EXHIBIT 10.11
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
DATED: DECEMBER 31, 1997
$24,500,000
BY AND BETWEEN
FLEET CAPITAL CORPORATION,
AS LENDER
AND
EAGLE PACIFIC INDUSTRIES, INC.,
AS BORROWER
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TABLE OF CONTENTS
PAGE
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SECTION 1. CREDIT FACILITY....................................................1
1.1 Revolving Credit Loans...........................................2
1.2 Term Loan........................................................2
1.3 Working Capital Loans............................................2
SECTION 2. INTEREST, FEES AND CHARGES.........................................3
2.1 Interest.........................................................3
2.2 Computation of Interest and Fees.................................5
2.3 Closing Fee......................................................5
2.4 Unused Line Fee..................................................6
2.5 Collection Charges...............................................6
2.6 Audit and Appraisal Fees.........................................6
2.7 Reimbursement of Expenses........................................6
2.8 Bank Charges.....................................................7
SECTION 3. LOAN ADMINISTRATION................................................7
3.1 Manner of Borrowing Revolving Credit Loans.......................7
3.2 Payments.........................................................8
3.3 Mandatory Prepayments............................................8
3.4 Application of Payments and Collections..........................9
3.5 All Loans to Constitute One Obligation...........................9
3.6 Loan Account.....................................................9
3.7 Statements of Account............................................9
SECTION 4. TERM AND TERMINATION..............................................10
4.1 Term of Agreement...............................................10
4.2 Termination.....................................................10
SECTION 5. SECURITY INTERESTS................................................11
5.1 Security Interest in Collateral.................................11
5.2 Lien Perfection; Further Assurances.............................12
5.3 Lien on Realty..................................................12
SECTION 6. COLLATERAL ADMINISTRATION.........................................13
6.1 General.........................................................13
6.2 Administration of Accounts......................................13
6.3 Administration of Inventory.....................................15
6.4 Administration of Equipment.....................................15
6.5 Payment of Charges..............................................16
SECTION 7. REPRESENTATIONS AND WARRANTIES....................................16
7.1 General Representations and Warranties..........................16
7.2 Continuous Nature of Representations and Warranties.............21
7.3 Survival of Representations and Warranties......................22
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS...............................22
8.1 Affirmative Covenants...........................................22
8.2 Negative Covenants..............................................24
8.3 Specific Financial Covenants....................................29
SECTION 9. CONDITIONS PRECEDENT..............................................31
9.1 Documentation...................................................31
9.2 No Default......................................................31
9.3 Other Loan Documents............................................31
9.4 No Litigation...................................................31
9.5 Restructuring...................................................31
9.6 Subordinated Debt Documents.....................................31
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.................32
10.1 Events of Default...............................................32
10.2 Acceleration of the Obligations.................................34
10.3 Other Remedies..................................................34
10.4 Remedies Cumulative; No Waiver..................................35
SECTION 11. MISCELLANEOUS.....................................................35
11.1 Power of Attorney...............................................35
11.2 Indemnity.......................................................36
11.3 Modification of Agreement; Sale of Interest.....................37
11.4 Severability....................................................37
11.5 Successors and Assigns..........................................37
11.6 Cumulative Effect; Conflict of Terms............................37
11.7 Execution in Counterparts.......................................37
11.8 Notice..........................................................38
11.9 Lender's Consent................................................39
11.10 Credit Inquiries................................................39
11.11 Time of Essence.................................................39
11.12 Entire Agreement................................................39
11.13 Interpretation..................................................39
11.14 GOVERNING LAW; CONSENT TO FORUM.................................39
11.15 WAIVERS BY BORROWER.............................................40
11.16 Publicity.......................................................41
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made this 31st day of
December, 1997, by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode
Island corporation with an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇; and EAGLE PACIFIC INDUSTRIES, INC. ("Borrower"), a Minnesota corporation
with its chief executive office and principal place of business at 2430
Metropolitan Centre, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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.
RECITALS
A. Lender and Eagle Plastics, Inc. ("EPI"), Pacific Plastics, Inc. ("PPI"), and
Arrow Pacific Plastics, Inc. ("APP") entered into a Loan and Security Agreement
dated as of May 10, 1996 pursuant to which Lender extended certain financing to
EPI, PPI and APP, such financing being comprised of the revolving credit and
term loan lines of credit. Said Loan and Security Agreement, as amended from
time to time, is hereinafter referred to as the "Original Loan Agreement." The
payment and performance of EPI's, PPI's and APP's liabilities and obligations
owing to Lender under the Original Loan Agreement were guaranteed by Borrower.
B. EPI, PPI, APP and Borrower have effected, or will effect simultaneously with
the closing of this Agreement, a corporate restructuring (the "Restructuring")
pursuant to which EPI, PPI and APP have been, or will be, merged into Borrower.
C. Borrower desires that the Original Loan Agreement be amended and restated in
order to reflect the results of the Restructuring.
D. As security for the loans heretofore made under the Original Loan Agreement
and the loans to be made by Lender to, or for the account of, Borrower and
Borrower's predecessors-in-interest by merger EPI, PPI and APP, and for the
repayment of the "Obligations" (as hereinafter defined) owing by Borrower to
Lender, Borrower will grant to Lender, a lien on, and a security interest in,
all of its assets (including, without limitation, those acquired in connection
with the merger of EPI, PPI and APP into Borrower) in favor of Lender.
E. Accordingly, in consideration of the mutual agreements contained herein, and
subject to the terms and conditions hereof, the parties hereto agree as follows:
SECTION 2. 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, Lender
agrees to make a Total Credit Facility of up to Twenty-Four Million Five Hundred
Thousand Dollars ($24,500,000) available upon Borrower's request therefor, as
follows:
2.1 Revolving Credit Loans.
2.1.1 Loans and Reserves. Lender agrees, for so long as no Default or Event of
Default exists,
to make Revolving Credit Loans to Borrower from time to time, 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 Borrowing Base at such
time. Lender shall have the right to establish reserves in such amounts, and
with respect to such matters, as Lender shall deem necessary or appropriate,
against the amount of Revolving Credit Loans which Borrower may otherwise
request under this subsection 1.1.1, including, without limitation, with respect
to (i) other sums chargeable against Borrower's Loan Account as Revolving Credit
Loans under any section of this Agreement; (ii) amounts owing by Borrower to any
Person to the extent secured by a Lien on, or trust over, any Property of
Borrower and Borrower has not already established funded reserves over which
Lender has a security interest; and (iii) such other matters, events, conditions
or contingencies as to which Lender, in its sole credit judgment, determines
reserves should be established from time to time hereunder.
2.1.2 Use of Proceeds. The Revolving Credit Loans shall be used solely for the
purposes described in the Original Agreement and for Borrower's general
operating capital needs in a manner consistent with the provisions of this
Agreement and all applicable laws.
2.2 Term Loan.
2.2.1 Term Loan. Pursuant to Section 1.2 of the Original Loan Agreement Lender
made (i) a term loan (the "EPI Term Loan") to EPI on the Original Closing Date
in the principal amount of Three Million Two Hundred Seventy-Five Thousand
Dollars ($3,275,000), (ii) a term loan (the "PPI Term Loan") to PPI on the
Original Closing Date in the principal amount of Three Million Seven Hundred
Seventy-Five Thousand Dollars ($3,775,000), and (iii) a term loan (the "APP Term
Loan") to APP on the Original Closing Date in the principal amount of Nine
Hundred Fifty Thousand Dollars ($950,000). The proceeds of the EPI Term Loan,
the PPI Term Loan and the APP Term Loan were used for purposes described in the
Original Loan Agreement. As of the Restructuring Closing Date, the aggregate
principal balance of such term loans is Six Million One Hundred Eighty-Nine
Thousand Three Hundred Dollars ($6,189,300). As of the Restructuring Closing
Date, the EPI Term Loan, the PPI Term Loan and the APP Term Loan shall
hereinafter be collectively referred to as the "Term Loan" and shall be
evidenced by a certain amended and restated secured promissory note in the form
of Exhibit A attached hereto and incorporated herein (the "Term Note"). The Term
Loan shall be repayable in accordance with the terms of the Term Note and shall
be secured by the Property of Borrower described in Section 5 hereof and in the
Security Documents.
2.3 Working Capital Loans. On any date between December 31, 1997 and June 29,
1998, upon two (2) Business Days notice to Lender, Lender shall make a working
capital loan ("Working Capital Loan") to Borrower, in the principal amount of
Four Million Dollars ($4,000,000); provided, however, that Lender shall not be
required to make a Working Capital Loan at any time when a Default or Event of
Default is existing and continuing. The outstanding principal amount of the
Working Capital Loan, together with all accrued but unpaid interest thereon,
shall be due and payable on the earlier of (i) the date of termination of this
Agreement as provided in Section 4, (ii) the occurrence of an Event of Default
in consequence of which Lender elects to accelerate the maturity and payment of
the Obligations and (iii) June 30, 1998. The proceeds of the Working Capital
Loan shall be used solely for the purposes for which the proceeds of the
Revolving Credit Loans are authorized to be used.
SECTION 3. INTEREST, FEES AND CHARGES
3.1 Interest.
3.1.1 Rates of Interest.
(A) Interest. (i) Interest shall accrue on the Prime Portion outstanding at the
end of each day (computed on the basis of a calendar year of 360 days and actual
days elapsed) at a fluctuating rate per annum equal to the sum of one-quarter of
one percent (1/4%) plus the Base Rate. After the date hereof, the foregoing rate
of interest shall be increased or decreased, as the case may be, by an amount
equal to any increase or decrease in the Base Rate, with such adjustments to be
effective as of the opening of business on the day that any such change in the
Base Rate becomes effective. The Base Rate in effect on the date hereof shall be
the Base Rate effective on the opening of business on the date hereof, but if
this Agreement is executed on a day that is not a Business Day, the Base Rate in
effect on the date hereof shall be the Base Rate effective as of the opening of
business on the last Business Day immediately preceding the date hereof.
(ii) Interest shall accrue on each LIBOR Revolving Loan Portion outstanding at
the end of each day (computed on the basis of a calendar year of 360 days and
actual days elapsed) at rates equal to the sum of the LIBOR Rate applicable to
each such LIBOR Revolving Loan Portion plus two and one-half percent (2 1/2%).
(iii) Interest shall accrue on each LIBOR Term Portion outstanding at the end of
each day (computed on the basis of a calendar year of 360 days and actual days
elapsed) at rates equal to the sum of the LIBOR Rate applicable to each such
LIBOR Term Portion plus two and three-quarters percent (2 3/4%).
(B) LIBOR Option.
(i) Conditions for Basing Interest on the LIBOR Rate. Upon the condition that:
(a) Lender shall have received a LIBOR Request from Borrower at least 3 Business
Days prior to the first day of the LIBOR Period requested:
(b) There shall have occurred no change in applicable law which would make it
unlawful for Lender to obtain deposits of U.S. dollars in the London interbank
foreign currency deposits market;
(c) 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 which has not been waived by
Lender; and
(d) Lender shall have determined in good faith that it is able to determine the
LIBOR Rate in respect of the requested LIBOR Period and that Lender is able to
obtain deposits of U.S. dollars in the London interbank foreign currency
deposits market in the applicable amounts and for the requested LIBOR Period;
then interest on the LIBOR Portion requested during the LIBOR Period requested
will be based on the applicable LIBOR Rate. The foregoing notwithstanding,
Borrower acknowledges that there may not be more than three LIBOR Portions
outstanding at any one time.
(ii) Indemnification for Funding and Other Losses. Each LIBOR Request shall be
irrevocable and binding on Borrower. Borrower shall indemnify Lender against any
expense or loss suffered by Lender as a result of any 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 as a result of 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 Lender to fund or maintain
the requested LIBOR Portion, when, as a result of such failure on the part of
Borrower or prepayment by Borrower, interest on such LIBOR Portion is not based
on the applicable LIBOR Rate for the requested LIBOR Period.
(iii) Change in Applicable Laws, Regulations, etc. If any Legal Requirement
shall make it unlawful for Lender to fund through the purchase of U.S. dollar
deposits any LIBOR Portion, or otherwise to give effect to its obligations as
contemplated under this Section 2.1.1(B), or shall impose on 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 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 Lender which includes any LIBOR
Portion, or shall impose on Lender any restrictions on the amount of such a
category of liabilities or assets which Lender may hold, (i) Lender may by
notice thereof to Borrower terminate the LIBOR Option, with respect to the Term
Loan, the Working Capital Loan and the Revolving Credit Loans made or to be made
by Lender, (ii) any LIBOR Portion subject thereto shall immediately bear
interest thereafter at the rate provided for in Section 2.1.1(A) payable on the
dates provided for in Section 3.2.2 and (iii) Borrower shall indemnify Lender
against any out-of-pocket loss, penalty or expense incurred by Lender by reason
of the liquidation or redeployment of deposits or other funds acquired by Lender
to fund or maintain such LIBOR Portion.
(iv) Taxes. It is the understanding of Borrower and Lender that Lender shall
receive payments of amounts of principal of and interest on the Revolving Credit
Loans, the Working Capital Loan and the Term Loan with respect to the LIBOR
Portions from time to time subject to a LIBOR Option free and clear of, and
without deduction for, any Taxes. If (i) Lender shall be subject to any such Tax
in respect of any such LIBOR Portion or any part thereof or (ii) Borrower shall
be required to withhold or deduct any such Tax from any such amount, the LIBOR
Rate applicable to such LIBOR Portion shall be adjusted by Lender to reflect all
additional costs incurred by Lender in connection with the payments by Lender or
the withholding by Borrower of such Tax and Borrower shall provide Lender with a
statement detailing the amount of any such Tax actually paid by Borrower.
Determination by Lender of the amount of such costs shall, in the absence of
manifest error, be conclusive, and at Borrower's request, Lender shall
demonstrate the basis of such determination. If after any such adjustment, any
part of any Tax paid by Lender is subsequently recovered by Lender, Lender shall
reimburse Borrower to the extent of the amount so recovered. A certificate of an
officer of Lender setting forth the amount of such recovery and the basis
therefor shall, in the absence of manifest error, be conclusive.
3.1.2 Default Rate of Interest. Upon and during the continuance 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 two percent (2%) above the
interest rate otherwise applicable thereto (the "Default Rate").
3.1.3 Maximum Interest. In no event whatsoever shall the aggregate of all
amounts deemed
interest hereunder or under the Term Note and charged or collected pursuant to
the terms of this Agreement or pursuant to the Term 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, or the Term Note are in contravention of any such law, such
provisions shall be deemed amended to conform thereto.
3.2 Computation of Interest and Fees. Interest, unused line fees and collection
charges hereunder shall be calculated daily and shall be computed on the actual
number of days elapsed over a year of 360 days. For the purpose of computing
interest hereunder, all items of payment received by Lender shall be deemed
applied by Lender on account of the Obligations (subject to final payment of
such items) on the first Business Day after receipt by Lender of such items in
Lender's account located in Chicago, Illinois.
3.3 Closing Fee. Lender acknowledges that EPI, PPI and APP paid to Lender a
closing fee of One Hundred Twenty-Five Thousand Dollars ($125,000) on the
Original Closing Date. On December 31, 1997, in order to induce Lender to make
the Working Capital Loan, Borrower agrees to pay to Lender a working capital
loan fee in the amount of Twenty Thousand Dollars ($20,000). Said working
capital loan fee shall be deemed fully earned and non-refundable on December 31,
1997. On the date on which Lender makes the Working Capital Loan to Borrower,
Borrower shall pay to Lender an additional working capital loan fee in the
amount of Twenty Thousand Dollars ($20,000). Said second working capital loan
Fee shall be deemed fully earned and non-refundable on the date the Working
Capital Loan is made.
3.4 Unused Line Fee. Borrower shall pay to Lender a fee equal to one-half of one
percent (1/2%) per annum of the average monthly amount by which Sixteen Million
Five Hundred Thousand Dollars ($16,500,000) exceeds the sum of the outstanding
principal balance of the Revolving Credit Loans. The unused line fee shall be
payable monthly in arrears on the first day of each calendar month hereafter.
3.5 Collection Charges. If items of payment are received by Lender at a time
when there are no Revolving Credit Loans outstanding, such items of payment
shall be subject to a collection charge equal to one days' interest on the
amount thereof at the rate then applicable to Revolving Credit Loans, which
collection charges shall be payable by Borrower to Lender on the first Business
Day of each month.
3.6 Audit and Appraisal Fees. Borrower shall pay to Lender audit and appraisal
fees in the amount of $2,500 for each calendar quarter or portion thereof within
the Original Term hereof plus all out-of-pocket expenses incurred by Lender in
connection with such audits and appraisals. Such fees shall be payable on the
first day of the month following the date of issuance by Lender of a request for
payment thereof to Borrower which request shall itemize such fees and expenses
in reasonable detail.
3.7 Reimbursement of Expenses. If, at any time or times regardless of whether or
not an Event of Default then exists, Lender incurs legal or accounting expenses
or any other costs or out-of-pocket expenses in connection with (i) 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; (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby; (iii)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, Borrower or any other Person)
in any way relating to the Collateral, this Agreement or any of the other Loan
Documents or Borrower's affairs; (iv) any attempt to enforce any rights of
Lender or any Participating Lender against Borrower or any other Person which
may be obligated to Lender by virtue of this Agreement or any of the other Loan
Documents, including, without limitation, the Account Debtors provided that
Borrower shall not be required to reimburse Participating Lenders for the cost
of more than one counsel in connection with any such enforcement action; or (v)
any attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all such
reasonable legal and accounting expenses, other costs and out of pocket expenses
of Lender shall be charged to Borrower. All amounts chargeable to Borrower under
this Section 2.7 shall be Obligations secured by all of the Collateral, shall be
payable on demand to Lender or to such Participating Lender, as the case may be,
and shall bear interest from the date such demand is made until paid in full at
the rate applicable to Revolving Credit Loans from time to time. Borrower shall
also reimburse Lender for expenses incurred by Lender in its administration of
the Collateral to the extent and in the manner provided in Section 6 hereof. The
foregoing notwithstanding, Borrower shall not be required to reimburse Lender or
any Participating Lender for any costs or expenses incurred in any action in
which Borrower, pursuant to a final non-appealable court order, is the
prevailing party.
3.8 Bank Charges. Borrower shall pay to Lender, on demand, any and all fees,
costs or expenses which Lender 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 Lender, of proceeds of loans made by Lender to
Borrower pursuant to this Agreement and (ii) the depositing for collection, by
Lender, of any check or item of payment received or delivered to Lender on
account of the Obligations.
SECTION 4. LOAN ADMINISTRATION.
4.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the credit
facility established pursuant to Section 1 hereof shall be as follows:
4.1.1 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
Lender notice of its intention to borrow, in which notice Borrower shall specify
the amount of the proposed borrowing and the proposed borrowing date, no later
than 11:00 a.m. Chicago time on the proposed borrowing date, 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 or the Term Note, 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. As an accommodation to Borrower, Lender may permit telephonic
requests for loans and electronic transmittal of instructions, authorizations,
agreements or reports to Lender by Borrower. Unless Borrower, as applicable,
specifically directs Lender in writing not to accept or act upon telephonic or
electronic communications from Borrower, Lender shall have no liability to
Borrower for any loss or damage suffered by Borrower as a result of Lender'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 Lender by Borrower and Lender
shall have no duty to verify the origin of any such communication or the
authority of the person sending it.
4.1.2 Disbursement. Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of
each Revolving Credit Loan requested, or deemed to be requested, pursuant to
this subsection 3.1.2 as follows: (i) the proceeds of each Revolving Credit Loan
requested under subsection 3.1.1(i) shall be disbursed by Lender 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 Lender from
time to time or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each Revolving Credit Loan requested under subsection
3.1.1(ii) shall be disbursed by Lender by way of direct payment of the relevant
interest or other Obligation.
4.1.3 Authorization. Borrower hereby irrevocably authorizes Lender, in Lender's
sole discretion, 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 costs, fees and expenses at any time owed by Borrower to Lender
hereunder. Lender shall promptly give Borrower notice of such advance.
4.2 Payments. Except where evidenced by notes or other instruments issued or
made by Borrower to Lender specifically containing payment provisions which are
in conflict with this Section 3.2 (in which event the conflicting provisions of
said notes or other instruments shall govern and control), the Obligations shall
be payable as follows:
4.2.1 Principal. Principal payable on account of Revolving Credit Loans shall be
payable by Borrower to Lender immediately upon the earliest of (i) the receipt
by Lender or Borrower of any proceeds of any of the Collateral other than
Equipment or real Property, to the extent of said proceeds, (ii) the occurrence
of an Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations, or (iii) termination of this Agreement
pursuant to Section 4 hereof; provided, however, that if an Overadvance shall
exist at any time, Borrower shall, on demand, repay the Overadvance. Principal
payable on account of the Term Loan shall be payable by Borrower to Lender in
accordance with the terms and conditions of the Term Note and the provisions of
this Agreement.
4.2.2 Interest. Interest accrued on the Prime Portion and the LIBOR Portions
shall be due on the earliest of (i) the first day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in the consequence
of which Lender elects to accelerate the maturity and payment of the Obligations
or (iii) termination of this Agreement pursuant to Section 4 hereof; provided,
however, the Borrower hereby irrevocably authorizes Lender, in Lender's sole
discretion, to advance to Borrower and to charge to Borrower's Loan Account
hereunder as a Revolving Credit Loan, a sum sufficient each month to pay all
interest accrued on the Prime Portion and the LIBOR Portions during the
immediately preceding month. Lender shall promptly give Borrower notice of such
advance.
4.2.3 Costs, Fees and Charges. Costs, fees and charges payable pursuant to this
Agreement shall be payable by Borrower as and when provided in Section 2 hereof,
to Lender or to any other Person designated by Lender in writing.
4.2.4 Other Obligations. The balance of the Obligations requiring the payment of
money, if any, shall be payable by Borrower to Lender as and when provided in
this Agreement, the Other Agreements or the Security Documents, or on demand,
whichever is later.
4.3 Mandatory Prepayments.
4.3.1 Proceeds /of Sale, Loss, Destruction or Condemnation of Collateral. Except
as provided in subsection 6.4.2 hereof, if Borrower sells any of the Equipment
or real Property, or if any of the Collateral is lost or destroyed or taken by
condemnation, Borrower shall pay to Lender, unless otherwise agreed by Lender,
as and when received by Borrower and as a mandatory prepayment of the Term Loan,
a sum equal to the proceeds (including insurance payments) received by Borrower
from such sale, loss, destruction or condemnation. Any such mandatory prepayment
of the Term Loan shall be applied against regularly scheduled installment
payments due under the Term Note in inverse order maturity.
4.4 Application of Payments and Collections. All items of payment received by
Lender by 12:00 noon, Chicago time, on any Business Day shall be deemed received
on that Business Day. All items of payment received after 12:00 noon, Chicago
time, on any Business Day shall be deemed received on the following Business
Day. For the purpose of computing interest hereunder, all items of payment
received by Lender shall be deemed applied by Lender on account of the
Obligations (subject to final payment of such items) on the first Business Day
after receipt of such item in immediately good funds. Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Lender from or on behalf
of Borrower, and after the occurrence and during the continuation of an Event of
Default, Borrower does hereby irrevocably agree that Lender 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 Lender or its agent
against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. If as the
result of collections of Accounts as authorized by subsection 6.2.6 hereof a
credit balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower at any time or
times for so long as no Default or Event of Default exists. Such credit balance
shall not be applied or be deemed to have been applied as a prepayment of the
Term Loan, except that Lender may, at its option, offset such credit balance
against any of the Obligations upon and during the continuation of an Event of
Default.
4.5 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.
4.6 Loan Account. Lender shall enter all Loans as debits to 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 Lender, 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.
4.7 Statements of Account. Lender will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrower unless Lender is notified by Borrower in writing to the contrary
within 30 days of the date each accounting is mailed to Borrower. Such notice
shall only be deemed an objection to those items specifically objected to
therein.
SECTION 5. TERM AND TERMINATION
5.1 Term of Agreement. Subject to Lender's right to cease making Loans to
Borrower upon or during the continuation of any Default or Event of Default,
this Agreement shall be in effect for a period of three (3) years from the
Original Closing Date, through and including May 9, 1999 (the "Original Term"),
unless terminated as provided in Section 4.2 hereof.
5.2 Termination.
5.2.1 Termination by Lender. Upon at least 90 days prior written notice to
Borrower, Lender may terminate this Agreement as of the last day of the Original
Term and Lender may terminate this Agreement without notice upon or during the
continuation of an Event of Default.
5.2.2 Termination by Borrower. Upon at least 90 days prior written notice to
Lender, Borrower may, at its option, terminate this Agreement; provided,
however, no such termination (either pursuant to Section 4.2.1 above or this
Section 4.2.2) shall be effective until Borrower has paid all of the Obligations
in immediately available funds. Any notice of termination given by Borrower
shall be irrevocable unless Lender otherwise agrees in writing, and Lender shall
have no obligation to make any Loans on or after the termination date stated in
any such termination notice given pursuant to this Section 4.2.2 or pursuant to
Section 4.2.1 above. 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.
5.2.3 Termination Charges. At the effective date of termination of this
Agreement for any reason, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other charges owing under the terms
of this Agreement and any of the other Loan Documents) as liquidated damages for
the loss of the bargain and not as a penalty, an amount equal to (i) the sum of
one percent (1%) of the lesser of the principal balance of the Term Loan or Four
Million Dollars ($4,000,000) less the amount of any prior prepayments of the
Term Loan plus three percent (3%) of the remaining portion of the Total Credit
Facility less the amount of principal paid on the Term Loan as of such date, if
termination occurs during the first or second twelve-month period of the
Original Term (May 10, 1996 through May 9, 1998); or (ii) the sum of one percent
(1%) of the lesser of the principal balance of the Term Loan or Four Million
Dollars ($4,000,000) less the amount of any prior prepayments of the Term Loan
plus two percent (2%) of the remaining portion of the Total Credit Facility less
the amount of principal paid on the Term Loan as of such date, if termination
occurs during the third 12-month period of the Original Term (May 10, 1998
through May 9, 1999). If termination occurs on the last day of the Original
Term, no termination charge shall be payable. Any other prepayment of the Term
Loan shall be subject to a prepayment fee equal to (i) the sum of (x) one
percent (1%) of the lesser of the amount of the prepayment or Four Million
Dollars ($4,000,000) less the amount of any prior prepayments of the Term Loan
plus (y) three percent (3%) of the remainder (if any) of the prepayment, if the
prepayment occurs during the first or second twelve-month period of the Original
Term (May 10, 1996 through May 9, 1998); or (ii) the sum of (x) one percent (1%)
of the lesser of the amount of the prepayment or Four Million Dollars
($4,000,000) less the amount of any prior prepayments of the Term Loan, plus (y)
two percent (2%) of the remainder (if any) of the prepayment if the prepayment
occurs within the third twelve month period of the Original Term (May 10, 1998
through May 8, 1999). No prepayment fee shall be due in respect to any
prepayment made after May 8, 1999.
5.2.4 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 Lender
shall retain its Liens in the Collateral and all of its rights and remedies
under the Loan Documents notwithstanding such termination until Borrower has
paid the Obligations to Lender, in full, in immediately available funds,
together with the applicable termination charge, if any. Notwithstanding the
payment in full of the Obligations, Lender shall not be required to terminate
its security interests in the Collateral unless, with respect to any loss or
damage Lender may incur as a result of dishonored checks or other items of
payment received by Lender from Borrower or any Account Debtor and applied to
the Obligations, Lender shall, at its option, (i) have received a written
agreement, 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 Lender from any such loss or damage; or (ii) have retained such
monetary reserves and Liens on the Collateral for such period of time as Lender,
in its reasonable discretion, may deem necessary to protect Lender from any such
loss or damage.
SECTION 6. SECURITY INTERESTS
6.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to 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;
(v) Investment Property;
(vi) All monies and other Property of any kind now or at any time or times
hereafter in the possession or under the control of Lender or a bailee or
Affiliate of Lender;
(vii) All accessions to, substitutions for and all replacements, products and
cash and non-cash proceeds of (i) through (vi) above, including, without
limitation, proceeds of and unearned premiums with respect to insurance policies
insuring any of the Collateral; and
(viii) 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 (vii) above.
6.2 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 Lender'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 Lender's Lien upon the Collateral. Unless
prohibited by applicable law, Borrower hereby authorizes Lender to execute and
file any such financing statement on Borrower's behalf. 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
Lender's request, Borrower shall also promptly execute or cause to be executed
and shall deliver to Lender any and all documents, instruments and agreements
reasonably deemed necessary by Lender to give effect to or carry out the terms
or intent of the Loan Documents.
6.3 Lien on Realty. The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by the Mortgages. If
Borrower shall acquire at any time or times hereafter any interest in other real
Property (other than leasehold interests in sales offices), Borrower agrees
promptly to execute and deliver to Lender, as additional security and Collateral
for the Obligations, deeds of trust, security deeds, mortgages or other
collateral assignments satisfactory in form and substance to Lender and its
counsel (herein collectively referred to as "New Mortgages") covering such real
Property. The Mortgages and each New Mortgage shall be duly recorded (at
Borrower's expense) in each office where such recording is required to
constitute a valid Lien on the real Property covered thereby. In respect to each
Mortgage and each New Mortgage, Borrower shall deliver to Lender, at Borrower's
expense, mortgagee title insurance policies issued by a title insurance company
satisfactory to Lender insuring Lender, as mortgagee; such policies shall be in
form and substance satisfactory to Lender and shall insure a valid first Lien in
favor of Lender on the Property covered thereby, subject only to those
exceptions acceptable to Lender and its counsel. Said policies shall be in form
and substance satisfactory to Lender. Borrower shall also deliver to Lender such
other documents, including, without limitation, ALTA Surveys of the real
Property, as Lender and its counsel may reasonably request relating to the real
Property subject to any such New Mortgage. The foregoing notwithstanding,
Borrower shall not be required to provide a New Mortgage or an ALTA Survey in
respect to the real Property in Utah acquired in the last six months of 1997
until the later of May 15, 1998 or the date on which Borrower has requested
Lender to make the Working Capital Loan and further shall not be required to
provide any such New Mortgage or ALTA Survey if, prior to the later of the dates
described above, Borrower has consummated a sale and leaseback or similar
transaction in respect to such Property, as described in Section 8.2.8.
SECTION 7. COLLATERAL ADMINISTRATION
7.1 General
7.1.1 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 of the business locations set forth in Exhibit B hereto and shall
not, without the prior written approval of Lender, be moved therefrom except,
prior to an Event of Default and Lender's acceleration of the maturity of the
Obligations in consequence thereof, for (i) sales of Inventory in the ordinary
course of business; and (ii) removals in connection with dispositions of
Equipment that are authorized by subsection 6.4.2 hereof.
7.1.2 Insurance of Collateral. Borrower shall maintain and pay for insurance
upon all Collateral wherever located and with respect to Borrower's business,
covering casualty, hazard, public liability and such other risks in such amounts
and with such insurance companies as are reasonably satisfactory to Lender.
Borrower shall deliver the originals of such policies to Lender with
satisfactory lender's loss payable endorsements, naming Lender as sole loss
payee, assignee or additional insured, as appropriate. Each policy of insurance
or endorsement shall contain a clause requiring the insurer to give not less
than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Lender shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrower fails to provide and pay for such insurance, Lender may, at its option,
but shall not be required to, procure the same and charge Borrower therefor.
Borrower agrees to deliver to Lender, promptly as rendered, true copies of all
reports made in any reporting forms to insurance companies.
7.1.3 Protection of Collateral. All expenses of 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, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. 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 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.
7.2 Administration of Accounts.
7.2.1 Records, Schedules and Assignments of Accounts. Borrower shall execute and
deliver to Lender a Borrowing Base Certificate in the form attached hereto as
Exhibit C on a monthly basis or, if requested by Lender, more frequently.
Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit to Lender on such periodic
basis as Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. On or before the fifteenth day of each
month from and after the date hereof, Borrower shall deliver to Lender, in form
acceptable to Lender, a detailed aged trial balance of all of its Accounts
existing as of the last day of the preceding month, specifying the names,
addresses, face value, dates of invoices and due dates for each Account Debtor
obligated on an Account so listed ("Schedule of Accounts"), and, upon Lender'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 then existing Accounts as Lender shall
reasonably request. If requested by Lender, Borrower shall execute and deliver
to Lender formal written assignments of all of its Accounts weekly or daily,
which shall include all Accounts that have been created since the date of the
last assignment, together with copies of invoices or invoice registers related
thereto.
7.2.2 Discounts, Allowances, Disputes. If Borrower grants any discounts,
allowances or credits that are not shown on the face of the invoice for the
Account involved, Borrower shall report such discounts, allowances or credits,
as the case may be, to Lender as part of the next required Schedule of Accounts.
If any amounts due and owing in excess of $25,000 are in dispute between
Borrower and any Account Debtor, Borrower shall provide Lender with written
notice thereof at the time of submission of the next Schedule of Accounts,
explaining in detail the reason for the dispute, all claims related thereto and
the amount in controversy. Upon and during the continuation of an Event of
Default, Lender shall have the right to settle or adjust all disputes and claims
directly with the Account Debtor and to compromise the amount or extend the time
for payment of the Accounts upon such terms and conditions as Lender may deem
advisable, and to charge the deficiencies, costs and expenses thereof, including
reasonable attorney's fees, to
Borrower.
7.2.3 Taxes. If an Account includes a charge for any tax payable to any
governmental taxing authority, Lender 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, provided, however, that Lender shall
not be liable for any taxes to any governmental taxing authority that may be due
by Borrower. Borrower will be given notice of, and will be consulted with
respect to, such payment if no Event of Default has occurred and is continuing.
7.2.4 Account Verification. Whether or not a Default or an Event of Default has
occurred, any of Lender's officers, employees or agents shall have the right, at
any time or times hereafter, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to any
Accounts by mail, telephone, telegraph or otherwise. Borrower shall cooperate
fully with Lender in an effort to facilitate and promptly conclude any such
verification process. So long as no Event of Default has occurred and is
continuing, Lender will verify accounts using an anonymous name or some third
party service.
7.2.5 Maintenance of Dominion Account. Borrower shall maintain a Dominion
Account(s) pursuant to a lockbox arrangement acceptable to Lender with such
banks as may be selected by Borrower and be acceptable to Lender. 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 to
the Dominion Account for application on account of the Obligations. All funds
deposited in the Dominion Account shall immediately become the property of
Lender and Borrower shall obtain the agreement by such banks in favor of Lender
to waive any offset rights against the funds so deposited. Lender assumes no
responsibility for such lockbox arrangement, including, without limitation, any
claim of accord and satisfaction or release with respect to deposits accepted by
any bank thereunder.
7.2.6 Collection of Accounts, Proceeds of Collateral. To expedite collection,
Borrower shall endeavor in the first instance to make collection of its Accounts
for Lender. All remittances received by Borrower on account of Accounts,
together with the proceeds of any other Collateral, shall be held as Lender's
property by Borrower as trustee of an express trust for Lender's benefit and
Borrower shall immediately deposit same in kind in the Dominion Account. Lender
retains the right at all times during the continuance of a Default or an Event
of Default to notify Account Debtors that Accounts have been assigned to Lender
and to collect Accounts directly in its own name and to charge the collection
costs and expenses, including attorneys' fees to Borrower.
7.3 Administration of Inventory.
7.3.1 Records and Reports of Inventory. Borrower shall keep accurate and
complete records of its Inventory. Borrower shall furnish Lender Inventory
reports in form and detail satisfactory to Lender at such times as Lender may
request, but at least once each month, not later than the fifteen day of such
month. Borrower shall conduct a physical inventory no less frequently than
annually and shall provide to Lender a report based on each such physical
inventory promptly thereafter, together with such supporting information as
Lender shall request.
7.3.2 Returns of Inventory. If at any time or times hereafter any Account Debtor
returns any Inventory to Borrower the shipment of which generated an Account on
which such Account Debtor is obligated in excess of $35,000, Borrower shall
immediately notify Lender of the same, specifying the reason for such return and
the location, condition and intended disposition of the
returned Inventory.
7.4 Administration of Equipment.
7.4.1 Records and Schedules of Equipment. Borrower shall keep accurate records
itemizing and describing the kind, type, quality, quantity and value of its
Equipment and all dispositions made in accordance with subsection 6.4.2 hereof,
and shall furnish Lender with a current schedule containing the foregoing
information on at least an annual basis and more often if requested by Lender.
Immediately on request therefor by Lender, Borrower shall deliver to Lender any
and all evidence of ownership, if any, of any of the Equipment.
7.4.2 Dispositions of Equipment. Borrower will not sell, lease or otherwise
dispose of or transfer any of the Equipment or any part thereof without the
prior written consent of Lender; provided, however, that the foregoing
restriction shall not apply, for so long as no Default or Event of Default
exists, to (i) dispositions of Equipment which, in the aggregate during any
consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $250,000 or less, provided that all proceeds thereof are
remitted to Lender for application to the outstanding principal balance of the
Term Loan (which proceeds shall be applied to regularly scheduled installments
of principal in inverse order of maturity), or (ii) replacements of Equipment
that is substantially worn, damaged or obsolete with Equipment of like kind,
function and value, provided that the replacement Equipment shall be acquired
prior to or concurrently with any disposition of the Equipment that is to be
replaced, the replacement Equipment shall be free and clear of Liens other than
Permitted Liens that are not Purchase Money Liens, and Borrower shall have given
Lender at least 5 days prior written notice of such disposition.
7.5 Payment of Charges. All amounts chargeable to Borrower under Section 6
hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until paid
in full at the rate applicable to Revolving Credit Loans from time to time.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 General Representations and Warranties. To induce Lender to enter into this
Agreement and to make advances hereunder, Borrower warrants, represents and
covenants to Lender that:
8.1.1 Organization and Qualification. Borrower and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Borrower and each of its Subsidiaries
is duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each state or jurisdiction listed on Exhibit D hereto and
in all other states and jurisdictions in which the failure of Borrower or any
Subsidiary to be so qualified would have a material adverse effect on the
financial condition, business or Properties of Borrower or any Subsidiary.
8.1.2 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 action and do not
and will not (i) require any consent or approval of the shareholders of Borrower
or any of its Subsidiaries; (ii) contravene Borrower's or any of its
Subsidiaries' charter,
articles or certificate of incorporation or by-laws; (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;
(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 Borrower or any of
its Subsidiaries or its or such Subsidiary's Properties may be bound or
affected; 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.
8.1.3 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 Borrower and each of its Subsidiaries (to the extent a
party thereto) enforceable against each of them in accordance with its
respective terms.
8.1.4 Capital Structure. Exhibit E hereto states (i) the correct name of each of
the Subsidiaries of Borrower, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by Borrower, (ii) the name of Borrower's
corporate or joint venture Affiliates and the nature of the affiliation, (iii)
the number, nature and holder of all outstanding Securities of each Subsidiary
of Borrower and (iv) the number of authorized, issued and treasury shares of
Borrower and each Subsidiary of Borrower. Borrower has good title to all of the
shares it purports to own of the stock of each of its Subsidiaries, free and
clear in each case of any Lien other than Permitted Liens. All such shares have
been duly issued and are fully paid and non-assessable. Except as disclosed on
Exhibit E hereto, there are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of any of Borrower's Subsidiaries.
8.1.5 Corporate Names. Neither Borrower nor any of Borrower's Subsidiaries has
been known as or used any corporate, fictitious or trade names except those
listed on Exhibit F hereto. Except as set forth on Exhibit F, neither Borrower
or any of Borrower's Subsidiaries has been the surviving corporation of a merger
or consolidation or acquired all or substantially all of the assets of any
Person.
8.1.6 Business Locations; Agent for Process. Borrower's and each of its
Subsidiaries' chief executive office and other places of business are as listed
on Exhibit B hereto. During the preceding one-year period, neither Borrower nor
any of its Subsidiaries has had an office, place of business or agent for
service of process other than as listed on Exhibit B. Except as shown on Exhibit
B, no inventory is stored with a bailee, warehouseman or similar party, nor is
any Inventory consigned to any Person.
8.1.7 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. Borrower has
paid or discharged all lawful claims which, if unpaid, might become a Lien
against any of Borrower's Properties that is not a Permitted Lien. The Liens
granted to Lender under Section 5 hereof are first priority Liens, subject only
to Permitted Liens.
8.1.8 Accounts. Lender may rely, in determining which Accounts are Eligible
Accounts, on all statements and representations made by Borrower with respect to
any Account or Accounts. Unless otherwise indicated in writing to Lender, with
respect to each Account:
(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 Lender;
(iv) Such Account, and Lender's security interest therein, is not, and will not
(by voluntary act or omission of Borrower) be in the future, subject to any
offset, Lien, deduction, defense, dispute, counterclaim or any other adverse
condition except for disputes resulting in returned goods where the amount in
controversy is deemed by Lender to be immaterial, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for any
reason;
(v) Borrower has made no agreement with any Account Debtor thereunder for any
extension, compromise, settlement or modification of any such Account or any
deduction therefrom, except discounts or allowances which are granted by
Borrower in the ordinary course of its business for prompt payment and which are
reflected in the calculation of the net amount of each respective invoice
related thereto and are reflected in the Schedules of Accounts submitted to
Lender pursuant to subsection 6.2.1 hereof;
(vi) 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 to
Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account Debtor thereunder (1) had
the capacity to contract at the time any contract or other document giving rise
to the Account was executed and (2) such Account Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no proceedings or actions
which are threatened or pending against any Account Debtor thereunder which
might result in any material adverse change in such Account Debtor's financial
condition or the collectibility of such Account.
8.1.9 Equipment. The Equipment is in good operating condition and repair, and
all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted. Borrower will not permit any of
the Equipment to become affixed to any real Property leased to Borrower 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 acceptable to Lender, and
Borrower will not permit any of the Equipment 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 Lender.
8.1.10 Financial Statements; Fiscal Year. The Consolidated and consolidating
balance sheets of Borrower and such other Persons described therein (including
the accounts of all Subsidiaries of Borrower for the respective periods during
which a Subsidiary relationship existed) as of December 31, 1995, and the
related statements of income, changes in stockholder's equity, and changes in
financial position for the periods ended on such dates, have been prepared in
accordance with GAAP, and present fairly the financial positions of Borrower and
such Persons at such dates and the results of Borrower's operations for such
periods. Since December 31, 1995, there has been no material change in the
condition, financial or otherwise, of Borrower and such other Persons as shown
on the Consolidated balance sheet as of such date and no change in the aggregate
value of Equipment and real Property owned by Borrower or such other Persons,
except changes in the ordinary course of business, none of which individually or
in the aggregate has been materially adverse. The fiscal year of Borrower and
each of its Subsidiaries ends on December 31st of each year.
8.1.11 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 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 Lender in
writing which materially affects adversely or, so far as Borrower can now
foresee, will materially affect adversely the Properties, business, prospects,
profits or condition (financial or otherwise) of Borrower or any of its
Subsidiaries or the ability of Borrower or any of its Subsidiaries to perform
this Agreement or the other Loan Documents.
8.1.12 Solvent Financial Condition. Borrower and each of its Subsidiaries is now
and, after giving effect to the Loans at all times will be, Solvent.
8.1.13 Surety Obligations. 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 any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
8.1.14 Taxes. Borrower's federal tax identification number is ▇▇-▇▇▇▇▇▇▇. EPI's
federal tax identification number was ▇▇-▇▇▇▇▇▇▇. PPI's federal tax
identification number was ▇▇-▇▇▇▇▇▇▇. APP's federal tax identification number
was ▇▇-▇▇▇▇▇▇▇. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit G hereto. Borrower and each of its Subsidiaries
have filed all federal, state and local tax returns and other reports any of
them is required by law to file and has paid, or made provision for the payment
of, all taxes, assessments, fees, levies and other governmental charges upon any
of them, any of their income and Properties as and when such taxes, assessments,
fees, levies and charges that are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books therefor.
The provision for taxes on the books of Borrower and its Subsidiaries are
adequate for all years not closed by applicable statutes, and for its current
fiscal year.
8.1.15 Brokers. There are no claims for brokerage commissions, finder's fees or
investment banking fees in connection with the transactions contemplated by this
Agreement.
8.1.16 Patents, Trademarks, Copyrights and Licenses. Borrower and each of its
Subsidiaries
owns or possesses all the patents, trademarks, service marks, trade names,
copyrights and licenses necessary for the present and planned future conduct of
its business without any known conflict with the rights of others. All such
patents, trademarks, service marks, tradenames, copyrights, licenses and other
similar rights are listed on Exhibit H hereto.
8.1.17 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.
8.1.18 Compliance with Laws. Borrower and each of its Subsidiaries has duly
complied 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 and 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. Borrower and each of
its Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in compliance with all federal, state and local laws,
rules and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. ss. 201 et seq.) as
amended.
8.1.19 Restrictions. Neither Borrower nor any of its Subsidiaries is a party or
subject to any contract, agreement, or charter or other corporate restriction,
which materially and adversely affects its business or the use or ownership of
any of its Properties. 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 I 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.
8.1.20 Litigation. Except as set forth on Exhibit J hereto, there are no
actions, suits, proceedings or investigations pending, or to the knowledge of
Borrower, threatened, against or affecting Borrower or any of its Subsidiaries,
or the business, operations, Properties, prospects, profits or condition of
Borrower or any of its Subsidiaries. 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.
8.1.21 No Defaults. No event has occurred and no condition exists which would,
upon or after the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute a Default or an Event of Default. Neither
Borrower nor any of its Subsidiaries are or is in default, and no event has
occurred and no condition exists which constitutes, or which with 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.
8.1.22 Leases. Exhibit K hereto is a complete listing of all capitalized leases
of Borrower and its Subsidiaries and Exhibit L hereto is a complete listing of
all operating 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.
8.1.23 Pension Plans. Except as disclosed on Exhibit M hereto, neither Borrower
nor any of its
Subsidiaries has any Plan. Borrower and each of its Subsidiaries is in full
compliance with the requirements of ERISA and the regulations promulgated
thereunder with respect to each Plan. No fact or situation that could result in
a material adverse change in the financial condition of Borrower or any of its
Subsidiaries exists in connection with any Plan. Neither Borrower nor any of its
Subsidiaries has any withdrawal liability in connection with a Multiemployer
Plan.
8.1.24 Trade Relations. There exists no actual or 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 or any of its Subsidiaries, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially affect adversely Borrower or any of its
Subsidiaries or 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.
8.1.25 Labor Relations. Except as described on Exhibit N hereto, 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.
8.2 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
Borrower's or its Subsidiaries' business or operations that would render the
information in any exhibit attached hereto either inaccurate, incomplete or
misleading, so long as Lender has consented to such changes or such changes are
expressly permitted by this Agreement.
8.3 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 Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1 Affirmative Covenants. During the term of this Agreement, and thereafter for
so long as there are any Obligations to Lender, Borrower covenants that, unless
otherwise consented to by Lender in writing, it each shall:
9.1.1 Visits and Inspections. Permit representatives of Lender, from time to
time, as often as may be reasonably requested, but only during normal business
hours, to visit and inspect the Properties of 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.
9.1.2 Notices. Promptly notify Lender 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.
9.1.3 Financial Statements. Keep, and cause each of their respective
Subsidiaries to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to 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 Lender and is
consistent with GAAP):
(i) not later than 105 days after the close of each fiscal year of Borrower,
unqualified audited (in respect to the Consolidated financial statements only)
financial statements of Borrower and its Subsidiaries and operating divisions as
of the end of such year, on a Consolidated and consolidating basis, certified
(in respect to the Consolidated financial statements only) by a firm of
independent certified public accountants of recognized standing selected by
Borrower but acceptable to Lender (except for a qualification for a change in
accounting principles with which the accountant concurs);
(ii) not later than 30 days after the end of each month hereafter, including the
last month of Borrower's fiscal year, unaudited interim financial statements of
Borrower and its Subsidiaries and operating divisions as of the end of such
month and of the portion of Borrower's financial year then elapsed, on a
Consolidated and consolidating basis, certified by the principal financial
officer of Borrower as prepared in accordance with GAAP and fairly presenting
the Consolidated 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) promptly after the sending or filing thereof, as the case may be, copies
of any proxy statements, financial statements or reports which Borrower has made
available to its shareholders and copies of any regular, periodic and special
reports or registration statements which Borrower files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any annual report to be filed
with ERISA in connection with each Plan; and
(v) such other data and information (financial and otherwise) as Lender, from
time to time, may reasonably request, bearing upon or related to the Collateral
or Borrower's and each of its Subsidiaries' financial condition or results of
operations.
The foregoing notwithstanding, Lender agrees that in respect to operating
divisions, Borrower shall only be required to deliver income statements pursuant
to clauses (i) and (ii) above.
Concurrently with the delivery of the financial statements described in clause
(i) of this subsection 8.1.3, Borrower shall forward to Lender 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 Lender a certificate of the aforesaid certified public accountants certifying
to Lender 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, and
acknowledging, in a manner satisfactory to Lender, that they are aware that
Lender is relying on such financial statements in making its decisions with
respect to the Loans. Concurrently with the delivery of the financial statements
described in clauses (i) and (ii) of this subsection 8.1.3, or more frequently
if requested by Lender, Borrower shall cause to be prepared and furnished to
Lender a Compliance Certificate in the form of Exhibit O hereto executed by the
Chief Financial Officer of Borrower.
Borrower authorizes Lender or its designated representatives to communicate
directly with its independent certified public accountants and authorize those
accountants to disclose to Lender any and all financial statements and other
supporting financial documents and schedules. At or before the Original Closing
Date, Borrower delivered a letter addressed to such accountants instructing them
to comply with the provisions of this Section 8.1.3. Further within five (5)
days after the earlier of the last day of each fiscal year of Borrower and the
date Borrower engaged independent certified public accountants to audit
Borrower's financial statements, Borrower shall deliver to such independent
certified public accountants a letter from Borrower addressed to such
independent certified public accountants indicating that it is a primary
intention of Borrower in engaging such accountants that Lender relies upon such
financial statements of Borrower and its Subsidiaries.
9.1.4 Landlord and Storage Agreements. Provide Lender with copies of all
agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
9.1.5 Projections. No later than 30 days prior to the end of each fiscal year of
Borrower, deliver to Lender Projections of Borrower and each of its operating
divisions on a Consolidated and unconsolidated basis for the forthcoming 3
years, year by year, and for the forthcoming fiscal year, month by month. The
foregoing notwithstanding, Lender agrees that, in respect to operating
divisions, Borrower shall only be required to deliver projected profit and loss
statements pursuant to this section.
9.2 Negative Covenants. During the term of this Agreement, and thereafter for so
long as there are any Obligations to Lender, Borrower covenants that, unless
Lender has first consented thereto in writing, it will not:
9.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate, or permit any
Subsidiary of Borrower to merge or consolidate, with any Person; nor acquire,
nor permit any of its Subsidiaries to acquire, all or any substantial part of
the Properties of any Person, unless prior to the consummation of any such
merger, consolidation or acquisition, Lender has consented in writing to such
transaction, which consent shall not be unreasonably withheld or delayed.
9.2.2 Loans. Except as provided in Section 8.2.7 hereof, make, or permit any
Subsidiary of any Borrower to make, any loans or other advances of money (other
than for salary, travel, advances, advances against commissions and other
similar advances in the ordinary course of business) to any Person, except that
if after giving effect to any such loans or advance there is no existing and
continuing Default or Event of Default, Borrower may make loans and advances to
its officers and executives for the purpose of financing the purchase by such
officers and executives in the open market of shares of Borrower's common stock;
provided that the aggregate amount of such loans and advances under this clause
does not exceed at any point in time Six Hundred Thousand
Dollars ($600,000).
9.2.3 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 Lender;
(ii) Subordinated Debt outstanding in respect to the Subordinated Debt
Documents;
(iii) Indebtedness of any Subsidiary of Borrower to such Borrower;
(iv) accounts payable to trade creditors and current operating expenses (other
than for Money Borrowed) which are not aged more than 30 days from the due date,
in each case incurred in the ordinary course of business and paid within such
time period, unless the same are being actively contested in good faith and by
appropriate and lawful proceedings; and Borrower or such Subsidiary shall have
set aside such reserves, if any, with respect thereto as are required by GAAP
and deemed adequate by Borrower or such Subsidiary and its independent
accountants;
(v) Obligations to pay Rentals permitted by subsection 8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of endorsements of checks and other
negotiable instruments for deposit or collection in the ordinary course of
business;
(viii) Indebtedness outstanding under the Hastings Documents;
(ix) Indebtedness outstanding under the Promissory Note and Stock Pledge
Agreement;
(x) Indebtedness under Capitalized Leases listed on Exhibit K;
(xi) Indebtedness incurred in connection with the acquisition of approximately
30 acres of vacant land in ▇▇▇▇▇▇▇, Oregon, in a principal amount not to exceed
One Hundred Three Thousand Dollars ($103,000);
(xii) Indebtedness outstanding under the ▇▇▇▇▇▇▇ Note; and
(xiii) Indebtedness not included in paragraphs (i) through (xii) above which
does not exceed at any time, in the aggregate, the sum of $250,000.
9.2.4 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 stockholder, except 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 Lender
and are no less favorable to Borrower than what would be obtainable in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower or such Subsidiary.
9.2.5 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 Lender;
(ii) Liens for taxes (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 hereto, but only if in Lender's judgment such Lien does not
adversely affect Lender's rights or the priority of Lender's Lien in the
Collateral;
(iii) Liens arising in the ordinary course of Borrower's business 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 materially impair the use thereof
in the operation of Borrower's business; (iv) Purchase Money Liens securing
Permitted Purchase Money Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's Subsidiaries to Borrower or
another such Subsidiary;
(vi) such other Liens as appear on Exhibit P hereto;
(vii) Liens on approximately 30 acres of vacant land in ▇▇▇▇▇▇▇, Oregon,
securing the Indebtedness described in Section 8.2.3(xi);
(viii) Liens securing Indebtedness outstanding under the Hastings Documents; and
(ix) such other Liens as Lender may hereafter approve in writing.
9.2.6 Subordinated Debt and Other Indebtedness. Make, or permit any Subsidiary
of Borrower to make, any payment or repurchase 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 Intercreditor
and Subordination Agreement relative thereto or other subordination agreement
relative thereto. Except for regularly scheduled (as of the Closing Date)
payments of principal and interest, make or permit any Subsidiary of any
Borrower to make any payment or repurchase of any part or all of any of the
Indebtedness outstanding under the Hastings Documents or the Promissory Note and
Stock Pledge Agreement. Amend or modify any of the Subordinated Debt Documents,
the Hastings Documents or the Promissory Note and Stock Pledge Agreement in any
manner adverse to Borrower or Lender. The foregoing notwithstanding:
(i) Borrower may prepay or repurchase up to Two Million Dollars ($2,000,000) of
the principal amount of the Indebtedness outstanding under the Subordinated Debt
Documents if, (x) after giving effect to any such prepayment or repurchase,
there would exist and be continuing no Default or Event of Default, (y)
immediately prior to such repayment or repurchase and immediately after such
prepayment or repurchase the outstanding principal balance of the Revolving
Credit Loan is $0, and (z) the funds used to effect such prepayment or
repurchase are not the proceeds of Revolving Credit Loans; and
(ii) after effecting the prepayment or repurchase provided for in clause (i)
above, Borrower may prepay or repurchase up to an additional One Million Five
Hundred Thousand Dollars
($1,500,000) of the principal amount of the Indebtedness outstanding under the
Subordinated Debt Documents if (x) after giving effect to any such prepayment or
repurchase, there would exist and be continuing no Default or Event of Default,
(y) immediately prior to such prepayment or repurchase the outstanding principal
balance of the Revolving Credit Loan is $0, (z) the funds used to effect such
prepayment or repurchase are not the proceeds of Revolving Credit Loans, and
(aa) Lender has elected in writing not to have the funds to be used to effect
such prepayment or repurchase applied to a prepayment of the outstanding
principal balance of the Term Loan. If Lender does elect to have such funds be
applied to a prepayment of the Term Loan such prepayment shall be accompanied by
the prepayment fee provided for in Section 4.2.3 and shall be applied to
installments of principal in inverse order of maturity.
9.2.7 Distributions. Declare or make, or permit any Subsidiary of any Borrower
to declare or make, any Distributions; provided, however, that:
(a) Lender acknowledges that immediately after the closing of the transactions
contemplated by the Original Loan Agreement, EPI, PPI and/or APP made
Distributions to Borrower in an amount not to exceed Four Million Twenty
Thousand Dollars ($4,020,000) in order to permit Borrower to repay Four Million
Twenty Thousand Dollars ($4,020,000) of Indebtedness owed under the Subordinated
Debt Documents;
(b) In connection with the Restructuring, Borrowing issued the ▇▇▇▇▇▇▇ Note in
exchange for shares of EPI's common Stock held by ▇▇▇▇▇ ▇▇▇▇▇▇▇; and
(c) If after giving effect to any such Distribution there would be no existing
and continuing Default or Event of Default, Borrower may make regularly
scheduled quarterly dividends on its Series A Stock and Preferred Stock.
9.2.8 Capital Expenditures. Make Capital Expenditures (including, without
limitation, by way of capitalized leases) which, in the aggregate, as to
Borrower and its Subsidiaries during any fiscal year of Borrower exceeds the
amount set forth opposite such fiscal year in the following schedule:
================================== =============================================
Fiscal Year Ending Permitted Capital Expenditure
================================== =============================================
December 31, 1996 $5,500,000
================================== =============================================
December 31, 1997 $4,000,000 plus the Carryover Amount
================================== =============================================
December 31, 1998 and each
subsequent fiscal year $2,500,000 plus the Carryover Amount
================================== =============================================
"Carryover Amount" shall mean (x) in respect to the fiscal year ending December
31, 1997, Five Million Five Hundred Thousand Dollars ($5,500,000) less the
amount of Capital Expenditures made in the fiscal year of Borrower ending
December 31, 1996, and (y) in respect to subsequent fiscal years, the amount of
permitted Capital Expenditures (without giving effect to any Carryover Amount)
for the previous two fiscal years minus the amount of Capital Expenditures made
in such fiscal years. If, after the Restructuring Closing Date, Lender, in its
sole discretion, agrees to
increase the amount of permitted Capital Expenditures, Lender agrees that
Borrower shall not be required to pay any fees in connection with any such
increase. The foregoing notwithstanding, Lender acknowledges that during fiscal
year 1998 Borrower intends to make Capital Expenditures in connection with the
expansion of the facilities located in Utah in an amount which when aggregated
with all other Capital Expenditures made by Borrower in fiscal year 1998 shall
not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000). Borrower
shall not be deemed to have violated the provisions of this Section 8.2.8 by
reason of said Capital Expenditures if on or prior to December 31, 1998 Borrower
has refinanced said Capital Expenditures through a sale and leaseback or other
similar transaction, the terms and conditions of which are acceptable to Lender,
and the proceeds of such refinancing received by Borrower equal or exceed Five
Million One Hundred Thousand Dollars ($5,100,000). For purposes of this Section
8.2.8, the amount of Capital Expenditures made by Borrower within fiscal year
1998 shall be deemed reduced by the amount of the proceeds received by Borrower
from the sale and leaseback or other similar transaction consummated by Borrower
in respect to its Utah facilities..
9.2.9 Disposition of Assets. Sell, lease or otherwise dispose of any of, or
permit any Subsidiary of Borrower to sell, lease or otherwise dispose any of,
its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as no Event of Default
exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower, (iii) dispositions expressly authorized by this Agreement or (iv) the
sale and leaseback transaction affected by APP in respect to the facility in
Salt Lake City, Utah.
9.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to issue any
additional shares of its capital stock except director's qualifying shares.
9.2.11 ▇▇▇▇-and-Hold Sales, Etc. Make a sale to any customer on a ▇▇▇▇-and-hold,
guaranteed sale, sale and return, sale on approval or consignment basis, or any
sale on a repurchase or return basis.
9.2.12 Restricted Investment. Except as otherwise permitted by Section 8.2.2,
make or have, or permit any Subsidiary of Borrower to make or have, any
Restricted Investment.
9.2.13 Leases. Become, or permit any of its Subsidiaries to become, a lessee
under any operating lease (other than a lease under which Borrower or any of its
Subsidiaries is lessor) of Property if the aggregate Rentals payable during any
current or future period of 12 consecutive months under the lease in question
and all other leases under which Borrower or any of its Subsidiaries is then
lessee would exceed $900,000. The term "Rentals" means, as of the date of
determination, all payments which the lessee is required to make by the terms of
any lease.
9.2.14 Tax Consolidation. File or consent to the filing of any consolidated
income tax return with any Person other than a Subsidiary of Borrower.
9.3 Specific Financial Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
9.3.1 Minimum Consolidated Adjusted Tangible Net Worth. Maintain at all times
within each of the following periods, a Consolidated Adjusted Tangible Net Worth
of not less than the
amount shown below for the period corresponding thereto:
Period Amount
------ ------
June 30, 1996 through and
including September 29, 1996 ($1,000,000)
September 30, 1996 through and
including December 30, 1996 ($100,000)
December 31, 1996 through and
including March 30, 1997 $200,000
March 31, 1997 through and
including June 29, 1997 $300,000
June 30, 1997 through and
including September 29, 1997 $1,300,000
September 30, 1997 through and
including December 30, 1997 $2,200,000
December 31, 1997 through and
including March 30, 1998 $2,500,000
March 31, 1998 through and
including June 29, 1998 $2,600,000
June 30, 1998 through and
including September 29, 1998 $3,600,000
September 30, 1998 through and
including December 30, 1998 $4,500,000
December 31, 1998 through and
including March 30, 1999 $4,800,000
March 31, 1999 through and
including each fiscal quarter thereafter $4,900,000
9.3.2 Consolidated Net Cash Flow. Achieve Consolidated Net Cash Flow for each of
the periods listed below equal to or greater than the amount set forth opposite
such period:
Net Cash Flow Amount
------------- ------
January 1, 1996 through and
including June 30, 1996 $150,000
January 1, 1996 through and
including September 30, 1996 $650,000
January 1, 1996 through and
including December 31, 1996 ($1,500,000)
January 1, 1997 through and
including March 31, 1997 ($1,000,000)
January 1, 1997 through and
including June 30, 1997 ($350,000)
January 1, 1997 through and
including September 30, 1997 $150,000
January 1, 1997 through and
including December 31, 1997 ($1,500,000)
January 1, 1998 through and
including March 31, 1998 ($1,150,000)
January 1, 1998 through and
including June 30, 1998 ($500,000)
January 1, 1998 through and
including September 30, 1998 $0
January 1, 1998 through and
including December 31, 1998 ($150,000)
January 1, 1999 through and
including March 31, 1999 ($500,000)
9.3.3 Senior Interest Coverage Ratio. Achieve, at the end of each fiscal quarter
within the term hereof a Senior Interest Coverage Ratio equal to or greater than
the ratio shown below for the quarter corresponding thereto:
Each Fiscal Quarter Ending Ratio
-------------------------- -----
January 1st to March 31st 2.50 to 1
January 1st to June 30th 3.50 to 1
January 1st to September 30th 3.50 to 1
January 1st to December 31st 2.40 to 1
SECTION 10. 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 Lender under the
other sections of this Agreement, Lender shall not be required to make any Loan
under this Agreement unless and until each of the following conditions has been
and continues to be satisfied:
10.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, including all documents, instruments,
agreements and schedules listed in the Schedule of Documents attached hereto and
incorporated
herein as Exhibit Q, all in form and substance satisfactory to Lender and its
counsel.
10.2 No Default. No Default or Event of Default shall exist.
10.3 Other Loan Documents. Each of the conditions precedent set forth in the
other Loan Documents shall have been satisfied.
10.4 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
10.5 Restructuring. The Restructuring shall have been consummated, or will be
consummated, simultaneously with the effectiveness of this Agreement pursuant to
such merger agreements and other agreements as are acceptable to Lender in the
reasonable exercise of its discretion.
10.6 Subordinated Debt Documents. The provisions of the Subordinated Debt
Documents shall have been amended to reflect the Restructuring in a manner
reasonably acceptable to Lender.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1 Events of Default. The occurrence of one or more of the following events
shall constitute an "Event of Default":
11.1.1 Payment of Interest, Principal and Fees. Borrower shall fail to pay any
interest or principal due in respect to outstanding Revolving Credit Loans, the
Term Loan or any fees payable in respect to unused Revolving Credit Loans on the
due date thereof (whether due at stated maturity, on demand, upon acceleration
or otherwise).
11.1.2 Payment of Other Obligations. Borrower shall fail to pay any of the
Obligations (other than interest and principal due in respect to outstanding
Revolving Credit Loans, the Term Loan or any fees payable in respect to unused
Revolving Credit Loans) on or within five (5) days after the due date for such
Obligation (whether due at stated maturity, on demand, upon acceleration or
otherwise).
11.1.3 Misrepresentations. Any representation, warranty or other statement made
or furnished to Lender by or on behalf of Borrower or any Subsidiary of Borrower
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 or furnished or when reaffirmed pursuant to Section 7.2 hereof.
11.1.4 Breach of Specific Covenants. Borrower shall fail or neglect to perform,
keep or observe any covenant contained in Sections 5.2, 5.3, 6.1.1, 6.2, 8.1.1,
8.1.3, 8.2 or 8.3 hereof on the date that Borrower is required to perform, keep
or observe such covenant.
11.1.5 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 Lender's satisfaction within five
(5) days after the sooner to occur of Borrower's receipt of notice of such
breach from Lender or the date on which such failure or neglect first becomes
known to any officer of Borrower; provided, however, that if a cure cannot be
effected within such five (5) day period, Borrower shall have ten (10)
additional days to effect such cure if during such ten-day period Borrower is
diligent in pursuing such a cure.
11.1.6 Default Under Security Documents/Other Agreements. Any event of default
shall occur under, or Borrower 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.
11.1.7 Other Defaults. There shall occur any default or event of default on the
part of Borrower under any agreement, document or instrument to which Borrower
is a party or by which Borrower or any of its Property is bound, creating or
relating to any Indebtedness (other than the Obligations) if the payment or
maturity of such Indebtedness is accelerated in consequence of such event of
default or demand for payment of such Indebtedness is made.
11.1.8 Uninsured Losses. Any material loss, theft, damage or destruction of any
of the Collateral not fully covered (subject to such deductibles as Lender shall
have permitted) by insurance.
11.1.9 Intentionally Omitted.
11.1.10 Insolvency and Related Proceedings. Borrower 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 under the
Bankruptcy Code (if against Borrower, the continuation of such proceeding for
more than 30 days), or Borrower shall make any offer of settlement, extension or
composition to its unsecured creditors generally.
11.1.11 Business Disruption: Condemnation. There shall occur a cessation of a
substantial part of the business of Borrower or any Subsidiary of Borrower for a
period which significantly affects Borrower's capacity to continue its business,
on a profitable basis; or Borrower or any Subsidiary of Borrower shall suffer
the loss or revocation of any license or permit now held or hereafter acquired
by Borrower which is necessary to the continued or lawful operation of its
business; or Borrower 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 leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term; or any part of the
Collateral shall be taken through condemnation or the value of such Property
shall be impaired through condemnation.
11.1.12 Change of Ownership. The Spell Group shall cease to own and control,
beneficially and of record, at least ten percent (10%) of the issued and
outstanding capital stock of Borrower, on a fully diluted basis after giving
effect to the exercise of all options and warrants.
11.1.13 ERISA. A Reportable Event shall occur which Lender, in its sole
discretion, shall determine in good faith 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 or any Subsidiary of Borrower is in "default" (as
defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting
from Borrower's or such Subsidiary's complete or partial withdrawal from such
Plan.
11.1.14 Challenge to Agreement. Borrower, any Subsidiary of Borrower, 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 Lender.
11.1.15 Criminal Forfeiture. Borrower or any Subsidiary of Borrower shall be
criminally indicted or convicted under any law that could lead to a forfeiture
of any Property of Borrower or any Subsidiary of Borrower.
11.1.16 Judgments. Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $50,000 in the
aggregate shall be rendered against Borrower and the same shall not (i) be fully
covered by insurance or other comparable bond, or (ii) within thirty days after
the entry thereof, have been discharged or execution thereof stayed pending
appeal, or shall not have been discharged within five days after the expiration
of any such stay.
11.2 Acceleration of the Obligations. Without in any way limiting the right of
Lender to demand payment of any portion of the Obligations payable on demand in
accordance with Section 3.2 hereof, upon or at any time during the continuance
of an Event of Default, all or any portion of the Obligations shall, at the
option of Lender and without presentment, demand protest or further notice by
Lender, become at once due and payable and Borrower shall forthwith pay to
Lender, the full amount of such Obligations, provided, that upon the occurrence
of an Event of Default specified in subsection 10.1.10 hereof, all of the
Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
11.3 Other Remedies. Upon and during the continuance of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
11.3.1 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 Lender
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.
11.3.2 The right to take immediate possession of the Collateral, and to (i)
require Borrower to assemble the Collateral, at Borrower's expense, and make it
available to Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof).
11.3.3 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 in a commercially reasonable manner.
Borrower agrees that 10 days written notice to Borrower 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 Lender may designate in said notice.
Lender shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Lender 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 Lender 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 Lender in collecting the Obligations, in enforcing the rights of
Lender 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; third, to
the principal of the Obligations; and fourth to Borrower or as otherwise
directed by a court of competent jurisdiction. If any deficiency shall arise,
Borrower shall remain liable to Lender therefor.
11.3.4 Lender is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, 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 advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit.
11.4 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 Lender or contained in any other
agreement between Lender 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 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 all other Obligations owing or to
become owing from Borrower to Lender shall 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 Lender, 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 Lender and
directed to Borrower.
SECTION 12. MISCELLANEOUS
12.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in Borrower's or Lender's name, but
at the cost and expense of Borrower:
12.1.1 At such time or times upon or during the continuation of a Default or an
Event of Default as Lender 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 Lender
or under Lender's control; provided that Lender may at any time endorse
Borrower's name on any checks, notes, acceptance, drafts, money orders or other
evidence of payment in order to effect the deposit of such items in a Dominion
Account.
12.1.2 At such time or times upon or during the continuation of an Event of
Default as Lender 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 Lender
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 deal with all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender 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 Lender 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 Lender's
determination, to fulfill Borrower's obligations under this Agreement.
12.2 Indemnity. Borrower hereby agrees to indemnify Lender and hold Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure to observe, perform
or discharge Borrower's duties hereunder; provided, however, Borrower shall have
no obligation to indemnify Lender for any losses, costs, damages, penalties,
forfeitures, claims or expenses arising from Lender's gross negligence or wilful
misconduct. In addition, Borrower shall defend Lender against and save it
harmless from all claims of any Person with respect to the Collateral. Without
limiting the generality of the foregoing, these indemnities shall extend to any
claims asserted against Lender by any Person under any Environmental Laws or
similar 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. Notwithstanding any contrary provision in this Agreement, the
obligation of Borrower under this Section 11.2 shall survive the payment in full
of the Obligations and the termination of this Agreement.
12.3 Modification of Agreement; Sale of Interest. This Agreement may not be
modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. 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.
Borrower hereby consents to 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, Lender's rights, title, interests, remedies, powers, and
duties hereunder or thereunder and any such participation, sale, assignment,
transfer or other disposition shall be at Lender's sole cost and expense. In the
case of an assignment, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were
"Lender" hereunder and Lender shall be relieved of all obligations hereunder
upon any such assignments. Borrower agrees that it will use its best efforts to
assist and cooperate with Lender in any manner reasonably requested by Lender to
effect the sale of participations 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 at no
out-of-pocket cost to Borrower. Borrower further agrees that Lender may disclose
credit information regarding Borrower and its Subsidiaries to any potential
participant or assignee.
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 and Lender permitted under Section 11.3
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 Section 3.2 hereof
and 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 or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: Eagle Pacific Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President and COO
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copies to: Eagle Pacific Industries, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ West and ▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender.
12.9 Lender's Consent. Except as may be otherwise expressly provided, whenever
Lender's 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, Lender shall be authorized to give or withhold
such consent in its sole and absolute discretion and to condition its consent
upon the giving of additional collateral security for the Obligations, the
payment of money or any other matter.
12.10 Credit Inquiries. Borrower hereby authorizes and permits 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.
12.12 Entire Agreement. This Agreement and 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 and 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 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT 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 AND FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'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 OR LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF ▇▇▇▇ COUNTY,
ILLINOIS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER 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 ACTUAL RECEIPT THEREOF.
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY 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.
12.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH
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 LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES
AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD (OTHER THAN IN RESPECT OF
LENDER'S ACTS OF GROSS NEGLIGENCE OR WILFUL MISCONDUCT); (iii) NOTICE PRIOR TO
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'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 LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT 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.
12.16 Publicity. Borrower hereby consents to Lender's use of the name or
tradestyle of Borrower in any announcements or advertisements relating to the
completion of the transactions contemplated hereby and the role played by Lender
in providing financing to Borrower hereunder in such media and in such manner as
Lender, in its sole discretion, determines.
IN WITNESS WHEREOF, this Agreement has been duly executed in Chicago, Illinois,
on the day and year specified at the beginning of this Agreement.
EAGLE PACIFIC INDUSTRIES, INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
ACCEPTED IN CHICAGO, ILLINOIS:
FLEET CAPITAL CORPORATION
("Lender")
By:
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
APPENDIX A
GENERAL DEFINITIONS
When used in the Amended and Restated Loan and Security Agreement dated as of
December 31, 1997, by and between Fleet Capital Corporation and Eagle Pacific
Industries, Inc., 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 in
which Borrower now has or hereafter acquired 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.
Agreement - the Amended and Restated Loan and Security Agreement referred to in
the first sentence of this Appendix A, all Exhibits thereto and this Appendix A.
ALTA Survey - a survey prepared in accordance with the standards adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping in 1986, known as the "Minimum Standard Detail Requirements of Land
Title Surveys". The ALTA Survey shall be in sufficient form to satisfy the
requirements of Chicago Title Insurance Company to provide extended coverage
over survey defects and shall also show the location of all easements,
utilities, and covenants of record, dimensions of all improvements,
encroachments from any adjoining property, and certify as to the location of any
flood plain area affecting the subject real estate. The ALTA Survey shall
contain the following certification: "To Eagle Pacific Industries, Inc., Fleet
Capital Corporation and Chicago Title Insurance Company. This is to certify that
this map of plat and the survey on which it is based were made in accordance
with the "Minimum Standard Detail Requirements for Land Title Surveys" jointly
established and adopted by ALTA and ACSM in 1986. (signed (SEAL) License No.
_____________".
Amendment Agreement - shall have the meaning contained in the definition of
Subordinated Debt Documents.
APP - as defined in Recital A.
Availability - the aggregate amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which Lender may have paid for the
account of Borrower pursuant to any of the Loan Documents and which have not
been reimbursed by Borrower) is subtracted from the Borrowing Base. If the
amount outstanding is equal to or greater than the Borrowing Base, Availability
is 0.
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 as a substitute therefor shall be the Base
Rate.
▇▇▇▇▇ - ▇▇▇▇▇▇▇ ▇▇▇▇▇ Mezzanine Capital Fund, L.P.
Board - the Board of Governors of the Federal Reserve System of the United
States of America.
Borrowing Base - as at any date of determination thereof, an amount equal to the
lesser of:
(i) Sixteen Million Five Hundred Thousand Dollars ($16,500,000); or
(ii) an amount equal to:
(a) up to eighty-five percent 85%, of the net amount of Eligible Accounts
outstanding at such date;
PLUS
(b) the lesser of (1) Eight Million Dollars ($8,000,000); or (2) up to
fifty-five percent (55%) of the value of Eligible Inventory at such date
calculated on the basis of the lower of cost or market with the cost of raw
materials and finished goods calculated on a first-in, first-out basis.
For purposes hereof, 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 Lender'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.
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 the Lender is
conducting business and on which banks may conduct business in London, England,
Chicago, Illinois, and New York, New York and (ii) when used with respect to the
other provisions of this Agreement, shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed either in
the State of Illinois or in the State of Wisconsin.
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.
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.
Commitment Termination Date - the earliest of (i) May 9, 1999; (ii) the date of
termination of the Commitment to make further Revolving Credit Loan pursuant to
Section 4.2.1 or 4.2.2 hereof; and (iii) the date of termination of the
Commitment to make further Revolving Credit Loans pursuant to Section 10.2
hereof.
Consolidated - the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Consolidated Adjusted Net Earnings From Operations - with respect to any fiscal
period, means the Consolidated net earnings (or loss) after provision for income
taxes for such fiscal period of Borrower as reflected on the financial statement
of Borrower supplied to Lender pursuant to subsection 8.1.3 of the Agreement,
but excluding:
(ii) any gain or loss arising from the sale of capital assets;
(iii) any gain arising from any write-up of assets;
(iv) earnings of any Subsidiary of Borrower accrued prior to the date it became
a Subsidiary;
(v) earnings of any corporation, substantially all the assets of which have been
acquired in any manner by Borrower, realized by such corporation prior to the
date of such acquisition;
(vi) net earnings of any business entity (other than a Subsidiary of any
Borrower) in which Borrower has an ownership interest unless such net earnings
shall have actually been received by Borrower in the form of cash distributions;
(vii) any portion of the net earnings of any Subsidiary of Borrower which for
any reason is unavailable for payment of dividends to Borrower;
(viii) the earnings of any Person to which any assets of Borrower shall have
been sold, transferred of disposed of, or into which Borrower shall have merged,
or been a party to any consolidation or other form of reorganization, prior to
the date of such transaction;
(ix) any gain arising from the acquisition or disposition of any Securities of
Borrower; and
(x) any gain arising from extraordinary or non-recurring items.
Consolidated Adjusted Tangible Assets - all Consolidated assets of Borrower
except: (i) any surplus resulting from any write-up of assets subsequent to
December 31, 1995; (ii) deferred assets, including all prepaid expenses; (iii)
patents, copyrights, trademarks, trade names, non-compete agreements, franchises
and other similar intangibles; (iv) goodwill, including any amounts, however
designated on a Consolidated balance sheet of a Person or its Subsidiaries,
representing the excess of the purchase price paid for assets or stock over the
value assigned
thereto on the books of such Person; (v) Restricted Investments; (vi)
unamortized debt discount and expense; (vii) assets located outside the United
States of America or Mexico and notes and receivables due from obligors outside
of the United States of America; and (viii) Accounts, notes and other
receivables due from Affiliates or employees.
Consolidated Adjusted Tangible Net Worth - at any date means a sum equal to:
(ii) the net book value (after deducting related depreciation, obsolescence,
amortization, valuation, and other proper reserves) at which the Consolidated
Adjusted Tangible Assets of Borrower would be shown on a balance sheet at such
date in accordance with GAAP, minus (iii) the amount at which Borrower's
Consolidated liabilities (other than capital stock and surplus) would be shown
on such balance sheet in accordance with GAAP, and including as liabilities all
reserves for contingencies and other potential liabilities.
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 except that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
Current Liabilities - at any date means the amount at which all of the current
liabilities of a Person would be properly classified as current liabilities on a
balance sheet at such date in accordance with GAAP excluding the Loans and
current maturities of any long-term Indebtedness.
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.
Distribution - in respect of any corporation means and includes: (i) the payment
of any dividends or other distributions on capital stock of the corporation
(except distributions in such stock) and (ii) the redemption or acquisition of
Securities unless made contemporaneously from the net proceeds of the sale of
Securities.
Dominion Account - a special account of Lender established by Borrower pursuant
to the Agreement at a bank selected by Borrower, but acceptable to Lender in its
reasonable discretion, and over which Lender shall have sole and exclusive
access and control for withdrawal purposes.
EBIT - with respect to any fiscal period, the sum of Borrower's Consolidated net
earnings (or loss) before interest expense and taxes for said period as
determined in accordance with GAAP.
Eligible Account - an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services which Lender, 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:
(ii) it arises out of a sale made by Borrower to a Subsidiary or an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower; or
(iii) it is unpaid for more than 30 days after the original due date shown on
the invoice; or
(iv) it is due or unpaid more than 210 days after the original invoice date; or
(v) 25% or more of the Accounts from the Account Debtor are not deemed Eligible
Accounts hereunder; or
(vi) the total unpaid Accounts of the Account Debtor exceed 20% of the net
amount of all Eligible Accounts, to the extent of such excess; or
(vii) any covenant, representation or warranty contained in the Agreement with
respect to such Account has been breached; or
(viii) the Account Debtor is also Borrower's creditor or supplier, 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 the Account otherwise is or may become
subject to any right of setoff by the Account Debtor; or
(ix) 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 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
(x) it arises from a sale to an Account Debtor outside the United States or
Canada (other than Quebec), unless the sale is on letter of credit, guaranty or
acceptance terms in each case acceptable to Lender in its sole discretion; or
(xi) it arises from a sale to the Account Debtor on a ▇▇▇▇-and-hold, guaranteed
sale, sale-or-return, sale-on-approval, consignment or any other repurchase or
return basis; or
(xii) the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless Borrower assigns its right to payment
of such Account to Lender, in a manner satisfactory to Lender so as to comply
with the Assignment of Claims Act of 1940 (31 U.S.C. ss. 203 et seq., as
amended); or
(xiii) the Account is subject to a Lien other than a Permitted Lien; or
(xiv) 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
(xv) the Account is evidenced by chattel paper or an instrument of any kind, or
has been reduced to judgment; or
(xvi) 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
(xvii) Borrower has made an agreement with the Account Debtor to extend the time
of payment thereof.
Eligible Inventory - such Inventory of Borrower (other than packaging materials
and supplies) which Lender, in its reasonable credit judgments deems to be
Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(ii) it is not raw materials or finished goods that is, in Lender's opinion,
readily marketable in its current form; or
(iii) it is not in good, new and saleable condition; or
(iv) it is slow-moving, obsolete or unmerchantable; or
(v) it does not meet all standards imposed by any governmental agency or
authority; or
(vi) it does not conform in all respects to the warranties and representations
set forth in the Agreement,
(vii) it is not at all times subject to Lender's duly perfected, first priority
security interest and no other Lien except a Permitted Lien;
(viii) it is not situated at a location in compliance with the Agreement or is
in transit; or
(ix) is not situated at a location in the United States of America.
Environmental Laws - all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidances, orders and consent decrees relating to
health, safety and environmental matters.
EPI - as defined in Recital A.
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 Borrower's operations or owned by Borrower or
in which Borrower has an interest, whether now owned or hereafter acquired by
Borrower 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.
GAAP - generally accepted accounting principles in the United States of America
in effect from time to time.
General Intangibles - all general intangibles of Borrower, whether now owned or
hereafter created or acquired by Borrower, including, without limitation, all
choses in action, causes of action, corporate or other business records, deposit
accounts, inventions, designs, patents, patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to Borrower
to secure payment of any of the Accounts by an Account Debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Accounts).
Hastings Documents - that certain Redevelopment Contract between the City of
Hastings, Nebraska, and EPI and related Promissory Notes.
Indebtedness - as applied to a Person means, without duplication
(ii) 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,
(iii) all obligations of other Persons which such Person has guaranteed,
(iv) all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person, and
(v) in the case of Borrower (without duplication), the Obligations.
Intercreditor and Subordination Agreement - the Intercreditor and Subordination
Agreement dated on or about the Original Closing Date by and between Lender and
▇▇▇▇▇ and acknowledged by Borrower and EPI, PPI and AAP in respect to the
Indebtedness evidenced by the Subordinated Debt Documents.
Inventory - all of Borrower's inventory, whether now owned or hereafter acquired
including, but not limited to, all goods intended for sale or lease by Borrower,
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 Borrower's business; and all documents evidencing and General
Intangibles relating to any of the foregoing, whether now owned or hereafter
acquired by Borrower.
Investment Property - all of Borrower's investment property, whether now owned
or hereinafter acquired by Borrower, including, without limitation, all
securities (certificated or uncertificated), securities accounts, securities
entitlements, commodity accounts and contracts.
Legal Requirement - any requirement imposed upon Lender or any Participating
Lender by any law of the United States of America or the United Kingdom or by
any regulation, order, interpretation, ruling of official directive (whether or
not having the force of law) of the 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.
LIBOR Interest Payment Date - with respect to any LIBOR Portion, the last day of
the applicable LIBOR Period.
LIBOR Option - the option granted pursuant to Section 2.1.1(B) to have the
interest on all or any portion of the principal amount of the Term Loan,
Revolving Credit Loans and/or Working Capital Loan based on a LIBOR Rate.
LIBOR Period - any period, selected as provided in Section 3.1(B) of 1 month, 2
months or 3 months, commencing on any Business Day, subject to the provisions of
Section 3.1(B); provided, however, that no LIBOR Period shall extend beyond the
last day of the Original Term, unless Borrower and Lender have agreed to an
extension of the Original Term beyond the expiration of the LIBOR Period in
question. If any LIBOR Period so elected 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 Lender in accordance with the then
current banking practice in London. Each determination by the Lender of LIBOR
Period shall, in the absence of manifest error, be conclusive, and at Borrower's
request, Lender shall demonstrate the basis for such determination.
LIBOR Portion - that portion of the Revolving Credit Loans, the Working Capital
Loan or of the Term Loan 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, which does not exceed the
outstanding balance of Revolving Credit Loan, the Working Capital Loan and/or
Term Loan 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 2.1.1(B) hereof 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 (a) the Base LIBOR Rate ( as hereinafter defined)
and (b) Statutory Reserves. For purposes of this definition, the term "Base
LIBOR Rate" shall mean the rate (rounded to the nearest 1/8 of 1% or, if there
is no nearest 1/8 of 1%, 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 Bank, in the London interbank
foreign currency deposits market at approximately 11:00 a.m., London time, two
(2) Business Days prior to the commencement of such LIBOR Period, for delivery
on the first day of such LIBOR Period. Each determination by Lender of any LIBOR
Rate shall in the absence of manifest error, be conclusive, and at Borrower's
request, Lender shall demonstrate the basis of such determination.
LIBOR Request - a notice in writing (or by telephonic communication confirmed by
telex, telecopy or other facsimile transmission on the same day as the telephone
request) from Borrower to Lender requesting that interest on all or a portion of
the Revolving Credit Loans, Working Capital Loan and/or Term 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) a dollar amount of the LIBOR Portion consistent with the definition of
such term.
LIBOR Revolving Loan 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, which does
not exceed the outstanding balance of Revolving Credit Loan 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 2.1.1(B) hereof and the LIBOR Period of which was commenced and not
terminated.
LIBOR Term Portion - that portion of the Term Loan specified in a LIBOR Request
which is not less than $1,000,000, which does not exceed the outstanding balance
of Term Loan 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 2.1.1(B) hereof and the LIBOR
Period of which was commenced and not terminated.
LIBOR Working Capital Loan Portion - that portion of Working Capital Loan
specified in a LIBOR Request which is not less than $1,000,000, which does not
exceed the outstanding balance of Working Capital Loan 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 bearing interest on the LIBOR Rate in
Section 2.1.1(B) hereof and the LIBOR Period of which was commenced and not
terminated.
Lien - any interest in Property securing an obligation owed to, or a claim by, a
Person other than the owner of the Property, whether such interest is based on
common law, statute or contract. The term "Lien" shall also include
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 Lender 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 Lender pursuant to the
Agreement.
Money Borrowed - means (i) Indebtedness arising from the lending of money by any
Person to Borrower; (ii) Indebtedness, whether or not in any such case arising
from the lending by any Person of money to Borrower (A) which is represented by
notes payable or drafts accepted that evidence extensions of credit, (B) which
constitutes obligations evidenced by bonds, debentures, notes or similar
instruments, or (C) 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 under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under clauses
(i) through (iii) hereof, if owed directly by Borrower.
Mortgages - the mortgages, deeds of trust, security deeds and/or leasehold
mortgages executed by a predecessor-in-interest to Borrower by merger on or
about the Original Closing Date of the Original Loan Agreement in favor of
Lender and by which one of Borrower's predecessors-in-interest shall grant and
convey to Lender, as security for the Obligations, a Lien upon the real
Property of Borrower located in or at (i) Hastings, Nebraska and (ii) ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of ERISA.
Net Cash Flow - for any period, means Borrower's (i) Consolidated Adjusted Net
Earnings from Operations for such period, plus (ii) Consolidated depreciation
and amortization expenses for such period, plus (iii) Consolidated deferred
taxes for such period, all as determined in accordance with GAAP minus (iv)
Consolidated Capital Expenditures (net of sale and leaseback or other similar
transaction proceeds received by Lender in respect to Borrower's Utah facility)
minus (v) all principal payments (other than principal payments made in respect
to the Revolving Credit Loans and in respect to Indebtedness for Money Borrowed
owed to FirsTier Bank, National Association, Bank of America, Oregon or payments
made in respect to outstanding Indebtedness under the Subordinated Loan Debt
Documents on the Original Closing Date to the extent permitted by Section
8.2.7(a) of the Agreement) made within such period in respect of Indebtedness
for Money Borrowed.
New Mortgages - as defined in Section 5.3 of the Agreement.
Obligations - all Loans 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 Lender 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.
Original Closing Date - May 10, 1996.
Original Loan Agreement - as defined in Recital A.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and documents (other than
the Agreement and the Security Documents), heretofore, now or hereafter executed
by any Borrower, any Subsidiary of any Borrower or any other third party and
delivered to Lender in respect of the transactions contemplated by the
Agreement.
Overadvance - the amount, if any, by which the outstanding principal amount of
Revolving Credit Loans exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the right by Lender to
participate in any of the Loans described in the Agreement and who shall have
entered into a participation agreement in form and substance satisfactory to
Lender.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of the
Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of any
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when
aggregated with the principal amount of all other such Indebtedness and
Capitalized Lease Obligations of Borrower at the time outstanding, does not
exceed One Million Two Hundred Fifty Thousand Dollars ($1,250,000). For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized 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 that is covered by Title IV of ERISA.
PPI - as defined in Recital A.
Preferred Stock - Borrower's 8% convertible preferred stock, $0.01 par value.
Prime Portion - that portion of the Revolving Credit Loans, the Working Capital
and the Term Loan not subject to a LIBOR Option.
Projections - Borrower's forecasted Consolidated and consolidating (a) balance
sheets, (b) profit and loss statements, (c) cash flow statements, and (d)
capitalization statements, all prepared on a consistent basis with Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
Promissory Note and Stock Pledge Agreement - that certain Promissory Note and
Stock Pledge Agreement dated as of July 10, 1995 between Pacific Acquisition
Corp., PPI and the selling shareholder signatories thereto, as in effect on the
Original Closing Date.
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.
Rentals - as defined in subsection 8.2.12 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of ERISA.
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:
(ii) investments in one or more Subsidiaries of Borrower to the extent existing
on the Restructuring Closing Date;
(iii) Property to be used in the ordinary course of business;
(iv) Current Assets arising from the sale of goods and services in the ordinary
course of business of Borrower and its Subsidiaries;
(v) 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;
(vi) investments in certificates of deposit maturing within one year from the
date of acquisition issued by a bank or trust company organized under the laws
of the United States or any state thereof having capital surplus and undivided
profits aggregating at least $100,000,000; and
(vii) 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.
Restructuring - as defined in Recital B.
Restructuring Closing Date - the date on which all of the conditions precedent
in Section 9 of the Agreement are satisfied.
Revolving Credit Loan - a Loan made by Lender as provided in Section 1.1 of the
Agreement.
▇▇▇▇▇▇▇ Note - that certain Promissory Note in the principal amount of Three
Hundred Seventy-Nine Thousand One Hundred Thirty and 84/100 Dollars
($379,130.84) dated August 6, 1997, executed by Borrower in favor of ▇▇▇▇▇
▇▇▇▇▇▇▇.
Schedule of Accounts - as defined in subsection 6.4.1 of the Agreement.
Security - shall have the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
Security Documents - the Mortgages, any New Mortgage, the Patent Assignment, the
Trademark Assignments and all other instruments and agreements now or at any
time hereafter securing the whole or any part of the Obligations.
Senior Interest Coverage Ratio - with respect to any period of determination,
the ratio of Consolidated (i) EBIT for such period to (ii) Senior Interest
Expense for such period, all as determined in accordance with GAAP.
Senior Interest Expense - with respect to any fiscal period, the interest
expense incurred by Borrower for such period in respect to all Indebtedness for
Money Borrowed (other than Indebtedness outstanding pursuant to the Subordinated
Debt Documents) as determined in
accordance with GAAP owing by Borrower to Lender for such period.
Series A Stock - Borrower's Series A 7% Convertible Preferred Stock, $0.01 par
value.
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), (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.
Spell Group - shall mean collectively ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, G. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ any of their spouses
or any family trust which is controlled by any of the foregoing.
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 and any other banking authority to which Bank or Lender
is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board
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 bank or 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, provided
that no adjustment shall reduce Statutory Reserves below the amount in effect on
the Closing Date. At Borrower's request, the Lender shall provide Borrower with
Lender's calculations of Statutory Reserves.
Subordinated Loan Agreement - shall mean the Debenture Acquisition Agreement (as
defined in the definition of Subordinated Debt Documents) together with all
amendments and modifications thereto, including without limitation, the
Amendment Agreement.
Subordinated Debt - Indebtedness of Borrower that is subordinated to the
Obligations in a manner satisfactory to Lender, including, without limitation,
Indebtedness outstanding pursuant to the Subordinated Debt Documents.
Subordinated Debt Documents - that certain Debenture Acquisition Agreement
("Debenture Acquisition Agreement") dated as of March 16, 1995 by and among
▇▇▇▇▇, EPI and Borrower with any notes, documents, instruments, agreements,
guaranties, exhibits or schedules executed and/or delivered in connection
therewith, and all amendments and modifications thereto, including without,
limitation, that certain Amendment Agreement dated May 10, 1996 by and among
▇▇▇▇▇, EPI, PPI, APP and Borrower, that certain Amendment Agreement dated
February 14, 1997 by and among ▇▇▇▇▇, EPI, PPI, APP and Borrower, that certain
Amendment Agreement dated May 1, 1997 by and among ▇▇▇▇▇, EPI, PPI, APP and
Borrower and that certain Amendment Agreement dated on or about the
Restructuring Closing Date by and among ▇▇▇▇▇ and Borrower.
Subsidiary - any corporation of which a Person owns, directly or indirectly
through one or more intermediaries, more than 50% of the Voting Stock at the
time of determination.
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 Lender and/or (ii) to be
withheld or deducted from any payment otherwise required hereby to be made by
Borrower to Lender; provided, that the term "Tax" shall not include any taxes
imposed upon the net income of Lender.
Term Loan - the Loan described in Section 1.2.1 of the Agreement.
Term Note - the Amended and Restated Secured Promissory Note to be executed by
Borrower on or about the Restructuring Closing Date in favor of Lender to
evidence the Term Loan, which shall be in the form of Exhibit A to the
Agreement.
Total Credit Facility - Sixteen Million Five Hundred Thousand Dollars
($16,500,000) plus the outstanding principal balance of the Term Loan.
Trademark Assignment - the Trademark Security Agreement to be executed by
Borrower on or about the Restructuring Closing Date in favor of Lender and by
which Borrower shall assign to Lender, and grant to Lender a security interest
in, as security for the Obligations all of Borrower's right, title and interest
in and to all of its trademarks.
Voting Stock - Securities of any class or classes of a corporation the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
Working Capital Loan - the Loan made by Lender as provided in Section 1.3 of the
Agreement.
Warrants - shall have the meaning contained in the Amendment Agreement.
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.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing.
LIST OF EXHIBITS
----------------
Exhibit A Term Note
Exhibit B Borrower's and each Subsidiary's of Borrower Business Locations
Exhibit C Form of Borrowing Base Certificate
Exhibit D Jurisdictions in which Borrower and each Subsidiary of Borrower is
Authorized to do Business
Exhibit E Capital Structure of Borrower
Exhibit F Corporate Names
Exhibit G Tax Identification Numbers of Subsidiaries
Exhibit H Patents, Trademarks, Copyrights and Licenses
Exhibit I Contracts Restricting Borrower's Right to Incur Debts
Exhibit J Litigation
Exhibit K Capitalized Leases
Exhibit L Operating Leases
Exhibit M Pension Plans
Exhibit N Labor Contracts
Exhibit O Compliance Certificate
Exhibit P Permitted Liens
Exhibit Q Schedule of Documents