or any other agreement, instrument or document evidencing or relating to
the Dealer Financing Arrangement.
-39-
8.2.18. ▇▇▇▇▇▇▇ Agreements. Amend or modify any agreement,
------------------
instrument or document (a) pursuant to which ▇▇▇▇▇▇▇ was established, (b)
pursuant to which its profits and losses are allocated, or (c) which deals
with the obligation of any owner of a membership interest in ▇▇▇▇▇▇▇ to
make capital contributions to or investments in ▇▇▇▇▇▇▇, or to purchase
goods from ▇▇▇▇▇▇▇, including without limitation ▇▇▇▇▇▇▇'▇ Operating
Agreement, ▇▇▇▇▇▇▇'▇ Certificate of Formation, the Preorganization
Contribution Agreement between Borrower and Deere & Company, the Contract
Manufacturing Agreement between ▇▇▇▇▇▇▇ and Borrower and the Contract
Manufacturing Agreement between ▇▇▇▇▇▇▇ and Deere & Company.
8.3. Specific Financial Covenants.
----------------------------
During the Term, and thereafter for so long as there are any
Obligations outstanding, Borrower covenants that, unless otherwise consented to
by Majority Lenders in writing, it shall comply with all of the financial
covenants set forth in Exhibit 8.3 hereto. If GAAP changes from the basis used
-----------
in preparing the audited financial statements delivered to Agent by Borrower on
or before the Closing Date, Borrower will provide Agent with certificates
demonstrating compliance with such financial covenants and will include, at the
election of Borrower or upon the request of Agent, calculations setting forth
the adjustments necessary to demonstrate how Borrower is in compliance with such
financial covenants based upon GAAP as in effect on the Closing Date.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Agent or
any Lender under the other sections of this Agreement, no Lender shall be
required to make any Loan, nor shall Agent be required to issue or procure any
Letter of Credit or LC Guaranty unless and until each of the following
conditions has been and continues to be satisfied:
9.1. Documentation.
-------------
Agent shall have received, in form and substance satisfactory to Agent
and its counsel, a duly executed copy of this Agreement and the other Loan
Documents, together with such additional documents, instruments and certificates
as Agent and its counsel shall require in connection therewith from time to
time, all in form and substance satisfactory to Agent and its counsel.
9.2. No Default.
----------
No Default or Event of Default shall exist.
9.3. Other Conditions.
----------------
Each of the conditions precedent set forth in the Loan Documents shall
have been satisfied.
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9.4. Excess Availability.
-------------------
Agent shall have determined that immediately after Lenders have made
the initial Loans and after Agent has issued or procured the initial Letters of
Credit and LC Guaranties contemplated hereby, and Borrower has paid (or, if
accrued, treated as paid), all closing costs incurred in connection with the
transactions contemplated hereby, and has reserved an amount sufficient to pay
all trade payables greater than 60 days past due, Excess Availability shall not
be less than $10,000,000.
9.5. No Litigation.
-------------
No action, proceeding, investigation, regulation or legislation shall
have been instituted or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.
9.6. Material Adverse Effect.
-----------------------
Except as disclosed on Exhibit 9.6 attached hereto, since October 31,
-----------
2000, there has not been any material adverse change in its business, assets,
financial condition, income or prospects and no event or condition exists which
would be reasonably likely to result in any Material Adverse Effect.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default.
-----------------
The occurrence of one or more of the following events shall constitute
an "Event of Default":
10.1.1. Payment of Obligations. Borrower shall fail to pay any of
----------------------
the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
10.1.2. Misrepresentations. Any representation, warranty or other
------------------
statement made or furnished to Agent or any Lender by or on behalf of
Borrower, any Subsidiary of Borrower or any Guarantor in this Agreement,
any of the other Loan Documents or any instrument, certificate or financial
statement furnished in compliance with or in reference thereto proves to
have been false or misleading in any material respect when made, furnished
or remade pursuant to Section 7.2 hereof.
10.1.3. Breach of Specific Covenants. Borrower shall fail or
----------------------------
neglect to perform, keep or observe any covenant contained in Sections 5.2,
6.1.2, 8.1.1, 8.1.2, 8.1.4, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant or shall fail or neglect
to perform, keep or observe any covenant contained in Section 8.1.3 hereof
within 5 days following the date on which Borrower is required to perform,
keep or observe such covenant.
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10.1.4. Breach of Other Covenants. Borrower shall fail or neglect
-------------------------
to perform, keep or observe any covenant contained in this Agreement (other
than a covenant which is dealt with specifically elsewhere in Section 10.1
hereof) and the breach of such other covenant is not cured to Agent's
satisfaction within 30 days after the sooner to occur of Borrower's receipt
of notice of such breach from Agent or the date on which such failure or
neglect first becomes known to any officer of Borrower.
10.1.5. Default Under Security Documents or Other Agreements. Any
----------------------------------------------------
event of default shall occur under, or Borrower, any of its Subsidiaries or
any other Guarantor shall default in the performance or observance of any
term, covenant, condition or agreement contained in, any of the Security
Documents or the Other Agreements and such default shall continue beyond
any applicable grace period.
10.1.6. Other Defaults. There shall occur any default or event of
--------------
default on the part of Borrower, any Subsidiary of Borrower or any other
Guarantor under any agreement, document or instrument to which Borrower,
such Subsidiary of Borrower or such Guarantor is a party or by which
Borrower, such Subsidiary of Borrower or such Guarantor or any of its
Property is bound, evidencing or relating to (a) any Indebtedness (other
than the Obligations) with an outstanding principal balance in excess of
$250,000, if the payment or maturity of such Indebtedness is or could be
accelerated in consequence of such event of default or demand for payment
of such Indebtedness is made or could be made in accordance with the terms
thereof or (b) the Senior Notes Debt, the Parent Debentures Debt or the
Seller Secured Debt (including without limitation the failure of Borrower
to pay accrued interest in respect of the Senior Notes Debt that was due on
January 15, 2001 prior to the expiration of the cure period applicable
thereto under the Senior Notes Indenture).
10.1.7. Uninsured Losses. Any material loss, theft, damage or
----------------
destruction of any portion of the Collateral having a fair market value of
$250,000 for any single such event, or $500,000 in the aggregate for all
such events, in any case if not fully covered (subject to such deductibles
and self-insurance retentions as Agent shall have permitted) by insurance.
10.1.8. Insolvency and Related Proceedings. Borrower, any Subsidiary
----------------------------------
of Borrower or any Guarantor shall cease to be Solvent or shall suffer the
appointment of a receiver, trustee, custodian or similar fiduciary, or
shall make an assignment for the benefit of creditors, or any petition for
an order for relief shall be filed by or against Borrower, any Subsidiary
of Borrower or any Guarantor under the federal bankruptcy laws (if against
Borrower, any Subsidiary of Borrower or any Guarantor the continuation of
such proceeding for more than 30 days), or Borrower, any Subsidiary of
Borrower or any Guarantor shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally, or Borrower,
any Subsidiary of Borrower or any Guarantor shall cease doing business or
commence a liquidation of its assets.
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10.1.9. Business Disruption; Condemnation. There shall occur a
---------------------------------
cessation of a substantial part of the business of Borrower, any Subsidiary
of Borrower or any Guarantor for a period which materially adversely
affects Borrower's, such Subsidiary's or such Guarantor's capacity to
continue its business on a profitable basis; or Borrower, any Subsidiary of
Borrower or any Guarantor shall suffer the loss or revocation of any
material license or permit now held or hereafter acquired by Borrower, any
Subsidiary of Borrower or any Guarantor which is necessary to the continued
or lawful operation of its business; or Borrower, any Subsidiary of
Borrower or any Guarantor shall be enjoined, restrained or in any way
prevented by court, governmental or administrative order from conducting
all or any material part of its business affairs; or any material lease or
agreement pursuant to which Borrower, any Subsidiary of Borrower or any
Guarantor leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term, except any such
lease or agreement the cancellation or termination of which would not
reasonably be expected to have a Material Adverse Effect; or any material
portion of the Collateral shall be taken through condemnation or the value
of such Property shall be impaired through condemnation.
10.1.10. Change of Ownership. (a) Madison Dearborn Capital Partners
-------------------
II, L.P. shall cease to own and control, beneficially and of record both
(i) in excess of 50% of the issued and outstanding Voting Stock of Parent
and (ii) a sufficient percentage of the issued and outstanding Voting Stock
of Parent to control the board of directors of Parent, (b) Parent shall
cease to own and control, beneficially and of record (directly or
indirectly), 100% of the issued and outstanding Securities and Voting Stock
of Borrower and each of its other Subsidiaries, (c) Borrower shall cease to
own and control, beneficially and of record (directly or indirectly), 100%
of the issued and outstanding Securities and Voting Stock of each of its
Subsidiaries or (d) a "Change of Control" shall occur under either the
Senior Notes Indenture or the Parent Debentures Indenture.
10.1.11. ERISA. A Reportable Event shall occur which, in Agent's
-----
discretion, constitutes grounds for the termination by the Pension Benefit
Guaranty Corporation of any Plan or for the appointment by the appropriate
United States district court of a trustee for any Plan, or if any Plan
shall be terminated or any such trustee shall be requested or appointed, or
if Borrower, any Subsidiary of Borrower or any other Guarantor is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from Borrower's, such
Subsidiary's or such Guarantor's complete or partial withdrawal from such
Plan and any such event would reasonably be expected to have a Material
Adverse Effect.
10.1.12. Challenge to Agreement. Borrower, any Subsidiary of Borrower
----------------------
or any other Guarantor, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of
this Agreement or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of
any Lien granted to Agent.
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10.1.13. Repudiation of or Default Under Guaranty Agreement. Any
--------------------------------------------------
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed
by such Guarantor, or shall repudiate such Guarantor's liability thereunder
or shall be in default under the terms thereof.
10.1.14. Criminal Forfeiture. Borrower, any Subsidiary of Borrower or
-------------------
any Guarantor shall be criminally indicted or convicted under any law that
could lead to a forfeiture of any Property of Borrower, any Subsidiary of
Borrower or any Guarantor.
10.1.15. Judgments. Any money judgments, writ of attachment or
---------
similar processes (collectively, "Judgments") are issued or rendered
against Borrower, any Subsidiary of Borrower or any other Guarantor, or any
of their respective Property (i) in the case of money judgments, in an
amount of $100,000 or more for any single judgment, attachment or process
or $500,000 or more for all such judgments, attachments or processes in the
aggregate, in each case in excess of any applicable insurance with respect
to which the insurer has admitted liability, and (ii) in the case of non-
monetary Judgments, such Judgment or Judgments (in the aggregate) would
reasonably be expected to have a Material Adverse Effect, in each case
which Judgment is not stayed, released or discharged within 30 days.
10.2. Acceleration of the Obligations.
-------------------------------
Upon or at any time after the occurrence and during the continuance of
an Event of Default, Agent or Majority Lenders may declare all or any portion of
the Obligations at once due and payable without presentment, demand protest or
further notice by Agent or any Lender, and Borrower shall forthwith pay to
Agent, the full amount of such Obligations, provided, that upon the occurrence
--------
of an Event of Default specified in subsection 10.1.8 hereof, all of the
Obligations shall become automatically due and payable without declaration,
notice or demand by Agent or any Lender.
10.3. Other Remedies.
--------------
Upon the occurrence and during the continuance of an Event of Default,
Agent shall have and may exercise from time to time the following rights and
remedies:
10.3.1. All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable
rights to which Agent or Lenders may be entitled, all of which rights and
remedies shall be cumulative and shall be in addition to any other rights
or remedies contained in this Agreement or any of the other Loan Documents,
and none of which shall be exclusive.
10.3.2. The right to take immediate possession of the Collateral,
and to (i) require Borrower and each of its Subsidiaries to assemble the
Collateral, at Borrower's expense, and make it available to Agent at a
place designated by Agent which is reasonably convenient to both parties,
and (ii) enter any premises where any of the Collateral shall be located
and to keep and store the Collateral on said premises
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until sold (and if said premises be the Property of Borrower or any
Subsidiary of Borrower, Borrower agrees not to charge, or permit any of its
Subsidiaries to charge, Agent for storage thereof).
10.3.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as
Agent, in its sole discretion, may deem advisable. Borrower agrees that 10
days' written notice to Borrower or any of its Subsidiaries of any public
or private sale or other disposition of Collateral shall be reasonable
notice thereof, and such sale shall be at such locations as Agent may
designate in said notice. Agent shall have the right to conduct such sales
on Borrower's or any of its Subsidiaries' premises, without charge
therefor, and such sales may be adjourned from time to time in accordance
with applicable law. Agent shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Agent, on behalf of Lenders, may purchase all or
any part of the Collateral at public or, if permitted by law, private sale
and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. The proceeds realized from
the sale of any Collateral may be applied, after allowing 2 Business Days
for collection, first to the costs, expenses and attorneys' fees incurred
by Agent in collecting the Obligations, in enforcing the rights of Agent
and Lenders under the Loan Documents and in collecting, retaking,
completing, protecting, removing, storing, advertising for sale, selling
and delivering any Collateral, second to the interest due upon any of the
Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrower and each Guarantor shall remain jointly
and severally liable to Agent and Lenders therefor.
10.3.4. Agent is hereby granted a license or other right to use,
without charge, Borrower's and each of its Subsidiary's labels, patents,
copyrights, licenses, rights of use of any name, trade secrets, tradenames,
trademarks and advertising matter, or any Property of a similar nature, as
it pertains to the Collateral, in completing, advertising for sale and
selling any Collateral and Borrower's and each of its Subsidiary's rights
under all licenses and all franchise agreements shall inure to Agent's
benefit.
10.3.5. Agent may, at its option, require Borrower to deposit with
Agent funds equal to the LC Amount and, if Borrower fails to promptly make
such deposit, Agent may advance such amount as a Revolving Credit Loan
(whether or not an Overadvance is created thereby). Each such Revolving
Credit Loan shall be secured by all of the Collateral and shall bear
interest and be payable at the same rate and in the same manner as Loans.
Any such deposit or advance shall be held by Agent as a reserve to fund
future payments on such LC Guaranties and future drawings against such
Letters of Credit. At such time as all LC Guaranties have been paid or
terminated and all Letters of Credit have been drawn upon or expired, any
amounts remaining in such reserve shall be applied against any outstanding
Obligations, or, if all Obligations have been indefeasibly paid in full,
returned to Borrower.
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10.4. Set Off and Sharing of Payments.
-------------------------------
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, during the continuance of
any Event of Default, each Lender is hereby authorized by Borrower at any time
or from time to time, with prior written consent of Agent and with reasonably
prompt subsequent notice to Borrower (any prior or contemporaneous notice to
Borrower being hereby expressly waived) to set off and to appropriate and to
apply any and all (i) balances held by such Lender at any of its offices for the
account of Borrower or any of its Subsidiaries (regardless of whether such
balances are then due to Borrower or its Subsidiaries), and (ii) other property
at any time held or owing by such Lender to or for the credit or for the account
of Borrower or any of its Subsidiaries, against and on account of any of the
Obligations. Any Lender exercising a right to set off shall, to the extent the
amount of any such set off exceeds its Revolving Loan Percentage of the amount
set off, purchase for cash (and the other Lenders shall sell) interests in each
such other Lender's pro rata share of the Obligations as would be necessary to
cause such Lender to share such excess with each other Lender in accordance with
their respective Revolving Loan Percentages. Each Borrower agrees, to the
fullest extent permitted by law, that any Lender may exercise its right to set
off with respect to amounts in excess of its pro rata share of the Obligations
and upon doing so shall deliver such excess to Agent for the benefit of all
Lenders in accordance with the Revolving Loan Percentages.
10.5. Remedies Cumulative; No Waiver.
------------------------------
All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of Borrower contained in this Agreement and
the other Loan Documents, or in any document referred to herein or contained in
any agreement supplementary hereto or in any schedule or in any Guaranty
Agreement given to Agent or any Lender or contained in any other agreement
between any Lender and Borrower or between Agent and Borrower heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and not
in derogation or substitution of any of the terms, covenants, conditions, or
agreements of Borrower herein contained. The failure or delay of Agent or any
Lender to require strict performance by Borrower of any provision of this
Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance, Liens,
rights, powers and remedies, but all such requirements, Liens, rights, powers,
and remedies shall continue in full force and effect until all Loans and other
Obligations owing or to become owing from Borrower to Agent and each Lender have
been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of
the other Loan Documents and no Event of Default by Borrower under this
Agreement or any other Loan Documents shall be deemed to have been suspended or
waived by Lenders, unless such suspension or waiver is by an instrument in
writing specifying such suspension or waiver and is signed by a duly authorized
representative of Agent and directed to Borrower.
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SECTION 11. THE AGENT
11.1. Authorization and Action.
------------------------
Each Lender hereby appoints and authorizes Agent to take such action
on its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. Each Lender
hereby acknowledges that Agent shall not have by reason of this Agreement
assumed a fiduciary relationship in respect of any Lender. In performing its
functions and duties under this Agreement, Agent shall act solely as agent of
Lenders and shall not assume, or be deemed to have assumed, any obligation
toward, or relationship of agency or trust with or for, Borrower. As to any
matters not expressly provided for by this Agreement and the other Loan
Documents, Agent may, but shall not be required to, exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, whenever such instruction shall be
requested by Agent or required hereunder, or a greater or lesser number of
Lenders if so required hereunder, and such instructions shall be binding upon
all Lenders; provided, that Agent shall be fully justified in failing or
--------
refusing to take any action which exposes Agent to any liability or which is
contrary to this Agreement, the other Loan Documents or applicable law, unless
Agent is indemnified to its satisfaction by the other Lenders against any and
all liability and expense which it may incur by reason of taking or continuing
to take any such action. If Agent seeks the consent or approval of the Majority
Lenders (or a greater or lesser number of Lenders as required in this
Agreement), with respect to any action hereunder, Agent shall send notice
thereof to each Lender and shall notify each Lender at any time that the
Majority Lenders (or such greater or lesser number of Lenders) have instructed
Agent to act or refrain from acting pursuant hereto.
11.2. Agent's Reliance, Etc.
----------------------
Neither Agent, any Affiliate of Agent, nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing,
Agent: (i) may treat each Lender party hereto as the holder of Obligations
until Agent receives written notice of the assignment or transfer or such
lender's portion of the Obligations signed by such Lender and in form reasonably
satisfactory to Agent; (ii) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (iii) makes no warranties or
representations to any Lender and shall not be responsible to any Lender for any
recitals, statements, warranties or representations made in or in connection
with this Agreement or any other Loan Documents; (iv) shall not have any duty
beyond Agent's customary practices in respect of loans in which Agent is the
only lender, to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of Borrower, to inspect the property (including the
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books and records) of Borrower, to monitor the financial condition of Borrower
or to ascertain the existence or possible existence or continuation of any
Default or Event of Default; (v) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (vi) shall not be liable to any
Lender for any action taken, or inaction, by Agent upon the instructions of
Majority Lenders pursuant to Section 11.1 hereof or refraining to take any
action pending such instructions; (vii) shall not be liable for any
apportionment or distributions of payments made by it in good faith pursuant to
Section 3 hereof; (viii) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate, message or other instrument or writing (which may be by telephone,
facsimile, telegram, cable or telex) believed in good faith by it to be genuine
and signed or sent by the proper party or parties; and (ix) may assume that no
Event of Default has occurred and is continuing, unless Agent has actual
knowledge of the Event of Default, has received notice from Borrower or
Borrower's independent certified public accounts stating the nature of the Event
of Default, or has received notice from a Lender stating the nature of the Event
of Default and that such Lender considers the Event of Default to have occurred
and to be continuing. In the event any apportionment or distribution described
in clause (vii) above is determined to have been made in error, the sole
recourse of any Person to whom payment was due but not made shall be to recover
from the recipients of such payments any payment in excess of the amount to
which they are determined to have been entitled.
11.3. Fleet and Affiliates.
--------------------
With respect to its commitment hereunder to make Loans, Fleet shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
Agent; and the terms "Lender," "Lenders" or "Majority Lenders" shall, unless
otherwise expressly indicated, include Fleet in its individual capacity as a
Lender. Fleet and its Affiliates may lend money to, and generally engage in any
kind of business with, Borrower, and any Person who may do business with or own
Securities of Borrower all as if Fleet were not Agent and without any duty to
account therefor to any other Lender.
11.4. Lender Credit Decision.
----------------------
Each Lender acknowledges that it has, independently and without
reliance upon Agent or any other Lender and based on the financial statements
referred to herein and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Agent
shall not have any duty or responsibility, either initially or on an ongoing
basis, to provide any Lender with any credit or other similar information
regarding Borrower.
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11.5. Indemnification.
---------------
Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrower), in accordance with their respective Revolving Loan Percentages, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent under this Agreement; provided
--------
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for its ratable share, as set forth above, of any out-of-
pocket expenses (including attorneys' fees) incurred by Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiation, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this Agreement and
each other Loan Document, to the extent that Agent is not reimbursed for such
expenses by Borrower. The obligations of Lenders under this Section 11.5 shall
survive the payment in full of all Obligations and the termination of this
Agreement. If after payment and distribution of any amount by Agent to Lenders,
any Lender or any other Person, including Borrower, any creditor of Borrower, a
liquidator, administrator or trustee in bankruptcy, recovers from Agent any
amount found to have been wrongfully paid to Agent or disbursed by Agent to
Lenders, then Lenders, in accordance with their respective Revolving Loan
Percentages, shall reimburse Agent for all such amounts.
11.6. Rights and Remedies to be Exercised by Agent Only.
-------------------------------------------------
Each Lender agrees that, except as set forth in subsection 10.4, no
Lender shall have any right individually (i) to realize upon the security
created by this Agreement or any other Loan Document, (ii) to enforce any
provision of this Agreement or any other Loan Document, or (iii) to make demand
under this Agreement or any other Loan Document.
11.7. Agency Provisions Relating to Collateral.
----------------------------------------
Each Lender authorizes and ratifies Agent's entry into this Agreement
and the Security Documents for the benefit of Lenders. Each Lender agrees that
any action taken by Agent with respect to the Collateral in accordance with the
provisions of this Agreement or the Security Documents, and the exercise by
Agent of the powers set forth herein or therein, together with such other powers
as are reasonably incidental thereto, shall be authorized and binding upon all
Lenders. Agent is hereby authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, from time to time
prior to an Event of Default, to take any action with respect to any Collateral
or the Loan Documents which may be necessary to perfect and maintain perfected
Agent's Liens upon the Collateral, for its benefit and the ratable benefit of
Lenders. Lenders hereby irrevocably authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral
(i) upon termination of the Agreement and payment and satisfaction of all
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Obligations; or (ii) constituting property being sold or disposed of if Borrower
certifies to Agent that the sale or disposition is made in compliance with
subsection 7.2.9 hereof (and Agent may rely conclusively on any such
certificate, without further inquiry); or (iii) constituting property in which
Borrower owned no interest at the time the Lien was granted or at any time
thereafter; or (iv) in connection with any foreclosure sale or other disposition
of Collateral after the occurrence and during the continuation of an Event of
Default or (v) if approved, authorized or ratified in writing by Agent at the
direction of all Lenders. Upon request by Agent at any time, Lenders will
confirm in writing Agent's authority to release particular types or items of
Collateral pursuant hereto. Agent shall have no obligation whatsoever to any
Lender or to any other Person to assure that the Collateral exists or is owned
by Borrower or is cared for, protected or insured or has been encumbered or that
the Liens granted to Agent herein or pursuant to the Security Documents have
been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of its rights, authorities and powers granted or
available to Agent in this Section 11.7 or in any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, but consistent with the provisions of this
Agreement, including given Agent's own interest in the Collateral as a Lender
and that Agent shall have no duty or liability whatsoever to any Lender.
11.8. Agent's Right to Purchase Commitments.
-------------------------------------
Agent shall have the right, but shall not be obligated, at any time
upon written notice to any Lender and with the consent of such Lender, which may
be granted or withheld in such Lender's sole discretion, to purchase for Agent's
own account all of such Lender's interests in this Agreement, the other Loan
Documents and the Obligations, for the face amount of the outstanding
Obligations owed to such Lender, including without limitation all accrued and
unpaid interest and fees.
11.9. Right of Sale, Assignment, Participations.
-----------------------------------------
Borrower hereby consents to any Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, such Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder subject to the terms and
conditions set forth below:
11.9.1. Sales, Assignments. Each Lender hereby agrees that, with
------------------
respect to any sale or assignment (i) no such sale or assignment shall be
for an amount of less than $5,000,000, (ii) each such sale or assignment
shall be made on terms and conditions which are customary in the industry
at the time of the transaction, (iii) Agent and, in the absence of a
Default or Event of Default, Borrower, must consent, such consent not to be
unreasonably withheld, to each such assignment to a Person that is not an
original signatory to this Agreement, (iv) the assignee Lender shall pay
-50-
to the Agent a processing and recordation fee of $3,500 and any out-of-
pocket attorneys' fees and expenses incurred by the Agent in connection
with any such sale or assignment. After such sale or assignment has been
consummated (x) the assignee Lender thereupon shall become a "Lender" for
all purposes of this Agreement and (y) the assigning Lender shall have no
further liability for funding the portion of Revolving Loan Commitments
assumed by such other Lender.
11.9.2. Participations. Any Lender may grant participations in its
--------------
extensions of credit hereunder to any other Lender or other lending
institution (a "Participant"), provided that (i) no such participation
--------
shall be for an amount of less than $5,000,000, (ii) no Participant shall
thereby acquire any direct rights under this Agreement, (iii) no
Participant shall be granted any right to consent to any amendment, except
to the extent any of the same pertain to (1) reducing the aggregate
principal amount of, or interest rate on, or fees applicable to, any Loan
or (2) extending the final stated maturity of any Loan or the stated
maturity of any portion of any payment of principal of, or interest or fees
applicable to, any of the Loans; provided, that the rights described in
--------
this subclause (2) shall not be deemed to include the right to consent to
any amendment with respect to or which has the effect of requiring any
mandatory prepayment of any portion of any Loan or any amendment or waiver
of any Default or Event of Default, (iv) no sale of a participation in
extensions of credit shall in any manner relieve the originating Lender of
its obligations hereunder, (v) the originating Lender shall remain solely
responsible for the performance of such obligations, (vi) Borrower and the
Agent shall continue to deal solely and directly with the originating
Lender in connection with the originating Lender's rights and obligations
under this Agreement and the other Loan Documents, (vii) in no event shall
any financial institution purchasing the participation grant a
participation in its participation interest in the Loans without the prior
written consent of Agent, and, in the absence of a Default or an Event of
Default, Borrower, which consents shall not unreasonably be withheld and
(viii) all amounts payable by Borrower hereunder shall be determined as if
the originating Lender had not sold any such participation.
11.9.3. Certain Agreements of Borrower. Borrower agrees that (i) it
------------------------------
will use its best efforts to assist and cooperate with each Lender in any
manner reasonably requested by such Lender to effect the sale of
participation in or assignments of any of the Loan Documents or any portion
thereof or interest therein, including, without limitation, assisting in
the preparation of appropriate disclosure documents and making members of
management available at reasonable times to meet with and answer questions
of potential assignees and Participants; and (ii) subject to the provisions
of Section 12.14 hereof, such Lender may disclose credit information
regarding Borrower to any potential Participant or assignee.
11.9.4. Non U.S. Resident Transferees. If, pursuant to this Section
-----------------------------
11.9, any interest in this Agreement or any Loans is transferred to any
transferee which is organized under the laws of any jurisdiction other than
the United States or any state thereof, the transferor Lender shall cause
such transferee (other than any Participant),
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and may cause any Participant, concurrently with and as a condition
precedent to the effectiveness of such transfer, to (i) represent to the
transferor Lender (for the benefit of the transferor Lender, the Agent, and
Borrower) that under applicable law and treaties no taxes will be required
to be withheld by Agent, Borrower or the transferor Lender with respect to
any payments to be made to such transferee in respect of the interest so
transferred, (ii) furnish to the transferor Lender, Agent and Borrower
either United States Internal Revenue Service Form 4224 or United States
Internal Revenue Service Form 1001 (wherein such transferee claims
entitlement to complete exemption from United States federal withholding
tax on all interest payments hereunder), and (iii) agree (for the benefit
of the transferor Lender, Agent and Borrower) to provide the transferor
Lender, Agent and Borrower a new Form 4224 or Form 1001 upon the
obsolescence of any previously delivered form and comparable statements in
accordance with applicable United States laws and regulations and
amendments duly executed and completed by such transferee, and to comply
from time to time with all applicable United States laws and regulations
with regard to such withholding tax exemption.
11.10. Amendment.
---------
No amendment or waiver of any provision of this Agreement or any other
Loan Document, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Majority Lenders and Borrower, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no amendment, waiver or consent shall be effective, unless
--------
(i) in writing and signed by each Lender, do any of the following: (1) increase
or decrease the aggregate Loan Commitments, or any Lender's Revolving Loan
Commitment, (2) reduce the principal of, or interest on, any amount payable
hereunder other than those payable only to Fleet in its capacity as Agent, which
may be reduced by Fleet unilaterally, (3) increase or decrease any interest rate
payable hereunder, (4) postpone any date fixed for any payment of principal of,
or interest on, any amounts payable hereunder, other than those payable only to
Fleet in its capacity as Agent, which may be postponed by Fleet unilaterally,
(5) reduce the number of Lenders that shall be required for Lenders or any of
them to take any action hereunder, (6) release or discharge any Person liable
for the performance of any obligations of Borrower hereunder or under any of the
Loan Documents, (7) make less restrictive the provisions of subsection 8.2.6 or
subsection 8.2.7, (8) amend any provision of this Agreement that requires the
consent of all Lenders or consent to or waive any breach thereof, (9) amend this
Section 11.10 or (10) release any substantial portion of the Collateral, unless
otherwise permitted pursuant to Section 11.7 hereof; or (ii) in writing and
signed by Agent in addition to the Lenders required above to take such action,
affect the rights or duties of Agent under this Agreement, or any Loan Document.
11.11. Resignation of Agent; Appointment of Successor.
----------------------------------------------
The Agent may resign as Agent by giving not less than thirty (30)
days' prior written notice to the Lenders and Borrower. If the Agent shall
resign under this Agreement, then, (i) subject to the consent of the Borrower
(which consent shall not be unreasonably
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withheld and which consent shall not be required during any period in which a
Default or an Event of Default exists), the Majority Lenders shall appoint from
among the Lenders a successor agent for the Lenders or (ii) if a successor agent
shall not be so appointed and approved within the thirty (30) day period
following the Agent's notice to the Lenders and the Borrower of its resignation,
then the Agent shall appoint a successor agent who shall serve as Agent until
such time as the Majority Lenders appoint a successor agent, subject to the
Borrower's consent as set forth above. Upon its appointment, such successor
agent shall succeed to the rights, powers and duties of the Agent and the term
"Agent" shall mean such successor effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated without any other
or further act or deed on the part of such former Agent or any of the parties to
this Agreement. After the resignation of any Agent hereunder, the provisions of
this Section 11 shall inure to the benefit of such former Agent and such former
Agent shall not by reason of such resignation be deemed to be released from
liability for any actions taken or not taken by it while it was an Agent under
this Agreement.
SECTION 12. MISCELLANEOUS
12.1. Power of Attorney.
-----------------
Borrower hereby irrevocably designates, makes, constitutes and
appoints Agent (and all Persons designated by Agent) as Borrower's true and
lawful attorney (and agent-in-fact), solely with respect to the matters set
forth in this Section 12.1, and Agent, or Agent's agent, may, without notice to
Borrower and in Borrower's or Agent's name, but at the cost and expense of
Borrower:
12.1.1. At such time or times as Agent or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Agent or under
Agent's control.
12.1.2. At such time or times upon or after the occurrence and
during the continuance of an Event of Default (provided that the occurrence
of an Event of Default shall not be required with respect to clauses (iv),
(vi), (viii) and (ix) below), as Agent or its agent in its sole discretion
may determine: (i) demand payment of the Accounts from the Account Debtors,
enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to
the collection of the Accounts; (ii) settle, adjust, compromise, discharge
or release any of the Accounts or other Collateral or any legal proceedings
brought to collect any of the Accounts or other Collateral; (iii) sell or
assign any of the Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Agent deems advisable; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign Borrower's name to a proof of claim
in bankruptcy or similar document against any Account Debtor or to any
notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (vi) receive, open and dispose of
all mail addressed to Borrower and notify postal authorities to change the
-53-
address for delivery thereof to such address as Agent may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
account of the Obligations; (viii) endorse the name of Borrower upon any
chattel paper, document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading
or similar document or agreement relating to the Accounts, Inventory and
any other Collateral; (ix) use Borrower's stationery and sign the name of
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, Equipment and any other Collateral; (xi) make and
adjust claims under policies of insurance; and (xii) do all other acts and
things necessary, in Agent's determination, to fulfill Borrower's
obligations under this Agreement.
The power of attorney granted hereby shall constitute a power coupled
with an interest and shall be irrevocable.
12.2. Indemnity.
---------
Borrower hereby agrees to indemnify Agent and each Lender (and each of
their Affiliates) and hold Agent and each Lender (and each of their Affiliates)
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by any such Person (including reasonable
attorneys fees and legal expenses) as the result of Borrower's failure to
observe, perform or discharge Borrower's duties hereunder. In addition,
Borrower shall defend Agent and each Lender (and each of their Affiliates)
against and save it harmless from all claims of any Person with respect to the
Collateral (except those resulting from the gross negligence or intentional
misconduct of any such Person). Without limiting the generality of the
foregoing, these indemnities shall extend to any claims asserted against Agent
or any Lender (and each of their Affiliates) by any Person under any
Environmental Laws by reason of Borrower's or any other Person's failure to
comply with laws applicable to solid or hazardous waste materials or other toxic
substances. The indemnities provided in this Section 12.2 shall not extend to
any costs incurred in connection with any litigation, contest, dispute, suit,
proceeding or action in which Borrower prevails as against Agent or any Lender
(or any of their Affiliates). Notwithstanding any contrary provision in this
Agreement, the obligation of Borrower under this Section 12.2 shall survive the
payment in full of the Obligations and the termination of this Agreement.
12.3. Sale of Interest.
----------------
Borrower may not sell, assign or transfer any interest in this
Agreement, any of the other Loan Documents, or any of the Obligations, or any
portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder.
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12.4. Severability.
------------
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
12.5. Successors and Assigns.
----------------------
This Agreement, the Other Agreements and the Security Documents shall
be binding upon and inure to the benefit of the successors and assigns of
Borrower, Agent and each Lender permitted under Section 11.9 hereof.
12.6. Cumulative Effect; Conflict of Terms.
------------------------------------
The provisions of the Other Agreements and the Security Documents are
hereby made cumulative with the provisions of this Agreement. Except as
otherwise provided in any of the other Loan Documents by specific reference to
the applicable provision of this Agreement, if any provision contained in this
Agreement is in direct conflict with, or inconsistent with, any provision in any
of the other Loan Documents, the provision contained in this Agreement shall
govern and control.
12.7. Execution in Counterparts.
-------------------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
12.8. Notice.
------
Except as otherwise provided herein, all notices, requests and demands
to or upon a party hereto, to be effective, shall be in writing and shall be
sent by certified or registered mail, return receipt requested, by personal
delivery against receipt, by overnight courier or by facsimile and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given, delivered or received immediately when delivered against receipt,
one Business Day after deposit with an overnight courier or, in the case of
facsimile notice, when sent, addressed as follows:
If to Agent: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to: Goldberg, Kohn, Bell, Black,
▇▇▇▇▇▇▇▇▇▇ & Moritz, Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: WEC Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇,
Chairman of the Board
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; provided, however, that any notice,
--------
request or demand to or upon a Lender pursuant to subsection 3.1.1 or 4.2.2
hereof shall not be effective until received by such Lender.
12.9. Consent.
-------
Whenever Agent's or Majority's Lenders' consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
except as otherwise specifically provided herein, Agent or Majority Lenders, as
applicable, shall be authorized to give or withhold such consent in their sole
and absolute discretion.
12.10. Credit Inquiries.
----------------
Borrower hereby authorizes and permits Agent and each Lender to
respond to usual and customary credit inquiries from third parties concerning
Borrower or any of its Subsidiaries.
12.11. Time of Essence.
---------------
Time is of the essence of this Agreement, the Other Agreements and the
Security Documents.
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12.12. Entire Agreement.
----------------
This Agreement and the other Loan Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written.
12.13. Interpretation.
--------------
No provision of this Agreement or any of the other Loan Documents
shall be construed against or interpreted to the disadvantage of any party
hereto by any court or other governmental or judicial authority by reason of
such party having or being deemed to have structured or dictated such provision.
12.14. Confidentiality.
---------------
Agent and each Lender shall hold all nonpublic information obtained
pursuant to the requirements of this Agreement in accordance with Agent's and
such Lender's customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure reasonably required by a prospective participant or assignee
in connection with the contemplated participation or assignment or as required
or requested by any governmental authority or representative thereof or pursuant
to legal process and shall require any such participant or assignee to agree to
comply with this Section 12.14.
12.15. GOVERNING LAW; CONSENT TO FORUM.
-------------------------------
THIS AGREEMENT HAS BEEN NEGOTIATED AND DELIVERED IN AND SHALL BE
DEEMED TO HAVE BEEN MADE IN CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS; PROVIDED,
--------
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN ILLINOIS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD,
MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT'S LIEN UPON SUCH COLLATERAL AND
THE ENFORCEMENT OF AGENT'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED,
AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS
OF BORROWER, AGENT OR ANY LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE
CIRCUIT COURT OF ▇▇▇▇ COUNTY, ILLINOIS, OR, AT AGENT'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
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DISPUTES BETWEEN BORROWER ON THE ONE HAND AND AGENT OR ANY LENDER ON THE OTHER
HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO
THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
----- --- ----------
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY LENDER OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.16. WAIVERS BY BORROWER.
-------------------
BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND EACH
LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS
OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF
PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS,
CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY
TIME HELD BY AGENT OR ANY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND
HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS REGARD;
(iii) NOTICE PRIOR TO AGENT'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
AGENT TO EXERCISE ANY OF AGENT'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S
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AND EACH LENDER'S ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER.
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
-59-
IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year specified at the beginning of this Agreement.
WEC COMPANY, a Delaware corporation
By____________________________________
Title_________________________________
FLEET CAPITAL CORPORATION, a Rhode Island
corporation, as Agent and a Lender
By____________________________________
Title_________________________________
Revolving Loan Commitment: $50,000,000
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of February 7,
2001, by and among Fleet Capital Corporation, individually and as Agent, the
other financial institutions which are or become parties thereto and WEC
Company, the following terms shall have the following meanings (terms defined in
the singular to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or on
--------------
account of an Account.
Accounts - all accounts, contract rights, chattel paper, instruments
--------
and documents, whether now owned or hereafter created or acquired by
Borrower or any of its Subsidiaries or in which Borrower or any of its
Subsidiaries now has or hereafter acquires any interest.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
---------
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, a Person; (ii) which beneficially owns
or holds 5% or more of any class of the Voting Stock of a Person; or (iii)
5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially
owned or held by a Person or a Subsidiary of a Person.
Agent - Fleet Capital Corporation in its capacity as agent for the
-----
Lenders under the Agreement and any successor in that capacity appointed
pursuant to subsection 11.11.
Agreement - the Loan and Security Agreement referred to in the first
---------
sentence of this Appendix A, all Exhibits and Schedules thereto and this
Appendix A, as each of the same may be amended from time to time.
▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇ Industries, L.L.C.
-------
Applicable Margin - from the Closing Date to, but not including, the
-----------------
first Adjustment Date (as hereinafter defined) the percentages set forth
below with respect to the Base Rate Portion, the LIBOR Portions and the
Unused Line Fee:
Base Rate Portion .50%
LIBOR Portions 2.50%
Unused Line Fee .50%
The percentages set forth above will be adjusted on the first day of
the month following delivery by Borrower to Agent of the financial
statements required to be delivered pursuant to subsection 8.1.3(ii) of the
Agreement for January, 2002 and for each March, June, September and
December thereafter beginning with the month
ending March 31, 2002 (each such date an "Adjustment Date"), effective
prospectively, by reference to the Interest Coverage Ratio for the four
fiscal quarters most recently ending in accordance with the following:
Interest LIBOR Base Rate Unused Line
-------- ----- --------- -----------
Coverage Ratio Portions Portions Fee
-------------- -------- -------- ---
less than or equal to 1.1 to 1.0 2.75% .75% .50%
greater than 1.1 to 1.0 but less 2.50% .50% .50%
than or equal to 1.5 to 1.0
greater than 1.5 to 1.0 but less 2.25% .25% .375%
than or equal to 2.0 to 1.0
greater than 2.0 to 1.0 2.00% 0% .375%
provided that, (i) if Borrower's audited financial statements for any
--------
fiscal year delivered pursuant to subsection 8.1.3(i) of the Agreement
reflect an Interest Coverage Ratio that yields a different Applicable
Margin than that yielded by the monthly financial statements previously
delivered pursuant to subsection 8.1.3(ii) of the Agreement for the last
month of such fiscal year, the Applicable Margin shall be readjusted
retroactive to the preceding Adjustment Date and (ii) if Borrower fails to
deliver the financial statements required to be delivered pursuant to
subsection 8.1.3(i) or subsection 8.1.3(ii) of the Agreement on or before
the due date thereof, the interest rate shall automatically adjust to the
highest interest rate set forth above, effective prospectively from such
due date until the next Adjustment Date.
Asset Disposition - as defined in Section 1.01 of the Senior Notes
-----------------
Indenture.
Asset Disposition Adjustment Amount - the aggregate amount of all
-----------------------------------
reductions in the Revolving Credit Maximum Amount required to be made
pursuant to subsection 3.3.1 of the Agreement.
Asset Disposition Threshold - $1,000,000 in the aggregate with respect
---------------------------
to all Asset Dispositions occurring on or after July 28, 1999.
Bank - Fleet National Bank.
----
Base Rate - the rate of interest announced or quoted by Bank from time
---------
to time as its prime rate for commercial loans, whether or not such rate is
the lowest rate charged by Bank to its most preferred borrowers; and, if
such prime rate for commercial loans is discontinued by Bank as a standard,
a comparable reference rate designated by Bank in good faith as a
substitute therefor shall be the Base Rate.
Base Rate Portion - that portion of the Revolving Credit Loans that is
-----------------
not subject to a LIBOR Option.
A-2
Borrowing Base - as at any date of determination thereof, an amount
--------------
equal to the lesser of:
(i) the Revolving Credit Maximum Amount minus the Indebtedness
-----
Adjustment Amount; or
(ii) an amount equal to the sum of:
(a) 85% of the net amount of Eligible Accounts outstanding
at such date; plus
----
(b) the lesser of (I) $25,000,000 and (II) the sum of (A)
60% of the net amount of Eligible Inventory consisting of raw
materials and finished goods at such date, plus (B) 25% of the
----
net amount of Eligible Inventory consisting of work-in-process at
such date (not to exceed $2,000,000); plus
----
(c) the lesser of (I) the Fixed Asset Sublimit and (II) the
sum of (A) 85% of the value of Eligible Equipment at such date
plus (B) 70% of the value of Eligible Real Property at such date;
minus;
-----
(d) the Asset Disposition Adjustment Amount; minus;
-----
(e) the Indebtedness Adjustment Amount.
For purposes hereof, (1) the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at Agent's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any
time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with such Accounts at such time, (2) the amount of
Eligible Inventory shall be determined on a first-in, first-out, lower of
cost or market basis in accordance with GAAP, (3) Eligible Equipment shall
be valued at orderly liquidation value pursuant to the most recent
appraisal obtained pursuant to Section 2.12; provided, that Eligible
Equipment purchased subsequent to delivery of an appraisal shall be valued
at the hard cost thereof, as evidenced by invoices, receipts and other
materials required by Agent with respect thereto, until the delivery of the
next subsequent appraisal, at which time such Eligible Equipment shall be
valued at orderly liquidation value as reflected in such appraisal, and (4)
Eligible Real Property shall be valued at fair market value pursuant to the
most recent appraisal obtained pursuant to Section 2.12; provided, that
Eligible Real Property purchased subsequent to delivery of an appraisal
shall be valued at the purchase price thereof, as evidenced by such
materials as are required by Agent with respect thereto, until the delivery
of the next subsequent appraisal, at which time such Eligible Real Property
shall be valued at fair market value as reflected in such appraisal.
A-3
Business Day - (i) when used with respect to the LIBOR Option, shall
------------
mean a day on which dealings may be effected in deposits of United States
Dollars in the London interbank foreign currency deposits market and on
which Agent is conducting and other banks may conduct business in London,
England, in the State of Wisconsin or the State of Illinois and (ii) when
used with respect to any other provision of the Agreement, any day
excluding Saturday, Sunday and any day which is a legal holiday under the
laws of the State of Wisconsin or the State of Illinois or is a day on
which banking institutions located in either of such states are closed.
Capital Expenditures - expenditures made or liabilities incurred for
--------------------
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease
Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
----------------------------
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Capital Source - Capital Source, Inc.
--------------
Capital Source Agreements - the agreements, instruments and documents
-------------------------
to be executed after the date hereof by Borrower and Capital Source in
order to evidence and secure the Dealer Financing Arrangement, which shall
be in form and substance substantially similar to the Capital Source Letter
of Understanding and otherwise in form and substance satisfactory to Agent.
Capital Source Letter of Understanding - the letter of understanding
--------------------------------------
dated February 7, 2001 between Borrower and Capital Source, a copy of which
is attached hereto as Exhibit A.
---------
Cash Interest Expense - as defined in Exhibit 8.3 to the Agreement.
--------------------- -----------
Closing Date - the date on which all of the conditions precedent in
------------
Section 9 of the Agreement are satisfied and the initial Loan is made or
the initial Letter of Credit or LC Guaranty is issued under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
----
State of Illinois, as from time to time in effect.
Collateral - all of the Property and interests in Property described
----------
in Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of
the Obligations.
Consolidated - the consolidation in accordance with GAAP of the
------------
accounts or other items as to which such term applies.
A-4
Current Assets - at any date means the amount at which all of the
--------------
current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP.
Dealer Financing Arrangement - an arrangement whereby the Accounts
----------------------------
owing by an Account Debtor of Borrower that acts as a dealer for Borrower,
are sold to Capital Source, as set forth in the Capital Source Agreements.
Default - an event or condition the occurrence of which would, with
-------
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
------------
Deposit Account - a demand, time, savings, passbook or like account
---------------
maintained with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a certificate of deposit.
Derivative Obligations - every obligation of a Person under any
----------------------
forward contract, futures contract, swap, option or other financing
agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon
interest rates, currency exchange rates, commodities or other indices.
Distribution - in respect of any Person means and includes: (i) the
------------
payment of any dividends or other distributions on Securities (except
distributions in such Securities) and (ii) the redemption or acquisition of
Securities of such Person, as the case may be, unless made
contemporaneously from the net proceeds of the sale of Securities.
Dominion Account - a special bank account or accounts of Agent
----------------
established by Borrower pursuant to subsection 6.2.4 of the Agreement at
banks selected by Borrower, but acceptable to Agent in its sole discretion,
and over which Agent shall have sole and exclusive access and control for
withdrawal purposes.
EBITDA - as defined in Exhibit 8.3 to the Agreement.
------ -----------
Eligible Account - an Account arising in the ordinary course of the
----------------
business of Borrower from the sale of goods or rendition of services which
Agent, in its reasonable credit judgment, deems to be an Eligible Account.
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account if:
(i) it arises out of a sale made or services rendered by
Borrower to a Subsidiary of Borrower or an Affiliate of Borrower or to
a Person controlled by an Affiliate of Borrower; or
(ii) with respect to any Account due to Borrower and arising out
of a sale by Borrower's Agricultural and Turf division, it remains
unpaid more
A-5
than 30 days after the original due date shown on the original
invoice; and with respect to any other Account, it remains unpaid for
more that 60 days after the original due date shown on the original
invoice; or
(iii) it is owed by an Account Debtor and the total unpaid
Accounts of such Account Debtor exceed 20% of the net amount of all
Eligible Accounts, but only to the extent of such excess; or
(iv) it is an Account due from an Account Debtor with respect
to which any Account is subject to the Dealer Financing Arrangement;
or
(v) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vi) the Account Debtor is also a creditor or supplier of
Borrower or any Subsidiary of Borrower, or the Account Debtor has
disputed liability with respect to such Account, or the Account Debtor
has made any claim with respect to any other Account due from such
Account Debtor to Borrower or any Subsidiary of Borrower, or the
Account otherwise is or may become subject to right of setoff by the
Account Debtor, provided, that any such Account shall be eligible to
--------
the extent such amount thereof exceeds such contract, dispute, claim,
setoff or similar right; or
(vii) the Account Debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction in
the premises in respect of the Account Debtor in an involuntary case
under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other petition or other application for relief under
the federal bankruptcy laws, as now constituted or hereafter amended,
has been filed against the Account Debtor, or if the Account Debtor
has failed, suspended business, ceased to be Solvent, or consented to
or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or
affairs; or
(viii) it arises from a sale or services rendered to an Account
Debtor outside the United States, unless the sale is either (1) to an
Account Debtor located in any province or territory of Canada other
than one in which the Personal Property Security Act has not been
adopted in substantially the same form as currently in effect in
Ontario (which, as of the date hereof, include Quebec, the Northwest
Territories and Nunavut) or (2) on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its reasonable
credit judgment; or
(ix) (1) it arises from a sale to the Account Debtor on a ▇▇▇▇-
and-hold or consignment basis; or (2) it is subject to a reserve
established by Borrower
A-6
or any of its Subsidiaries for potential returns or refunds, to the
extent of such reserve; or
(x) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower or any
such Subsidiary, as applicable, assigns its right to payment of such
Account to Agent, in a manner satisfactory to Agent, in its reasonable
credit judgment, so as to comply with the Assignment of Claims Act of
1940 (31 U.S.C. (S)203 et seq., as amended); or
-- ---
(xi) it is not at all times subject to Agent's duly perfected,
first priority security interest and to no other Lien that is not a
Permitted Lien; or
(xii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by Borrower and accepted
by the Account Debtor or the Account otherwise does not represent a
final sale; or
(xiii) the Account is evidenced by chattel paper or an instrument
of any kind, or has been reduced to judgment; or
(xiv) Borrower or a Subsidiary of Borrower has made any
agreement with the Account Debtor for any deduction therefrom, except
for discounts or allowances which are made in the ordinary course of
business for prompt payment and which discounts or allowances are
reflected in the calculation of the face value of each invoice related
to such Account; or
(xv) more than 25% of the Accounts owing from the Account
Debtor are not Eligible Accounts hereunder.
Eligible Equipment - Equipment of Borrower (other than dies, molds,
------------------
tooling, parts, supplies, accessories and the like) which Agent, in its
reasonable credit judgment, deems to be Eligible Equipment. Without
limiting the generality of the foregoing, no Equipment shall be Eligible
Equipment if:
(i) it is not in good, new and usable condition, subject to
ordinary wear and tear; or
(ii) it does not conform in all respects to any covenants,
warranties and representations set forth in the Agreement; or
(iii) it is at all times subject to Agent's duly perfected,
first priority security interest and no other Lien except a Permitted
Lien; or
(iv) it is not situated at a location in compliance with the
Agreement or is in transit (or in the case of a motor vehicle, it is
not based out of a location in compliance with the Agreement),
provided that Equipment situated at a location
--------
A-7
not owned by Borrower will be Eligible Equipment only if Agent has
received a satisfactory landlord's agreement or bailee letter, as
applicable, with respect to such location; or
(v) it is not otherwise acceptable to Agent in its reasonable
credit judgment.
Eligible Inventory - Inventory of Borrower (other than packaging
------------------
materials and supplies, tooling, samples and literature) which Agent, in
its reasonable credit judgment, deems to be Eligible Inventory. Without
limiting the generality of the foregoing, no Inventory shall be Eligible
Inventory if:
(i) it is not raw materials or finished goods that is readily
marketable in its current form or work-in-process that is good and
usable condition; or
(ii) if it is raw materials or finished goods, it is not in
good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any governmental
agency or authority; or
(v) it does not conform in all respects to any covenants,
warranties and representations set forth in the Agreement; or
(vi) it is not at all times subject to Agent's duly perfected,
first priority security interest and no other Lien except a Permitted
Lien; or
(vii) it is not situated at a location in compliance with the
Agreement or is in transit, provided that Inventory situated at a
--------
location not owned by Borrower will be Eligible Inventory only if
Agent has received a satisfactory landlord's agreement or bailee
letter, as applicable, with respect to such location; or
(viii) it is in transit; or
(ix) it is not otherwise acceptable to Agent in its reasonable
credit judgment.
Eligible Real Property - real Property of Borrower which Agent, in its
----------------------
reasonable credit judgment, deems to be Eligible Real Property. Without
limiting the generality of the foregoing, no real Property shall be
Eligible Real Property if:
(i) it is not real Property owned in fee simple by Borrower;
or
(ii) it is not improved Real Property used and usable in
Borrower's business; or
A-8
(iii) it does not conform in all respect to any covenants,
warranties and representations set forth in the Agreement and any
applicable Mortgage; or
(iv) it is not at all times subject to Agent's duly perfected
first priority mortgage Lien and to no other Lien that is not a
Permitted Lien; or
(v) Borrower has not complied with Section 5.3 of the
Agreement with respect to such real Property; or
(vi) it is not otherwise acceptable to Agent in its reasonable
credit judgment.
Environmental Laws - all federal, state and local laws, rules,
------------------
regulations, ordinances, orders and consent decrees relating to pollution
or the protection of the environment.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
---------
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in the operations of Borrower
or any of its Subsidiaries or owned by Borrower or any of its Subsidiaries
or in which Borrower or any of its Subsidiaries has an interest, whether
now owned or hereafter acquired by Borrower or any of its Subsidiaries and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
therefor.
ERISA - the Employee Retirement Income Security Act of 1974, as
-----
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
----------------
Excess Availability - as defined in Exhibit 8.3 to the Agreement.
------------------- -----------
Existing Credit Agreement - the Amended and Restated Credit Agreement
-------------------------
dated as of July 28, 1999 among Borrower, Parent, the Lenders party thereto
and Credit Suisse First Boston, as lead Arranger, Syndication Agent and
Administrative Agent.
Fee Letter - as defined in subsection 2.4 of the Agreement.
----------
Fixed Asset Sublimit - $10,000,000, initially, to be reduced by
--------------------
$250,000 on the first anniversary of this Agreement and as of the end of
each calendar quarter thereafter, as such amount may be further reduced
from time to time pursuant to the terms of this Agreement.
Fixed Charge Coverage Ratio - with respect to any fiscal year, (i)
---------------------------
EBITDA for such fiscal year minus the sum of (a) any provision for (plus
----- ----
any benefit from) income taxes included in the determination of Borrower's
net earnings (or loss) for
A-9
such fiscal year plus (b) non-financed Capital Expenditures made during
----
such fiscal year divided by (ii) Fixed Charges for such fiscal year.
----------
Fixed Charges - for any fiscal year, the sum of (i) scheduled
-------------
principal payments of Money Borrowed (including the principal portion of
scheduled payments of Capitalized Lease Obligations) that were made by
Borrower during such fiscal year plus Cash Interest Expense for such fiscal
----
year.
GAAP - generally accepted accounting principles in the United States
----
of America in effect from time to time.
General Intangibles - all personal property of Borrower or any of its
-------------------
Subsidiaries (including things in action) other than goods, Accounts,
chattel paper, documents, instruments and money, whether now owned or
hereafter created or acquired by Borrower or any of its Subsidiaries.
Guarantors - Parent and each other Person who now or hereafter
----------
guarantees payment or performance of the whole or any part of the
Obligations.
Guaranty Agreements - the Continuing Guaranty Agreement which is to be
-------------------
executed on the Closing Date by Parent, in form and substance satisfactory
to Agent, together with each other guaranty hereafter executed by any
Guarantor.
Indebtedness - as applied to a Person means, without duplication:
------------
(i) all items which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness
is to be determined, including, without limitation, Capitalized Lease
Obligations;
(ii) all obligations of other Persons which such Person has
guaranteed;
(iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such
Person;
(iv) Derivative Obligations; and
(v) in the case of Borrower (without duplication), the
Obligations.
Indebtedness Adjustment Amount - the aggregate amount of all
------------------------------
Indebtedness of Parent, Borrower and their Subsidiaries (other than the
Obligations) that is classified as permitted Indebtedness under Section
4.13(b)(xvii) of the Senior Notes Indenture or Section 4.13(b)(xvii) of the
Parent Debentures Indenture.
Intellectual Property - means: (i) United States, international, and
---------------------
foreign patents and patent applications, (ii) trademarks and service marks,
whether or not registered, including all common law rights, and
registrations and applications for
A-10
registration thereof and other source identifiers (including Internet
domain names), (iii) copyrights, whether or not registered, and
registrations and applications for registration thereof, including
copyrights in computer software and databases and (iv) confidential and
proprietary information, including trade secrets.
Interest Coverage Ratio - as defined in Exhibit 8.3 to the Agreement.
----------------------- -----------
Inventory - all of the inventory of Borrower or any of its
---------
Subsidiaries, whether now owned or hereafter acquired (including inventory
purchased on account), including, but not limited to, all goods intended
for sale or lease by Borrower or any of its Subsidiaries, or for display or
demonstration; all work in process; all raw materials and other materials
and supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed
in the business of Borrower or any of its Subsidiaries; and all documents
evidencing and General Intangibles relating to any of the foregoing,
whether now owned or hereafter acquired by Borrower or any of its
Subsidiaries.
Investment Property - all of the investment property of Borrower or
-------------------
any of its Subsidiaries, whether now owned or hereafter acquired,
including, but not limited to, all Securities (certificated or
uncertificated), securities accounts, securities entitlements, commodity
accounts and commodity contracts.
LC Amount - at any time, the aggregate undrawn face amount of all
---------
Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Agent or any Affiliate of
-----------
Agent shall guaranty the payment or performance by Borrower of its
reimbursement obligation under any letter of credit.
LC Obligations - Any Obligations that arise from any draw against any
--------------
Letter of Credit or against any Letter of Credit supported by an LC
Guaranty.
Legal Requirement - any requirement imposed upon Agent or any Lender
-----------------
by any law of the United States of America or the United Kingdom or by any
regulation, order, interpretation, ruling or official directive (whether or
not having the force of law) of the Federal Reserve Board, the Bank of
England or any other board, central bank or governmental or administrative
agency, institution or authority of the United States of America, the
United Kingdom or any political subdivision of either thereof.
Letter of Credit - any standby or documentary letter of credit issued
----------------
by Agent or any Affiliate of Agent for the account of Borrower.
LIBOR Interest Payment Date - the first day of each calendar month
---------------------------
during and immediately following the applicable LIBOR Period.
A-11
LIBOR Option - the option granted pursuant to subsection 2.3 of the
------------
Agreement to have the interest on all or any portion of the principal
amount of the Loans based on a LIBOR Rate.
LIBOR Period - any period of 1 month, 2 months, 3 months or 6 months
------------
commencing on a Business Day, selected as provided in subsection 2.3(i);
provided, that no LIBOR Period shall extend beyond the last day of the
--------
Term, unless Borrower and Lenders have agreed to an extension of the Term
beyond the expiration of the LIBOR Period in question. If any LIBOR Period
so selected shall end on a date that is not a Business Day, such LIBOR
Period shall instead end on the next preceding or succeeding Business Day
as determined by Agent in accordance with the then current banking practice
in London; provided, that Borrower shall not be required to pay double
--------
interest, even though the preceding LIBOR Period ends and the new LIBOR
Period begins on the same day. Each determination by Agent of the LIBOR
Period shall, in the absence of manifest error, be conclusive.
LIBOR Portion - that portion of the Revolving Credit Loans specified
-------------
in a LIBOR Request (including any portion of Revolving Credit Loans which
is being borrowed by Borrower concurrently with such LIBOR Request) which
is not less than $1,000,000 and is an integral multiple of $100,000, which
does not exceed the outstanding balance of Revolving Credit Loans not
already subject to a LIBOR Option and, which, as of the date of the LIBOR
Request specifying such LIBOR Portion, has met the conditions for basing
interest on the LIBOR Rate in Section 2.3 of the Agreement and the LIBOR
Period of which was commenced and not terminated.
LIBOR Rate - with respect to any LIBOR Portion for the related LIBOR
----------
Period, an interest rate per annum (rounded upwards, if necessary, to the
next higher 1/8 of 1%) equal to the product of (i) the Base LIBOR Rate (as
hereinafter defined) multiplied by (ii) Statutory Reserves. For purposes of
----------
this definition, the term "Base LIBOR Rate" shall mean the rate (rounded
upwards, if necessary, to the next higher 1/8 of 1%) at which deposits of
U.S. dollars approximately equal in principal amount to the LIBOR Portion
specified in the applicable LIBOR Request are offered to Agent by prime
banks in the London interbank foreign currency deposits market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such LIBOR Period, for delivery on the first day of such
LIBOR Period. Each determination by Agent of any LIBOR Rate shall, in the
absence of manifest error, be conclusive.
LIBOR Request - a notice in writing (or by telephone confirmed by
-------------
telex, telecopy or other facsimile transmission on the same day as the
telephone request) from Borrower to Agent requesting that interest on a
Revolving Credit Loan be based on the LIBOR Rate, specifying: (i) the first
day of the LIBOR Period; (ii) the length of the LIBOR Period consistent
with the definition of that term; and (iii) the dollar amount of the LIBOR
Portion, consistent with the definition of such terms.
A-12
Lien - any interest in Property securing an obligation owed to, or a
----
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall
also include rights of seller under conditional sales contracts or title
retention agreements, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Loan Account - the loan account established on the books of Agent
------------
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
--------------
Documents.
Loans - all loans and advances of any kind made by Agent or any Lender
-----
pursuant to the Agreement.
Majority Lenders - as of any date, (i) if 2 or fewer Lenders hold
----------------
Revolving Loan Commitments, Lenders holding 100% of the aggregate Revolving
Loan Commitments and (ii) if 3 or more Lenders hold Revolving Loan
Commitments, Lenders holding 66 2/3% or more of the aggregate Revolving
Loan Commitments, but not less than 2 Lenders.
Material Adverse Effect - (i) a material adverse effect on the
-----------------------
business, condition (financial or otherwise), operation, performance or
properties of Borrower or any of its Subsidiaries, (ii) a material adverse
effect on the rights and remedies of Agent or Lenders under the Loan
Documents, or (iii) the material impairment of the ability of Borrower or
any of its Subsidiaries to perform its obligations hereunder or under any
Loan Document.
Money Borrowed - means, without duplication, (i) Indebtedness arising
--------------
from the lending of money by any Person to Borrower or any of its
Subsidiaries; (ii) Indebtedness, whether or not in any such case arising
from the lending by any Person of money to Borrower or any of its
Subsidiaries, (1) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (2) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (3) upon
which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property;
(iii) Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit and (v) Indebtedness of Borrower or any of its
Subsidiaries under any guaranty of obligations that would constitute
Indebtedness for Money Borrowed under clauses (i) through (iii) hereof, if
A-13
owed directly by Borrower or any of its Subsidiaries. Money Borrowed shall
not include trade payables or accrued expenses.
Mortgages - All mortgages, deeds of trust and comparable documents now
---------
or at any time hereafter securing the whole or any part of the Obligations.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
------------------
of ERISA.
Net Available Cash - as defined in Section 1.01 of the Senior Notes
------------------
Indenture.
Obligations - all Loans, all LC Obligations and all other advances,
-----------
debts, liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or payable
from Borrower to Agent, for its own benefit and the benefit of the Lenders,
or from Borrower to Bank, of any kind or nature, present or future, whether
or not evidenced by any note, guaranty or other instrument, whether arising
under the Agreement or any of the other Loan Documents or otherwise,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now
existing or hereafter arising and however acquired, including without
limitation any Derivative Obligations owing to Agent, any Lender or Bank.
Other Agreements - any and all agreements, instruments and documents
----------------
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other
third party and delivered to Agent in respect of the transactions
contemplated by the Agreement.
Overadvance - the amount, if any, by which the outstanding principal
-----------
amount of Revolving Credit Loans, plus the sum of the LC Amount and
reserves, exceed the Borrowing Base.
Parent - ▇▇▇▇▇ Equipment Company, a Delaware corporation.
------
Parent Debentures - collectively, the 15% Senior Discount Debentures
-----------------
due July 15, 2011 in the original aggregate principal amount of $52,204,000
issued by Parent pursuant to the Parent Debentures Indenture, and exchanged
on or about November, 1999 for certain 15% Senior Discount Debentures due
July 15, 2011 in connection with a certain exchange offer, as the same
exist on the Closing Date or are amended in compliance with subsection
8.2.6 of the Agreement or otherwise with the consent of Majority Lenders.
Parent Debentures Debt - the Indebtedness of Parent in the original
----------------------
aggregate principal amount of $52,204,000 pursuant to the Parent
Debentures.
Parent Debentures Indenture - the Debenture Indenture dated as of July
---------------------------
28, 1999 issued by Parent, as Issuer and United States Trust Company of
Texas, N.A., as
A-14
Trustee, as the same exists on the Closing Date or is amended in compliance
with subsection 8.2.6 of the Agreement or otherwise with the consent of
Majority Lenders.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of
---------------
the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
-------------------------------------
Borrower incurred after the date hereof which is secured by a Purchase
Money Lien and the principal amount of which, when aggregated with the
principal amount of all other such Indebtedness and Capitalized Lease
Obligations of Borrower and its Subsidiaries at the time outstanding, does
not exceed $500,000. For the purposes of this definition, the principal
amount of any Purchase Money Indebtedness consisting of capitalized leases
(as opposed to operating leases) shall be computed as a Capitalized Lease
Obligation.
Person - an individual, partnership, corporation, limited liability
------
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
----
employees of Borrower or any of its Subsidiaries that is covered by Title
IV of ERISA.
Projections - Borrower's forecasted Consolidated (i) balance sheets,
-----------
(ii) profit and loss statements, (iii) cash flow statements, and (iv)
capitalization statements, all prepared on a consistent basis with the
historical financial statements of Borrower and its Subsidiaries, together
with appropriate supporting details and a statement of underlying
assumptions.
Property - any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
---------------------------
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within 10 days prior to or after
the acquisition of any fixed assets for the purpose of financing all or any
part of the purchase price thereof, and (iii) any renewals, extensions or
refinancings thereof, but not any increases in the principal amounts
thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
-------------------
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
Reportable Event - any of the events set forth in Section 4043(b) of
----------------
ERISA.
A-15
Restricted Investment - any investment made in cash or by delivery of
---------------------
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following:
(i) investments by Borrower, to the extent existing on the
Closing Date, in one or more Subsidiaries of Borrower;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower or any of its
Subsidiaries;
(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one
--------
year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within
one year from the date of acquisition and fully insured by the Federal
Deposit Insurance Corporation;
(vi) investments in commercial paper given the highest rating
by a national credit rating agency and maturing not more than 270 days
from the date of creation thereof;
(vii) investments in money market, mutual or similar funds
having assets in excess of $100,000,000 and the investments of which
are limited to investment grade securities;
(viii) intercompany loans permitted under subsection 8.2.2(iv)
of the Agreement;
(ix) investments existing on the date hereof and listed on
Exhibit 8.2.12 hereto;
--------------
(x) investments in ▇▇▇▇▇▇▇ during the 2001 and 2002 fiscal
years, not in excess of $100,000 per fiscal quarter, but only so long
as the other owners of membership interests in ▇▇▇▇▇▇▇ are
simultaneously making investments in ▇▇▇▇▇▇▇ on the same terms and in
the same aggregate amounts as is Borrower; and
(xi) investments otherwise expressly permitted pursuant to the
Agreement.
Revolving Credit Loan - a Loan made by Lender pursuant to Section 1.1
---------------------
of the Agreement.
A-16
Revolving Credit Maximum Amount - $50,000,000, as such amount may be
-------------------------------
reduced from time to time pursuant to the terms of the Agreement.
Revolving Loan Commitment - with respect to any Lender, the amount of
-------------------------
such Lender's commitment pursuant to subsection 1.1.1 of the Agreement, as
set forth below such Lender's name on the signature page hereof.
Revolving Loan Percentage - with respect to each Lender, the
-------------------------
percentage equal to the quotient of such Lender's Revolving Loan Commitment
divided by the aggregate of all Revolving Loan Commitments.
------- --
Revolving Notes - the Secured Promissory Note to be executed by
---------------
Borrower in favor of each Lender to evidence such Lender's Revolving Loan
Commitment.
Security - all shares of stock, partnership interests, membership
--------
interests, membership units or other ownership interests in any other
Person and all warrants, options or other rights to acquire the same.
Security Documents - the Guaranty Agreements, the Mortgages and all
------------------
other instruments and agreements now or at any time hereafter securing the
whole or any part of the Obligations.
Seller Secured Debt - the Indebtedness of Borrower to ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------
▇▇▇▇▇▇▇ and certain other Persons in the original principal amount of
$5,000,000 pursuant to the Seller Secured Note.
Seller Secured Note - the Promissory Note secured by Deed of Trust
-------------------
dated June 30, 1994 issued by Borrower to ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ and certain
other Persons in the original principal amount of $5,000,000, as the same
exists on the Closing Date or is amended in compliance with subsection
8.2.6 or otherwise with the consent of Majority Lenders.
Senior Notes - collectively, the 12% Senior Notes due July 15, 2009 in
------------
the original aggregate principal amount of $130,000,000 issued by Borrower
pursuant to the Senior Notes Indenture, and exchanged on or about November,
1999 for certain 12% Senior Notes due July 15, 2009 in connection with a
certain exchange offer, as the same exist on the Closing Date or are
amended in compliance with subsection 8.2.6 or otherwise with the consent
of Majority Lenders.
Senior Notes Debt - the Indebtedness of Borrower in the original
-----------------
aggregate principal amount of $130,000,000 pursuant to the Senior Notes.
Senior Notes Indenture - the Senior Notes Indenture dated as of July
----------------------
28, 1999 issued by Borrower, as Issuer, Parent, as Parent Guarantor and
United States Trust Company of New York, as Trustee, as the same exists on
the Closing Date, or is amended in compliance with subsection 8.2.6 of the
Agreement or otherwise with the consent of Majority Lenders.
A-17
Solvent - as to any Person, such Person (i) owns Property whose fair
-------
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts discounted based on the
likelihood of their having to be paid), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient
to carry on its business and transactions and all business and transactions
in which it is about to engage.
Statutory Reserves - a fraction (expressed as a decimal) the numerator
------------------
of which is the number one, and the denominator of which is the number one
minus the aggregate of the maximum reserve percentages (including, without
-----
limitation, any marginal, special, emergency or supplemental reserves),
expressed as a decimal, established by the Board of Governors of the
Federal Reserve System and any other banking authority to which Lender is
subject for Eurocurrency Liabilities (as defined in Regulation D of the
Board of Governors of the Federal Reserve System or any successor thereto).
Such reserve percentages shall include, without limitation, those imposed
under such Regulation D. LIBOR Portions shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exceptions
or offsets which may be available from time to time to any Lender under
such Regulation D. Statutory Reserves shall be adjusted automatically on
and as of the effective date of any change in any reserve percentage.
Subordinated Debt - Indebtedness of Borrower or any Subsidiary of
-----------------
Borrower that is subordinated to the Obligations in a manner satisfactory
to Agent, and contains terms, including without limitation, payment terms,
satisfactory to Agent.
Subsidiary - any Person of which another Person owns, directly or
----------
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination. For purposes hereof, ▇▇▇▇▇▇▇ shall not
be deemed to be a Subsidiary of Borrower.
Tax - in relation to any LIBOR Portion and the applicable LIBOR Rate,
---
any tax, levy, impost, duty, deduction, withholding or charges of whatever
nature required by any Legal Requirement (i) to be paid by any Lender
and/or (ii) to be withheld or deducted from any payment otherwise required
hereby to be made by Borrower to any Lender; provided, that the term "Tax"
--------
shall not include any taxes imposed upon the income of any Lender or
franchise taxes.
Term - as defined in Section 4.1 of the Agreement.
----
Total Credit Facility - $50,000,000, as reduced from time to time
---------------------
pursuant to the terms of the Agreement.
Unused Line Fee - as defined in Section 2.6 of the Agreement.
---------------
A-18
Voting Stock - Securities of any class or classes of a corporation,
------------
limited partnership or limited liability company or any other entity the
holders of which are ordinarily, in the absence of contingencies, entitled
to vote with respect to the election of corporate directors (or Persons
performing similar functions).
Other Terms. All other terms contained in the Agreement shall have,
-----------
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
-------------------------------
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
A-19
LIST OF EXHIBITS AND SCHEDULES
Exhibit 2.5 Letter of Credit Charges
Exhibit 6.1.1 Business Locations
Exhibit 7.1.1 Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Exhibit 7.1.4 Capital Structure of Borrower and each Subsidiary
Exhibit 7.1.5 Names
Exhibit 7.1.10 Material Changes
Exhibit 7.1.13 Surety Obligations
Exhibit 7.1.14 Tax Identification Numbers of Subsidiaries
Exhibit 7.1.15 Brokers' Fees
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.18 Compliance with Laws
Exhibit 7.1.19 Contracts Restricting Right to Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.21 Defaults and Events of Default
Exhibit 7.1.22 Capitalized and Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.24 Trade Relations
Exhibit 7.1.25 Labor Relations
Exhibit 8.1.3 Compliance Certificate
Exhibit 8.2.2 Loans
Exhibit 8.2.3 Existing Indebtedness
Exhibit 8.2.5 Permitted Liens
Exhibit 8.2.12 Permitted Investments
Exhibit 8.3 Financial Covenants
Exhibit 9.6 Material Adverse Effects
Exhibit A Capital Source Letter of Understanding
EXHIBIT 6.1.1
BUSINESS LOCATIONS
1. Borrower currently has the following business locations, and no others:
Chief Executive Office:
Other Locations:
2. Borrower maintains its books and records relating to Accounts and General
Intangibles at:
3. Borrower has had no office, place of business or agent for process located
in any county other than as set forth above, except:
4. Each Subsidiary currently has the following business locations, and no
others:
Chief Executive Office:
Other Locations:
5. Each Subsidiary maintains its books and records relating to Accounts and
General Intangibles at:
6. Each Subsidiary has had no office, place of business or agent for process
located in any county other than as set forth above, except:
7. The following bailees, warehouseman, similar parties and consignees hold
inventory of Borrower or one of its Subsidiaries:
===============================================================================================
Owner of
--------
Name and Address of Party Nature of Relationship Amount of Inventory Inventory
------------------------- ---------------------- ------------------- ---------
===============================================================================================
-----------------------------------------------------------------------------------------------
===============================================================================================
Exhibit 6.1.1 - Page 1
===============================================================================================
Owner of
--------
Name and Address of Party Nature of Relationship Amount of Inventory Inventory
------------------------- ---------------------- ------------------- ---------
===============================================================================================
-----------------------------------------------------------------------------------------------
===============================================================================================
Exhibit 6.1.1 - Page 2
EXHIBIT 7.1.1
JURISDICTIONS IN WHICH BORROWER
AND ITS SUBSIDIARIES
ARE AUTHORIZED TO DO BUSINESS
Name of Entity Jurisdictions
-------------- -------------
Exhibit 7.1.1 - Page 1
EXHIBIT 7.1.4
CAPITAL STRUCTURE
1. The class and the number of authorized and issued Securities of Borrower
and each of its Subsidiaries and the record owner of such Securities are as
follows:
Borrower:
--------
============================================================================================
Class of Number of Securities Number of Securities
Securities Issued and Outstanding Record Owners Authorized but Unissued
---------- ---------------------- ------------- -----------------------
============================================================================================
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
============================================================================================
Subsidiaries:
------------
============================================================================================
Class of Number of Securities Number of Securities
Securities Issued and Outstanding Record Owners Authorized but Unissued
---------- ---------------------- ------------- -----------------------
============================================================================================
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
============================================================================================
2. The number, nature and holder of all other outstanding Securities of
Borrower and each Subsidiary are as follows:
3. The correct name and jurisdiction of incorporation or organization of each
Subsidiary of Borrower and the percentage of its issued and outstanding
Voting Stock owned by Borrower are as follows:
===============================================================================================
Jurisdiction of Percentage of Voting
Name Incorporation/Organization Stock Owned by Borrower
---- -------------------------- -----------------------
===============================================================================================
===============================================================================================
Exhibit 7.1.4 - Page 1
===============================================================================================
Jurisdiction of Percentage of Voting
Name Incorporation/Organization Stock Owned by Borrower
---- -------------------------- -----------------------
===============================================================================================
-----------------------------------------------------------------------------------------------
===============================================================================================
4. The name of each of Borrower's and each Subsidiary's corporate or joint
venture Affiliates and the nature of the affiliation are as follows:
5. The agreements or instruments binding upon the partners, members or
shareholders of Borrower or any of its Subsidiaries and relating to the
ownership of its Securities, are as follows:
Exhibit 7.1.4 Page 2
EXHIBIT 7.1.5
NAMES
1. Borrower's correct name, as registered with the Secretary of State of the
State of Delaware is:
WEC Company
2. In the conduct of its business, Borrower has used the following names:
3. Each Subsidiary's correct name, as registered with the Secretary of State
of the State of its incorporation or formation, is:
4. In the conduct of its business, each Subsidiary has used the following
names:
5. Borrower has not been the surviving entity of a merger or consolidation nor
has it acquired substantially all the assets of any person.
6. No Subsidiary has been the surviving entity of a merger or consolidation
nor has it acquired substantially all the assets of any person.
Exhibit 7.1.5 - Page 1
EXHIBIT 7.1.10
MATERIAL CHANGES
Exhibit 7.1.10 - Page 1
EXHIBIT 7.1.13
SURETY OBLIGATIONS
Exhibit 7.1.13 - Page 1
EXHIBIT 7.1.14
TAX IDENTIFICATION NUMBERS OF SUBSIDIARIES
Subsidiary Number
---------- ------
Exhibit 7.1.14 - Page 1
EXHIBIT 7.1.15
BROKERS' FEES
Exhibit 7.1.15 - Page 1
EXHIBIT 7.1.16
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
1. Borrower's and its Subsidiaries' patents:
=====================================================================================================
Status in Federal Registration Registration
Patent Owner Patent Office Number Date
------ ----- ------------- ------ ----
=====================================================================================================
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
=====================================================================================================
2. Borrower's and its Subsidiaries' trademarks:
=====================================================================================================
Status in Federal Registration Registration
Trademark Owner Patent Office Number Date
--------- ----- ------------- ------ ----
=====================================================================================================
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
=====================================================================================================
3. Borrower's and its Subsidiaries' copyrights:
=====================================================================================================
Status in Federal Registration Registration
Copyrights Owner Copyright Office Number Date
---------- ----- ---------------- ------ ----
=====================================================================================================
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
=====================================================================================================
4. Borrower's and its Subsidiaries' licenses (other than routine business
licenses, authorizing them to transact business in local jurisdictions):
=====================================================================================================
Name of License Nature of License Licensor Term of License
--------------- ----------------- -------- ---------------
=====================================================================================================
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
=====================================================================================================
5. Infringement Activities:
Exhibit 7.1.16 - Page 1
6. Unregistered material trademarks, service marks and copyrights:
7. Material license agreements that do not permit assignment or limit the use
of license after default:
Exhibit 7.1.16 - Page 2
EXHIBIT 7.1.18
COMPLIANCE WITH LAWS
Exhibit 7.1.18 - Page 1
EXHIBIT 7.1.19
CONTRACTS RESTRICTING RIGHT TO INCUR DEBT
Contracts that restrict the right of Borrower or any of its Subsidiaries to
incur Indebtedness:
================================================================================================
Title of Contract Identity of Parties Nature of Restriction Term of Contract
----------------- ------------------- --------------------- ----------------
================================================================================================
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
================================================================================================
Exhibit 7.1.19 - Page 1
EXHIBIT 7.1.20
LITIGATION
1. Actions, suits, proceedings and investigations pending against Borrower or
any Subsidiary:
==============================================================================================
Title of Action Nature of Action Complaining Parties Jurisdiction or Tribunal
--------------- ---------------- ------------------- ------------------------
==============================================================================================
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
==============================================================================================
2. The only threatened actions, suits, proceedings or investigations of which
Borrower or any Subsidiary is aware are as follows:
Exhibit 7.1.20 - Page 1
EXHIBIT 7.1.21
DEFAULTS AND EVENTS OF DEFAULT
Exhibit 7.1.21 - Page 1
EXHIBIT 7.1.22
CAPITALIZED AND OPERATING LEASES
Borrower and its Subsidiaries have the following capitalized and operating
leases:
===============================================================================================
Lessee Lessor Term of Lease Property Covered
------ ------ ------------- ----------------
===============================================================================================
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
===============================================================================================
Exhibit 7.1.22 - Page 1
EXHIBIT 7.1.23
PENSION PLANS
Borrower and its Subsidiaries have the following Plans:
============================================================================================
Party Type of Plan
----- ------------
============================================================================================
Borrower
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Subsidiaries
--------------------------------------------------------------------------------------------
============================================================================================
Exhibit 7.1.23 - Page 1
EXHIBIT 7.1.24
TRADE RELATIONS
Exhibit 7.1.14 - Page 1
EXHIBIT 7.1.25
COLLECTIVE BARGAINING AGREEMENTS; LABOR CONTROVERSIES
1. Borrower and its Subsidiaries are parties to the following collective
bargaining agreements:
==============================================================================================
Type of Agreement Parties Term of Agreement
----------------- ------- -----------------
==============================================================================================
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
==============================================================================================
2. Material grievances, disputes of controversies with employees of Borrower
or any of its Subsidiaries are as follows:
==============================================================================================
Parties Involved Nature of Grievance, Dispute or Controversy
---------------- -------------------------------------------
==============================================================================================
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
==============================================================================================
3. Threatened strikes, work stoppages and asserted pending demands for
collective bargaining with respect to Borrower or any of its Subsidiaries
are as follows:
==============================================================================================
Parties Involved Nature of Matter
---------------- ---------------
==============================================================================================
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
==============================================================================================
Exhibit 7.1.25 - Page 1
EXHIBIT 8.1.3
COMPLIANCE CERTIFICATE
[Letterhead of WEC Company]
__________________, ___
Fleet Capital Corporation, as Agent
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned, the chief financial officer [Vice President-Finance]
of WEC Company, a Delaware corporation ("Borrower"), gives this certificate to
Fleet Capital Corporation, in its capacity as Agent ("Agent") in accordance with
the requirements of subsection 8.1.3 of that certain Loan and Security Agreement
dated February 7, 2001 among Borrower, Agent and the Lenders party thereto
("Loan Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the balance sheets and statements of
income of Borrower and its Subsidiaries for the monthly period ending
_______________, ____, copies of which are attached hereto, I hereby certify
that:
(i) With respect to the Excess Availability covenant contained in
Exhibit 8.3 to the Loan Agreement:
-----------
(a) The Interest Coverage Ratio is _____ to 1.0.
(b) Excess Availability is $__________.
(ii) Capital Expenditures during the period and for the fiscal year to
date total $__________ and $__________, respectively.
2. No Default exists on the date hereof, other than:
__________________ ________________________________________________ [if none, so
state]; and
3. No Event of Default exists on the date hereof, other than
__________ ____________________________________________________ [if none, so
state].
Very truly yours,
__________________________________________________
Chief Financial Officer [Vice President-Finance]
Exhibit 8.1.3 - Page 1
EXHIBIT 8.2.2
LOANS
1. Promissory Note dated August __, 1998, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, in favor of WEC
Company in the original principal amount of $100,000.
2. Promissory Note dated January 19, 2000, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, in favor of
WEC Company in the original principal amount of $10,000.
3. Promissory Note dated August __, 1998, by ▇▇▇▇▇ ▇▇▇▇▇▇▇, in favor of WEC
Company in the original principal amount of $30,000.
4. Promissory Note dated February 2, 2000, by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in favor of WEC
Company in the original principal amount of $7,780.98.
Exhibit 8.2.2 - Page 1
EXHIBIT 8.2.3
EXISTING INDEBTEDNESS
Borrower Lender Amount Maturity
-------- ------ ------ --------
Exhibit 8.2.3 - Page 1
EXHIBIT 8.2.5
PERMITTED LIENS
===================================================================================
Secured Party Nature of Lien
------------- --------------
===================================================================================
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
===================================================================================
Exhibit 8.2.5 - Page 1
EXHIBIT 8.2.12
PERMITTED INVESTMENTS
Exhibit 8.2.12 - Page 1
EXHIBIT 8.3
FINANCIAL COVENANTS
DEFINITIONS
-----------
Cash Interest Expense - with respect to any period of determination,
---------------------
Borrower's and its Subsidiaries' Consolidated interest expense paid in cash, or
due (whether or not paid), during such period (excluding interest income),
including, without limitation, the interest portion of Capitalized Lease
Obligations, as determined in accordance with GAAP.
EBITDA - with respect to any period of determination, the sum of
------
Borrower's and its Subsidiaries' Consolidated net earnings (or loss) before
interest expense, income taxes, depreciation and amortization for said period
(but excluding any extraordinary gains for such period) as determined in
accordance with GAAP.
Excess Availability - the difference derived when the sum of the
-------------------
principal amount of Revolving Credit Loans then outstanding (including any
amounts which Agent or any Lender may have paid for the account of Borrower
pursuant to any of the Loan Documents and which have not been reimbursed by
Borrower), the LC Amount and any reserves is subtracted from the value of
clauses (ii)(a), (b) and (c) of the definition of the term Borrowing Base
--------------
contained in the Agreement, but without reference to any dollar sublimits
contained therein.
Interest Coverage Ratio - with respect to any period of 12 consecutive
-----------------------
months, EBITDA for such period divided by Cash Interest Expense for such period,
----------
determined for Borrower with its Subsidiaries on a Consolidated basis in
accordance with GAAP.
COVENANT
--------
Excess Availability - Borrower shall maintain Excess Availability at
-------------------
all times hereafter, equal to or greater than (i) $7,000,000, if the Interest
Coverage Ratio as of the last day of the most recent month for which financial
statements have been delivered pursuant to subsection 8.1.3 of the Agreement, is
less than 1.5 to 1.0, or (b) $5,000,000, if the Interest Coverage Ratio as of
the last day of the most recent month for which financial statements have been
delivered pursuant to subsection 8.1.3 of the Agreement, is equal to or greater
than 1.5 to 1.0.
Exhibit 8.3 - Page 1
EXHIBIT 9.6
MATERIAL ADVERSE EFFECTS
Exhibit 9.6 - Page 1
EXHIBIT A
CAPITAL SOURCE LETTER OF UNDERSTANDING
Attached.
Exhibit A - Page 1