EXHIBIT 10.32
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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JEH/EAGLE SUPPLY, INC., EAGLE SUPPLY, INC. and
JEH/EAGLE, L.P.
AS BORROWERS,
FLEET CAPITAL CORPORATION
AS AGENT,
AND
GENERAL ELECTRIC CAPITAL CORPORATION
AS DOCUMENTATION AGENT,
AND
The Financial Institutions identified in Annex I,
AS LENDERS
DATED AS OF MARCH 10, 2004
TABLE OF CONTENTS
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SECTION 1. C REDIT FACILITY......................................2
1.1 Revolving Credit Loans................................2
1.2 Term Loan.............................................3
1.3 Letters of Credit; LC Guaranties......................3
SECTION 2. INTEREST, FEES AND CHARGES............................4
2.1 Interest..............................................4
2.2 Letter of Credit and LC Guaranty Fees.................5
2.3 Collateral Monitoring Fee.............................6
2.4 Closing Fee...........................................6
2.5 Unused Availability Fee...............................6
2.6 Audit and Appraisal Fees..............................6
2.7 Overadvance Fee.......................................6
2.8 Capital Adequacy Change...............................7
2.9 Reimbursement of Expenses.............................8
2.10 Bank Charges..........................................8
2.11 Confirmation of Existing Indebtedness.................8
SECTION 3. LOAN ADMINISTRATION...................................9
3.1 Manner of Borrowing Revolving Credit Loans............9
3.2 Payments.............................................12
3.3 Prepayments..........................................13
3.4 Application of Payments and Collections..............13
3.5 All Loans to Constitute One Obligation...............14
3.6 Loan Account.........................................14
3.7 Statements of Account................................14
SECTION 4. TERM AND TERMINATION.................................14
4.1 Term of Agreement....................................14
4.2 Termination..........................................14
SECTION 5. SECURITY INTERESTS...................................15
5.1 Security Interest in Collateral......................15
5.2 Other Collateral.....................................16
5.3 Lien Perfection; Further Assurances..................17
5.4 Key Man Life Insurance...............................17
SECTION 6. COLLATERAL ADMINISTRATION............................17
6.1 Location of Collateral...............................17
6.2 Insurance of Collateral..............................17
6.3 Protection of Collateral.............................18
6.4 Administration of Accounts...........................18
6.5 Administration of Inventory..........................19
6.6 Records and Schedules of Equipment...................20
6.7 Payment of Charges...................................20
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SECTION 7. REPRESENTATIONS AND WARRANTIES.......................20
7.1 General Representations and Warranties...............20
7.2 Continuous Nature of Representations and Warranties..25
7.3 Survival of Representations and Warranties...........25
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS..................26
8.1 Affirmative Covenants................................26
8.2 Negative Covenants...................................28
8.3 Specific Financial Covenants.........................32
SECTION 9. CONDITIONS PRECEDENT.................................32
9.1 Documentation........................................33
9.2 No Default...........................................34
9.3 Other Loan Documents.................................34
9.4 No Litigation........................................34
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT....34
10.1 Events of Default....................................34
10.2 Acceleration of the Obligations......................37
10.3 Other Remedies.......................................37
10.4 Payments after an Event of Default...................38
10.5 Remedies Cumulative; No Waiver.......................39
SECTION 11. AGENT................................................39
11.1 Appointment and Authorization........................39
11.2 General Immunity.....................................39
11.3 Consultation with Counsel............................40
11.4 Documents............................................40
11.5 Rights as a Lender...................................40
11.6 Responsibility of Agent..............................40
11.7 Collections and Disbursements........................40
11.8 Indemnification......................................41
11.9 Expenses.............................................41
11.10 No Reliance..........................................42
11.11 Reporting............................................42
11.12 Removal of Agent.....................................42
11.13 Action on Instructions of Lenders....................42
11.14 Several Obligations..................................43
11.15 Consent of Lenders...................................43
11.16 Participations and Assignments.......................44
11.17 Borrowers' Consent...................................44
SECTION 12. MISCELLANEOUS........................................44
12.1 Power of Attorney....................................44
12.2 Indemnity............................................45
12.3 Modification of Agreement; Sale of Interest..........45
12.4 Severability.........................................46
12.5 Successors and Assigns...............................46
12.6 Cumulative Effect, Conflict of Terms.................46
12.7 Execution in Counterparts............................46
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12.8 Notice...............................................46
12.9 Lender's Consent.....................................47
12.10 Credit Inquiries.....................................48
12.11 Time of Essence......................................48
12.12 Entire Agreement.....................................48
12.13 Interpretation.......................................48
12.14 GOVERNING LAW; CONSENT TO FORUM......................48
12.15 WAIVERS BY BORROWERS.................................49
12.16 Parties to Act in a Commercially Reasonable Manner...49
SECTION 13. SPECIAL INTER-BORROWER AND GUARANTOR PROVISIONS......49
13.1 Certain Borrower and Guarantor Acknowledgments
and Agreements.....................................49
13.2 Maximum Amount Of Joint and Several Liability........50
13.3 Authorization of Guarantor by Borrowers..............50
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of
this 10th day of March, 2004, by and among the lending institutions listed in
Annex I attached hereto and incorporated herein by reference (each a "Lender"
and collectively, "Lenders"), FLEET CAPITAL CORPORATION, a Rhode Island
corporation with an office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, as agent for Lenders (in such capacity, "Agent"), GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation, as documentation agent for Lenders
(in such capacity, "Documentation Agent") and JEH/EAGLE SUPPLY, INC., a Delaware
corporation with its executive office and principal place of business at ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("JEH"), EAGLE SUPPLY, INC., a
Florida corporation with its executive office and principal place of business at
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Eagle"), and JEH/EAGLE,
L.P., a Texas limited partnership with its executive office and principal place
of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Eagle LP"
and collectively with JEH and Eagle, referred to as the "Borrowers" and
sometimes, each individually is also referred to as "Borrower"). Capitalized
terms used in this Agreement have the meanings assigned to them in Appendix A,
General Definitions. Accounting terms not otherwise specifically defined herein
shall be construed in accordance with GAAP consistently applied.
BACKGROUND
A. On or about December 23, 1994, Fleet Capital Corporation ("FCC") and
Eagle entered into a certain Loan and Security Agreement (as amended from time
to time, the "Eagle Supply Loan Agreement") and certain related agreements,
instruments and documents, including, but not limited to, a revolving credit
note, a term note, an equipment note and a guaranty agreement, to evidence the
obligation of Eagle Supply, Inc. to repay an original maximum amount of
$7,500,000 thereunder.
B. On or about July 8, 1997, FCC and JEH entered into a certain Loan and
Security Agreement (as amended from time to time, the "JEH Loan Agreement") and
certain related agreements, instruments and documents, including, but not
limited to a revolving credit note, a term note, an equipment note and a
guaranty agreement, to evidence the obligation of JEH/Eagle Supply, Inc. to
repay an original maximum amount of $20,000,000 thereunder.
C. On or about October 22, 1998, FCC and MSI/Eagle Supply, Inc. entered
into a certain Loan and Security Agreement (as amended from time to time, the
"MSI Loan Agreement") and certain related agreements, instruments and documents,
including, but not limited to a revolving credit note, a term note, and
equipment term note and a guaranty agreement, to evidence the obligation of
MSI/Eagle Supply, Inc. to repay an original maximum amount of $9,075,000
thereunder. On or about May 31, 2000 MSI/Eagle Supply, Inc. and JEH merged, with
JEH remaining as the surviving entity.
D. On or about June 20, 2000, FCC, JEH and Eagle entered into a certain
Amended, Restated and Consolidated Loan and Security Agreement (as amended from
time to time, the "Consolidated Loan Agreement") and certain related agreements,
instruments and documents, including, but not limited to, a revolving credit
note, a term note, and an equipment term note to
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evidence the obligation of JEH and Eagle to repay an original maximum amount of
$44,975,000 thereunder.
E. As of July 1, 2000, Eagle LP joined as a Borrower under the Consolidated
Loan Agreement pursuant to that certain Joinder to Amended, Restated and
Consolidated Loan and Security Agreement by among FCC, JEH, Eagle and Eagle LP.
F. The parties have agreed to amend and restate the Amended, Restated and
Consolidated Loan and Security Agreement and certain of the other Existing Loan
Documents or the terms and conditions set forth herein, and in connection
therewith, the parties have agreed that, as set forth in Annex I hereto, General
Electric Capital Corporation is also to become a Lender and Documentation Agent
hereto.
G. Borrowers continue in the business of selling roofing supplies, masonry
supplies and related products to both residential and contractor customers.
Borrowers wish, from time to time, to obtain advances from Lenders up to the
Total Credit Facility. Lenders are willing to continue to make loans and grant
extensions of credit to Borrowers under the terms and provisions hereinafter set
forth.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to Sixty Million
Dollars ($60,000,000) available upon Borrowers' request therefor, as follows:
1.1 Revolving Credit Loans.
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1.1.1 Loans and Reserves. Each Lender agrees severally, for so long as
no Default or Event of Default exists, to make Revolving Credit Loans to
Borrowers from time to time, as requested by Borrowers in the manner set forth
in subsection 3.1.1 hereof, up to a maximum principal amount at any time
outstanding equal to such Lender's Pro Rata Percentage of the Borrowing Base at
such time less reserves, if any. No Lender's portion of the Loans shall at any
time exceed its respective Pro Rata Share. Agent shall have the right to
establish reserves in such amounts, and with respect to such matters, as Agent
shall deem necessary or appropriate, against the amount of Revolving Credit
Loans which Borrowers may otherwise request under this subsection 1.1.1,
including, without limitation, with respect to: (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Borrowers' business; (ii)
shrinkage, spoilage and obsolescence of Inventory; (iii) slow moving Inventory;
(iv) other sums chargeable against Borrowers' Loan Account as Revolving Credit
Loans under any section of this Agreement; (v) amounts owing by Borrowers to any
Person to the extent secured by a Lien (other than a Permitted Lien) on, or
trust over, any Collateral of Borrowers; and (vi) 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.
1.1.2 Overadvance. Lenders may in their sole discretion and upon their
unanimous agreement, make Revolving Credit Loans to Borrowers as requested by
Borrowers in accordance with the terms of subsection 3.1.1 hereof at a time when
the unpaid balance of Revolving
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Credit Loans exceeds, or would exceed with the making of any such Revolving
Credit Loan, the Borrowing Base (any such loan being herein referred to
individually as an "Overadvance" and collectively as "Overadvances") (including
any requested seasonal Overadvance facility in an amount up to Two Million
Dollars ($2,000,000) during the time period beginning on December 31 and ending
on March 31 of any year). All Overadvances shall be repaid on demand, shall be
secured by all of the Collateral and shall bear interest as provided in this
Agreement for Revolving Credit Base Rate Loans.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used for
Borrowers' general working capital needs in a manner consistent with the
provisions of this Agreement and applicable law.
1.2 Term Loan. The Equipment Term Loan and the Acquisition Term Loan each
as defined under the Existing Loan Documents are hereby consolidated and reset
into the Term Loan in the principal amount of $703,900. Each Lender shall be
deemed to have advanced to Borrowers an amount equal to its Pro Rata Percentage
of the Term Loan, which shall be repaid in successive monthly installments in
accordance with the terms of the Second Amended, Restated and Consolidated Term
Note ("Term Note"). Each monthly installment shall be due and payable on the
first day of each month, commencing on April 1, 2004, followed by a final
installment which shall be due and payable on the earlier to occur of January 1,
2005, termination of this Agreement or acceleration of the Obligations
hereunder. The Term Loan shall be secured by all of the Collateral.
1.3 Letters of Credit; LC Guaranties. Agent agrees, for so long as no
Default or Event of Default exists, and if requested by Borrowers, to (i) issue
its, or cause to be issued by its Affiliates, standby Letters of Credit for the
account of one or more of the Borrowers or (ii) execute LC Guaranties by which
Agent or its Affiliates shall guaranty the payment or performance by Borrowers
of their reimbursement obligations with respect to standby Letters of Credit
issued for a Borrower's account by other Persons in support of Borrowers'
obligations (other than obligations for the repayment of Money Borrowed);
provided that (i) the LC Amount shall at no time exceed $1,000,000 and (ii) no
Letter of Credit or LC Guaranty shall be issued in an amount in excess of the
then existing availability under the Borrowing Base. No Letter of Credit or LC
Guaranty may have an expiration date that is after the earlier of (a) the date
which is 365 days after the date of issuance or (b) the last day of the Term,
except to the extent that Borrowers provide Agent, for the benefit of Agent and
the other Lenders, as applicable, at the time of and as a condition to the
issuance thereof, with collateral acceptable to Agent in its sole discretion in
an amount equal to 105% of the face amount thereof. Any amounts paid by Agent or
its Affiliates under any LC Guaranty or in connection with any Letter of Credit
shall be treated as Revolving Credit Loans, shall be secured by all of the
Collateral and shall bear interest and be payable at the same rate and in the
same manner as Revolving Credit Loans. Each Lender agrees that immediately upon
the issuance of any Letter of Credit or LC Guaranty by Agent or Agent's
Affiliate, such Lender shall have acquired an undivided participating interest
(without recourse or warranty) in accordance with such Lender's Pro Rata
Percentage, in all of Agent's or Agent's Affiliate's rights and liabilities with
respect to such Letter of Credit or LC Guaranty. Each Lender shall be directly
and unconditionally obligated to Agent or Agent's Affiliate, according to its
Pro Rata Percentage, to reimburse Agent or Agent's Affiliate, without setoff or
deduction of any kind or nature, for honoring any drawing under any Letter of
Credit or making any payment under any LC Guaranty (without regard to the
occurrence of a Default or an Event of Default including, without limitation,
following the commencement of any
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bankruptcy, reorganization, insolvency, liquidation or dissolution proceeding).
The amount of Agent's or Agent's Affiliate's payment (and the respective
reimbursements of the Lenders to Agent or its Affiliate) shall automatically
constitute a Revolving Credit Loan without regard to any borrowing condition
herein and without any request, consent or other action of Borrowers.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest
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2.1.1 Revolving Credit Interest:
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(a) Rate Options. At the time of each Revolving Credit Loan under
the Revolving Credit Facility, and thereafter from time to time, Borrowers shall
have the right, subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred and is continuing, to
designate to Agent in writing that all, or a portion of the Revolving Credit
Loans shall bear interest at either the (i) Revolving Credit LIBOR Rate or (ii)
Revolving Credit Base Rate. Interest on each portion thereof shall accrue and be
paid at the time and rate applicable to the respective option selected by
Borrowers or otherwise governing under the terms of this Agreement. If for any
reason the Revolving Credit LIBOR Rate option is unavailable, or Borrowers do
not designate that the Revolving Credit LIBOR Rate should apply, the Revolving
Credit Base Rate shall apply. The rate of interest on Revolving Credit Base Rate
Loans shall increase or decrease by an amount equal to any increase or decrease
in the Base Rate effective as of the opening of business on the day that any
such change in the Base Rate occurs.
(b) Revolving Credit LIBOR Rate Option. Provided no Default or
Event of Default has occurred and is continuing, and subject to the provisions
of Section 2.1.1 (a)(i) if Borrowers desire to have the Revolving Credit LIBOR
Rate apply to all or a portion of the Revolving Credit Loans, Borrowers shall
give Agent a written irrevocable request no later than 11:00 A.M. (Eastern time)
on the third (3rd) Business Day prior to the requested borrowing date specifying
(i) the date the Revolving Credit LIBOR Rate shall apply (which shall be a
Business Day), (ii) the Interest Period, and (iii) the amount to be subject to
the Revolving Credit LIBOR Rate; provided that, such amount shall be at least
$250,000 and in an integral multiple of Two Hundred Fifty Thousand Dollars
($250,000).
2.1.2 Term Interest:
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(a) Rate Options. On the Closing Date, and thereafter from time
to time, Borrowers shall have the right, subject to the terms and conditions of
this Agreement, and provided no Default or Event of Default has occurred and is
continuing, to designate to Agent in writing that all, or a portion of the
outstanding principal balance of the Term Loan shall bear interest at either the
(x) Term LIBOR Rate, or (y) Term Base Rate. Interest on each portion thereof
shall accrue and be paid at the time and rate applicable to the respective
option selected by Borrowers or otherwise governing under the terms of this
Agreement. If for any reason the Term LIBOR Rate is not available, or Borrowers
do not elect the Term LIBOR Rate, the Term Loan shall bear interest at the Term
Base Rate. The rate of interest on the Term Base Rate Loans shall increase or
decrease by an amount equal to any increase or decrease in the Base Rate,
effective as of the opening of business on the date that any such change in the
Base Rate occurs.
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(b) Term LIBOR Rate Option. Provided no Default or Event of
Default has occurred and is continuing, and subject to the provisions of Section
2.1.2(a) if Borrowers desire to have the Term LIBOR Rate apply to all or a
portion of the Term Loan, Borrowers shall give Agent a written irrevocable
request no later than 11:00 A.M. (Eastern time) on the third (3rd) Business Day
prior to the requested borrowing date specifying (i) the date the Term LIBOR
Rate shall apply (which shall be a Business Day), (ii) the Interest Period, and
(iii) the amount of the Term Loan to be subject to the Term LIBOR Rate; provided
that, such amount shall be at least $250,000 and in an integral multiple of Two
Hundred Fifty Thousand Dollars ($250,000).
2.1.3 Default Rate of Interest. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
the Loans shall bear interest at a rate per annum equal to two percent (2%)
above the rate then applicable with respect to Base Rate Loans (the "Default
Rate"). Interest shall continue to accrue and be paid at the applicable rates
set forth herein regardless of the rate option, even after default, maturity,
acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the
happening of any event or occurrence whether similar or dissimilar.
2.1.4 Computation of Interest and Fees. Interest, Letter of Credit and
LC Guaranty fees, and all other fees and collection charges hereunder shall be
calculated daily and shall be computed on the actual number of days elapsed over
a year consisting of three hundred and sixty (360) days.
2.1.5 Maximum Interest. In no event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected pursuant to the
terms of this Agreement exceed the highest rate permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If any provisions of this Agreement are in contravention of
any such law, such provisions shall be deemed amended to conform thereto. To the
extent the laws of the State of Texas may apply to this Agreement,
notwithstanding anything herein to the contrary, if at any time the applicable
interest rate, together with all fees and charges which are treated as interest
under applicable law (collectively, the "Charges"), as provided for herein or in
any other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by a Lender, shall exceed the maximum
lawful rate (the "Maximum Rate"), which may be contracted for, charged, taken,
received or reserved by a Lender in accordance with applicable law, the rate of
interest payable on the Loans, together with all Charges payable to Lenders
and/or Agent, shall be limited to the Maximum Rate. For purposes of Texas law,
the term "Maximum Rate" means the maximum rate of nonusurious interest permitted
from day to day by applicable law, including as to Article 5069, Vernon's Texas
Civil Statutes (and as the same may be incorporated by reference in other Texas
statutes), but otherwise without limitation, that rate based upon the "weekly
ceiling".
2.2 Letter of Credit and LC Guaranty Fees. Borrowers shall pay to Agent for
standby Letters of Credit and LC Guaranties of standby Letters of Credit, two
and one-half of one percent (2.50%) per annum of the aggregate face amount of
such Letters of Credit and LC Guaranties outstanding from time to time during
the term of this Agreement, plus all normal and customary charges associated
with the issuance thereof, which fees and charges shall be deemed fully earned
upon issuance of each such Letter of Credit or LC Guaranty, shall be due and
payable on the first Business Day of each month and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason.
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2.3 Collateral Monitoring Fee. Borrowers shall pay to Agent each month, for
its own account, in arrears, on the first Business Day of the following month, a
collateral monitoring fee of $1,500. Such fee shall be pro-rated for any month
during which this Agreement is in effect for less than a full month.
2.4 Closing Fee. Agent shall have earned, and Borrowers shall be
unconditionally obligated to pay to Agent on the Closing Date, a closing fee in
the amount of Three Hundred Seventy Five Thousand Dollars ($375,000).
2.5 Unused Availability Fee. Borrowers shall pay to Agent, for the ratable
benefit of Lenders, an Unused Availability Fee ("Unused Availability Fee"),
which shall be payable in arrears on the first Business Day of each calendar
month hereafter. The Unused Availability Fee shall equal one-quarter of one
percent (.25%) per annum of the amount by which the Revolving Credit Limit
exceeds the average daily amount of the Revolving Credit Loans outstanding plus
the LC Amount during the immediately preceding month.
2.6 Audit and Appraisal Fees.
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2.6.1 Audit Fees. Borrowers shall pay to Agent and Documentation
Agent, for their own account, audit fees from time to time in connection with
Agent's and Documentation Agent's periodic audits of Borrowers' books and
records and such other matters as Agent and Documentation Agent shall deem
appropriate, plus all reasonable out-of-pocket expenses incurred by Agent and
Documentation Agent in connection with such audits. Such audit fees shall be
calculated at the rate of $850 for each member of Agent's and Documentation
Agent's field examination staff engaged in any such audit for each day during
which such examination is being conducted and, absent the occurrence and
continuance of an Event of Default, such audits shall be conducted not less than
three (3) times during each twelve (12) month period, commencing as of the
Closing Date. Appraisal fees shall be payable on the first day of the month
following the date of issuance by Agent of a request for payment thereof to
Borrowers. Upon Borrowers' request, Agent shall provide to Borrowers in
reasonable detail the back-up and support of any out-of-pocket expenses referred
to herein.
2.6.2 Appraisal Fees. Borrowers shall reimburse to Agent and
Documentation Agent, for any costs and all reasonable out-of-pocket expenses
incurred by Agent in connection with obtaining appraisals of the Collateral from
time to time. Absent the occurrence and continuance of an Event of Default, such
appraisals shall be conducted not more than one (1) time during each twelve (12)
month period, commencing as of the Closing Date. Appraisal costs and expenses
shall be payable on the first day of the month following the date of issuance by
Agent of a request for payment thereof to Borrowers.
2.7 Overadvance Fee. In the event that Lenders approve Overadvances in
accordance with Section 1.1.2, Borrowers agree to pay an additional fee (the
"Overadvance Fee") to be agreed upon among Borrowers, Agent and Documentation
Agent each time an Overadvance facility is approved. Upon approval of any
Overadvance, Lenders shall have earned, and Borrowers shall unconditionally be
obligated to pay Lenders, the Overadvance Fee, to be shared by Lenders on a Pro
Rata Percentage basis.
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2.8 Capital Adequacy Change. If Agent shall have determined that the
adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
Agent or any Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority (each such law, rule, regulation, request or directive a "Capital
Adequacy Rule"), does or shall have the effect of reducing the rate of return on
such Lender's capital as a consequence of its obligations hereunder to a level
below that which such Lender could have achieved but for such adoption, change
or compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by a material amount, then from time to time, after submission
by Agent to Borrowers of a written demand therefor (a "Capital Adequacy
Demand"), the Borrowers shall pay to Agent for the account of each such Lender
such additional amount or amounts (each a "Capital Adequacy Amount", it being
understood that Capital Adequacy Amount may include an increase in the
applicable interest rate margin charged under this Agreement) as will compensate
such Lender for such reduction. A certificate of such Lender claiming
entitlement to payment as set forth above shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such reduction, the additional Capital Adequacy Amount or Amounts
to be paid to such Lender, and the method by which such Capital Adequacy Amounts
were determined. In determining such Capital Adequacy Amount, such Lender may
use any reasonable averaging and attribution method.
2.8.1 Termination of Agreement following Capital Adequacy Demand. At
their option, Borrowers may elect to terminate this Agreement following their
receipt of a Capital Adequacy Demand, provided Borrowers give Agent and each
Lender notice of such election not more than thirty (30) days following their
receipt of such Capital Adequacy Demand, and provided, further, that so long as
the effective date of such termination and the payment and satisfaction in full
of all Obligations occurs within one hundred and eighty (180) days from the date
of such notice, Borrowers shall not be obligated to pay any of the charges
described in subsection 4.2.3, it being understood, however, that until such
effective date of termination and the payment and satisfaction in full of all
Obligations, Borrowers shall continue to be obligated to pay Agent for the
account of each Lender for each Capital Adequacy Amount theretofore requested by
Agent on behalf of such Lender pursuant to a Capital Adequacy Demand.
2.8.2 Subsequent Change in Capital Adequacy Rules. In the event that
any Capital Adequacy Rule, the adoption or change in or compliance by Agent or
any Lender with which shall have resulted in a Capital Adequacy Demand, shall be
revised subsequent to the date of such Capital Adequacy Demand, such that, in
such Lender's determination, its rate of return on capital shall be improved to
a level more favorable than the rate of return which, as a result of the initial
change in such Capital Adequacy Rule, precipitated such Capital Adequacy Demand,
then, in such event, effective promptly following such determination, provided
Borrowers shall not have theretofore given to Agent and each Lender a notice of
election to terminate in accordance with subsection 2.8.1: (i) in the case of a
Capital Adequacy Demand to increase the applicable interest rate margin, Agent
shall reduce the applicable interest rate margin by a percentage; and (ii) in
the case of a Capital Adequacy Demand for payment of a fee or other charge, each
Lender shall rebate to Borrowers a portion of such payment, in each case which
Agent shall determine to be reasonably commensurate with the improvement in such
Lender's rate of return on capital caused by the subsequent revision to the
Capital Adequacy Rule. Notwithstanding anything hereinabove to the contrary,
neither Agent nor any Lender shall have an obligation whatsoever to make any
such
7
adjustment to the applicable interest rate margin, or to otherwise rebate any
Capital Adequacy Amount to Borrowers, at any time on or after: (i) the
occurrence and continuance of an Event of Default; (ii) the date of Borrowers'
notice of election to terminate in accordance with subsection 2.8.1; or (iii)
the effective date of termination of this Agreement.
2.9 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Agent and/or any Lender incurs
reasonable legal or reasonable accounting expenses or any other reasonable costs
or reasonable 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 Agent or Lenders,
Borrowers or any other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrowers' affairs; (iv) any
attempt to enforce any rights of Agent and/or Lenders against Borrowers or any
other Person which may be obligated to Agent or Lenders by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; 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 reasonable accounting expenses
and other reasonable costs and reasonable out of pocket expenses of Agent and/or
any Lender shall be charged to Borrowers. All amounts chargeable to Borrowers
under this Section 2.9 shall be Obligations secured by all of the Collateral,
shall be payable on demand to Agent or such 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 Base Rate Loans from time to time. Borrowers shall also
reimburse Agent and/or Lenders for reasonable expenses incurred by Agent and/or
Lenders in the administration of the Collateral to the extent and in the manner
provided in Section 6 hereof. Notwithstanding anything to the contrary contained
in Section 2.9(i) above, Borrowers shall only be obligated to reimburse GE an
amount up to $35,000 in connection with the reasonable costs and expenses
incurred by GE up to the Closing Date for the negotiation, preparation and due
diligence in connection with this Agreement.
2.10 Bank Charges. Borrowers shall pay to Agent and/or any Lender, on
demand, any and all fees, costs or expenses which Agent and/or any Lender pays
to a bank or other similar institution arising out of or in connection with (i)
the forwarding to Borrowers or any other Person on behalf of Borrowers, by Agent
or any Lender, proceeds of Loans and (ii) the depositing for collection, by
Agent or any Lender, of any check or item of payment received or delivered to
Agent or any Lender on account of the Obligations.
2.11 Confirmation of Existing Indebtedness. Borrowers acknowledge and
confirm that as of March __, 2004, they are indebted to FCC, without defense,
set-off or counter-claim under the Existing Loan Documents in the principal
amount of $_____________ ("Existing Indebtedness"). This Agreement and the Notes
and the Surety Agreement, amend, restate and consolidate, but do not extinguish
the indebtedness evidenced by the Existing Loan Documents. The Existing
Indebtedness shall be deemed to constitute Loans hereunder and Borrowers shall
be jointly and severally, absolutely and unconditionally liable for the
repayment of Loans in accordance with the terms hereof and the other Loan
Documents. The execution and delivery of this Agreement and the other Loan
Documents, however, does not evidence or represent a refinancing, repayment,
accord and/or satisfaction or novation of the Existing Indebtedness. All of
FCC's obligations to Borrowers with
8
respect to Loans to be made concurrently herewith or hereafter the date hereof
are set forth in this Agreement. All Liens and security interests previously
granted to or for the benefit of FCC, pursuant to, or in connection with, the
Existing Loan Documents are acknowledged and reconfirmed and remain in full
force and effect and are not intended to be released, replaced or impaired and
are hereunder deemed to be granted to FCC in its capacity as Agent for the
benefit of Lenders. Borrowers confirm that to the extent that any of the Loan
Documents (as defined in the Existing Loan Documents) have not been amended
and/or restated, they remain in full force and effect and shall be deemed for
all purposes to be Loan Documents as used herein. In conjunction with the
amendment, restatement and consolidation of the Term Loan referred to herein, no
new funds shall be advanced to Borrowers and appropriate adjustments shall be
made by Lenders to equalize their respective Pro Rata Share of all Loans.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the credit
facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Revolving Credit Loan Requests. A request for a Revolving Credit
Loan shall be made, or shall be deemed to be made, in the following manner: (i)
Borrowers shall give Agent same day notice, no later than 1:00 P.M. (Eastern
time) of such day, of their intention to borrow a Revolving Credit Base Rate
Loan, and at least three (3) Business Days prior notice of their intention to
borrow a Revolving Credit LIBOR Rate Loan, in which notice Borrowers shall
specify the amount of the proposed borrowing and 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, 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 Borrowers, Agent may permit telephone
requests for Revolving Credit Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Agent by Borrowers. Unless Borrowers
specifically direct Agent in writing not to accept or act upon telephonic or
electronic communications from Borrowers, Agent shall have no liability to
Borrowers for any loss or damage suffered by Borrowers as a result of Agent's
honoring any requests, executions of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Agent by Borrowers, and Agent
shall have no duty to verify the origin of any such communication or the
authority of the person sending it. Each notice of borrowing shall be
irrevocable by and binding on Borrowers, and if such notice requests the
borrowing of a LIBOR Rate Loan, such notice shall state the Interest Period with
respect thereto. Borrowers, at their option, may choose Base Rate Loans or LIBOR
Rate Loans, provided that any LIBOR Rate Loan shall be in a minimum amount of
$250,000, and provided, further, that the right of Borrowers to choose any LIBOR
Rate Loan is subject to the provisions of subsection 3.1.4.
3.1.2 Disbursement. Borrowers hereby irrevocably authorize Agent 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 Agent via wire transfer, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrowers, and
in the case of each subsequent borrowing, by wire transfer to such bank account
as may be agreed upon by Borrowers and Agent from time to time or elsewhere if
pursuant to a written direction from
9
Borrowers; and (ii) the proceeds of each Revolving Credit Loan requested under
subsection 3.1.1(ii) shall be disbursed by Agent by way of direct payment of the
relevant interest or other Obligation.
3.1.3 Authorization. Borrowers hereby irrevocably authorize Agent, in
Agent 's sole discretion, to advance to Borrowers, and to charge to Borrowers'
Loan Account hereunder as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligations during the immediately preceding month and
to pay all other Obligations whether in the form of Loans, costs, fees or
expenses at any time owed by Borrowers to Agent and/or any Lender hereunder.
3.1.4 Notice of Continuation and Notice of Conversion.
------------------------------------------------
(a) Subject to the provisions of subsection 3.1.4(c), Borrowers
may elect to maintain any borrowing consisting of LIBOR Rate Loans, or any
portion thereof, as a LIBOR Rate Loan by selecting a new Interest Period for
such borrowing, which new Interest Period shall commence on the last day of the
then existing Interest Period. Each selection of a new Interest Period (a
"Continuation") shall be made on three (3) Business Days' prior notice, given by
Borrowers to Lender not later than 11:00 A.M. (Eastern time) on the third (3rd)
Business Day preceding the date of any proposed Continuation. If the Borrowers
elect to maintain more than one borrowing consisting of LIBOR Rate Loans by
combining such borrowings into one borrowing and selecting a new Interest Period
pursuant to this subsection, each of the borrowings so combined shall consist of
Loans having Interest Periods ending on the same date provided that Borrowers
may not combine Revolving Credit LIBOR Rate Loans and Term LIBOR Rate Loans with
each other. If the Borrowers shall fail to select a new Interest Period for any
borrowing consisting of LIBOR Rate Loans in accordance with this subsection,
such LIBOR Rate Loans will automatically convert into corresponding Base Rate
Loans.
(b) Subject to the provisions of subsection 3.1.4 (c), Borrowers
may, on three (3) Business Days' prior notice given to Lender, convert the
entire amount of or a portion of all Loans of the same Type into Loans of
another Type (a "Conversion"), provided that no Default or Event of Default
shall have occurred and be continuing, and provided, further, that any
Conversion of any LIBOR Rate Loans into Base Rate Loans may only be made on the
last day of the Interest Period for such LIBOR Rate Loans, and upon Conversion
of any Base Rate Loans into LIBOR Rate Loans, Borrowers shall pay accrued
interest to the date of Conversion on the principal amount converted on the
first day of the following month. Each such notice shall be given not later than
11:00 A.M. (Eastern time) on the third (3rd) Business Day preceding the date of
any proposed Conversion. Each Conversion shall be in an aggregate amount of not
less than $250,000. Borrowers may elect to convert the entire amount of or a
portion of all Loans of the same Type comprising more than one borrowing into
Loans of another Type by combining such borrowings into one borrowing consisting
of Loans of such other Type; provided, however, that if the borrowings so
combined consist of LIBOR Rate Loans, such LIBOR Rate Loans shall have Interest
Periods ending on the same date and; provided further, that Borrowers may not
combine Revolving Credit Loans and all or a portion of the Term Loan with each
other.
(c) Notwithstanding anything contained in clauses (a) and (b)
above to the contrary:
(i) In the event that Borrowers shall have requested a LIBOR
Rate Loan(s) in accordance with the terms hereof and Agent shall have reasonably
determined that
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Eurodollar deposits equal to the amount of the principal of the requested LIBOR
Rate Loan and for the Interest Period specified are unavailable, impractical or
unlawful, or that the rate based on the LIBOR Rate will not adequately and
fairly reflect the cost of funds of the LIBOR Rate Loan applicable to the
specified Interest Period, of making or maintaining the principal amount of the
requested LIBOR Rate Loan specified by Borrowers during the Interest Period
specified, or that by reason of circumstances affecting Eurodollar markets,
adequate and reasonable means do not exist for ascertaining the rate based on
the LIBOR Rate applicable to the specified Interest Period, Agent shall promptly
give notice of such determination to Borrowers that the rate based on the LIBOR
Rate is not available. A reasonable determination by Agent hereunder shall be
conclusive evidence of the correctness of the fact and amount of such additional
costs or unavailability, absent manifest error. Upon such a determination, (A)
the right of Borrowers to select, continue or convert to, or maintain a LIBOR
Rate Loan at the rate based on the LIBOR Rate shall be suspended until Agent
shall have notified Borrowers that such conditions shall have ceased to exist,
and (B) the requested LIBOR Rate Loans shall accrue interest as if such Loans
were Base Rate Loans.
(ii) The LIBOR Rate may be automatically adjusted by Agent
on a prospective basis to take into account the additional or increased cost of
maintaining any necessary reserves for Eurodollar deposits or increased costs
due to changes in applicable law or regulation or the interpretation thereof by
Agent based on the Federal Reserve Board's or any other applicable agency's or
governing body's directive, mandate or interpretation, occurring subsequent to
the commencement of the then applicable Interest Period, including but not
limited to changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any successor or other
applicable governing body), excluding the Reserve Percentage and any Reserve
which has resulted in a payment pursuant to Section 2.5 above, that increase the
cost to Lenders of funding the LIBOR Rate Loans. Agent shall promptly give
Borrowers notice of such a determination and adjustment, which determination
shall be conclusive absent manifest error.
(iii) There shall not be outstanding at any one time more
than an aggregate of six (6) LIBOR Rate Loans.
(d) Each notice of Continuation or Conversion shall be
irrevocable and binding on Borrowers. In the case of (i) any borrowing of a
Loan, Continuation or Conversion that the related notice of borrowing, notice of
Continuation or notice of Conversion specifies is to be comprised of LIBOR Rate
Loans, or (ii) any payment of principal of, or Conversion or Continuation of,
any LIBOR Rate Loan made other then on the last day of the Interest Period for
such Loan as a result of a payment, prepayment, Conversion or Continuation of
such Loan or acceleration of the maturity of any of the Obligations pursuant to
Section 10 hereof, or for any other reason, then in any such case, upon Lender's
demand, Borrowers shall pay to Agent and/or any Lender and indemnify Agent
and/or any Lender from and against (i) any loss, cost or expense incurred by
Agent and/or any Lender as a result of any failure to fulfill, on or before the
date for such borrowing, Continuation or Conversion, the applicable conditions
set forth in Section 9 hereof, and (ii) any additional losses, costs or expenses
which Agent and/or any Lender may reasonably incur as a result of such payment,
including, without limitation in each such case, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
redeployment of deposits or other funds acquired by Agent and/or any Lender to
fund the LIBOR Rate Loans to be made as part of such borrowing, Continuation or
Conversion.
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3.1.5 Borrowing Base Certificates. Borrowers shall give Agent a
Borrowing Base Certificate on a daily basis.
3.1.6 Administration of Revolving Credit Loans.
-----------------------------------------
(a) Notwithstanding anything to the contrary contained herein,
commencing with the first Business Day following the Closing Date, each
borrowing of Revolving Credit Loans shall be advanced by Agent and each payment
by any Borrower on account of Revolving Credit Loans shall be applied in
accordance with Section 11.7 of this Agreement. On or before 12:00 P.M.,
(Eastern time), on each Settlement Date commencing with the first Settlement
Date following the Closing Date, Agent and Lenders shall make certain payments
as follows: (I) if the aggregate amount of new Revolving Credit Loans made by
Agent during the preceding week (if any) exceeds the aggregate amount of
repayments applied to outstanding Revolving Credit Loans during such preceding
week, then each Lender shall provide Agent with funds in an amount equal to its
Pro Rata Percentage of the difference between (w) such Revolving Credit Loans
and (x) such repayments and (II) if the aggregate amount of repayments applied
to outstanding Revolving Credit Loans during such week exceeds the aggregate
amount of new Revolving Credit Loans made during such week, then Agent shall
provide each Lender with funds in an amount equal to its applicable Pro Rata
Percentage of the difference between (y) such repayments and (z) such Revolving
Credit Loans.
(b) Each Lender shall be entitled to earn interest at the
applicable Revolving Credit Base Rate or Revolving Credit LIBOR Rate,
as applicable, on outstanding Revolving Credit Loans which it has
funded.
(c) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and
Revolving Credit Loans made during the week immediately preceding such
Settlement Date. Such certificate of Agent shall be conclusive in the
absence of manifest error.
3.2 Payments. Except where evidenced by notes or other instruments issued
or made by Borrowers to Lenders 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:
3.2.1 Principal.
----------
(a) Principal payable on account of Revolving Credit Loans shall
be payable by Borrowers, jointly and severally, to Lenders immediately upon the
earliest of (i) the receipt by Agent, any Lender or any Borrower of any proceeds
of any of the Collateral, to the extent of said proceeds, (ii) the occurrence of
an Event of Default in consequence of which Agent 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, Borrowers shall, on demand, repay the Overadvance.
(b) Principal payable on account of the Term Loan shall be
payable by Borrowers, jointly and severally, as set forth in Sections 1.2,
Section 3.4 and the Term Note.
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3.2.2 Interest. Interest accrued on all Loans shall be payable by
Borrowers, jointly and severally, and shall be due on the earliest of (i) the
first calendar 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 consequence of which the maturity and payment of the
Obligations is accelerated, or (iii) termination of this Agreement pursuant to
Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrowers, jointly and severally,
as and when provided in Section 2 hereof, to Agent, Lenders or to any other
Person designated by Agent in writing.
3.2.4 Other Obligations. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrowers, jointly and severally,
to Agent or Lenders as and when provided in this Agreement, the Other Agreements
or the Security Documents, or on demand, whichever is earlier.
3.3 Prepayments.
------------
3.3.1 Except for dispositions of Inventory permitted by Section 8.2.7
(if any), if a Borrower sells any of the Collateral or if any of the Collateral
is lost or destroyed or taken by condemnation, Borrowers shall pay to Agent,
unless otherwise agreed to by Agent, or as otherwise expressly authorized by
this Agreement, as and when received by such Borrower and as a mandatory
prepayment of the outstanding Loans, until paid and satisfied in full, a sum
equal to the proceeds (including insurance proceeds) received by such Borrower
from such sale, loss or destruction. Any such prepayment shall be applied first
to the Term Loan in the inverse order of maturity and then to the Revolving
Credit Loans; provided that, if such Loan is accruing interest at the LIBOR
Based Rate, such prepayment shall be delivered to Agent as and when received by
Borrowers but applied at the end of the applicable Interest Period.
3.3.2 LIBOR Rate Loans. No portion of the LIBOR Rate Loans may be
prepaid during an Interest Period unless Borrowers first satisfy in full their
obligations under Section 3.1.4(d) above arising from such prepayment.
3.4 Application of Payments and Collections. All items of payment received
by Agent by 12:00 noon, (Eastern time), on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
(Eastern 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 Agent and/or any Lender shall be deemed applied by Agent for
the benefit of Lenders on account of the Obligations (subject to final payment
of such items) on the second Business Day after receipt (or deemed receipt) by
Agent of good funds in Agent's account located in Chicago, Illinois, or such
other account as to which Agent may advise Borrowers in writing. Borrowers
irrevocably waive the right to direct the application of any and all payments
and collections at any time or times hereafter received by Agent from or on
behalf of Borrowers, and Borrowers do hereby irrevocably agree that Agent shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Agent or its
agent against the Obligations, in such manner as Agent may deem advisable,
notwithstanding any entry by Borrowers upon any of their books and records. If
as the result of collections of Accounts as authorized by subsection 6.4.6
hereof a credit balance exists in the Loan
13
Account, such credit balance shall not accrue interest in favor of Borrowers,
but shall be available to Borrowers at any time or times for so long as no
Default or Event of Default exists.
3.5 All Loans to Constitute One Obligation. The Loans and LC Guaranties
shall constitute one general Obligation of Borrowers, and shall be secured by
Agent 's Lien upon all of the Collateral.
3.6 Loan Account. Agent shall enter all Loans as debits to the Loan Account
and shall also record in the Loan Account all payments made by Borrowers on any
Obligations and all proceeds of Collateral which are paid to Agent and/or
Lenders, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrowers.
3.7 Statements of Account. Agent will account to Borrowers monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent shall be deemed final, binding and conclusive
upon Borrowers unless Agent is notified by Borrowers in writing to the contrary
within thirty (30) days of the date such accounting is mailed to Borrowers. Such
notice shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lenders' right to cease making Loans to
Borrowers upon or after the occurrence of any Default or Event of Default, this
Agreement shall be in effect for a period commencing as of the Closing Date and
continuing through and including March 9, 2009 (the "Term"), unless this
Agreement shall be sooner terminated as provided in Section 4.2 hereof.
4.2 Termination.
------------
4.2.1 Termination by Lender. Agent may, and at the discretion of
Majority Lenders shall, terminate this Agreement without notice at any time on
or after the occurrence of an Event of Default.
4.2.2 Termination by Borrowers. Upon at least ninety (90) days prior
written notice to Agent, Borrowers may, at their option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrowers have paid all of the Obligations in immediately available funds and
all Letters of Credit and LC Guaranties have expired or been cash collateralized
to Agent's satisfaction. Any notice of termination given by Borrowers shall be
irrevocable unless Agent and Lenders otherwise agree in writing, and Lenders
shall have no obligation to make any Loans or issue or procure any Letters of
Credit or LC Guaranties on or after the termination date stated in such notice.
Borrowers may elect to terminate this Agreement in its entirety only. No section
of this Agreement or Type of Loan available hereunder may be terminated singly.
4.2.3 Termination Charges. At the effective date of any termination of
this Agreement, Borrowers shall pay to Agent for the benefit of Lenders (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 (a) three percent (3.0%) of the Total Credit Facility if termination
occurs during the first year of this Agreement, (b) two percent (2.0%) of the
Total Credit Facility if
14
termination occurs during the second year of this Agreement, and (c) one percent
(1.0%) of the Total Credit Facility if termination occurs during the third year
of this Agreement. Notwithstanding anything hereinabove to the contrary, no
termination charge shall be payable under any of the following circumstances:
(a) if termination of this Agreement occurs pursuant to and in accordance with
the terms of subsection 2.7.1; (b) if termination of this Agreement occurs after
the third anniversary, but on or before the last day of the Term; or (c) if
termination occurs contemporaneously with a sale of all or substantially all of
the equity (capital stock) or assets of Borrowers or Guarantor, or all or
substantially all of the capital stock of Guarantor.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination by Borrowers, Agent or Lenders
of this Agreement. All undertakings, agreements, covenants, warranties and
representations of Borrowers contained in the Loan Documents (including without
limitation, all indemnity obligations) shall survive any such termination, and
Agent and Lenders shall retain all of their Liens in the Collateral and all of
their rights and remedies under the Loan Documents notwithstanding such
termination until Borrowers have paid the Obligations to Agent, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Agent and Lenders
shall not be required to terminate their security interests in the Collateral
unless, with respect to any loss or damage Agent and any Lender may incur as a
result of dishonored checks or other items of payment received by Agent or any
Lender from Borrowers or any Account Debtor and applied to the Obligations or
with respect to any outstanding LC Amounts, Agent shall, at its option, (i) have
received a written agreement executed by Borrowers and by any Person whose loans
or other advances to Borrowers are used in whole or in part to satisfy the
Obligations, indemnifying Agent and any 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 Agent and any Lender, in its reasonable discretion, may deem
necessary to protect Agent and any Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Agent and Lenders of the Obligations, each Borrower hereby
reconfirms its prior grant, and grants to Agent for the benefit of Lenders a
continuing Lien upon all of such 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) Chattel Paper;
(iii) Deposit Accounts;
(iv) Documents;
(v) Fixtures
(vi) General Intangibles, including Payment Intangibles and Software
and, Intellectual Property;
15
(vii) Goods (including all Equipment, Fixtures and Inventory), and
all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(viii) Instruments;
(ix) Investment Property, including without limitation, Certificated
Securities, Uncertificated Securities, Security Entitlements,
Financial Assets;
(x) money (of every jurisdiction whatsoever);
(xi) Letter-of-Credit Rights;
(xii) Supporting Obligations;
(xiii) Commercial Tort Claims;
(xiv) to the extent not included in the foregoing, all other personal
property of any kind or description; and
(xv) all real Property of each Borrower; provided that, to the
extent that any state in which such real Property is located
charges any stamp, recording or similar taxes in connection
with the granting and recording of a mortgage, the amount of
recovery under such mortgage shall be limited to 120% of the
then fair market value of such real Property;
together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, or evidencing,
embodying, incorporating or referring to any of the foregoing, and all Proceeds,
products, offspring, rents, issues, profits and returns of and from any of the
foregoing.
5.2 Other Collateral
----------------
5.2.1 Commercial Tort Claims. Each Borrower shall promptly notify
Agent in writing upon incurring or otherwise obtaining a Commercial Tort Claim
after the Closing Date against any third party and, upon request of Agent,
promptly enter into an amendment to this Agreement and do such other acts or
things deemed appropriate by Agent to give Agent for the benefit of Lenders a
security interest in any such Commercial Tort Claim.
5.2.2 Other Collateral. Each Borrower shall promptly notify Agent in
writing upon acquiring or otherwise obtaining any Collateral after the date
hereof consisting of Deposit Accounts, Investment Property, Letter-of-Credit
Rights or Electronic Chattel Paper and, upon the request of Agent, promptly
execute such other documents, and do such other acts or things deemed
appropriate by Agent to deliver to Agent control with respect to such
Collateral; promptly notify Agent in writing upon acquiring or otherwise
obtaining any Collateral after the date hereof consisting of Documents or
Instruments and, upon the request of Agent, will promptly execute such other
documents, and do such other acts or things deemed appropriate by Agent to
deliver to Agent possession of such Documents which are negotiable and
Instruments, and, with respect to nonnegotiable Documents, to have such
nonnegotiable Documents issued in the name of Agent; and with respect to
Collateral in the possession of a third party, other than Certificated
Securities and
16
Goods covered by a Document, obtain an acknowledgement from the third party that
it is holding the Collateral for the benefit of Agent on behalf of Lenders.
5.3 Lien Perfection; Further Assurances.
------------------------------------
(a) In addition to the foregoing, each Borrower as debtor shall
deliver UCC financing statements as required under the Code, and shall do
anything further that may be lawfully and reasonably required by Agent to
perfect its security interests and to effectuate the intentions and objectives
of this Agreement, including, but not limited to, the execution (if required)
and delivery of continuation statements, amendments to financing statements,
security agreements, contracts and any other documents required hereunder. At
Agent's request, each Borrower shall also immediately deliver (with execution by
such Borrower of all necessary documents or forms to reflect Agent's security
interest therein) to Agent, all items for which Agent must or may receive
possession to obtain a perfected security interest.
(b) Agent is hereby authorized to file financing statements naming
Borrower as debtor, in accordance with the Uniform Commercial Code, and if
necessary, to the extent applicable, to otherwise file financing statements
without Borrower's signature if permitted by law. Each Borrower hereby
authorizes Agent to file all financing statements and amendments to financing
statements describing the Collateral as "All Assets" or using similar language
in any filing office as Agent, in its sole, discretion may determine, including
financing statements containing language indicating that the acquisition by a
third party of any right, title or interest in or to the Collateral without
Agent's consent shall be a violation of Agent's rights. Borrowers agree to
comply with the requirements of all federal and state laws and reasonable
requests of Agent in order for Agent to have and maintain a valid and perfected
first priority security interest in the Collateral including, without
limitation, executing and causing any other Person to execute such documents as
Agent may require to obtain Control (as defined in the UCC) over all Deposit
Accounts, Electronic Chattel Paper, Letter-of-Credit Rights and Investment
Property.
5.4 Key Man Life Insurance. As additional security for the payment and
performance to Agent and Lenders of all Obligations, Borrowers shall have caused
to be assigned to Agent for the benefit of Lenders, and maintained at all times,
Key Man Life Insurance policy on the life of: (i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in an amount
equal to at least $1,000,000; (ii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in an amount equal to at
least $1,000,000; and (iii) ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ in an amount equal to at least
$1,000,000.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 Location of Collateral. All Collateral, other than Inventory in
transit, will at all times be kept by Borrowers at one or more of the business
locations set forth in Exhibit 6.1 hereto, or upon prior written notice to Agent
and delivery of landlord waiver acceptable to Agent, other business locations of
Borrowers that may be opened from time to time subsequent to the Closing Date,
and shall not, without the prior written approval of Agent, be moved therefrom
except for sales of Inventory in the ordinary course of business.
6.2 Insurance of Collateral. Each Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to such
Borrower's business, covering casualty, hazard, public liability, flood and such
other risks in such amounts and with such insurance companies as are reasonably
satisfactory to Agent. Borrowers shall deliver the originals or copies of such
policies, or
17
certificates of insurance in form and substance satisfactory to
Agent, evidencing such issuance to Agent with lender's loss payable
endorsements, in form satisfactory to Agent, naming Agent for the ratable
benefit of Lenders as "lender loss payee", and Agent for the benefit of Lenders
as 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 Agent in the event of cancellation of the policy for any
reason whatsoever and a clause specifying that the interest of Agent shall not
be impaired or invalidated by any act or neglect of any 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 any Borrower fails to provide and pay for
such insurance, Agent may, at its option, but shall not be required to, procure
the same and charge the Borrowers therefor. Borrowers agree to deliver to Agent,
promptly as rendered, true copies of all reports made in any reporting forms to
insurance companies.
6.3 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 Borrowers. If any Borrower fails to promptly pay any
portion thereof when due, Agent may, at its option, but shall not be required
to, pay the same and charge Borrowers therefor. Agent shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Agent's 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
Borrowers' sole risk.
6.4 Administration of Accounts.
---------------------------
6.4.1 Records, Schedules and Assignments of Accounts. Each Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Agent on such periodic basis as Agent
shall request a sales and collections report for the preceding period, in form
satisfactory to Agent. On or before the twentieth day of each month from and
after the date hereof, Borrowers shall deliver to Agent, in form acceptable to
Agent, a detailed aged trial balance of all 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 Agent's request therefor, copies of proof of
delivery and the original copy of all documents, including, without limitation,
repayment histories and present status reports relating to the Accounts so
scheduled and such other matters and information relating to the status of then
existing Accounts as Agent shall reasonably request. In addition, if at any time
following the Closing Date, Accounts in an aggregate face amount in excess of
Two Hundred Fifty Thousand Dollars ($250,000) become ineligible because they
fall within one of the specified categories of ineligibility set forth in the
definition of Eligible Accounts or otherwise established by Agent, Borrowers
shall notify Agent of such occurrence on the first Business Day following such
occurrence and the Borrowing Base shall thereupon be adjusted to reflect such
occurrence. If requested by Agent, each Borrower shall execute and deliver to
Agent 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.
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6.4.2 Discounts, Allowances, Disputes. If any Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, such Borrower shall report such discounts, allowances
or credits, as the case may be, to Agent as part of the next required Schedule
of Accounts. If any amounts due and owing in excess of Fifty Thousand Dollars
($50,000) are in dispute between any Borrower and any Account Debtor, such
Borrower shall provide Agent 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
after the occurrence of an Event of Default which continues without cure for a
period of fifteen (15) days, Agent 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 Agent may deem advisable, and to charge the deficiencies, costs
and expenses thereof, including attorneys' fees, to Borrowers.
6.4.3 Taxes. If an Account includes a charge for any tax payable to
any governmental taxing authority, Agent is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing Authority for the account of any
Borrower and to charge Borrowers therefor; provided, however, that Agent shall
not be liable for any taxes to any governmental taxing authority that may be due
by Borrowers, or any of them.
6.4.4 Account Verification. Whether or not a Default or an Event of
Default has occurred, any of Agent's officers, employees or agents shall have
the right, at any time or times hereafter, in the name of Agent, any designee of
Agent or Borrowers, to verify the validity, amount or any other matter relating
to any Accounts by mail, telephone, telegraph or otherwise. Each Borrower shall
cooperate fully with Agent in an effort to facilitate and promptly conclude any
such verification process.
6.4.5 Maintenance of Dominion Account. Borrowers shall maintain a
Dominion Account pursuant to a tripartite arrangement among Borrowers, Agent and
a bank or banks as may be selected by Borrowers and acceptable to Agent. Such
arrangement shall include such terms and conditions as are acceptable to Agent.
All funds deposited in the Dominion Account shall immediately become the
property of Agent for the benefit of Lenders, and Borrowers shall obtain the
agreement by such banks in favor of Agent to waive any offset rights against the
funds so deposited. Agent assumes no responsibility for such arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
6.4.6 Collection of Accounts; Proceeds of Collateral. To expedite
collection, Borrowers shall endeavor in the first instance to make collection of
their Accounts for Agent. All remittances received by Borrowers on account of
Accounts, together with the proceeds of any other Collateral, shall be held as
Agent's property for the benefit of Lenders, by Borrowers as trustee, of an
express trust for Agent's benefit, and Borrowers shall immediately deposit same
in kind in the Dominion Account, except as otherwise permitted in this
Agreement. Agent retains the right at all times after the occurrence of a
Default or an Event of Default to notify Account Debtors that Accounts have been
assigned to Agent and to collect Accounts directly in its own name and to charge
the collection costs and expenses, including reasonable attorneys' fees to
Borrowers. Agent has no duty to protect, insure, collect or realize upon the
Accounts or preserve rights therein.
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6.5 Administration of Inventory.
----------------------------
6.5.1 Records and Reports of Inventory. Each Borrower shall keep
accurate and complete records of their Inventory. Borrowers shall furnish to
Agent Inventory reports in form and detail satisfactory to Agent at such times
as Agent may request, but at least once each month, not later than the twentieth
day of such month. Each Borrower shall conduct a physical inventory no less
frequently than annually and shall provide to Agent a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Agent shall request.
6.5.2 Returns of Inventory. If at any time or times hereafter any
Account Debtor returns any Inventory to any Borrower, the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
Twenty Five Thousand Dollars ($25,000), such Borrower shall immediately notify
Agent of the same, specifying the reason for such return and the location,
condition and intended disposition of the returned Inventory.
6.6 Records and Schedules of Equipment. Each Borrower shall keep
accurate records, itemizing and describing the kind, type, quality, quantity and
value of their Equipment, and shall furnish Agent with a current schedule
containing the foregoing information on at least an annual basis and more often
if requested by Agent. Immediately on request therefor by Agent, Borrowers shall
deliver to Agent any and all evidence of ownership, if any, of any of the
Equipment.
6.7 Payment of Charges. All amounts chargeable to Borrowers under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Base Rate Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Agent and Lenders to
enter into this Agreement and to make advances hereunder, each Borrower
warrants, represents and covenants to Agent and Lenders that:
7.1.1 Organization and Qualification. Each Borrower and its
Subsidiaries are corporations or limited partnerships, as applicable, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation. Each Borrower and its Subsidiaries are duly
qualified and are authorized to do business and are in good standing as foreign
corporations or organizations, as applicable, in each state or jurisdiction
listed on Exhibit 7.1.1 hereto and in all other states and jurisdictions where
the character of their business or the nature of their activities make such
qualification necessary.
7.1.2 Corporate Power and Authority. Each Borrower and its
Subsidiaries are duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which they
are a party. The execution, delivery and performance of this Agreement and each
of the other Loan Documents have been duly authorized by all necessary corporate
or partnership action, as applicable, and do not and will not (i) require any
consent or approval of the shareholders of such Borrower or any of its
Subsidiaries; (ii) contravene such Borrower's or any of its Subsidiaries
charter, articles or certificate of incorporation or certificate of limited
partnership, as applicable, or bylaws or limited partnership agreements, as
applicable; (iii) violate, or cause such 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
20
having applicability to such 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 such Borrower or
any of its Subsidiaries are a party or by which it or their 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 such Borrower or any of its
Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each Borrower and its Subsidiaries enforceable
against them in accordance with their respective terms.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states (i) the correct
name of each of the Subsidiaries of each Borrower, their jurisdiction of
incorporation and the percentage of their Voting Stock owned by such Borrower,
(ii) the name of each 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 Borrower and each of its Subsidiaries and (iv)
the number of authorized, issued and treasury shares of each Borrower and each
of its Subsidiaries. Each Borrower has good title to all of the shares they
purport 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. 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 each
Borrower or any of its Subsidiaries. There are no outstanding agreements or
instruments binding upon any of Borrower's shareholders relating to the
ownership of their shares of capital stock.
7.1.5 Corporate Names. Neither Borrowers nor any of their Subsidiaries
have been known as or used any corporate, fictitious or trade names except those
listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit 7.1.5, neither
Borrowers nor any of their Subsidiaries have been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets of
any Person.
7.1.6 Business Locations, Agent for Process. Each Borrower's and its
Subsidiaries' executive offices and other places of business are as listed on
Exhibit 6.1 hereto. During the preceding one (1) year period, neither Borrowers
nor any of their Subsidiaries have had an office, place of business or agent for
service of process other than as listed on Exhibit 6.1. Except as shown on
Exhibit 6.1, no Inventory is stored with a bailee, warehouseman or similar
party, nor is any Inventory consigned to any Person.
7.1.7 Title to Properties, Priority of Liens. Each Borrower and its
Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of the Collateral and all of its other Property,
in each case, free and clear of all Liens except Permitted Liens. Each 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. Except with
respect to those Permitted Liens described in Section 8.2.5(d), and in Section
8.2.5(f) and (g) which specifically and expressly provide otherwise, the Liens
granted to Lender under Section 5 hereof are first priority perfected Liens.
21
7.1.8 Accounts. Agent may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by each Borrower
with respect to any Account or Accounts. Unless otherwise indicated in writing
to Agent, with respect to each Account:
(a) It is genuine and in all respects what it purports to be, and
it is not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery of
goods or rendition of services by such 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 such Borrower and the Account Debtor;
(c) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Agent;
(d) Such Account, and Agent's security interest therein, is not,
and will not (by voluntary act or omission of the Borrower) be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or any
other adverse condition known to such Borrower (or with respect to which
Borrower should reasonably have had such knowledge), except for a dispute
resulting in returned goods where such dispute is deemed by Agent to be
immaterial, and each such Account is absolutely owing to such Borrower and is
not contingent in any respect or for any reason;
(e) No Borrower has made an 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 such 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 Agent pursuant to Section 6.4 hereof;
(f) 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 Agent with respect thereto;
(g) To the best of such Borrower's knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor is
Solvent; and
(h) To the best of such 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.
7.1.9 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.
22
7.1.10 Financial Statements, Fiscal Year. Borrowers have caused
to be furnished to Lender year end audited financial statements for June 30,
2003, along with true and complete copies of any management letter(s) delivered
in conjunction therewith. The fiscal year of Borrowers and each of their
Subsidiaries ends on June 30 of each year.
7.1.11 Full Disclosure. The financial statements referred to in
subsection 7.1.10 hereof do not (to the best of Borrowers' knowledge), nor does
this Agreement or any other written statement of Borrowers to Agent and/or
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 Borrowers have failed to disclose to Agent and/or Lender
in writing which materially affects adversely or, so far as Borrowers can now
foresee, will materially affect adversely the Property, business, prospects,
profits or condition (financial or otherwise) of Borrowers or any of their
Subsidiaries or the ability of Borrowers or their Subsidiaries to perform this
Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. Each Borrower and its
Subsidiaries are now, and, after giving effect to the Loans to be made and the
Letters of Credit and LC Guaranties to be issued hereunder, at all times will
be, Solvent.
7.1.13 Surety Obligations. Neither Borrowers nor any of their
Subsidiaries are obligated as surety or indemnitor under any surety or similar
bond or other contract nor has Borrowers or any of their Subsidiaries issued or
entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any other Person.
7.1.14 Taxes. JEH's, Eagles' and Eagle, L.P.'s federal tax
identification numbers are ▇▇-▇▇▇▇▇▇▇, ▇▇-▇▇▇▇▇▇▇ and ▇▇-▇▇▇▇▇▇▇, respectively.
The federal tax identification number of each of Borrowers' Subsidiaries is
shown on Exhibit 7.1.14 hereto. Borrowers and each of their Subsidiaries have
filed all federal, state and local tax returns and other reports they are
required by law to file and have paid, or made provision for the payment of, all
taxes, assessments, fees, levies and other governmental charges upon them, their
income and property as and when such taxes, assessments, fees, levies and
charges are due and payable, unless and to the extent any thereof are being
actively contested in good faith and by appropriate proceedings, and Borrowers
maintain reasonable reserves on their books therefor. The provision for taxes on
the books of Borrowers and their Subsidiaries are adequate for all years not
closed by applicable statutes, and for their current fiscal year.
7.1.15 Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each
Borrower and its Subsidiaries own or possess all the patents, trademarks,
service marks, trade names, copyrights and licenses necessary for the present
and planned future conduct of their 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 7.1.16
hereto.
7.1.17 Governmental Consents. Each Borrower and its Subsidiaries
has, and are 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
23
heretofore or proposed to be conducted by them and to own or lease and operate
its Property as now owned or leased and operated by them.
7.1.18 Compliance with Laws. Each Borrower and its Subsidiaries
has duly complied with, and its Property, 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 such Borrower or such
Subsidiary, as applicable, their Property or the conduct of their business, and
there have been no citations, notices or orders of noncompliance issued to any
Borrower or any of their Subsidiaries under any such law, rule or regulation.
Each Borrower and its Subsidiaries have established and maintain an adequate
monitoring system to insure that they remain 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.
7.1.19 Restrictions. Neither Borrowers nor any of their
Subsidiaries are a party or subject to any contract, agreement or charter or
other corporate restriction which materially and adversely affects their
business or the use or ownership of any of their Property. Neither Borrowers nor
any of their Subsidiaries are a party or subject to any contract or agreement
which restricts their right or ability to incur Indebtedness, other than as set
forth on Exhibit 7.1.19 hereto, none of which prohibit the execution of or
compliance with this Agreement or the other Loan Documents by Borrowers or any
of their Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit 7.1.20 hereto,
there are no actions, suits, proceedings or investigations pending, or, to the
knowledge of Borrowers, threatened, against or affecting any Borrower or any of
its Subsidiaries, or the business, operations, Property, prospects, profits or
condition of such Borrowers or any of its Subsidiaries. Neither Borrowers nor
any of their Subsidiaries are in default with respect to any order, writ,
injunction, judgment, decree or rule of any court, governmental authority or
arbitration board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrowers' performance hereunder, constitute a Default or an Event of Default.
Neither Borrowers nor any of their Subsidiaries are 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.
7.1.22 Leases. Exhibit 7.1.22(a) hereto is a complete listing of
all capitalized leases of each Borrower and its Subsidiaries, and Exhibit
7.1.22(b) hereto is a complete listing of all operating leases of each Borrower
and its Subsidiaries. Each Borrower and its Subsidiaries are in full compliance
with all of the terms of each of their respective capitalized and operating
leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit 7.1.23
hereto, neither Borrowers nor any of their Subsidiaries have any Plan. Borrowers
and each of their Subsidiaries are 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 Borrowers or any of their Subsidiaries exists in
connection with any Plan. Neither Borrowers nor any of their Subsidiaries have
any withdrawal liability in connection with a Multiemployer Plan.
24
7.1.24 Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between each 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 such 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 such Borrower or any of its Subsidiaries or prevent such Borrower or
any of its Subsidiaries from conducting such businesses after the consummation
of the transaction contemplated by this Agreement in substantially the same
manner in which they have heretofore been conducted.
7.1.25 Labor Relations. Except as described on Exhibit 7.1.25
hereto, neither Borrowers nor any of their Subsidiaries are a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrowers' or any of
their Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.1.26 Environmental Matters: Except as disclosed on Exhibit
7.1.26 attached hereto and made a part hereof, each Borrower has no knowledge:
(a) of the presence of any Hazardous Substances on any of
the real property where such Borrower conducts operations or has its personal
property; or
(b) of any on-site spills, releases, discharges, disposal(s)
or storage of Hazardous Substances that have occurred or are presently occurring
on any of such real property or where any Collateral is located; or
(c) of any spills, releases, discharges or disposal(s) of
Hazardous Substances that have occurred or are presently occurring on any other
real property as a result of the conduct, action or activities of such Borrower.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to such
real property.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and in 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 Borrowers' or their Subsidiaries' businesses or
operations that would render the information in any exhibit attached hereto
either inaccurate, incomplete or misleading, so long as Agent has consented to
such changes or such changes are expressly permitted by this Agreement.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent
and Lenders and the parties thereto and the closing of the transactions
described therein or related thereto.
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SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent and/or any Lender,
each Borrower covenants that, unless otherwise consented to by Agent in writing,
it shall:
8.1.1 Visits and Inspections. Permit representatives of Agent and
Documentation Agent, from time to time, as often as may be reasonably requested,
but only during normal business hours, to visit and inspect the Property of
Borrowers and each of their Subsidiaries, inspect, audit and make extracts from
their books and records, and discuss with their officers, their employees and
their independent accountants, Borrowers' and each of their Subsidiaries'
businesses, assets, liabilities, financial condition, business prospects and
results of operations.
8.1.2 Financial Statements. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to their business activities
in which proper entries are made in accordance with sound financial and business
practices, in a manner consistent with the information previously provided to
Agent, reflecting all their financial transactions, and cause to be prepared and
furnished to Agent and Lenders the following:
(a) not later than one hundred and twenty (120) days after the
close of each fiscal year of Borrowers, unqualified audited financial statements
of Borrowers and their Subsidiaries as of the end of such year, on a
Consolidated and consolidating basis, certified by a firm of independent
certified public accountants of recognized standing selected by Borrowers but
acceptable to Agent (except for a qualification with respect to (A) the
reasonableness of fees, charges or credits between or among Borrowers, Guarantor
or any Affiliates or (B) changes in accounting principles with which the
accountants concur) together with any management letters delivered throughout
the year;
(b) not later than forty-five (45) days after the end of each
fiscal month hereafter (other than the first and last fiscal month of each
fiscal year, as to which Borrowers shall have no obligation to deliver to Agent
or Lenders financial statements as at and for the end of such fiscal months),
unaudited interim financial statements of Borrowers and their Subsidiaries as of
the end of such month and of the portion of Borrowers' fiscal year then elapsed,
on a Consolidated and consolidating basis, certified by the chief financial
officers of Borrowers as fairly presenting the Consolidated financial position
and results of operations of Borrowers and their 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;
(c) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrowers have made available to their Public shareholders, if any, and copies
of any regular, periodic and special reports or registration statements which
Borrowers file with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange;
(d) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan; and
26
(e) such other data and information (financial and otherwise) as
Agent, from time to time, may reasonably request, bearing upon or related to the
Collateral or Borrowers' and each of their Subsidiaries' financial condition or
results of operations.
Concurrently with the delivery of the financial statements described in
clause (a) of this subsection 8.1.2, Borrowers shall forward to Agent copies of
the accountants' letters, if any, to Borrowers' management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to Agent certificates of the aforesaid certified public
accountants certifying to Agent that, based upon their examination of the
financial statements of Borrowers and their Subsidiaries performed in connection
with their examination of said financial statements, they are not aware of any
Default or Event of Default, or, if they are aware of such Default or Event of
Default, specifying the nature thereof, and acknowledging, in a manner
satisfactory to Agent, that they are aware that Agent is relying on such
financial statements in making their decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in clauses
(a) and (b) of this subsection 8.1.2, or more frequently if requested by Agent,
Borrowers shall cause to be prepared and furnished to Agent a compliance
certificate in the form of Exhibit 8.1.2 hereto executed by the chief financial
officers of Borrowers.
8.1.3 Landlord and Storage Agreements. Provide Agent with copies of
all agreements between each 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.
8.1.4 Subordinations. Provide Agent with a debt subordination
agreement or other instrument, in form and substance satisfactory to Agent,
executed by Borrowers, or any of them, and in the case of such agreement
executed by any Person who is an officer, director or Affiliate of the Person to
whom Borrowers, or any of them, are or hereafter become indebted for
Subordinated Debt, subordinating in right of payment and claim all of such
Subordinated Debt, and any future advances thereon to the full and final payment
and performance of the Obligations (unless otherwise provided in such
agreement).
8.1.5 Guarantor Financial Statements. Deliver or cause to be delivered
to Agent and Lenders financial statements for Guarantor in form and substance
satisfactory to Agent at such intervals and covering such time periods as Agent
may request. Without limiting the generality of the foregoing, Borrowers shall
deliver to Agent and Lenders, or cause Guarantor to deliver to Lender:
(a) not later than one hundred and twenty (120) days after the
close of each fiscal year of the Guarantor, unqualified audited financial
statements of the Guarantor and its Subsidiaries as of the end of such year, on
a Consolidated and consolidating basis; and
(b) not later than forty-five (45) days after the end of each
fiscal quarter hereafter, unaudited interim financial statements of the
Guarantor and its Subsidiaries as of the end of such quarter and of the portion
of the Guarantor's fiscal year then elapsed, on a Consolidated and consolidating
basis, certified by the chief financial officer of the Guarantor as fairly
presenting the Consolidated financial position and results of operations of the
Guarantor and its Subsidiaries for such quarter and period subject only to
changes from audit and year-end adjustments and except that such statements need
not contain notes.
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8.1.6 Projections. No later than thirty (30) days prior to the end of
each fiscal year of Borrowers, deliver to Agent and Lenders, Projections of the
financial conditions and results of operation of Borrowers for the next
succeeding fiscal year, such Projections to be prepared on a month-to-month
basis.
8.1.7 Notices. Promptly notify Agent in writing of the occurrence of
any event or the existence of any fact which renders any representation or
warranty in this Agreement or in any of the other Loan Documents inaccurate,
incomplete or misleading.
8.1.8 Commercial Tort Claims: Each Borrower will immediately notify
Agent in writing in the event that any Borrower becomes a party to or obtains
any rights with respect to any Commercial Tort Claim. Such notification shall
include information sufficient to describe such Commercial Tort Claim,
including, but not limited to, the parties to the claim, the court in which the
claim was commenced, the docket number assigned to such claim, if any, and a
detailed explanation of the events that gave rise to the claim. Each Borrower
shall execute and deliver to Agent all documents and/or agreements necessary to
grant Agent for the benefit of Lenders a security interest in such Commercial
Tort Claim to secure the Obligations. Each Borrower authorizes Agent to file
(without such Borrower's signature) initial financing statements or amendments,
as Agent deems necessary to perfect its security interest in the Commercial Tort
Claim.
8.1.9 Letter of Credit Rights. Each Borrower shall provide Agent with
written notice of any Letters of Credit for which any Borrower is the
beneficiary. Each Borrower shall execute and deliver (or cause to be executed or
delivered) to Agent, all documents and agreements as Lender may require in order
to obtain and perfect its security interest for the benefit of Lenders in such
Letter of Credit Rights.
8.2 Negative Covenants. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Agent or any Lender, each Borrower
covenants that, unless Agent has first consented thereto in writing, it will
not:
8.2.1 Mergers, Consolidations, Acquisitions. Merge or consolidate, or
permit any Subsidiary of any Borrower to merge or consolidate, with any Person;
nor acquire, nor permit any of their Subsidiaries to acquire, all or any
substantial part of the Property of any Person, without Lenders' prior written
consent.
8.2.2 Loans. Make, or permit any Subsidiary of Borrowers 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 Persons other than Guarantor or an Affiliate, in excess of Two
Hundred Fifty Thousand Dollars ($250,000), in the aggregate outstanding at any
one time during any fiscal year of the such Borrower.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to exist,
or permit any Subsidiary of any Borrower to create, incur or suffer to exist,
any Indebtedness, except:
(a) Obligations owing to Agent or Lenders;
(b) Indebtedness of any Subsidiary of Borrowers to Borrowers;
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(c) accounts payable to trade creditors and obligations and
accruals for current operating expenses (other than for Money Borrowed) which
are not aged more than one hundred twenty (120) days from billing date or more
than forty five (45) days from 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
Borrowers or such Subsidiary shall have set aside such reserves, if any, with
respect thereto as are required by GAAP and deemed adequate by Borrowers or such
Subsidiary and their independent accountants;
(d) Obligations to pay Rentals permitted by subsection 8.2.9;
(e) Permitted Purchase Money Indebtedness;
(f) contingent liabilities arising out of (A) guarantees
permitted under subsection 8.2.6 or as otherwise permitted in this Agreement,
(B) endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business and (C) payments under lease
agreements, employment agreements and other agreements entered into in the
ordinary course of business upon fair and reasonable terms;
(g) Indebtedness owing by Borrowers, or any of them, or any
Subsidiary of any Borrower to the Guarantor or to any other Affiliate in respect
of intercompany advances or charges, provided such advances or charges are made
and incurred in the ordinary course of business pursuant to and consistent with
prior practices of the Guarantor or any Affiliate of the Guarantor and so long
as the interest rate corresponding to any such indebtedness does not exceed
8.75% per annum;
(h) Indebtedness which is secured by real Property;
(i) Subordinated Debt; and
(j) Indebtedness not included in paragraphs (a) or (b) above, or
not otherwise specifically permitted under this Agreement, which does not exceed
at any time, in the aggregate, the sum of Two Million Dollars ($2,000,000).
8.2.4 Affiliate Transactions. Enter into, or be a party to, or permit
any Subsidiary of any Borrower to enter into or be a party to, any transaction
with any Affiliate of Borrowers, except: (i) in the ordinary course of
Borrowers' or such Subsidiary's business and on terms no less favorable to
Borrowers or such Subsidiary than Borrowers or such Subsidiary could obtain in a
comparable arm's length transaction with a Person not an Affiliate of Borrowers
or such Subsidiary; (ii) as otherwise specifically permitted in this Agreement,
in the other Loan Documents or in any waiver of the terms of this covenant
agreed to in writing by Agent and Majority Lender (which waiver will not be
unreasonably withheld or delayed); and (iii) so long as no Default or Event of
Default exists or would exist after giving effect to such payment(s) and the
making of such payment(s) are otherwise permitted in accordance with the terms
of the Subordination Agreements, payments made by Borrowers to (A) Guarantor for
intercompany management fees not to exceed an amount equal to (1) Two Million
One Hundred Thousand Dollars ($2,100,000) in any twelve month period following
the Closing Date or (2) in any one month, One Hundred Seventy Five Thousand
Dollars ($175,000) plus all amounts accrued after the Closing Date but unpaid in
any prior month for the immediately preceding twelve month period, (B) Guarantor
for interest expense of up to (1) Six
29
Hundred Forty Eight Thousand Dollars ($648,000) in any twelve month period
following the Closing Date or (2) in any one month, Fifty Four Thousand Dollars
($54,000) plus all amounts accrued after the Closing Date but unpaid in any
prior month for the immediately preceding twelve month period, (C) TDA for
interest expense of up to (1) Eighty Seven Thousand Six Hundred Dollars
($87,600) in any twelve month period following the Closing Date or (2) in any
one month, Seven Thousand Three Hundred Dollars ($7,300) plus all amounts
accrued after the Closing Date but unpaid in any prior month for the immediately
preceding twelve month period, and (D) TDA for principal payments on account of
Subordinated Debt not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in
any one year period, provided that no such payments shall be made during the
existence of an Overadvance.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of any Borrower to create or suffer to exist, any Lien upon any of
their Property (exclusive of their Real Property existing as of the Closing
Date) income or profits, whether now owned or hereafter acquired, except:
(a) Liens at any time granted in favor of Agent;
(b) 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 Agent's judgment such Lien
does not adversely affect Agent's rights or the priority of Agent's Lien in the
Collateral;
(c) Liens arising in the ordinary course of Borrowers' businesses
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 Borrowers or materially
impair the use thereof in the operation of such Borrowers' businesses;
(d) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(e) Liens securing Indebtedness permitted under Section 8.2.3(h);
(f) such other Liens as appear on Exhibit 8.2.5 hereto; and
(g) such other Liens as Agent and Lenders may hereafter approve
in writing.
8.2.6 Guarantees. Guaranty, indemnify, or otherwise agree to become
liable for the payment or performance by any other Person of any Indebtedness or
other liabilities or obligations of such Person, except:
(a) as otherwise described under subsection 8.2.3 (f)(B); and
(b) for the guaranty by Borrowers of an Affiliate's payment or
performance obligations arising under any instrument or agreement in respect of
Indebtedness for which such Affiliate is liable and which Indebtedness is
secured by a mortgage or deed of trust in favor of the holder of such
Indebtedness against real Property, the title to or ownership of which is in
such Affiliate; provided that, (A) Borrowers, or any of them, are the tenant in
possession of such real
30
Property and (B) maximum liability of Borrowers under all such guarantees does
not exceed Two Million Five Hundred Thousand Dollars ($2,500,000) in the
aggregate at any one time outstanding.
8.2.7 Disposition of Assets. Sell or otherwise dispose of any of, or
permit any Subsidiary of any Borrower to sell or otherwise dispose of, any of
its Property, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except, in each case, for
so long as no Event of Default exists hereunder: (i) sales of Inventory and
sales of other Property which does not constitute Collateral, in each case in
the ordinary course of business; (ii) a transfer of Property to Borrowers by a
Subsidiary of Borrowers; (iii) transfers of Property (other than Collateral) by
Borrowers to (A) any Affiliate, including the Guarantor, in satisfaction of
indebtedness and (B) the Guarantor as a dividend, so long as, in each case, such
transfer is made in the ordinary course of business or pursuant to and
consistent with prior practices of any Affiliate, including the Guarantor, so
long as such dividends are otherwise permitted by this Agreement; or (iv) other
dispositions expressly authorized by this Agreement.
8.2.8 ▇▇▇▇-and-Hold Sales, Etc. Make a sale to any customer or
customers on a guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis, or in the case of sales on a
▇▇▇▇-and-hold basis in an aggregate amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) at any one time.
8.2.9 Leases. Become, or permit any of their Subsidiaries to become, a
lessee under any operating lease (other than a lease under which Borrowers or
any of their Subsidiaries are lessor) of Property if the aggregate Rentals
payable during any current or future period of twelve (12) consecutive months
under the lease in question and all other leases under which Borrowers or any of
their Subsidiaries are then lessee would exceed Eight Million Dollars
($8,000,000); provided, however, that not more than an additional aggregate sum
of Two Million ($2,000,000) may be payable during any current or future period
of twelve (12) consecutive months for Rentals payable (a) under operating leases
and (b) pursuant to Capitalized Lease Obligations, in each case entered into or
incurred, as the case may be, on or after the Closing Date with respect to
Property consisting of Equipment. 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, exclusive of occupancy costs.
8.2.10 Capital Expenditures. Make Capital Expenditures (other than
payments on Capitalized Lease Obligations) which, as to Borrowers and/or any of
their Subsidiaries exceed One Million Five Hundred Thousand Dollars
($1,500,000), in the aggregate, during any fiscal year of Borrowers or be
obligated for Capitalized Lease Obligations in excess of One Million Five
Hundred Thousand Dollars ($1,500,000) during any fiscal year of Borrowers or any
of their Subsidiaries.
8.2.11 Distributions. Declare or make, or permit any Subsidiary of any
Borrower to declare or make, any Distributions unless otherwise expressly
permitted by this Agreement.
8.2.12 Stock of Borrowers and/or Subsidiaries. Issue, or permit any of
their Subsidiaries to issue, any additional shares of their capital stock except
director's qualifying shares and except in respect to stock options to
Borrowers' directors or management, or in conjunction with an initial public
offering.
8.2.13 Restricted Investment. Make or have, or permit any Subsidiary
of Borrowers to make or have, any Restricted Investment.
31
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than Guarantor or a
Subsidiary of Borrowers.
8.2.15 Subordinated Debt. Make any payments of Subordinated Debt in
violation of the corresponding subordination agreement(s).
8.3 Specific Financial Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or any Lender,
Borrowers covenant and agree that unless otherwise consented to by Agent in
writing, they shall:
8.3.1 Minimum Adjusted Net Worth. Maintain at all times a Net Worth
(determined without regard to write-downs of intangibles) of not less than the
following amounts at the end of the following quarterly periods:
Period Net Worth
------ ---------
Quarter ending March 31, 2004 and each
quarter end through March 31, 2005 $8,500,000;
Quarter ending June 30, 2005 and each
quarter end through March 31, 2006 $8,500,000 plus 25% of positive
Net Income for each quarter being
tested on a cumulative basis; and
Quarter ending June 30, 2006 and each An amount equal to the required
quarter end through the end of the Term amount for the immediately prior
quarter plus 50% of the positive Net
Income for each quarter being tested
on a cumulative basis.
8.3.2 Fixed Charge Coverage Ratio. Commencing March 31, 2004, maintain
at all times a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00, to be
tested monthly on a trailing twelve (12) month basis.
8.3.3 Bad Debt Reserve Ratio. Commencing March 31, 2004, maintain a
Bad Debt Reserve Ratio of not less than .55 to 1, to be tested monthly.
8.3.4 Maximum Inter-company Transactions. Borrowers shall not make
payments on account of management expenses and interest expenses to Guarantor or
TDA Industries, Inc. in an amount in excess of the amounts permitted in Section
8.2.4 of this Agreement.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Agent and
Lenders under the other sections of this Agreement, Lenders shall not be
required to make any Loan under this Agreement unless and until
32
each of the following conditions has been and continues to be satisfied:
9.1 Documentation. Agent shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments, opinions and certificates as Lender and its counsel shall require
in connection therewith from time to time, all in form and substance
satisfactory to Agent and its counsel, including without limitation, the
following:
(a) Certificates of Insurance with respect to Borrowers' casualty and
liability insurance policies, together with loss payable endorsements on Agent's
standard form of Lender Loss Payee naming Agent as lender loss payee;
(b) Certified copies of (i) resolutions of Borrowers' and Guarantor's
respective board of directors authorizing the execution and delivery of this
Agreement and the Loan Documents (as applicable) and the performance of all
transactions contemplated hereby and thereby, (ii) Borrowers' and Guarantor's
by-laws and limited partnership agreements, as applicable, and (iii) incumbency
certificates of Borrowers and Guarantor;
(c) A copy of the Articles or Certificates of Incorporation or
Certification of limited partnership, as applicable, of Borrowers and Guarantor,
and all amendments thereto, certified by an officer of such Borrower or by the
Secretary of State or other appropriate official of their respective
jurisdiction of incorporation;
(d) Good standing certificates for Borrowers and Guarantor, issued by
the Secretary of State or other appropriate official of Borrowers' and
Guarantor's jurisdiction of incorporation and each jurisdiction where the
conduct of Borrowers' businesses activities or the ownership of their Properties
necessitates qualification;
(e) A closing certificate signed by the Chief Executive Officers of
Borrowers dated as of the date hereof, stating that (i) the representations and
warranties set forth in Section 7 hereof are true and correct on and as of such
date, (ii) Borrowers are, on such date, in compliance with all the terms and
provisions set forth in this Agreement and (iii) on such date no Default or
Event of Default has occurred or is continuing;
(f) The Security Documents duly executed, accepted and acknowledged by
or on behalf of each of the signatories thereto;
(g) The Other Agreements duly executed and delivered by Borrowers;
(h) The favorable, written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ P.A. and ▇▇▇▇▇▇,
Davidoff, Wolfe, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., counsel to Borrowers and Guarantor, as
to the transactions contemplated by this Agreement and any of the other Loan
Documents;
(i) An initial Borrowing Base Certificate from Borrowers;
(j) Appropriate arrangements for payment of all fees and expenses
owing hereunder;
33
(k) Landlord Waivers for each of Borrowers' locations as listed on
Exhibit 6.1 hereto;
(l) UCC-1 Financing Statements and/or amendments, as necessary;
(m) Evidence of Assignments to Agent of a Key-Man Life Insurance
Policy on the life of (i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in an amount equal to at least
$1,000,000; (ii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in an amount equal to at least $1,000,000; and
(iii) ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ in an amount equal to at least $1,000,000;
(n) Duly executed subordination agreements with respect to the
Subordinated Debt from TDA, in favor of Agent;
(o) Delivery of the original notes for all Accounts that have been
converted to note receivables together with an assignment agreement in form and
substance satisfactory to Agent in its sole discretion; and
(p) Such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in the
other Loan Documents, shall have been satisfied or waived by Lender in writing.
9.4 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.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrowers, or any of them, shall: (i)
fail to make any payment of interest, fees, expenses or principal under the Term
Loan or other Obligations (except those described in clause (ii) hereof) payable
under this Agreement on the due date thereof and such failure shall continue
without cure for three (3) days, provided that such three (3) day cure period
shall not be applicable if such payments are due and payable due to maturity, or
on demand or acceleration following an Event of Default; or (ii) fail to make
any payment of principal under the Revolving Credit Loans on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Agent or any Lender by or on behalf of Borrowers,
any Subsidiary of Borrowers or Guarantor in this Agreement, any of the other
Loan Documents or any instrument, certificate or financial statement furnished
in compliance with or in reference thereto proves to have been false or
34
misleading in any material respect when made or furnished or when reaffirmed
pursuant to Section 7.2 hereof.
10.1.3 Breach of Specific Covenants. Borrowers, or any of them, shall
fail or neglect to perform, keep or observe any covenant contained in Sections
5.2, 5.3, 6.1, 6.2, 6.4, 6.5, 8.1, 8.2 (other than subsection 8.2.5, but only to
the extent set forth in subsection 10.1.4) or 8.3 hereof, on the date that
Borrowers are required to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrowers, or any of them, shall
fail or neglect to keep or observe (i) any covenant contained in subsection
8.2.5 (b) or (c), to the extent any Lien referred to therein and which Borrowers
have suffered to exist has been created or arises without Borrowers' knowledge
or consent or (ii) any other covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
in either case the breach of such covenant is not cured to Agent's or Majority
Lenders' satisfaction within twenty (20) days after the sooner to occur of
Borrowers' receipt of notice of such breach from Agent or the date on which such
failure or neglect first becomes known to any officer of Borrowers.
10.1.5 Default Under Security Documents/Other Agreements. Any event of
default shall occur under, or Borrowers, or any of them, shall default in the
performance or observance of any covenant, condition or agreement contained in,
any of the Security Documents or the Other Agreements and such default shall
continue beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or event of
default which is continuing on the part of Borrowers, or any of them, under any
agreement, document or instrument to which Borrowers are a party or by which
Borrowers or any of their 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.
10.1.7 Uninsured Losses. Any loss, theft, damage or destruction of any
of the Collateral not fully covered (subject to such deductibles as Agent shall
have permitted) by insurance shall have occurred, and such loss, theft, damage
or destruction shall have a material adverse effect on Borrowers' financial
condition, Property or business prospects.
10.1.8 Adverse Changes. There shall occur any material adverse change
in the financial condition, Property or business prospects of Borrowers.
10.1.9 Insolvency and Related Proceedings. Borrowers, or any of them,
or any Guarantor shall cease to be Solvent or shall suffer the appointment of a
receiver, trustee, custodian or similar fiduciary, or shall make an assignment
for the benefit of creditors, or any petition for an order for relief shall be
filed by or against Borrowers, any Subsidiary of Borrowers or any Guarantor
under the Bankruptcy Code (if against Borrowers, any Subsidiary of Borrowers or
any Guarantor, the continuation of such proceeding for more than sixty (60)
days), or Borrowers or any Guarantor shall make any offer of settlement,
extension or composition to their respective unsecured creditors generally.
10.1.10 Business Disruption. There shall occur a cessation of a
substantial part of the businesses of Borrowers, or any of them, or any
Subsidiary of Borrowers for a period which
35
significantly affects Borrowers' or such Subsidiary's capacity to continue their
businesses, on a profitable basis; or Borrowers or any Subsidiary, if existing,
of Borrowers shall suffer the loss or revocation of any license or permit now
held or hereafter acquired by Borrowers or such Subsidiary which is necessary to
the continued or lawful operation of their business; or Borrowers or any
Subsidiary shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of
their business affairs.
10.1.11 Change of Ownership; etc. The Guarantor shall cease to own or
control, beneficially and of record, all of the issued and outstanding capital
stock of Borrowers, or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cease to own or control
beneficially, at least fifteen percent (15%) of the issued and outstanding
capital stock of the Guarantor or Borrowers, or ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall
cease to own or control beneficially, at least fifteen percent (15%) of the
issued and outstanding capital stock of the Guarantor or Borrowers, or ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cease to be actively
engaged in the senior management of Borrowers' business affairs, or upon any
sale or transfer permitted hereunder by the Guarantor of the issued and
outstanding capital stock of Borrowers, the Guarantor shall fail to then deliver
to Agent a writing executed by the Guarantor confirming the continuing
effectiveness of the Guaranty Agreement executed by it in favor of the Agent,
which writing shall contain a reaffirmation by the Guarantor of its continuing
liability under the Surety Agreement in accordance with its terms.
10.1.12 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 Borrowers, any Subsidiary of Borrowers or any Guarantor are
in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from Borrowers', such Subsidiary's or
such Guarantor's complete or partial withdrawal from such Plan.
10.1.13 Challenge to Agreement. Any Borrower, any Subsidiary of any
Borrower or any Guarantor, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted to
Agent or any Lender.
10.1.14 Repudiation of or Default Under Surety Agreement. Any
Guarantor shall revoke or attempt to revoke the Surety Agreement signed by such
Guarantor, or shall repudiate such Guarantor's liability thereunder or shall be
in default under the terms thereof.
10.1.15 Criminal Forfeiture. Any Borrower, any Subsidiary of any
Borrower or any Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of such Borrower, any
Subsidiary of such Borrower or any Guarantor.
10.1.16 Judgments. Any money judgment, writ of attachment or similar
process, singly, or in the aggregate, in each case in excess of Two Hundred
Fifty Thousand Dollars ($250,000), is filed against Borrowers, or any of them,
any Subsidiary of any Borrower or any Guarantor, or any of their respective
Property and such judgment, writ of attachment or similar
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process is not satisfied, bonded to the satisfaction of Lender or stayed, in
each case within 45 days of such filing.
10.2 Acceleration of the Obligations. Without in any way limiting the right
of Agent to demand payment of any portion of the Obligations payable on demand
in accordance with Section 3.2 hereof, upon or at any time after the occurrence
of an Event of Default, all or any portion of the Obligations shall, at the
option of Agent, (but subject to the written direction of Majority Lenders) and
without presentment, demand protest or further notice by Agent or any Lender,
become at once due and payable, and Borrowers shall forthwith pay to Agent for
the benefit of Lenders the full amount of such Obligations, provided, that upon
the occurrence of an Event of Default specified in subsection 10.1.9 hereof, all
of the Obligations shall become automatically due and payable without
declaration, notice or demand.
10.3 Other Remedies. Upon and after the occurrence of an Event of Default,
Agent shall have and may exercise from time to time the following rights and
remedies:
10.3.1 All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights to
which Agent or Lenders may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral, and
to (i) require Borrowers to assemble the Collateral, at Borrowers' expense, and
make it available to Agent at a place designated by Agent which is reasonably
convenient to both parties, and (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrowers,
Borrowers agree not to charge Agent or Lenders for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Agent, in its sole discretion,
may deem advisable. Borrowers agree that ten (10) days written notice to
Borrowers of any public or private sale or other disposition of Collateral shall
be reasonable notice thereof, and such sale shall be at such locations as Agent
may designate in said notice. Agent shall have the right to conduct such sales
on Borrowers' premises, without charge therefor, and such sales may be adjourned
from time to time in accordance with applicable law. Agent shall have the right
to sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Agent or any 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.
10.3.4 Agent is hereby granted a license or other right to use,
without charge, Borrowers' 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 Borrowers' rights under all licenses
and all franchise agreements shall inure to Agent's benefit.
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10.3.5 Agent may, at its option, require Borrowers to deposit with
Agent funds equal to the LC Amount. Any such deposit shall be held by Agent as a
reserve to fund future payments on such LC Guaranties and future drawings
against such Letters of Credit. At such time as all LC Guaranties have been paid
or terminated and all Letters of Credit have been drawn upon or expired, any
amounts remaining in such reserve shall be applied against any outstanding
Obligations, or, if all Obligations have been indefeasibly paid in full,
returned to Borrowers.
10.4 Payments after an Event of Default. The proceeds realized from the
sale of any Collateral may be applied as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of Agent in
connection with enforcing the rights of the Lenders under this Agreement and the
other Loan Documents and any protective advances made by Agent with respect to
the Collateral under or pursuant to the terms of this Agreement;
SECOND, to payment of any fees owed to Agent;
THIRD, to the payment of all of the Obligations (other than Obligations
arising under any Hedging Agreement) consisting of accrued fees and interest;
FOURTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letter of Credit or LC Guaranty);
FIFTH, to all other Obligations and other obligations which shall have
become due and payable under the other Loan Documents or otherwise and not
repaid pursuant to clauses "FIRST" through "FOURTH" above;
SIXTH, to the payment of all Obligations of the Borrowers to the Agent,
Agent's Affiliates, Bank or Bank Affiliates arising out of any Hedging Agreement
or cash management services which have not been reserved for by Agent;
SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive an amount equal to
its Pro Rata Share (based on the proportion that the then outstanding Loans held
by such Lender bears to the aggregate then outstanding Loans) of amounts
available to be applied pursuant to clauses "THIRD", "FOURTH" and "FIFTH" above;
and (iii) to the extent that any amounts available for distribution pursuant to
clause "FOURTH" above are attributable to the issued but undrawn amount of and
outstanding Letter of Credit or LC Guaranty, such amounts shall be held by the
Agent in a cash collateral account and applied (A) first, to reimburse the
issuer from time to time for any drawings under such Letter of Credit or LC
Guaranty and (B) then, following the expiration of all Letters of Credit and LC
Guaranties, to all other obligations of the types described in clauses "FOURTH",
"FIFTH" and "SIXTH" above in the manner provided in this Section 10.4.
Notwithstanding anything to the contrary contained in this Section 10.4,
Agent and FCC in
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its capacity as Lender, shall have the exclusive right to apply any proceeds
owing to Borrowers or Guarantor from Agent, Agent's Affiliates, Bank or Bank's
Affiliates under any Hedging Agreement against the Obligations owing to Agent
and/or FCC in its capacity as Lender prior to any distribution in accordance
with clauses "FIRST" through "SEVENTH" above.
10.5 Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrowers
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule or in any Surety Agreement given to Agent or any Lender or contained in
any other agreement between Agent or any Lender and Borrowers or Guarantor,
heretofore, concurrently, or hereafter entered into, shall be deemed cumulative
to and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of Borrowers herein contained. The failure or delay of
Agent or any Lender to require strict performance by Borrowers of any provision
of this Agreement or to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans and
all other Obligations owing or to become owing from Borrowers to Agent or any
Lender shall have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of Borrowers contained in this
Agreement or any of the other Loan Documents and no Event of Default by
Borrowers under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Agent or any 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 Agent or any Lender and
directed to Borrowers.
SECTION 11. AGENT
As between Agent, on one hand, and Lenders, on the other hand, Agent and
each Lender, who are now or shall become parties to this Agreement, agrees as
follows (and the Borrowers hereby consent to, and approve, such agreement):
11.1 Appointment and Authorization. Each Lender, and each subsequent holder
of any of the Notes by its acceptance thereof, hereby irrevocably appoints and
authorizes Agent to take such action on its behalf and to exercise such powers
under this Agreement as are delegated to Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. Subject to the provisions
of this Agreement, Agent will handle all transactions relating to the Loans and
all other Obligations, including, without limitation, all transactions with
respect to Letters of Credit, LC Guaranties, this Agreement, the other Loan
Documents and all related documents in accordance with its usual practices. The
rights, privileges and remedies accorded to the Agent hereunder shall be
exercised by Agent on behalf of and for the ratable benefit of all Lenders.
11.2 General Immunity. In performing its duties as Agent hereunder, Agent
will take the same care as it takes in connection with loans in which it alone
is interested. However, neither Agent nor any of its directors, officers, agents
or employees shall be liable for any action taken or omitted to be taken by it
or them hereunder or in connection herewith except as such action or omission
are caused solely from its or their own gross negligence or willful misconduct
unless such action was taken or omitted to be taken by Agent at the direction of
Majority Lenders.
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11.3 Consultation with Counsel. Agent may consult with legal counsel and
any other professional advisors or consultants deemed necessary or appropriate
and selected by Agent and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel or advisors.
11.4 Documents. Agent shall not be under a duty to examine into or pass
upon the effectiveness, genuineness or validity of this Agreement or any of the
Notes or any other Loan Document furnished pursuant hereto or in connection
herewith, and Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be. In addition, Agent shall not
be liable for failing to make any inquiry concerning the accuracy, performance
or observance of any of the terms, provisions or conditions of such instrument
or document.
11.5 Rights as a Lender. With respect to its applicable Pro Rata Share in
each of the Loans, Agent shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not Agent, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include
Agent in its individual capacity. Subject to the provisions of this Agreement,
Agent may lend money to and generally engage in any kind of business with
Borrowers and its Affiliates as if it were not Agent.
11.6 Responsibility of Agent. It is expressly understood and agreed that
the obligations of Agent hereunder are only those expressly set forth in this
Agreement and that Agent shall be entitled to assume that no Default or Event of
Default, has occurred and is continuing, unless Agent has actual knowledge of
such fact. Except to the extent Agent is required by Lenders pursuant to the
express terms hereof to take a specific action, Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights which may be vested in it by, or with respect to taking or refraining
from taking any action or actions that it may be able to take under or in
respect of, this Agreement and the Loan Documents. Agent shall incur no
liability under or in respect of this Agreement and the Loan Documents by acting
upon any notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party or
parties, or with respect to anything that it may do or refrain from doing in the
reasonable exercise of its judgment, or that may seem to it to be necessary or
desirable under the circumstances. It is agreed among Agent and Lenders that
Agent shall have no responsibility to carry out audits or otherwise examine the
books and records or properties of any Borrower, except as Agent in its
reasonable discretion deems appropriate and in accordance with the terms of this
Agreement. The relationship between Agent and each Lender is and shall be that
of agent and principal only and nothing herein shall be construed to constitute
Agent a joint venturer with any Lender, a trustee or fiduciary for any Lender or
for the holder of a participation therein nor impose on Agent duties and
obligations other than those set forth herein.
11.7 Collections and Disbursements.
------------------------------
(a) Agent will have the right to collect and receive all payments of
the Obligations, and to collect and receive all reimbursements for draws or
payments made under the Letters of Credit or LC Guaranties respectively,
together with all fees, charges or other amounts due under this Agreement and
the other Loan Documents, and Agent will remit to each Lender, according to its
applicable Pro Rata Percentage, all such payments actually received by Agent
(subject to any required clearance procedures) in accordance with the settlement
procedures established from time to time. Settlements (including adjustments of
the proportionate shares among
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the Lenders) shall occur weekly in accordance with Section 3.1.6 on the
Settlement Dates, or more frequently as determined by Agent. Between Settlement
Dates, all collections and payments shall first be applied to reduce the
outstanding principal balance of the Revolving Credit Loans and if FCC is the
Agent, collections and payments received between Settlement Dates shall be used
to reduce FCC's proportionate share of the Revolving Credit Loans.
(b) If any such payment received by Agent or FCC in its capacity as
the issuer of Letters of Credit or LC Guaranties is rescinded or otherwise
required to be returned for any reason at any time, whether before or after
termination of this Agreement and the other Loan Documents, each Lender will,
upon written notice from Agent, promptly pay over to Agent its Pro Rata
Percentage of the amount so rescinded or returned, together with interest and
other fees thereon if also required to be rescinded or returned.
(c) All payments by Agent and Lenders to each other hereunder shall be
in immediately available funds. Agent will at all times maintain proper books of
account and records reflecting the interest of each Lender in the Loans, in a
manner customary to Agent's keeping of such records, which books and records
shall be available for inspection by each Lender at reasonable times during
normal business hours, at such Lender's sole expense. Agent may treat the payees
of any Note as the holder thereof until written notice of the transfer thereof
shall have been received by Agent in accordance with Section 11.16. In the event
that any Lender shall receive any payments in reduction of the Loans in an
amount greater than its applicable Pro Rata Percentage in respect of Obligations
to Lenders evidenced hereby (including, without limitation amounts obtained by
reason of setoffs), such Lender shall hold such excess in trust for Agent (on
behalf of all other Lenders) and shall promptly remit to Agent such excess
amount so that the amounts received by each Lender hereunder shall at all times
be in accordance with its applicable Pro Rata Percentage. To the extent
necessary for each Lender's actual percentage of all outstanding Loans to equal
its applicable Pro Rata Percentage, the Lender having a greater share of any
payment(s) than its applicable Pro Rata Percentage shall acquire a participation
in the applicable Pro Rata Share of the other Lenders as determined by Agent.
11.8 Indemnification. Lenders hereby each indemnify Agent (and Agent's
Affiliates with respect to Letters of Credit and LC Guaranties) ratably
according to the respective amounts of each Lender's Pro Rata Percentage, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against Agent
(or Agent's Affiliates as the case may be) in any way relating to or arising out
of this Agreement or any other Loan Document or any action taken or omitted by
Agent (or Agent's Affiliates, as the case may be) under or related to this
Agreement or the Loans, provided that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from Agent's
(or Agent's Affiliate's, as the case may be) gross negligence or willful
misconduct unless such action was taken or omitted to be taken by Agent (or
Agent's Affiliates, as the case may be) at the direction of Majority Lenders.
Agent shall have the right to deduct, from any amounts to be paid by Agent to
any Lender hereunder, any amounts owing to Agent by such Lender by virtue of
this Section.
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11.9 Expenses.
---------
(a) All out-of-pocket costs and out-of-pocket expenses incurred by
Agent and not reimbursed on demand by Borrowers, in connection with the
analysis, negotiation, preparation, consummation, creation, amendment,
administration, termination work-out, forbearance and enforcement of the Loans
(including, without limitation, audit expenses, counsel, consultant and expert
fees and expenditures to protect, preserve and defend Agent's, and each Lender's
rights and interest under this Agreement and under the other Loan Documents) as
provided elsewhere in this Agreement shall be shared and paid on demand by
Lenders pro rata based on their applicable Pro Rata Percentage.
(b) Agent may deduct from payments or distributions to be made to
Lenders such funds as may be necessary to pay or reimburse Agent for such costs
or expenses.
11.10 No Reliance. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the other Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent. Each Lender
shall continue to make its own analysis and evaluation of each Borrower. Agent
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Borrower, any obligor or any Account Debtor of
any Borrower; the accuracy, sufficiency or currency of any information
concerning the financial condition, prospects or results of operations of any
Borrower; or the sufficiency, authenticity, legal effect, validity or
enforceability of this Agreement or the other Loan Documents. Agent assumes no
responsibility or liability with respect to the collectibility of the
Obligations or the performance by any Borrower of any obligation under this
Agreement or the Loan Documents.
11.11 Reporting. During the term of this Agreement, Agent will promptly
furnish each Lender with copies of all notices and financial statements of
Borrowers required to be delivered or obtained hereunder and such other
financial statements and reports and other information in Agent's possession as
any Lender may reasonably request. Agent will promptly notify Lenders when it
receives actual knowledge of any Event of Default under the Loan Documents.
11.12 Removal of Agent. Agent may resign at any time upon giving thirty
(30) days prior written notice thereof to Lenders and Borrowers. Agent may be
removed as Agent hereunder upon the written consent of all Lenders exclusive of
Agent upon the following: (i) willful misconduct in the performance of Agent's
duties or responsibilities under this Agreement as finally determined by a court
of competent jurisdiction; or (ii) if a receiver, trustee or conservator is
appointed for Agent or any state or federal regulatory authority assumes
management or control of Agent or if, under applicable law, the administrative
or discretionary duties and responsibilities of Agent hereunder become
controlled by or subject to the approval of any state or federal regulatory
authority. Upon any resignation or permitted removal of Agent, Lenders
(exclusive of Agent) shall have the right to appoint a successor Agent by
majority vote of the other Lenders (based upon the Pro Rata Percentages of the
other Lenders). Upon the acceptance of the appointment as a successor Agent
hereunder by such successor Agent, such successor Agent shall thereupon succeed
to and become vested with all rights, powers, obligations and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder.
11.13 Action on Instructions of Lenders. With respect to any provision of
this Agreement, or any issue arising thereunder, concerning which Agent is
authorized to act or withhold action by direction of Lenders (or, if applicable,
Majority Lenders), Agent shall in all cases be fully protected
42
in so acting, or in so refraining from acting, hereunder in accordance with
written instructions signed by Lenders (or, if applicable, Majority Lenders).
Such instructions and any action taken or failure to act pursuant thereto shall
be binding on all Lenders and on all holders of the Notes.
11.14 Several Obligations. The obligation of each Lender is several, and
neither Agent nor any other Lender shall be responsible for the obligation and
commitment of any other Lender.
11.15 Consent of Lenders.
-------------------
(a) Except as expressly provided herein, Agent shall have the sole and
exclusive right to service, administer and monitor the Loans and the Loan
Documents, including, without limitation, the right to exercise all rights,
remedies, privileges and options under this Agreement and under the other Loan
Documents, including, without limitation, the credit judgment with respect to
the making of Loans and the determination as to the basis on which and extent to
which Loans may be made and, upon consultation with Agent's Affiliates, the
determination as to whether draws should be honored for Letters of Credit.
(b) Notwithstanding anything to the contrary contained in Section
11.15(a) above, Agent shall not without the prior written consent of all
Lenders: (i) extend any payment date under the Notes or the Term of this
Agreement; (ii) reduce any interest rate applicable to any of the Loans, any fee
payable to Lenders hereunder or any fee for any Letter of Credit or LC Guaranty;
(iii) increase the Total Credit Facility; (iv) waive any Event of Default under
Section 10.1.1 and Section 10.1.2; (v) compromise or settle all or a portion of
the Obligations; (vi) release any obligor from the Obligations except in
connection with termination of the Revolving Credit Facility and the Term Loan
and full payment and satisfaction of all Obligations; (vii) amend the definition
of Majority Lenders; (viii) amend this Section 11.15(b); or (ix) release
Collateral in excess of Five Hundred Thousand Dollars ($500,000) in the
aggregate in any fiscal year provided that Agent may, in its discretion and
without the consent of any Lenders, release insurance proceeds collected under
Section 6.1.2 to Borrowers to permit the repair, reconstruction or replacement
of the loss or damage to Collateral.
(c) Notwithstanding anything to the contrary contained in Section
11.15(a) above, and subject to any applicable limitation set forth in Section
11.15(b) above, Agent shall not, without the prior written consent of Majority
Lenders: (i) waive any Event of Default; (ii) consent to any Borrower's taking
any action which, if taken, would constitute an Event of Default under this
Agreement or under any of the other Loan Documents; or (iii) amend or modify or
agree to an amendment or modification of this Agreement.
(d) After an acceleration of the Obligations, Agent shall have the
sole and exclusive right, after consultation (to the extent reasonably
practicable under the circumstances) with all Lenders and, unless otherwise
directed by Majority Lenders, to exercise or refrain from exercising any and all
right, remedies, privileges and options under this Agreement or the other Loan
Documents and available at law or in equity to protect the rights of Agent and
Lenders and collect the Obligations, including, without limitation, instituting
and pursuing all legal actions brought against any Borrower or to collect the
Obligations, or defending any and all actions brought by any Borrower or other
Person; or incurring expenses or otherwise making expenditures to protect the
Collateral, the Loans or Agent's or any Lenders' rights or remedies.
43
11.16 Participations and Assignments. Each Borrower hereby acknowledges and
agrees that any Lender may at any time (subject to the prior written consent of
Agent): (a) grant participations in up to forty-nine percent (49%) of its Pro
Rata Share of the Loans and of its right, title and interest therein or in or to
this Agreement (collectively, "Participations") to any other lending office of
such Lender or to any Participating Lender; provided, however, that: (i) all
amounts payable by Borrowers to each Lender hereunder shall be determined as if
such Lender had not granted such Participation; and (ii) any agreement pursuant
to which any Lender may grant a Participation: (A) shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of Borrowers hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provisions of this Agreement; (B) such
participation agreement may provide that such Lender will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participating Lender if such amendment, modification or waiver would reduce the
principal of or rate of interest on the Loans, increase the amount of the Total
Credit Facility, or postpone the date fixed for any scheduled payment of
principal of or interest on the Loans; and (C) shall not relieve such Lender
from its obligations, which shall remain absolute, to (subject to the terms and
conditions hereof) make Loans hereunder; and (b) assign, pursuant to a written
assignment and acceptance in form and substance satisfactory to Agent (the
"Assignment") all or any percent of its Pro Rata Share of the Loans, or any
right, title and interest therein or in and to this Agreement to any financial
institution so long as (i) after any such assignment occurs, the Pro Rata Share
of each Lender under this Agreement equals at least $5,000,000, (ii) Agent
consents to such assignment in writing, which consent shall not be unreasonably
withheld, and (iii) Agent receives an assignment fee from the assigning Lender
(not reimbursable by or chargeable to the Borrowers) of $3,500. Upon the
execution by the assignor and assignee of the Assignment, and delivery to Agent
of the Assignment for acceptance, the assigning Lender shall, to the extent
provided in the Assignment, be released from its obligations under this
Agreement and the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment have the rights and obligations of a Lender
hereunder. All Participations and assignments hereunder shall be of all of the
Loans in the same proportion as is the Pro Rata Percentage of all Loans of the
Lender making the assignment or granting the Participation. Each Borrower agrees
that it will use its best efforts to assist and cooperate with Agent in any
manner reasonably requested by Agent to effect the sale of participations in or
assignments pursuant to this Section 11.16, including, without limitation,
assisting in the preparation of appropriate disclosure documents. Borrower
further agrees that Agent may disclose credit information regarding such
Borrower to any potential participant or assignee.
11.17 Borrowers' Consent. Any amendment to Section 11 (other than Section
11.16) of this Agreement shall not require Borrower's consent.
SECTION 12. MISCELLANEOUS
12.1 Power of Attorney. Each Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as such
Borrower's true and lawful attorney (and agent-in-fact), coupled with an
interest, solely for the purposes set forth below, and Agent, or Agent's agent,
may, without notice to such Borrower and in either Borrower's or Agent's name,
but at the cost and expense of such Borrower:
12.1.1 At such time or times upon or after the occurrence of a Default
or an Event of Default as Agent or said agent, in its sole discretion, may
determine, endorse such Borrower's
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name on any checks, notes, acceptances, drafts, money orders or any other
evidence of payment or proceeds of the Collateral which come into the possession
of Agent or under Agent's control.
12.1.2 At such time or times upon or after the occurrence of an Event
of Default as Agent or its agent in its sole discretion may determine: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of such
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Agent
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign such Borrower's
name to a proof of claim in bankruptcy or similar document against any Account
Debtor or to any notice of lien, assignment or satisfaction of lien or similar
document in connection with any of the Collateral; (vi) receive, open and
dispose of all mail addressed to such Borrower and to notify postal authorities
to change the address for delivery thereof to such address as Agent may
designate; (vii) endorse the names of such Borrower upon any of the items of
payment or proceeds relating to any Collateral and deposit the same to the
account of Agent on account of the Obligations; (viii) endorse the names of such
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 such Borrower's stationery and sign
the names of such 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, and any other Collateral; (xi) make and adjust claims under
policies of insurance, and (xii) do all other acts and things necessary, in
Agent's determination, to fulfill such Borrower's obligations under this
Agreement.
12.2 Indemnity. Borrowers hereby agree to indemnify Agent and hold Agent
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Agent (including reasonable attorneys
fees and legal expenses) as the result of Borrowers' failure, or alleged
failure, to observe, perform or discharge Borrowers' duties hereunder. In
addition, Borrowers shall defend Agent and each Lender against and save each
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 Agent and each Lender by any Person under any
Environmental Laws or similar laws by reason of Borrowers' or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials or
other toxic substances. Notwithstanding any contrary provision in this
Agreement, the obligation of Borrowers under this Section 12.2 shall survive the
payment in full of the Obligations and the termination of this Agreement.
12.3 Modification of Agreement; Sale of Interest. This Agreement may not be
modified, altered or amended except by an agreement in writing signed by
Borrowers, Agent and Lenders. Borrowers 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, Borrowers'
rights, title, interests, remedies, powers, and duties hereunder or thereunder.
Borrowers hereby consent to any Lender's participation, sale, assignment,
transfer or other disposition, at any time or times hereafter, of this Agreement
and any of the other Loan Documents, or of any portion
45
hereof or thereof, including, without limitation, any Lender's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. 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. Borrowers agree that they will use their best efforts to assist and
cooperate with the transferring Lender in any manner reasonably requested by
such 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.
Borrowers further agree that each Lender may disclose credit information
regarding Borrowers and their 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 Borrowers, Agent and each Lender permitted under
Section 12.3 hereof.
12.6 Cumulative Effect, Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made coextensive 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, five (5)
days after deposit in the mail, postage prepaid, or one (1) Business Day after
deposit with an overnight courier or in the case of facsimile notice, when sent,
addressed as follows:
If to Agent: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
46
With a copy to: Blank Rome LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Lenders: To the address for each Lender set forth on Annex I hereto.
If to Borrowers: JEH/Eagle Supply, Inc., Eagle Supply, Inc. and/or
JEH/Eagle, L.P.
c/o Eagle Supply Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Executive Vice President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: Eagle Supply Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Executive Vice President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: until June 30, 2004 at:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
One Harbour Place
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esquire
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
at all times after June 30, 2004 at:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Corporate Center Three at International Plaza
4221 West Boy Scout
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esquire
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8, provided, however, that any notice,
request or demand to or upon Agent pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Agent. Any notice provided hereunder to
any Borrower shall be deemed to have been provided to, and shall bind and be
effective against, all Borrowers.
12.9 Lender's Consent. 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
47
action, inaction condition or event, Agent or any Lender shall be authorized to
give or withhold such 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. Borrowers hereby authorize and permit Agent and
each Lender to respond to usual and customary credit inquiries from third
parties concerning Borrowers or any of their 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 the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
12.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
12.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN PHILADELPHIA,
PENNSYLVANIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF AGENT'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OR ANY
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
NEW YORK AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWERS,
AGENT OR ANY LENDER, BORROWERS HEREBY CONSENT AND AGREE THAT THE SUPREME COURT
OF THE STATE OF NEW YORK, SITTING IN NEW YORK COUNTY, OR, AT AGENT'S OPTION, THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
BORROWERS, AGENT OR ANY LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWERS EXPRESSLY SUBMIT AND
CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND BORROWERS HEREBY WAIVE ANY OBJECTION WHICH BORROWERS MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY, SUCH COURT. BORROWERS HEREBY WAIVE PERSONAL SERVICE OF
THE SUMMONS,
48
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
BORROWERS' ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF AGENT OR LENDER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT 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 BORROWERS. BORROWERS WAIVE (i) THE RIGHT TO TRIAL BY JURY
(WHICH AGENT AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL
PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY AGENT ON WHICH BORROWERS MAY IN ANY WAY BE LIABLE
AND HEREBY RATIFY AND CONFIRM WHATEVER AGENT MAY DO IN THIS REGARD; (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 AGENT TO EXERCISE ANY OF
AGENT'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWERS ACKNOWLEDGE THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT AND LENDERS' ENTERING INTO
THIS AGREEMENT AND THAT AGENT AND EACH LENDER ARE RELYING UPON THE FOREGOING
WAIVERS IN THEIR FUTURE DEALINGS WITH BORROWERS. BORROWERS WARRANT AND REPRESENT
THAT THEY HAVE REVIEWED THE FOREGOING WAIVERS WITH THEIR LEGAL COUNSEL AND HAVE
KNOWINGLY AND VOLUNTARILY WAIVED THEIR 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 Parties to Act in a Commercially Reasonable Manner. Each party hereto
agrees to act at all times in their dealings with the other party hereto in a
commercially reasonable manner.
SECTION 13. SPECIAL INTER-BORROWER AND GUARANTOR PROVISIONS
13.1 Certain Borrower and Guarantor Acknowledgments and Agreements.
13.1.1 Each Borrower and Guarantor acknowledge that it will enjoy
significant benefits from the business conducted by the other Borrower because
of, inter alia, their combined ability to bargain with other Persons including
without limitation their ability to receive the Total
49
Credit Facility on favorable terms granted by this Agreement and other Loan
Documents which would not have been available to an individual Borrower acting
alone. Each Borrower and Guarantor has determined that it is in its best
interest to procure the Total Credit Facility which each Borrower may utilize
directly and which receive the credit support of the other Borrower as
contemplated by this Agreement and the other Loan Documents.
13.1.2 The Agent has advised the Borrowers that Agent and Lenders are
unwilling to enter into this Agreement and the other Loan Documents and make
available the Total Credit Facility extended hereby to any Borrower unless each
Borrower and Guarantor agree, among other things, to be jointly and severally
liable for the due and proper payment of the Obligations of Borrowers under this
Agreement and other Loan Documents. Each Borrower and Guarantor has determined
that it is in its best interest and in pursuit of its purposes that it so induce
the Lender to extend credit pursuant to this Agreement and the other documents
executed in connection herewith (i) because of the desirability to Borrowers of
the Total Credit Facility, the interest rates and the modes of borrowing
available hereunder, (ii) because each Borrower may engage in transactions
jointly with the other Borrowers and (iii) because each Borrower may require,
from time to time, access to funds under this Agreement for the purposes herein
set forth.
13.1.3 Each Borrower and Guarantor has determined that it has and,
after giving effect to the transactions contemplated by this Agreement and the
other Loan Documents (including, without limitation, the inter-Borrower
arrangement set forth in this Section 13.1) will have, assets having a fair
saleable value in excess of the amount required to pay its probable liability on
its existing debts as they fall due for payment and that the sum of its debts is
not and will not then be greater than all of its Property at a fair valuation,
that such Borrower and Guarantor has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature and that the value of
the benefits to be derived by such Borrower and Guarantor from the access to
funds under this Agreement (including, without limitation, the inter-Borrower
arrangement set forth in this Section 13.1) is reasonably equivalent to the
obligations undertaken pursuant hereto.
13.1.4 Guarantor (on behalf of each Borrower) shall maintain records
specifying (a) all Obligations incurred by each Borrower, (b) the date of such
incurrence, (c) the date and amount of any payments made in respect of such
Obligations and (d) all inter-Borrower obligations pursuant to this Section 13.
Guarantor shall make copies of such records available to the Agent, upon
request.
13.2 Maximum Amount Of Joint and Several Liability. To the extent that
applicable law otherwise would render the full amount of the joint and several
obligations of any Borrower and Guarantor hereunder and under the other Loan
Documents invalid or unenforceable, such Borrower's and Guarantor's obligations
hereunder and under the other Loan Documents shall be limited to the maximum
amount which does not result in such invalidity or unenforceability, provided,
however, that each Borrower's and Guarantor's obligations hereunder and under
the other Loan Documents shall be presumptively valid and enforceable to their
fullest extent in accordance with the terms hereof or thereof, as if this
Section 13.2 were not a part of this Agreement.
13.3 Authorization of Guarantor by Borrowers.
----------------------------------------
13.3.1 Each of the Borrowers hereby irrevocably authorizes Guarantor
to give notices, make requests, make payments, receive payments and notices,
give receipts and execute
50
agreements, make agreements or take any other action whatever on behalf of such
Borrower under and with respect to any Loan Document and each Borrower shall be
bound thereby. This authorization is coupled with an interest and shall be
irrevocable, and the Agent may rely on any notice, request, information supplied
by Guarantor, every document executed by Guarantor every agreement made by
Guarantor or other action taken by Guarantor in respect of the Borrowers or any
thereof as if the same were supplied, made or taken by any or all Borrowers.
Without limiting the generality of the foregoing, the failure of one or more
Borrowers to join in the execution of any writing in connection herewith shall
not, unless the context clearly requires, relieve any such Borrower from
obligations in respect of such writing.
13.3.2 Borrowers and Guarantor acknowledge that the credit provided
hereunder is on terms more favorable than any Borrower acting alone would
receive and that each Borrower benefits directly and indirectly from all Loans
hereunder. Each of the Borrowers and Guarantor, shall be jointly and severally
liable for all Obligations, regardless of, inter alia, which Borrower requested
(or received the proceeds of) a particular Loan.
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year specified at the beginning of this Agreement.
JEH/EAGLE SUPPLY, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
EAGLE SUPPLY, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
JEH/EAGLE, L.P.
By: JEH/Eagle Supply, Inc.
Its General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
AGENT:
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
SIGNATURES S-1 TO LOAN AND SECURITY AGREEMENT
[SIGNATURES CONTINUED ON NEXT PAGE]
DOCUMENTATION AGENT:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------------
Title: Duly Authorized Signatory
-------------------------------------------
LENDERS:
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------------
Title: Duly Authorized Signatory
-------------------------------------------
SIGNATURES S-2 TO LOAN AND SECURITY AGREEMENT
[SIGNATURES CONTINUED ON NEXT PAGE]
AGREED TO AND ACKNOWLEDGED,
INTENDING TO BE LEGALLY BOUND:
GUARANTOR:
EAGLE SUPPLY GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Title: Executive Vice President & Treasurer
SIGNATURE S-3 TO LOAN AND SECURITY AGREEMENT
ANNEX I
SCHEDULE OF LENDERS
PRO RATA PRO RATA
SHARE OF LOANS PERCENTAGE OF LOANS
-------------- -------------------
Fleet Capital Corporation $30,000,000 50.00%
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Loan Administration Manager
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
General Electric Capital Corporation $30,000,000 50.00%
▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
APPENDIX A
GENERAL DEFINITIONS
When used in the Second Amended and Restated Loan and Security Agreement
dated as of March __, 2004, by and among Fleet Capital Corporation, as Agent,
General Electric Capital Corporation, as Documentation Agent, the financial
institutions identified as "Lender" on Annex I attached thereto, and JEH/Eagle
Supply, Inc., Eagle Supply, Inc., and JEH/Eagle, L.P., 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 any Borrower or
in which any Borrower now has or hereafter acquires any interest.
Affiliate - a Person (other than a Subsidiary, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and his
wife, and any Persons affiliated with the foregoing): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; or (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 Second Amended and Restated Loan and Security Agreement
referred to in the first sentence of this Appendix A, all Exhibits thereto and
this Appendix A.
Applicable Inventory Sublimit - an amount equal to $27,500,000.
Availability - the amount of money which Borrowers are entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the sum of the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Lenders may have paid for the account
of Borrowers pursuant to any of the Loan Documents and which have not been
reimbursed by Borrowers) and any established reserves, is subtracted from the
Borrowing Base. If the amount outstanding is equal to or greater than the
Borrowing Base, Availability is 0.
Bad Debt Reserve Ratio - (i) the amount of Borrowers' bad debt reserve
divided by (ii) the aggregate amount of all of Accounts of Borrowers' evidenced
by an instrument (to include note receivables) plus all other Accounts that are
ninety (90) days past the due date.
Bank - Fleet National Bank or such other institution as Lender may
hereafter designate
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 asubstitute therefor
shall be the Base Rate.
Base Rate Loans - collectively, the Revolving Credit Base Rate Loans and
the Term Base Rate Loan.
Borrowing Base - as at any date of determination thereof, an amount equal
to the lesser of:
(i) The Revolving Credit Limit; or
(ii) an amount equal to:
(a) up to eighty percent (80%) of the net amount of Eligible
Accounts outstanding at such date;
PLUS
(b) an amount equal to the lesser of (1) the Applicable Inventory
Sublimit, (2) up to sixty percent (60%) of the value of the Eligible Inventory
or (3) up to eighty five percent (85%) of the net orderly liquidation value of
the Eligible Inventory.
MINUS
(c) without duplication, the amount of any reserves and any
amounts which Agent or Lenders shall have paid pursuant to any of the Loan
Documents for the account of Borrowers and which have not been reimbursed by
Borrowers.
MINUS
(d) the LC Amount.
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 Agent's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any time
issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time.
Borrowing Base Certificate - that certificate signed by the chief financial
officer of Borrowers showing the status of Borrowers' Accounts and Inventory,
outstanding Revolving Credit Loans and other information, in the form of Exhibit
A-1 to the Agreement.
Business Day - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are closed.
▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Demand and Capital Adequacy Rules
-each as defined in Section 2.7 of the Agreement.
Capital Expenditures - cash expenditures made for the acquisition of any
fixed assets or improvements, replacements, substitutions or additions thereto
which have a useful life of more than one year, including the total principal
portion of Capitalized Lease Obligations, but excluding expenditures for the
replacement of any assets leased under a Capitalized Lease Obligation in
connection with a casualty or loss thereof.
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.
Closing Date - the date on which all of the conditions precedent in Section
9 of the Agreement are satisfied and the Loans are reset in accordance with the
Agreement.
Code - the Uniform Commercial Code as adopted and in force in the State of
New York, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
Consolidated - the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Continuation - as defined in subsection 3.1.4 of the Agreement.
Conversion - as defined in subsection 3.1.4 of the Agreement.
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.
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 2.1.3 of the Agreement.
Deposit Accounts - all now existing or hereafter acquired or arising
deposit accounts, investment accounts, commercial paper, and certificates of
deposit of every nature, wherever located and all documents and records
associated therewith.
Distributions - 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
3
net proceeds of the sale of such Securities.
Dominion Account - a special blocked account owned and established by
Borrowers pursuant to the Agreement at a bank selected by Borrowers, but
acceptable to Agent in its reasonable discretion, and over which Agent shall
have sole and exclusive access and control for withdrawal purposes.
EBITDA - Borrowers' net income, plus interest expense, plus taxes, plus
depreciation, plus amortization, plus non-cash charges resulting from changes in
accounting principles, plus accrued but unpaid inter-company management fees and
other non-cash inter-company charges, calculated on a Consolidated basis in
accordance with GAAP.
Eligible Account - an Account arising in the ordinary course of any
Borrower's business from the sale of goods or rendition of services which Agent,
in its sole credit judgment, deems to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account if:
1. it arises out of a sale made by any Borrower to a Subsidiary or an
Affiliate of such Borrower or to a Person controlled by an Affiliate of such
Borrower; or
2. it is unpaid for more than sixty (60) days after the original due date
calculated pursuant to the payment terms reflected on the invoice or is
outstanding more than ninety (90) days from the invoice date; provided however,
that Agent and Lenders in their sole discretion may permit up to $3,000,000 of
Accounts aged not more than one hundred twenty (120) days from invoice date, for
Account Debtors which are approved by Agent and Lenders, in its sole discretion,
on a case-by-case basis to be included as Eligible Accounts; or
3. forty percent (40%) (to be reduced to 25% as of July 31, 2004) or more
of the Accounts from the Account Debtor (referred to as cross age) are not
deemed Eligible Accounts hereunder; or
4. the total unpaid Accounts of the Account Debtor exceed fifteen percent
(15%) of the net amount of all Eligible Accounts, to the extent of such excess;
or
5. any covenant, representation or warranty contained in the Agreement with
respect to such Account has been breached; or
6. the Account Debtor is also such 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 such Borrower, or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor; or
7. 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
4
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
8. it arises from a sale to an Account Debtor outside the United States,
unless the sale is on letter of credit, guaranty or acceptance terms, in each
case acceptable to Agent in its sole discretion; or
9. it arises from a sale to the Account Debtor on a guaranteed sale,
sale-or-return, sale-on-approval, consignment or any other repurchase or return
basis, or it arises from ▇▇▇▇ and hold sales in an aggregate amount in excess of
Two Hundred Fifty Thousand Dollars ($250,000); or
10. Agent believes, in its reasonable judgment, that collection of such
Account is insecure or that payment thereof is doubtful or will be delayed by
reason of the Account Debtor's financial condition; or
11. the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless a Borrower assigns its right to
payment of such Account to Agent, in a manner satisfactory to Agent, so as to
comply with the Assignment of Claims Act of 1940 (31 ▇.▇.▇.▇▇. 203 et seq., as
amended); or
12. the Account is not at all times subject to Agent's duly perfected,
first priority security interest or if it is subject to a Lien other than a
Permitted Lien; or
13. 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 a Borrower and accepted by the Account Debtor or the
Account otherwise does not represent a final sale; or
14. the total unpaid Accounts of the Account Debtor exceed a credit limit
determined by Agent, in its reasonable discretion, to the extent such Account
exceeds such limit; or
15. the Account is evidenced by chattel paper or an instrument (including
note receivables) of any kind, or has been reduced to judgment; or
16. any 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
17. such Borrower has made an agreement with the Account Debtor to extend
the time of payment thereof; or
5
18. such Account includes finance charges, late charges or similar type
charges or fees, to the extent of such charges and fees; or
19. such Account is not otherwise satisfactory to Agent as determined in
good faith by Agent in the exercise of its discretion in a reasonable manner.
Eligible Inventory - such Inventory of each Borrower (other than packaging
materials and supplies) which Agent, in its sole credit judgment, deems to be
Eligible Inventory, valued based on an average cost methodology. Without
limiting the generality of the foregoing, no Inventory shall be Eligible
Inventory if:
(i) it does not consist of finished goods that are, in Agent's opinion,
readily marketable in their current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is obsolete or unmerchantable or remains unsold and on Borrowers'
books and records for more than one year; or
(iv) it does not meet all standards imposed by any governmental agency or
authority; or
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement,
(vi) it is not at all times subject to Agent's duly perfected, first
priority Lien and no other Lien except a Permitted Lien; or
(vii) it is not situated at a location in compliance with the Agreement or
is in transit.
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.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description owned or used in each Borrower's
operations in which such Borrower has an interest, whether now owned or
hereafter acquired by such 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.
Existing Loan Documents - that certain Amended, Restated and Consolidated
Loan and
6
Security Agreement, as amended from time to time, by and among Fleet Capital
Corporation, as Lender, and Borrowers, that certain Amended, Restated and
Consolidated Revolving Credit Note, that certain Amended, Restated and
Consolidated Equipment Note, Amended, Restated and Consolidated Acquisition
Note, the Surety Agreement from Guarantor, each dated June 20, 2000, as such
agreements and instruments have been amended, restated, supplemented or replaced
from time to time, and each other document executed in connection therewith.
Fixed Charge Coverage Ratio - the ratio of (a) EBITDA, minus unfunded
Capital Expenditures (for purposes hereof, use of a Revolving Credit Loan for a
Capital Expenditure will be considered an unfunded Capital Expenditure) made
during such period, minus Net Cash Payments for Taxes made during the period
measured to (b) all principal payments and accrued interest expense and
Capitalized Lease Obligations, to be calculated on a trailing twelve (12)-month
basis.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
General Intangibles - as defined in the Code and includes all personal
Property of each Borrower (including, without limitation, payment intangibles
and software) other than goods, Accounts, commercial tort claims, deposit
accounts, investment property, letters of credit, money and oil, gas and other
minerals before extraction, whether now owned or hereafter created or acquired
by any Borrower.
Guarantor - Eagle Supply Group, Inc. and any other Person who may hereafter
guarantee payment or performance of the whole or any part of the Obligations
pursuant to a Surety Agreement.
Hedging Agreements - any documentation evidencing any interest rate swap,
interest "cap" or "collar" or any other interest rate hedging device or swap
agreement (as defined in 11 U.S.C. ss. 101 et seq., as amended) between any
Borrower and FCC or any Affiliate of FCC.
Indebtedness - as applied to a Person means, without duplication:
(i) all items, which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease Obligations;
(ii) all obligations of other Persons which such Person has guaranteed; and
(iii) all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person; and
(iv) in the case of Borrowers, without duplication, the Obligations and
each Borrower's obligations under and pursuant to the applicable Asset Purchase
Agreement.
Interest Period - for any LIBOR Rate Loan the period commencing on the date
of the borrowing thereof and ending on the last day of the period selected by
Borrowers pursuant to the
7
provisions contained herein. The duration of each such Interest Period shall be
for 30, 60, 90 or 180 days, in each case as Borrowers may select, pursuant to an
appropriate notice of borrowing, notice of Continuation or notice of Conversion;
provided, however, that Borrowers may not select any Interest Period that ends
after the last day of the Term. Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended so as to occur on the next succeeding Business
Day; provided, however, if such extension would cause the last day of such
Interest Period to occur during the next following calendar month, the last day
of such Interest Period shall occur on the next preceding Business Day.
Inventory - as defined in the Code and includes all of each Borrower's
Inventory, whether now owned or hereafter acquired, including, without
limitation, all goods intended for sale or lease by such 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 any Borrower's business; and all documents evidencing and General
Intangibles relating to any of the foregoing, whether now owned or hereafter
acquired by a Borrower.
Investment Property - as defined in the Code.
LC Amount - at any time, the aggregate undrawn face amount of all Letters
of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Bank or any Affiliate of Bank
shall guaranty the payment or performance by a Borrower(s) of its/their
reimbursement obligation under any letter of credit.
Letter of Credit - any letter of credit issued by Bank or any Affiliate of
Bank for the account of a Borrower(s).
LIBOR Rate - shall mean, with respect to the Interest Period applicable to
the borrowing of a LIBOR Rate Loan, the rate obtained (rounded upwards to the
nearest 1/100 of 1%) by dividing (i) the rate of interest per annum offered to
the Bank in the London interbank foreign currency deposits market as of
approximately 9:00 A.M. (Eastern time) two (2) Business Days prior to the
commencement of such Interest Period for U.S. dollar deposits of amounts in
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan for which the LIBOR Rate is being determined with maturities comparable to
the Interest Period for which such LIBOR Rate will apply, by (ii) a percentage
equal to 1 minus the stated Reserve (expressed as a decimal), if any, required
to be maintained against "Eurocurrency Liabilities" as specified in Regulation D
of the Board of Governors of the Federal Reserve System as from time to time
shall be in effect (or against any other category of liabilities, which includes
deposits, by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extension of credit on other assets, which
includes loans by a non-U.S. office of Bank or Agent to U.S. residents). In the
absence of manifest error, each determination by Agent of the applicable LIBOR
Rate shall be deemed conclusive.
8
LIBOR Rate Loans - collectively, the Revolving Credit LIBOR Rate Loans and
the Term LIBOR Rate Loan.
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(s) of the Agreement, each Borrower shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
Loan Account - the loan account established on the books of Agent pursuant
to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - collectively, the Revolving Credit Loans, the Term Loan and all
other loans and advances of any kind made by any Lender pursuant to the
Agreement.
London Business Day - Any Business Day on which banks in London, England
are open for business.
Majority Lenders - at any time, Lenders holding Pro Rata Percentages
aggregating at least 51% at such time.
Money Borrowed - means (i) Indebtedness arising from the lending of money
by any Person to a Borrower; (ii) Indebtedness, whether or not in any such case
arising from the lending by any Person of money to a 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) reimbursement obligations with respect to letters of
credit or guaranties of letters of credit and (iv) Indebtedness of a Borrower
under any guaranty of obligations that would constitute Indebtedness for Money
Borrowed under clauses (i) through (iii) hereof, if owed directly by such
Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Net Cash Payment for Taxes - an amount equal to the greater of (a) Zero
Dollars ($0) and (b) the difference between taxes actually paid during a
designated period, less any refunds or rebates actually received during such
period.
Net Worth - at any date, means with respect to any Person, an amount equal
to assets minus liabilities, as shown on a balance sheet at such date prepared
in accordance with GAAP.
9
Notes - collectively, the Second Amended, Restated and Consolidated
Revolving Credit Note and the Second Amended, Restated and the Second Amended,
Restated and Consolidated Term Note.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, including reimbursement obligations on
Letters of Credit and LC Guaranties, together with all interest, fees, costs,
expenses and other charges thereon, owing, arising, due or payable from
Borrowers, or any of them, to Agent, Agent's Affiliates, Bank or Bank's
Affiliates or any 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 (including without limitation, all interest whether
accruing before or after the filing of a voluntary or involuntary bankruptcy or
other insolvency proceeding and whether or not such interest is an allowable
claim in such proceeding), including without limitation any amounts incurred by
Agent or Agent's Affiliates, or Bank or Bank's Affiliates in providing any
automated clearing house services, cash management services and any amounts
incurred under any Hedging Agreements for the benefit of Borrowers. The term
"Obligations" includes without limitation, all interest charges, fees, expenses,
attorneys' fees, and any other sums chargeable to Borrowers, or any of them,
under any of the Loan Documents.
Other Agreements - any and all agreements, instruments and documents (other
than the Agreement and the Security Documents), heretofore, now or hereafter
executed or delivered by any Borrower, any Subsidiary of any Borrower or any
other third party and delivered to Agent and/or any Lender in respect of the
transactions contemplated by the Agreement and the Existing Loan Documents, as
each may be amended, modified, renewed, extended, replaced, restated or
substituted from time to time.
Overadvance - the amount, if any, by which the aggregate outstanding
principal amount the Loans exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the right by any
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 Agent.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of the
Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of a
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
Purchase Money Indebtedness and Capitalized Lease Obligations of Borrowers at
the time outstanding, does not exceed Three Million Dollars ($3,000,000).
Person - an individual, partnership, corporation, limited liability
company, joint stock
10
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 a Borrower(s) that is covered by Title IV of ERISA.
Projections - Borrowers' forecasted Consolidated and consolidating (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements, (d)
capitalization statements, and (e) prospective Borrowing Base and Availability,
all prepared on a consistent basis with Borrowers' historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Pro Rata Percentage - with respect to a Lender, the percentage set forth
next to such Lender's name on Annex I to the Agreement.
Pro Rata Share - with respect to each Lender, the "Pro Rata Share" set
forth next to such Lender's name on Annex I to the Agreement.
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 real Property or Equipment, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within ten (10) days prior to or after
the acquisition of any real Property or Equipment 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.
Regulation D - Regulation D of the Board of Governors of the Federal
Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations, as
amended, and any successor thereto.
Rentals - as defined in subsection 8.2.9 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of ERISA.
Reserve - For any day, that reserve (expressed as a decimal) which is in
effect (whether or not actually incurred) with respect to Bank on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor or any other banking authority to which Bank is subject including any
board or governmental or administrative agency of the United States or any
11
other jurisdiction to which Bank is subject), for determining the maximum
reserve requirement (including without limitation any basic, supplemental,
marginal or emergency reserves) for Eurocurrency liabilities as defined in
Regulation D.
Reserve Percentage - For Bank on any day, that percentage (expressed as a
decimal) which is in effect on such day, prescribed by the Board of Governors of
the Federal Reserve System (or any successor or any other banking authority to
which Agent or any Lender is subject, including any board or governmental or
administrative agency of the United States or any other jurisdiction to which
Bank is subject) for determining the maximum reserve requirement (including
without limitation any basic supplemental, marginal or emergency reserves) for
(i) deposits of United States Dollars or (ii) Eurocurrency liabilities as
defined in Regulation D, in each case used to fund a LIBOR Rate Loan subject to
an LIBOR Rate. The LIBOR Rate shall be adjusted automatically on and as of the
effective day of any change in the Reserve Percentage.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments otherwise permitted by this Agreement or investments in one
or more Subsidiaries of a Borrower to the extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in the
ordinary course of business of a Borrower and its Subsidiaries;
(iv) investments in direct obligations of the United States of America, or
any agency thereof or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof;
(v) investments in certificates of deposit maturing within one year from
the date of acquisition 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
(vi) investments in commercial paper given the highest rating by a national
credit rating agency and maturing not more than 270 days from the date of
creation thereof.
Revolving Credit Base Rate - a per annum rate equal to the Base Rate plus
50 basis points.
Revolving Credit Base Rate Loan - that portion of the Revolving Credit
Loans that bears interest at the Revolving Credit Base Rate.
Revolving Credit Facility - the credit facility established for Borrowers
by Agent under and pursuant to the terms of this Agreement under which Revolving
Credit Loans may be made from time to time.
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Revolving Credit LIBOR Rate - a per annum rate equal to the sum of the
LIBOR Rate plus 250 basis points.
Revolving Credit LIBOR Rate Loan - that portion of the Revolving Credit
Loans on which interest accrues at the Revolving Credit LIBOR Rate.
Revolving Credit Limit - an amount equal to the amount of the Total Credit
Facility minus the outstanding balance of the Term Loan.
Revolving Credit Loan - Loans made by Lenders as provided in Section 1.1 of
the Agreement.
Revolving Credit Note - collectively, the second amended and restated
secured promissory notes to be executed by Borrowers on the Closing Date in
favor of each Lender, each in the amount of such Lender's Pro Rata Percentage of
the Total Credit Facility, to evidence Borrowers' obligation to repay the
Revolving Credit Loans, which shall be in the form of Exhibit A-2 to the
Agreement.
Schedule of Accounts - as defined in subsection 6.4.1 of the Agreement.
Security - shall have the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.
Security Agreement - that certain Security Agreement in form and substance
satisfactory to Agent, to be executed by Guarantor and delivered to Agent, on or
before the Closing Date.
Security Documents - each Surety Agreement, Security Agreement and all
other instruments and agreements now or at any time hereafter securing or
providing a security interest or collateralization of all or any part of the
Obligations, as each may be amended, modified, renewed, extended, replaced,
restated or substituted from time to time.
Settlement Date - the Closing Date and thereafter, Wednesday of each week
unless such day is not a Business Day in which case it shall be the next
succeeding Business Day.
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.
Subordinated Debt - Indebtedness of Borrowers which by its terms, or by the
terms of the agreement pursuant to which such Indebtedness is issued, is
subordinated to the Obligations in a manner satisfactory to Agent and Lenders,
including without limitation, all Indebtedness of Borrowers to Guarantor, and
all Indebtedness of Borrowers to TDA, including the Indebtedness evidenced by
that certain promissory note in the original principal amount of $1,000,000,
each of which are subordinated to the Obligations pursuant to the Subordination
Agreements.
13
Subordination Agreements - those certain subordination agreements, in form
and substance satisfactory to Agent, to be executed and delivered to Agent by
Guarantor, TDA and any other holder of Subordinated Debt.
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.
Surety Agreement - a Surety Agreement in form and substance satisfactory to
Agent executed by Guarantor and delivered to Agent on or before the Closing
Date.
TDA - TDA Industries, Inc., a New York corporation.
Term - as defined in Section 4.1 of the Agreement.
Term Base Rate - a per annum rate equal to the sum of the Base Rate plus 50
basis points.
Term Base Rate Loan - that portion of the Term Loan that bears interest at
the Term Base Rate.
Term LIBOR Rate - a per annum rate equal to the sum of the LIBOR Rate plus
250 basis points.
Term LIBOR Rate Loan - that portion of the Term Loan (as designated by
Borrowers) on which interest accrues at the Term LIBOR Rate.
Term Loan - the Loan described in subsection 1.2 of the Agreement.
Term Notes - collectively, the second amended, restated and consolidated
promissory notes to be executed by Borrowers on or about the Closing Date in
favor of each Lender, each in amount of such Lender's Pro Rata Share of the Term
Loan, to evidence Borrowers' obligation to repay the Term Loan, which shall be
in the form of Exhibit A-3 to the Agreement.
Total Credit Facility - Sixty Million Dollars ($60,000,000).
Treasury Rate - with respect to the Term Loan, the average coupon
equivalent yield, in the secondary market, that Lender could obtain by
purchasing United States Treasury Securities in an amount approximately equal to
the Term Loan, maturing on the scheduled maturity date of the Term Loan.
Type - with respect to any Loan, whether such Loan, or portion thereof, is
a Base Rate Loan or a LIBOR Rate Loan.
Unused Availability Fee - as defined in Section 2.5 of the Agreement.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are
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ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar functions).
OTHER TERMS. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Terms used in the singular shall include
the plural where the context may require and vice versa. 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.
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