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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
dated as of February 4, 1997
among
PEN-TAB INDUSTRIES, INC.
as the Borrower
PEN-TAB HOLDINGS, INC.
(FORMERLY KNOWN AS
PEN-TAB INDUSTRIES, INC.)
as the Guarantor
and
BANK OF AMERICA ILLINOIS
as the Bank
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The following Table of Contents has been inserted for convenience only and does
not constitute a part of this Agreement.
TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . 1
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 20
1.3. Accounting and Financial Determinations. . . . . . . . . . . . . . 21
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENTS . . . . . . . . . . . 21
2.1. Revolving Loan Commitment. . . . . . . . . . . . . . . . . . . . . 21
2.2. LC Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3. Revolving Loan Borrowing Procedure . . . . . . . . . . . . . . . . 22
2.4. Conversion and Continuation Elections. . . . . . . . . . . . . . . 23
2.5. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.6. Revolving Note . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.7. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE III
THE LETTERS OF CREDIT. . . . . . . . . . . . . . . 26
3.1. Request for Issuance of Letters of Credit. . . . . . . . . . . . . 26
3.2. Expiration and other Terms . . . . . . . . . . . . . . . . . . . . 26
3.3. Notification of Demand for Payment . . . . . . . . . . . . . . . . 26
3.4. Funding by Bank. . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.5. Non-Conforming Demand For Payment. . . . . . . . . . . . . . . . . 27
3.6. Return of Letter of Credit . . . . . . . . . . . . . . . . . . . . 27
3.7. Reimbursement Agreement of the Borrower. . . . . . . . . . . . . . 27
3.8. Obligation to Reimburse for Letter of Credit Payments. . . . . . . 27
3.9. Mandatory Payment to Bank of LC Obligations. . . . . . . . . . . . 28
3.10. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV
PAYMENTS AND PREPAYMENTS. . . . . . . . . . . . . . 29
4.1. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . 29
4.2. Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . . 29
4.3. Method of Payment. . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 30
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ARTICLE V
TAXES, YIELD PROTECTION AND ILLEGALITY. . . . . . . . . . 30
5.1. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. Increased Costs and Reduction of Return. . . . . . . . . . . . . . 32
5.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.5. Inability to Determine Rates . . . . . . . . . . . . . . . . . . . 34
5.6. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI
COLLATERAL AND OTHER SECURITY . . . . . . . . . . . . 34
6.1. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2. Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3. Account Warranties . . . . . . . . . . . . . . . . . . . . . . . . 36
6.4. Verification of Accounts . . . . . . . . . . . . . . . . . . . . . 36
6.5. Collection of Accounts and Payments. . . . . . . . . . . . . . . . 37
6.6. Appointment as Attorney-in-Fact. . . . . . . . . . . . . . . . . . 38
6.7. Account Records. . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.8. Governmental Accounts . . . . . . . . . . . . . . . . . . . . . . 38
6.9. Instruments and Chattel Paper. . . . . . . . . . . . . . . . . . . 39
6.10. Inventory Warranties. . . . . . . . . . . . . . . . . . . . . . . 39
6.11. No Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.12. Equipment Warranties. . . . . . . . . . . . . . . . . . . . . . . 40
6.13. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
CONDITIONS PRECEDENT . . . . . . . . . . . . . . 41
7.1. Condition Precedent to Revolving Loan. . . . . . . . . . . . . . . 41
7.2. Conditions Precedent to All Revolving Loans and Letters
of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 44
8.1. Incorporation, Good Standing, and Due Qualification. . . . . . . .
8.2. Corporate Power and Authority. . . . . . . . . . . . . . . . . . . 44
8.3. Legally Enforceable Agreement. . . . . . . . . . . . . . . . . . . 45
8.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 45
8.5. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.7. No Defaults on Outstanding Judgments or Orders . . . . . . . . . . 46
8.8. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.9. Ownership and Liens. . . . . . . . . . . . . . . . . . . . . . . . 46
8.10. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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8.11. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.12. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.13. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . 47
8.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.15. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.16. Senior Obligations, etc. . . . . . . . . . . . . . . . . . . . 48
8.17. Investment Company Act. . . . . . . . . . . . . . . . . . . . . 48
8.18. Public Utility Holding Company Act. . . . . . . . . . . . . . . 48
ARTICLE IX
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . 48
9.1. Maintenance of Existence . . . . . . . . . . . . . . . . . . . . 48
9.2. Maintenance of Records . . . . . . . . . . . . . . . . . . . . . 49
9.3. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . 49
9.4. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 49
9.5. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . 49
9.6. Right of Inspection. . . . . . . . . . . . . . . . . . . . . . . 49
9.7. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . 50
9.8. Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . 53
9.9. Maintenance of Bank Accounts . . . . . . . . . . . . . . . . . . 53
9.10. Inventory and Equipment Locations . . . . . . . . . . . . . . . 54
9.11. Places of Business. . . . . . . . . . . . . . . . . . . . . . . 54
9.12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.13. Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.14. Collateral Identification . . . . . . . . . . . . . . . . . . . 55
9.15. Annual Clean-Up . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE X
NEGATIVE COVENANTS 55
10.1. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.3. Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.4. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5. Sale and Leaseback. . . . . . . . . . . . . . . . . . . . . . . 57
10.6. Restricted Payments, etc . . . . . . . . . . . . . . . . . . . 57
10.7. Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 58
10.8. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.9. Guaranties, Etc. . . . . . . . . . . . . . . . . . . . . . . . 59
10.10. Transaction With Affiliate . . . . . . . . . . . . . . . . . . 59
10.11. Subsidiary, Etc. . . . . . . . . . . . . . . . . . . . . . . . 60
10.12. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 60
10.13. Account Settlements. . . . . . . . . . . . . . . . . . . . . . 60
10.14. Modification of Certain Agreements . . . . . . . . . . . . . . 60
10.15. Assets of the Parent . . . . . . . . . . . . . . . . . . . . . 61
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ARTICLE XI
FINANCIAL COVENANTS. . . . . . . . . . . . . . 61
11.1. Debt Service Coverage Ratio . . . . . . . . . . . . . . . . . . 61
11.2. Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.3. Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XII
EVENTS OF DEFAULT. . . . . . . . . . . . . . 62
12.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE XIII
MISCELLANEOUS 66
13.1. Assignments and Participations 66
13.2. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . 67
13.3. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 67
13.4. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . 67
13.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 67
13.6. Costs, Expenses, and Taxes. . . . . . . . . . . . . . . . . . . 68
13.7. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . 68
13.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.9. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.10. Severability of Provisions . . . . . . . . . . . . . . . . . . 69
13.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.12. Submission to Jurisdiction; Waiver of Venue;
Service of Process . . . . . . . . . . . . . . . . . . . . . . . 69
13.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . 70
13.14. Reaffirmation and Restatement. . . . . . . . . . . . . . . . . 70
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SCHEDULES
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SCHEDULE 6.10 Inventory Locations
SCHEDULE 7.2 Litigation
SCHEDULE 8.12 Real Property
SCHEDULE 8.15 Debt
SCHEDULE 10.1 Liens
EXHIBITS
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EXHIBIT A Form of Revolving Note
EXHIBIT B Form of Trademark Agreement
EXHIBIT C Form of Opinion of Counsel for the Parent and the Borrower
EXHIBIT D Form of Borrowing Base Certificate
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Notice of Conversion/Continuation
EXHIBIT G Form of Assignment and Assumption Agreement
EXHIBIT H Form of Pledge Agreement
EXHIBIT I Form of Guaranty
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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as
of February 4, 1997 (the "Effective Date"), among PEN-TAB INDUSTRIES, INC., a
Delaware corporation (the "Borrower"), Pen-Tab Holdings, Inc. (formerly known as
Pen-Tab Industries, Inc.), a Virginia corporation (the "Parent") and BANK OF
AMERICA ILLINOIS (as successor to CONTINENTAL BANK N.A.), having its main
banking house at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Bank").
WHEREAS, the Borrower and the Parent, are parties to a certain
Assignment and Assumption Agreement (a copy of which is attached here to as
Exhibit G, the "Assignment and Assumption Agreement"), dated as of February 3,
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1997 and consented to by the Bank, whereby the Borrower assumed all of the
Liabilities (as such term is defined in the Existing Loan and Security Agreement
referred to below) from the Parent under the Existing Loan and Security
Agreement;
WHEREAS, the Borrower (as assignee of the Parent pursuant to the
Assignment and Assumption Agreement) and the Bank are parties to that certain
Amended and Restated Loan and Security Agreement, dated as of March 24, 1995 (as
amended and modified through the date hereof, the "Existing Loan and Security
Agreement"), whereby the Bank has agreed to make revolving loans to and issue
letters of credit in favor of the Borrower; and
WHEREAS, the Parent, the Borrower and the Bank desire to enter into
this Agreement in amendment and restatement of the Existing Loan and Security
Agreement, subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
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SECTION 1.1. Defined Terms. As used in this Agreement the following
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terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Account" shall mean any and all accounts, whether now owned or
hereafter acquired by the Borrower.
"Account Debtor" shall mean any Person who is or who may become
obligated to the Borrower under, with respect to, or on account of an Account.
"Affiliate" shall mean any Person which, directly or indirectly, owns
or controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at least ten
percent (10%) of the outstanding securities having ordinary voting power to
elect directors (regardless of whether, at the time, securities of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) of any corporation or managing
general partners of any partnership or any Subsidiary thereof, or which is
controlled by or is under common control with the Borrower, any corporation, or
any stockholder of such corporation, or any Subsidiary. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of management and policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Second Amended and Restated Loan and Security
Agreement, as the same may be further amended, modified, restated, refinanced,
refunded or renewed from time to time in whole or in part.
"Applicable Margin" shall be (i) until receipt by the Bank of the
certificate required pursuant to Section 9.7(3) for the Borrower's 1997 fiscal
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year, 1.75% with respect to Offshore Rate Loans, and .25% with respect to Base
Rate Loans, and (ii) thereafter, based on the Debt Service Coverage Ratio, as
follows:
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Tier Debt Service Offshore Base Rate
Coverage Ratio Rate Applicable
Applicable Margin
Margin
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I Less than 1.75:1 2.00% 0.50%
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II Greater than or 1.75% 0.25%
equal to 1.75:1 but
less than 2.25:1
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III Greater than or 1.50% 0.00%
equal to 2.25:1 but
less than 3.25:1
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Tier Debt Service Offshore Base Rate
Coverage Ratio Rate Applicable
Applicable Margin
Margin
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IV Greater than or 1.25% 0.00%
equal to 3.25:1 but
less than 4.75:1
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V Greater than equal 1.00% 0.00%
to 4.75:1
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With respect to clause (ii) above, the Applicable Margin shall be
adjusted on the fifteenth day following receipt by the Bank of the certificate
pursuant to Section 9.7(3), based on the Debt Service Coverage Ratio as of the
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last day of the fiscal period most recently ended; it being understood, with
-- ----- ----------
respect to clause (i) and (ii) above, that if the Borrower fails to timely
---------- ----
deliver the certificate in accordance with Section 9.7(3), then, until receipt
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of such certificate by the Bank, the Applicable Margin shall be 2.00% with
respect to Offshore Rate Loans and .050% with respect to Base Rate Loans.
"Assignment and Assumption Agreement" - see Recitals.
"Attorneys' Fees" shall mean the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys (and all
paralegals, secretaries, accountants and other staff employed by such attorneys)
employed by the Bank from time to time to negotiate and/or prepare documentation
for the loans made and the Letters of Credit issued hereunder, and/or to
commence, defend or intervene in any court proceeding, or to file a petition,
complaint, answer, motion or other pleadings, or to take any other action in or
with respect to any suit or proceeding (bankruptcy or otherwise) relating to the
Collateral or this Agreement or guarantees of any of the Liabilities; to
protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral; to attempt to enforce any security interest in any of the Collateral
or to give any advice with respect to such enforcement; and to enforce any of
the Bank's rights to collect any of the Liabilities.
"Authorized Representative" means any one of the following individuals
of the Parent or the Borrower, as the case may be: Chairman, Vice Chairman,
President, Executive Vice President, Vice President, Chief Financial Officer,
Treasurer, Secretary, Controller or Assistant Controller.
"Bank" - see Preamble.
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"Base Rate" means, for any day, the higher of:
(a) the rate of interest in effect for such day as publicly announced
from time to time by the Bank in Chicago, Illinois, as its "reference
rate." (It is a rate set by the Bank based upon various factors including
the Bank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may
be priced at, above, or below such announced rate.); and
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by the Bank shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Revolving Loan that bears interest based on
the Base Rate.
"Beneficiary" shall mean the beneficiary under any Letter of Credit.
"Bond" or "Bonds" means the Industrial Development Revenue Bonds (Pen-
Tab Industries, Inc. Project) Series 1995, of the Authority (as defined in the
Reimbursement Agreement) in the original aggregate principal amount of
$7,500,000 issued under the Indenture (as defined in the Reimbursement
Agreement), the liabilities of which have been assigned to and assumed by the
Borrower under the Assignment and Assumption Agreement.
"Borrower" means Pen-Tab Industries, Inc., a Delaware corporation.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans
of the same Type made to the Borrower on the same day by the Bank under Article
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II.
--
"Borrowing Base" means (1) the sum of
(a) an amount equal to 85% of the net amount (after deduction of
such reserves and allowances as the Bank deems proper and necessary in
its sole discretion) of the Borrower's Eligible Accounts; plus
----
(b) an amount equal to the lesser of (i) 55% of the net value
(as determined by the Bank and after deduction of such reserves and
allowances, as the Bank deems proper and necessary in its sole
discretion on a
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first-in first-out basis in accordance with GAAP) of the Borrower's
Eligible Inventory and (ii) $20,000,000; plus
----
(c) an amount equal to the greater of (i) $11,445,000 or (ii)
50% of the forced liquidation value of the Borrower's Eligible
Equipment (as determined by an independent appraiser selected by the
Bank with knowledge and skill in appraising Equipment of the type used
by the Borrower in its business) which amortizes over a period of
sixty (60) months or less; provided that until such determination is
made by such independent appraiser such amount shall equal
$11,445,000; minus
-----
(2) the sum of (a) the aggregate undrawn amount of any outstanding Letters
of Credit; plus (b) the aggregate face amount of any LC Applications; plus (c)
---- ----
the aggregate unreimbursed amounts drawn under any Letters of Credit or paid
under any LC Application; plus (d) without duplication, the aggregate
----
outstanding amount of all Revolving Loans; plus (e) $2,500,000 reserved in
----
connection with the IRB Letter of Credit.
Notwithstanding anything contained in the foregoing to the contrary, the Bank
reserves the right, in its sole and absolute discretion to at any time reduce or
increase any of the percentages or dollar amounts set forth above. Nothing
contained herein shall (1) be construed as the Bank's agreement to resort or
look to any particular type or item of Collateral as security for any specific
Revolving Loan, Letter of Credit or advance or in any way limit the Bank's right
to resort to any or all of the Collateral as security for any of the
Liabilities, or (2) be deemed to limit or reduce any Lien in or upon any portion
of the Collateral or other security for the Liabilities.
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.3.
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"Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks in Chicago, Illinois are authorized or required to
close under the laws of the State of Illinois.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
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"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of property of the Borrower or any of its Subsidiaries.
"Change in Control" shall be deemed to have occurred at such times as:
(a) ▇▇▇▇ ▇▇▇▇▇ is no longer a member of the Board of Directors of the Parent,
(b) with respect to the Parent, that ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
collectively ceases to own, free and clear of all Liens 35% of the outstanding
shares of voting stock of the Parent on a fully diluted basis, or (c) with
respect to the Borrower, the Parent ceases to own, free and clear of all Liens
100% of the outstanding shares of voting stock of the Borrower on a fully
diluted basis.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property which is subject to, or is to be
subject to, the Lien granted hereunder or under the Trademark Agreement or under
the Pledge Agreement.
"Commitment(s)" means, collectively, the Revolving Loan Commitment and
the LC Commitment.
"Consolidated Capital Expenditure" means, for any period, the capital
expenditures of the Borrower and its consolidated Subsidiaries for such period,
as the same are (or would in accordance with GAAP be) set forth in the
consolidated statement of cash flows of the Borrower and its consolidated
Subsidiaries for such period.
"Consolidated EBITDA" means, for any period, the consolidated net
earnings of the Borrower and its consolidated Subsidiaries plus the aggregate
----
amounts actually deducted in determining such net earnings for such period in
respect of (1) gross interest charges, (2) imputed interest charges related to
any Capital Leases, and (3) provision for income taxes, amortization and
depreciation. For fiscal year 1996 net earnings shall be calculated on a last-
in-first-out basis in accordance with GAAP and thereafter shall be calculated on
a first-in-first-out basis in accordance with GAAP.
"Consolidated Fixed Charges" means, for any period, the consolidated
cash interest expense (including all imputed interest related to any Capital
Lease) of the Borrower and its consolidated Subsidiaries for such period, plus
----
all required
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principal payments on any Debt (including, without duplication, all payments
related to any Capital Lease) made by the Borrower and its consolidated
Subsidiaries for such period.
"Consolidated Net Worth" means, at any time, the sum of the total of
stockholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) of the Borrower and its
consolidated Subsidiaries, calculated in accordance with GAAP.
"Contract Right" shall mean any right to payment under a contract not
yet earned by performance and not evidenced by an instrument or chattel paper.
"Conversion/Continuation Date" means any date on which, under Section
-------
2.4, the Borrower (a) converts Revolving Loans of one Type to another Type, or
---
(b) continues as Revolving Loans of the same Type, but with a new Interest
Period, Loans having Interest Periods maturing on such date.
"Debt" means: (1) indebtedness or liability for borrowed money, or
for the deferred purchase price of property or services (including trade
obligations); (2) obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any Plan; (4)
obligations under letters of credit issued for the account of any Person; (5)
all obligations arising under acceptance facilities; (6) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss; and (7) obligations secured by any Lien on property owned
by the Person, whether or not the obligations have been assumed.
"Debt Service Coverage Ratio" means the ratio set forth in Section
-------
11.1.
-----
"Default" means any of the events specified in Section 12.1, whether
------------
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Effective Date" shall mean the date of this Agreement as set forth in
the Preamble.
"Eligible Account" shall mean an Account owing to the Borrower which
meets each of the following requirements; provided that nothing contained in the
following requirements shall be
-7-
deemed to limit or restrict in any manner whatsoever the Bank's discretion in
determining which Accounts are eligible hereunder:
(1) it is genuine and in all respects what it purports to be;
(2) it arises from: (a) the performance of services by the
Borrower and such services have been fully performed and acknowledged
and accepted by the Account Debtor with respect thereto; or (b) the
sale or lease of goods by the Borrower, including cash on delivery
sales, and such goods have been completed in accordance with such
Account Debtor's specifications (if any) and delivered to and accepted
by such Account Debtor, and the Borrower has possession of, or has
delivered to the Bank, at the Bank's request, shipping and delivery
receipts evidencing such shipment;
(3) it is evidenced by an invoice or invoices (dated not later
than the date of shipment or performance and having payment terms
which are customary in the industry) rendered to the Account Debtor
with respect thereto and is due and payable in full within 90 days of
the date of such invoice, and is not evidenced by any instrument or
chattel paper;
(4) it is not subject to any Lien, other than the Lien of the
Bank hereunder;
(5) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor with respect thereto, and is not
subject to setoff, counterclaim, credit, allowance, adjustment or
other defense by such Account Debtor with respect thereto, or to any
claim by such Account Debtor denying liability thereunder in whole or
in part, and such Account Debtor has not refused to accept and/or has
not returned or offered or attempted to return any of the goods or
services which are the subject of such Account;
(6) there are no proceedings or actions (including, without
limitation, any insolvency or bankruptcy proceeding or action) which
are then threatened or pending against the Account Debtor which might
result in any material adverse change in such Account Debtor's
financial condition or in its ability to pay any Account in full when
due;
(7) it does not arise out of a contract or order which, by its
terms, forbids or makes void or
-8-
unenforceable the assignment by the Borrower to the Bank of the
Account arising with respect thereto;
(8) the Account Debtor is not a director, officer, employee,
agent, Subsidiary, or Affiliate of the Borrower;
(9) the Account Debtor is a resident or citizen of and is
located within the United States of America, other than Account
Debtors located in Canada which Accounts do not in the aggregate
exceed $5,000,000 at any time;
(10) it is not an Account arising from a "sale on approval,"
"sale or return," "consignment," or subject to any other repurchase or
return agreement;
(11) it is not an Account with respect to which possession and/or
control of the goods sold giving rise thereto is held, maintained or
retained by the Borrower (or by any agent or custodian of the
Borrower) for the account of or subject to further and/or future
direction from the Account Debtor thereof;
(12) it is not an Account which in any way fails to meet or
violates any warrant, representation, or covenant contained in this
Agreement relating directly or indirectly to the Borrower's Accounts;
(13) the Account Debtor thereunder is not located in the State of
New Jersey, Minnesota or any other state denying creditors access to
its courts unless the Borrower has filed a Notice of Business
Activities Report or similar filing with the applicable state agency
for the then current year;
(14) it is not owing by any Account Debtor who shall have failed
to pay in full any invoice evidencing any Account within 90 days after
the due date of such invoice, unless the total invoices of such
Account Debtor which have not been paid within 90 days of the due date
represent less than 10% of the total invoice amounts then outstanding
of such Account Debtor.
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account until such time, if any, as such Account no longer fails to
meet any of the foregoing requirements. Furthermore, with respect to any
Account, if the Bank at any time or times hereafter determines in
-9-
its sole discretion that the prospect of payment or performance by the Account
Debtor with respect thereto is or will be impaired, notwithstanding anything to
the contrary contained above, such Account shall forthwith cease to be an
Eligible Account. Furthermore, with respect to invoices for which the Borrower
has granted specific dated terms, no invoice shall be considered an Eligible
Account if it is more than 90 days past due as to any regularly scheduled due
date.
"Eligible Equipment" means Equipment of the Borrower which meets each
of the following requirements; provided that nothing contained in the following
requirements shall be deemed to limit or restrict in any manner whatsoever the
Bank's discretion in determining which Equipment is eligible hereunder:
(1) it is in good and workable condition, ordinary wear and tear
excepted;
(2) no portion of the purchase price thereof remains unpaid, as
established by documentation satisfactory to the Bank;
(3) it is not subject to any Lien, other than the Lien in favor
of the Bank;
(4) it complies with the Borrower's specifications and has been
delivered to and accepted by the Borrower;
(5) there exists no dispute with respect thereto between the
Borrower and the manufacturer or supplier thereof including, without
limitation, disputes regarding warranty, representation or other
claims; and
(6) it is not Equipment which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Other Agreement relating directly or indirectly to
the Borrower's Equipment.
Equipment which at any time is Eligible Equipment, but which subsequently fails
to meet any of the foregoing requirements, shall forthwith cease to be Eligible
Equipment.
"Eligible Inventory" shall mean Inventory of the Borrower which meets
each of the following requirements; provided that nothing contained in the
following requirements shall be deemed to limit or restrict in any manner
whatsoever the Bank's discretion in determining which Inventory is eligible
hereunder:
-10-
(1) it is owned by the Borrower, and is not subject to any Lien,
other than the Lien of the Bank hereunder;
(2) if held for sale or lease or furnishing under contracts of
service, it is (except as the Bank may otherwise consent in writing)
finished, new and unused;
(3) it is not now and shall not at any time or times hereafter
be stored with a bailee, warehouseman or similar party without the
Bank's prior written consent, and in such event, the Borrower will
concurrently therewith cause any such bailee, warehouseman or similar
party to issue and deliver to the Bank, in form and substance
acceptable to the Bank, warehouse receipts therefor in the Bank's
name;
(4) the Bank has in good faith determined in accordance with the
Bank's prudent business practices that it is not unacceptable due to
age, type, category, quality and/or quantity;
(5) it is not Inventory which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement relating directly or indirectly to the Borrower's Inventory;
(6) it consists of raw materials or finished goods which are in
marketable condition.
Inventory of the Borrower which is at any time Eligible Inventory, but which
subsequently fails to meet any of the foregoing requirements, shall forthwith
cease to be Eligible Inventory.
"Environmental Laws" means any and all federal, state, local laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
-11-
"Equipment" shall mean all of the Borrower's now owned or hereafter
acquired fixtures and equipment, including, without limitation, furniture,
vehicles and trade fixtures.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Parent or the Borrower, as the case may
be, would be treated as a single employer under Section 4001 of ERISA.
"Eurodollar Reserve Percentage" has the meaning specified in the
definition of "Offshore Rate".
"Event of Default" means any of the events specified in Section 12.1,
------------
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Existing Loan and Security Agreement" - see Recitals.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the FRB (including any such successor, "H.15(519)") on
the preceding Business Day opposite the caption "Federal Funds (Effective)"; or,
if such rate is not so published on any such preceding Business Day, the rate
for such day will be the arithmetic mean as determined by the Bank of the rates
for the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of three leading brokers of Federal
funds transactions in New York City selected by the Bank.
"Fixtures" means all fixtures of the Borrower of every description and
all substitutions and replacements of any thereof.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation,
-12-
net income taxes and franchise taxes), and all liabilities with respect thereto,
imposed by any jurisdiction on account of amounts payable or paid pursuant to
Section 5.1.
-----------
"GAAP" - see Section 1.3.
-----------
"Guaranty" means a guaranty issued by the Parent in favor of the Bank,
substantially in the form of Exhibit I.
---------
"General Intangibles" shall mean all choses in action, causes of
action and all other intangible personal property of the Borrower of every kind
and nature (other than Accounts) now owned or hereafter acquired by the
Borrower, including, without limitation, corporate or other business records,
inventions, designs, patents, patent applications, trademarks, trade names,
trade secrets, goodwill, copyrights, registrations, licenses, franchises, tax
refund claims and any guarantee claims, security interests (regardless of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned by any Person and/or
one or more Subsidiaries of such Person.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Head Office" means the principal office of the Bank at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
"Indenture" means that certain Indenture, dated as of February 1,
1997, between the Borrower and U.S. Trust Company of New York, as Trustee.
"Interest Payment Date" means, as to any Loan other than a Base Rate
Loan, the last day of each Interest Period applicable to such Loan and, as to
any Base Rate Loan, the last day of each calendar quarter and each date such
Loan is converted into another Type of Loan, provided, however, that if any
-------- -------
Interest Period for an Offshore Rate Loan exceeds three months, the date that
falls three months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
-13-
"Interest Period" means, with respect to any Offshore Rate Loan, the
period commencing on the Business Day the Loan is disbursed or on the
Conversion/Continuation Date on which the Loan is converted into or continued as
an Offshore Rate Loan, and ending on the date one, two or three months
thereafter as selected by the Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation;
provided that:
--------
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iii) no Interest Period for any Revolving Loan shall extend
beyond Termination Date.
"Inventory" shall mean any and all goods, merchandise and other
personal property, including, without limitation, goods in transit, wheresoever
located and whether now owned or hereafter acquired by the Borrower which is or
may at any time be held for sale or lease, furnished under any contract of
service, or held as raw materials, work in process, supplies or materials used
or consumed in the Borrower's business, and any property of the Borrower the
sale or other disposition of which has given rise to an Account and which has
been returned to or repossessed or stopped in transmit by the Borrower.
"IRB Letter of Credit" means that certain Letter of Credit issued by
the Bank on behalf of the Borrower pursuant to the Reimbursement Agreement, as
the same may be amended, modified, restated, refinanced, refunded or renewed
from time to time in whole or in part.
"LC Administrative Fee" - see Section 3.10.
------------
"LC Application" - see Section 3.1.
-----------
"LC Commitment" - see Section 2.2.
-----------
-14-
"LC Facing Fee" - see Section 3.10.
------------
"LC Obligations" shall mean any and all obligations of every
description of the Borrower in connection with the Letters of Credit issued
pursuant to this Agreement, including without limitation all reimbursement
obligations (whether absolute or contingent) under any LC Application, and all
obligations in respect of related fees or expenses.
"Lending Office" means the office or offices of the Bank specified as
its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office",
as the case may be, beneath its name on the signature page hereto, or such other
office or offices as the Bank may from time to time notify the Company.
"Letter of Credit" - see Section 2.2.
-----------
"Letter of Credit Commitment" - Section 2.2.
-----------
"Liabilities" shall mean all of the Parent's and the Borrower's
liabilities, obligations and indebtedness to the Bank, or to any Affiliate of
the Bank, of any and every kind and nature (including, without limitation,
interest, charges, expenses, Attorneys' Fees and other sums chargeable to the
Parent or the Borrower by the Bank and future advances made to or for the
benefit of the Borrower) whether arising under this Agreement, the Reimbursement
Agreement, under any other Loan Document or any of the Other Agreements or
acquired by the Bank from any other sources, whether heretofore, now or
hereafter owing, arising, due, or payable from the Borrower to the Bank, or to
any Affiliate of the Bank, and howsoever evidenced, created, incurred, acquired
or owing, whether primary, secondary, direct, contingent, fixed, or otherwise,
including obligations of performance. Liabilities shall also include any and all
extensions, replacements, refinancings or renewals of any of the foregoing.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement, or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
-15-
"Loan Documents" means this Agreement, the Revolving Note, the LC
Applications, the Letters of Credit, the Trademark Agreement, the Pledge
Agreement, the Reimbursement Agreement, the Guaranty and any and all other
documents or instruments furnished or required to be furnished or delivered from
time to time in connection herewith.
"Material Adverse Change" or "Material Adverse Effect" shall mean any
change, event, action, condition or effect which individually or in the
aggregate (1) impair the validity or enforceability of this Agreement or any
other Loan Document, or (2) subject any officer of the Parent or the Borrower to
criminal liability or (3) materially and adversely affect the consolidated
business, operations, prospects or financial condition of the Parent or the
Borrower and any Subsidiary taken as a whole or (4) the ability of the Parent or
the Borrower or any Subsidiary to perform their respective obligations under
this Agreement and the other Loan Documents.
"Material Litigation" or "Material Litigation Development" shall mean
any Litigation, or development in any Litigation, as the case may be (1) which
involves this Agreement, any other Loan Document or other transactions
contemplated hereby or thereby, or (2) which could have a Material Adverse
Effect.
"Maximum Loan Availability" means, at any time, the lesser of (1) the
Borrowing Base as of the date of the most recent Borrowing Base certificate
delivered pursuant to Section 9.7(11) and (2) the Total Commitment Amount.
---------------
"Minimum Consolidated Net Worth" means, an amount which shall equal
the sum of (a) $-26,400,000, plus (b) with respect to each fiscal quarter ending
----
June 30 (commencing after the Effective Date), the greater of (i) 50% of
consolidated net income for such quarter and the immediately preceding fiscal
quarter, or (ii) $500,000, plus (c) with respect to each fiscal quarter ending
----
September 30 (commencing after the Effective Date), the greater of (i) 50% of
the consolidated net income for such fiscal quarter, or (ii) $1,000,000, and
plus (d) with respect to each fiscal quarter ending December 31 (commencing
----
after the Effective Date), the greater of (i) 50% of the Consolidated Net Worth
as of the end of such fiscal quarter, or (ii) $500,000.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Parent or the Borrower, as the case may be,
or any ERISA Affiliate.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit E.
---------
-16-
"Notice of Conversion/Continuation" means a notice in substantially
the form of Exhibit F.
---------
"Offshore Rate" means, for any Interest Period with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the nearest 1/16th of 1%) determined by the Bank as
follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%) in effect on such day (whether or
not applicable to the Bank) under regulations issued from time to time
by the FRB for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities") having a term comparable to such Interest
Period; and
"IBOR" means the rate of interest per annum determined by the
Bank to be the rate of interest at which dollar deposits in the
approximate amount of the amount of the Revolving Loan to be made or
continued as, or converted into, an Offshore Rate Loan and having a
maturity comparable to such Interest Period would be offered to the
Bank (or such affiliate of the Bank as may be designated for such
purpose by the Bank) in the interbank eurodollar market at their
request at approximately 10:00 a.m. (Chicago time) two Business Days
prior to the commencement of such Interest Period.
"Offshore Rate Loan" means a Loan that bears interest based on the
Offshore Rate.
"Organic Document" means, with respect to any Person, its certificate
of incorporation or other organizational document, its bylaws and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of its capital stock.
"Other Agreements" shall mean all agreements, instruments, documents,
financing statements, warehouse receipts, bills of lading, notices of assignment
of Accounts, schedules of Accounts assigned, mortgages and other written matter
necessary
-17-
or requested by the Bank to perfect and maintain perfected the Bank's security
interest in the Collateral, and all agreements, instruments and documents,
including, without limitation, notes, guarantees, mortgages, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter
whether heretofore, now, or hereafter delivered to the Bank, or to any Affiliate
of the Bank, with respect to this Agreement and executed by or on behalf of the
Parent or the Borrower or any similar agreements which have been assigned to and
assumed by the Borrower pursuant to the Assignment and Assumption Agreement.
"Other Taxes" means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Parent" - see Recitals.
"Participant" means any Person acquiring a participation in the
Liabilities in accordance Section 13.1 of this Agreement.
------------
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" - see Section 10.1.
------------
"Person" means an individual, sole proprietorship, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority, or
other entity of whatever nature.
"Plan" means any plan established, maintained, or to which
contributions have been made by the Parent or the Borrower or any ERISA
Affiliate.
"Pledge Agreement" means a Pledge Agreement, substantially in the form
of Exhibit H, executed by the Parent in favor of the Bank, covering among other
---------
things all of the capital stock of the Borrower.
-18-
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended
from time to time.
"Recapitalization Agreement" means that certain Recapitalization
Agreement, dated January 9, 1997, by and among Citicorp Venture Capital, Ltd.,
the Parent, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
"Reimbursement Agreement" means that certain Reimbursement Agreement
dated as of April 1, 1995, as amended and modified through the date hereof,
among the Borrower (as assignee of Parent pursuant to the Assignment and
Assumption Agreement) and the Bank pursuant to which the Bank issued the IRB
Letter of Credit, as the same may be further amended, modified, restated,
refinanced, refunded or renewed from time to time in whole or in part.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Revolving Loan(s)" has the meaning specified in Section 2.1, and may
-----------
be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of Revolving Loan).
"Revolving Loan Commitment" shall have the meaning assigned to such
term in Section 2.1.
-----------
"Revolving Note" shall have the meaning assigned to such term in
Section 2.5.
-----------
"Subordinated Debt" means all Debt of the Borrower issued pursuant to
the Indenture.
"Subsidiary" means, as to any Person, a Person (other than an
individual) of which shares of stock, partnership units or other equity
interests having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of directors,
general partners or other managers of such Person are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless the context otherwise
clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of
the Borrower.
"Supplemental Documentation" shall have the meaning assigned to such
term in Section 6.13.
------------
-19-
"Tax Distributions" shall have the meaning assigned to such term in
Section 10.6.
------------
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of the Bank,
taxes imposed on or measured by its net income by the jurisdiction (or any
political subdivision thereof) under the laws of which the Bank is organized or
maintains a lending office.
"Termination Date" means February 4, 2000.
"Total Commitment Amount" means $35,000,000.
"Trademark Agreement" means an Amended and Restated Trademark
Agreement, substantially in the form of Exhibit B, covering among other things,
---------
trademarks and trade names of the Borrower.
"Type" has the meaning specified in the definition of "Revolving
Loan."
SECTION 1.2. Other Definitional Provisions.
-----------------------------
(1) All terms defined in this Agreement shall have the above-
defined meanings when used in any Loan Document, or any certificate,
report or other document made or delivered pursuant to this Agreement,
unless the context therein shall clearly otherwise require.
(2) The words "hereof," "herein," "hereunder" and similar terms
when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
(3) The words "amended or modified" when used in this Agreement
or any other Loan Document shall mean with respect to this Agreement
or any other Loan Document such document as from time to time, in
whole or in part, amended, modified, supplemented, restated,
refinanced, refunded or renewed.
(4) In the computation of periods of time in this Agreement from
a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding."
-20-
SECTION 1.3. Accounting and Financial Determinations. For purposes of
---------------------------------------
this Agreement, unless otherwise specified, all accounting terms used herein or
in any other Loan Document shall be interpreted, all accounting determinations
and computations hereunder or thereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, those generally accepted accounting principles ("GAAP") applied
in the preparation of the financial statements referred to in Section 9.7. In
-----------
the event any "Accounting Changes" (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Borrower and Bank agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial condition
of Borrower shall be the same as if such Accounting Changes had not been made,
and until such time as such an amendment shall have been executed and delivered
by Borrower and the Bank, (A) all financial covenants, standards and terms in
this Agreement shall be calculated and/or construed as if such Accounting
Changes had not been made, and (B) Borrower shall prepare footnotes to each
Borrowing Base certificate and the financial statements required to be delivered
hereunder that show the differences between the financial statements delivered
(which reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes) and the basis
for calculating financial covenant compliance (without reflecting such
Accounting Changes). "Accounting Changes" means: (x) changes in accounting
principles required by GAAP and implemented by Borrower and (y) changes in
accounting principles recommended by Borrower's certified public accountants.
All effects of purchase accounting principles (A.P.B. 16 and/or 17 and EITF 88-
16 and FASB 109) and all adjustments for transaction expenses in connection with
the Recapitalization Agreement shall be excluded for purposes of preparation of
financial statements and other calculations and information to be provided to
the Bank.
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENTS
-----------------------------------
SECTION 2.1. Revolving Loan Commitment. Subject to the terms and
-------------------------
conditions set forth in this Agreement and the other Loan Documents, the Bank
agrees to make loans to the Borrower on a revolving basis (herein collectively
called the "Revolving Loans," and individually called a "Revolving Loan") from
time to time from the Effective Date to the Termination Date, at such times and
in such amounts as the Borrower may
-21-
request; provided, however, that the aggregate principal amount of all Revolving
Loans which the Bank shall be committed to have outstanding to the Borrower
shall not at any one time exceed (when added to the aggregate undrawn face
amount of all Letters of Credit issued and outstanding pursuant to Section 2.2
-----------
or drawn and not reimbursed pursuant to Section 3.7, it being understood that
-----------
such amount does not include the IRB Letter of Credit issued under the
Reimbursement Agreement) the Maximum Loan Availability. The foregoing commitment
of the Bank is herein called its "Revolving Loan Commitment."
SECTION 2.2. LC Commitment. The Bank agrees to issue from time to
-------------
time before the Termination Date such commercial and import letters of credit
(such letters of credit being herein collectively called "Letters of Credit" and
individually a "Letter of Credit") as the Borrower may request. The aggregate
undrawn face amount of all Letters of Credit issued and outstanding pursuant to
this Section 2.2 or drawn and not reimbursed pursuant to Section 3.7 shall not
----------- -----------
at any one time exceed (when added with the aggregate principal amount of the
Revolving Loans then outstanding) the Maximum Loan Availability. The foregoing
commitment of the Bank is herein called its "LC Commitment," and collectively
the "LC Commitments."
SECTION 2.3. Revolving Loan Borrowing Procedure.
----------------------------------
(a) Each Borrowing of Revolving Loans shall be made upon the
irrevocable written notice of an Authorized Representative of the Borrower
delivered to the Bank in the form of a Notice of Borrowing (which notice must be
received by the Bank (i) prior to 10:00 a.m. (Chicago time) two Business Days
prior to the requested Borrowing Date, in the case of Offshore Rate Loans, and
(ii) prior to 12:00 noon (Chicago time) on the requested Borrowing Date, in the
case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be (x) in the
case of Base Rate Loans, in a minimum amount of $100,000 or an
integral multiple of $50,000 in excess thereof and (y) in the case of
Offshore Rate Loans, in a minimum amount of $500,000 or an integral
multiple of $500,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business
Day;
(C) the Type of Revolving Loans comprising the Borrowing;
and
-22-
(D) in the case of an Offshore Rate Loan, the duration of
the Interest Period applicable to such Revolving Loans included in
such notice. If the Notice of Borrowing fails to specify the duration
of the Interest Period for any Borrowing of Offshore Rate Loans, such
Interest Period shall be three months.
(b) Subject to satisfaction of the applicable conditions precedent
set forth in Article VII hereof, the Bank shall make the proceeds of each
-----------
Revolving Loan available to the Borrower by causing an amount of same day funds
equal to the principal amount of such Revolving Loan to be credited to the
account of the Borrower at the Bank unless otherwise required pursuant to the
terms of this Agreement.
(c) After giving effect to any Borrowing, there may not be more than
five different Interest Periods in effect.
2.4. Conversion and Continuation Elections.
-------------------------------------
(a) Borrower may, upon irrevocable written notice to the Bank:
(i) elect, on any Business Day, in the case of Base Rate Loans,
or on the last day of the applicable Interest Period, in the case of any
Offshore Rate Loans, to convert any of its Revolving Loans (or any part
thereof in an amount not less than (x) in the case of Base Rate Loans, a
minimum amount of $100,000 or an integral multiple of $50,000 in excess
thereof and (y) in the case of Offshore Rate Loans, a minimum amount of
$500,000 or an integral multiple of $500,000 in excess thereof) into
Revolving Loans of any other Type; or
(ii) elect to renew on the last day of the applicable Interest
Period any Revolving Loans having Interest Periods maturing on such day (or
any part thereof in an amount not less than (x) in the case of Base Rate
Loans, a minimum amount of $100,000 or an integral multiple of $50,000 in
excess thereof and (y) in the case of Offshore Rate Loans, a minimum amount
of $500,000 or an integral multiple of $500,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
--------
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $500,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrower to continue such Revolving Loans as, and convert such Revolving
Loans into, Offshore Rate Loans shall terminate.
-23-
(b) the Borrower shall deliver a Notice of Conversion/Continuation to
be received by the Bank not later than 10:00 a.m. (Chicago time) at least (i)
two Business Days in advance of the Conversion/Continuation Date, if the
Revolving Loans are to be converted into or continued as Offshore Rate Loans;
and (ii) on the Conversion/Continuation Date, if the Revolving Loans are to be
converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Revolving Loans to be converted
or renewed;
(C) the Type of Revolving Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Borrower has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans, or if any Default or Event
of Default then exists, the Borrower shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) During the existence and continuation of a Default or Event of
Default, the Borrower may not elect to have a Revolving Loan converted into or
continued as an Offshore Rate Loan.
(e) After giving effect to any conversion or continuation of
Revolving Loans, there may not be more than five different Interest Periods in
effect.
SECTION 2.5. Interest.
--------
(a) Each Revolving Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate plus the Applicable Margin or the Base Rate plus the
Applicable Margin, as the case may be (and subject to the Borrower's right to
convert to other Types of Loans under Section 2.4).
-----------
(b) Interest on each Revolving Loan shall be paid in arrears on each
Interest Payment Date (or if such Interest
-24-
Payment Date is not a Business Day, then on the next Business Day following such
Interest Payment Date; provided, however, such extension of time in such case
-------- -------
shall not be included in the computation of the payment of interest) to the Bank
at the Head Office. Interest shall also be paid on the date of any prepayment
of Loans under Section 4.1 or 4.2 for the portion of the Loans so prepaid and
----------- ---
upon payment (including prepayment) in full thereof and, during the existence of
any Event of Default, interest shall be payable on demand.
(c) Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until paid in full,
payable on demand, at a rate which shall be two percent (2.0%) above the rate
which would otherwise be applicable.
(d) Interest and all fees hereunder shall be calculated on the basis
of a year of 360 days for the actual number of days elapsed.
(e) Anything herein to the contrary notwithstanding, the obligations
of the Company hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by the Bank would be contrary to the provisions of any
law applicable to the Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by the Bank, and in such event the
Company shall pay the Bank interest at the highest rate permitted by applicable
law.
(f) Each determination of an interest rate by the Bank shall be
conclusive and binding on the Borrower in the absence of manifest error.
SECTION 2.6. Revolving Note. All Revolving Loans made by the Bank
--------------
under this Agreement shall be evidenced by, and repaid with interest in
accordance with, a single amended and restated promissory note of the Borrower,
in substantially the form of Exhibit A, duly completed, in the principal amount
---------
of Thirty-Five Million Dollars ($35,000,000), payable to the Bank (the
"Revolving Note"). The Bank is hereby authorized by the Borrower to endorse on
the schedule attached to the Revolving Note the amount of each Revolving Loan
and the Borrower thereof and of each payment of principal received by the Bank
on account of such Revolving Loans, which endorsement shall, in the absence of
manifest error, be conclusive as to the outstanding balance of the Revolving
Loans made by the Bank; provided, however, that the failure to make such
notation with respect to any Revolving Loan
-25-
or payment shall not limit or otherwise affect the obligations of the Borrower
under this Agreement or the Revolving Note.
SECTION 2.7. Commitment Fee. The Borrower agrees to pay the Bank a
--------------
non-refundable unused commitment fee at the rate of .25% per annum on the
average daily amount by which the Total Commitment Amount exceeds the
outstanding Revolving Loans plus the undrawn face amount of the Letters of
Credit, for the period commencing on the date hereof and continuing to but not
including the Termination Date, payable quarterly in arrears on the last day of
March, June, September and December of each year and at maturity (or if such day
is not a Business Day, then on the next Business Day thereafter; provided,
--------
however, such extension of time in such case shall not be included in the
-------
computation of the payment of the commitment fee).
ARTICLE III
THE LETTERS OF CREDIT
SECTION 3.1. Request for Issuance of Letters of Credit. The Bank
-----------------------------------------
shall receive at least 5 Business Days' prior written notice of a request for
issuance of each Letter of Credit, each such request to be accompanied by an
application for issuance of letter of credit substantially in the form then used
by the Bank (an "LC Application") duly executed by the Borrower and in all
respects in form and substance satisfactory to the Bank, together with such
other documentation as the Bank may request in support thereof.
SECTION 3.2. Expiration and other Terms. Each Letter of Credit shall
--------------------------
expire on or before the Termination Date unless such Letter of Credit is cash
collateralized pursuant to documentation in form and substance satisfactory to
the Bank; provided that in no event shall the expiration date exceed more than
one year from the date of issuance of such Letter of Credit.
SECTION 3.3. Notification of Demand for Payment. The Bank shall
----------------------------------
promptly notify the Borrower of the amount of each demand for payment under a
Letter of Credit and of the date on which such payment is to be made.
SECTION 3.4. Funding by Bank. With respect to each demand for
---------------
payment pursuant to a Letter of Credit, the Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent such demand to
ascertain that the same appear on their face to be in conformity with the terms
and conditions of such Letter of Credit. If the Bank determines that a demand
for payment under a Letter of Credit conforms to
-26-
the terms and conditions of such Letter of Credit, then the Bank shall make
payment to the Beneficiary in accordance with the terms of such Letter of
Credit.
SECTION 3.5. Non-Conforming Demand For Payment. If, after
---------------------------------
examination of a demand for payment under a Letter of Credit, the Bank shall
have determined that such demand does not conform to the terms and conditions of
such Letter of Credit, then the Bank shall, as soon as reasonably practicable,
give notice to the related Beneficiary and to the Borrower to the effect that
demand was not in accordance with the terms and conditions of such Letter of
Credit, stating the reasons therefor and that the relevant document is being
held at the disposal of the Beneficiary or is being returned to the Beneficiary,
as the Bank may elect. The Beneficiary may attempt to correct any such non-
conforming demand for payment under such Letter of Credit if, and to the extent
that, the Beneficiary is entitled (without regard to the provisions of this
sentence) and able to do so.
SECTION 3.6. Return of Letter of Credit. With respect to each Letter
--------------------------
of Credit, the Bank shall have the right, provided the Bank is not then in
default under such Letter of Credit by reason of its having wrongfully failed to
honor a demand for payment previously made by the Beneficiary under such Letter
of Credit, to require the Beneficiary to surrender such Letter of Credit to the
Bank on the stated expiration date. The Borrower agrees, if necessary, to use
its best efforts to cause the Beneficiary to surrender such Letter of Credit.
SECTION 3.7. Reimbursement Agreement of the Borrower. The Borrower
---------------------------------------
hereby unconditionally and irrevocably agrees to reimburse the Bank, immediately
upon demand, for each payment made by the Bank under a Letter of Credit honoring
a demand for payment made by the Beneficiary thereunder, with interest on the
amount so paid by the Bank from and including the date paid by the Bank to the
date the Bank is reimbursed therefor, at a rate per annum equal to the Base Rate
from time to time in effect (but not less than the Base Rate in effect on the
date of such payment by the Bank). Interest shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
SECTION 3.8. Obligation to Reimburse for Letter of Credit Payments.
-----------------------------------------------------
The Borrower's obligation to reimburse the Bank for payments made by the Bank
under any Letter of Credit honoring a demand for payment by the Beneficiary
thereunder, shall be irrevocable, absolute and unconditional under any and all
circumstances including, without limitation, any of the following circumstances:
-27-
(1) any lack of legality, validity, regularity or
enforceability of this Agreement, any Letter of Credit or any
other Loan Document;
(2) the existence of any claim, setoff, defense or other
right which the Borrower may have or have had at any time against
any Beneficiary, the Bank, any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting) or any
other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transaction
between the Borrower and the Beneficiary of any Letter of
Credit);
(3) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(4) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents;
(5) payment by the Bank under any Letter of Credit against
presentation of a draft or certificate or other document that
does not comply with the terms of such Letter of Credit unless
such payment by the Bank constituted gross negligence or willful
misconduct of the Bank; or
(6) the occurrence of any Default or Event of Default;
provided, however, that the Borrower shall not be obligated to reimburse the
Bank for any wrongful payment made by the Bank under any Letter of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of the Bank or any of its officers, employees or agents.
SECTION 3.9. Mandatory Payment to Bank of LC Obligations. The
-------------------------------------------
Borrower agrees that, on any termination of the LC Commitments pursuant to
Section 12, it will pay to the Bank in dollars and in same day funds an amount
----------
equal to the principal amount of all LC Obligations under any LC Application,
whether or not the related Letter of Credit has been drawn (which amount shall
be retained by the Bank in a separate collateral account as security for the LC
Obligations and the other Liabilities).
-28-
SECTION 3.10. Fees. The Borrower agrees to pay the following fees
----
(all such fees being non-refundable and in the aggregate):
(1) The Borrower agrees to pay to the Bank a facing fee for
the Letter of Credit (the "LC Facing Fee") in an amount equal to
.25% of the aggregate outstanding face amount of the Letter of
Credit, such fee to be payable on the date of issuance of such
Letter of Credit.
(2) The Borrower agrees to pay such other standard,
published fees and amounts ("LC Administrative Fees") as the Bank
shall customarily require in connection with the amendment,
processing and/or administration of letters of credit, such fees
to be in addition to the fees payable under Section 3.10(1), with
---------------
respect to the issuance and/or negotiation of the Letter of
Credit.
ARTICLE IV
PAYMENTS AND PREPAYMENTS
------------------------
SECTION 4.1. Optional Prepayments. Subject to Section 5.4, the
-------------------- ------------
Borrower may, without penalty or premium, at any time, or from time to time,
upon irrevocable notice to the Banks on any Business Day, prepay Revolving Loans
in whole or in part, in minimum amounts (x) in the case of Base Rate Loans, of
$50,000 or an integral multiple of $50,000 in excess thereof and (y) in the case
of Offshore Rate Loans, of $500,000 or any multiple of $500,000 in excess
thereof. Such notice of prepayment shall specify the date and amount of such
prepayment and the Type(s) of Revolving Loans to be prepaid. If such notice is
given by the Borrower, the Borrower shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount prepaid
and any amounts required pursuant to Section 5.4.
-----------
SECTION 4.2. Mandatory Prepayments. In the event the aggregate
---------------------
outstanding principal balance of all Revolving Loans plus the aggregate undrawn
face amount of Letters of Credit issued and outstanding pursuant to Section 2.2
-----------
or drawn and not reimbursed exceeds the Maximum Loan Availability, the Borrower
shall, unless the Bank shall otherwise consent, without notice or demand of any
kind, immediately make such repayments of the Revolving Loans and the LC
Obligations or take such other actions as shall be necessary to eliminate such
excess. All Revolving
-29-
Loans and LC Obligations (including accrued and unpaid interest thereon) shall
be repaid by the Borrower on the Termination Date, unless payable sooner
pursuant to the provisions of this Agreement.
SECTION 4.3. Method of Payment. The Borrower shall make each payment
-----------------
under this Agreement, under the Revolving Note and under the Letters of Credit
not later than 12:00 noon, Chicago time, on the date when due in lawful money of
the United States to the Bank at the Head Office in immediately available funds.
Borrower hereby authorizes the Bank, if and to the extent payment is not made
when due under this Agreement, under the Revolving Note, under the Letters of
Credit and the other Loan Documents and Other Agreements, to charge from time to
time against any account of the Borrower with the Bank any amount so due from
the Borrower. Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment to be made under this Agreement,
under the Revolving Note and under the Letters of Credit shall be stated to be
due on a Saturday, Sunday, or a public holiday, or the equivalent for banks
generally under the laws of the State of Illinois, such payment shall be made on
the next succeeding Business Day, and such extension of time in such case shall
-----
be included in the computation of the payment of interest.
SECTION 4.4. Use of Proceeds. The proceeds of the Revolving Loans
---------------
and the Letters of Credit shall be used by the Borrower for working capital and
general corporate purposes. Borrower will not, directly or indirectly, use any
part of such proceeds for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U of the FRB or to extend credit to any Person
for the purpose of purchasing or carrying any such margin stock.
ARTICLE V
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
5.1 Taxes. (a) Any and all payments by the Borrower to the Bank
-----
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for, any Taxes. In addition, the
Borrower shall pay all Other Taxes.
(b) If the Borrower shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to the Bank, then:
-30-
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section),
the Bank receives and retains an amount equal to the sum it would have
received and retained had no such deductions or withholdings been made;
(ii) the Borrower shall make such deductions and withholdings;
(iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) the Borrower shall also pay to the Bank for the account of
the Bank, at the time interest is paid, Further Taxes in the amount that
the Bank specifies as necessary to preserve the after-tax yield the Bank
would have received if such Taxes, Other Taxes or Further Taxes had not
been imposed.
(c) The Borrower agree to indemnify and hold harmless the Bank for
the full amount of i) Taxes, ii) Other Taxes, and iii) Further Taxes in the
amount that the Bank specifies as necessary to preserve the after-tax yield the
Bank would have received if such Taxes, Other Taxes or Further Taxes had not
been imposed, and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes, Other Taxes or Further Taxes were correctly or legally asserted;
provided, however, the Borrower shall not indemnify the Bank for increases in
the Bank's income tax rate. Payment under this indemnification shall be made
within 30 days after the date the Bank makes written demand therefor.
(d) Within 30 days after the date of any payment by the Borrower of
Taxes, Other Taxes or Further Taxes, the Borrower shall furnish to the Bank the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Bank.
(e) If the Borrower is required to pay any amount to the Bank
pursuant to subsection (b) or (c) of this Section, then the Bank shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Borrower which may thereafter accrue, if such change in the sole
judgment of the Bank is not otherwise disadvantageous to the Bank.
-31-
5.2 Illegality.
----------
(a) If the Bank determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for the Bank or its applicable Lending Office to make Offshore Rate Loans, then,
on notice thereof by the Bank to the Borrower, any obligation of the Bank to
make Offshore Rate Loans shall be suspended until the Bank notifies the Borrower
that the circumstances giving rise to such determination no longer exist.
(b) If the Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Borrower shall, upon receipt of notice of such fact and
demand from the Bank, prepay in full such Offshore Rate Loans of the Bank then
outstanding, together with interest accrued thereon and amounts required under
Section 5.4, either on the last day of the Interest Period thereof, if the Bank
-----------
may lawfully continue to maintain such Offshore Rate Loans to such day, or
immediately, if the Bank may not lawfully continue to maintain such Offshore
Rate Loan. If the Borrower is required to so prepay any Offshore Rate Loan,
then concurrently with such prepayment, the Borrower shall borrow from the Bank,
in the amount of such repayment, a Base Rate Loan.
(c) Before giving any notice under this Section, the Bank shall
designate a different Lending Office with respect to its Offshore Rate Loans if
such designation will avoid the need for giving such notice and will not, in the
judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.
5.3 Increased Costs and Reduction of Return.
----------------------------------------
(a) If the Bank determines that, due to either (i) the introduction
of or any change (other than any change by way of imposition of or increase in
reserve requirements included in the calculation of the Offshore Rate or in
respect of the assessment rate payable by the Bank to the FDIC for insuring U.S.
deposits) in or in the interpretation of any law or regulation or (ii) the
compliance by the Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to the Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans or any increase in the cost to
the Bank of agreeing to issue, issuing or maintaining any Letter of Credit or of
agreeing to make or making, funding or maintaining any unpaid drawing under any
Letter of Credit, then the Borrower shall be liable for, and shall from time to
time, upon demand,
-32-
pay to the Bank, additional amounts as are sufficient to compensate the Bank for
such increased costs.
(b) If the Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any corporation controlling the Bank with
any Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank and (taking into consideration the Bank's or such corporation's
policies with respect to capital adequacy and the Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, upon demand of the Bank to the Borrower, the Borrower shall pay
to the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
5.4 Funding Losses. The Borrower shall reimburse the Bank and hold
--------------
the Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a) the failure of the Borrower to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Borrower to borrow, continue or convert a Loan
after the Borrower has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/ Continuation;
(c) the failure of the Borrower to make any prepayment in accordance
with any notice delivered under Section 4.1;
-----------
(d) the prepayment (including pursuant to Section 4.1 or 4.2) or
------------------
other payment (including after acceleration thereof) of an Offshore Rate Loan on
a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any Offshore Rate
-----------
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from
-33-
which such funds were obtained. For purposes of calculating amounts payable by
the Borrower to the Bank under this Section and under Section 5.3(a), each
--------------
Offshore Rate Loan made by the Bank (and each related reserve, special deposit
or similar requirement) shall be conclusively deemed to have been funded at the
LIBOR used in determining the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
5.5 Inability to Determine Rates. If the Bank determines that for
----------------------------
any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan, or that the Offshore Rate applicable pursuant to Section
-------
2.5(a) for any requested Interest Period with respect to a proposed Offshore
------
Rate Loan does not adequately and fairly reflect the cost to the Bank of funding
such Loan, the Bank will promptly so notify the Borrower. Thereafter, the
obligation of the Bank to make or maintain Offshore Rate Loans hereunder shall
be suspended until the Bank revokes such notice in writing. Upon receipt of
such notice, the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Bank shall make, convert or continue the Loans, as proposed by
the Borrower, in the amount specified in the applicable notice submitted by the
Borrower, but such Loans shall be made, converted or continued as Base Rate
Loans instead of Offshore Rate Loans.
5.6 Survival. The agreements and obligations of the Borrower in this
--------
Article V shall survive the payment of all other Liabilities.
---------
ARTICLE VI
COLLATERAL AND OTHER SECURITY
-----------------------------
SECTION 6.1. Collateral. As security for (1) the payment of all
----------
loans and advances now or hereafter made by the Bank to the Borrower under this
Agreement or to the Borrower (as assignee of the Parent) under the Existing Loan
and Security Agreement, or under the other Loan Documents (including without
limitation the Reimbursement Agreement) or Other Agreements, and (2) the payment
or other satisfaction of all other Liabilities, to the Bank whether now or
hereafter existing, direct or indirect or due or to become due, the Parent and
the Borrower each hereby grants to the Bank a first priority security interest,
subject to Permitted Liens, in and to the following property of the Parent
-34-
and the Borrower, whether now owned or existing, or hereafter acquired or coming
into existence, wherever now or hereafter located (hereinafter referred to as
"Collateral"):
(i) Accounts;
(ii) Equipment;
(iii) Inventory;
(iv) General Intangibles;
(v) Contract Rights, instruments, financial assets, documents and
chattel paper;
(vi) All monies, residues, and property of any kind, now or at
any time or times hereafter, in the possession or under the control of
the Bank or a bailee of the Bank, or any Participant;
(vii) All books and records (including, without limitation,
customer lists, credit files, computer programs) printouts and other
computer materials and records; of the Parent and the Borrower
pertaining to any of the foregoing.
Such security interest includes a continuing Lien in, on, and to all said
Collateral and the products and proceeds thereof, and any replacements,
additions, accessions, or substitutions thereof, after acquired property, and
the Accounts of other proceeds arising from the sale or other disposition of any
Inventory or Equipment of the Parent and the Borrower including any returns
thereof, including, where applicable, the proceeds of insurance covering any of
said Collateral. Collateral also includes any property of the Parent and the
Borrower subject to a separate security agreement or pledge in favor of the Bank
or any Affiliate of the Bank. Upon the indefeasible payment in full of the
Liabilities and termination of the Commitments (as such term is defined under
this Agreement and under the Reimbursement Agreement), the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Parent and/or the Borrower, as the case may be. Upon any such termination,
the Bank will, at the Borrower's expense, execute and deliver to the Parent and
the Borrower such documents as the Parent and/or the Borrower shall reasonably
request to evidence such termination and shall terminate its financing
statements with regard to the Collateral wherever filed. Solely for the
purposes of this Section 6.1 references to "Borrower" in the definitions of
-----------
"Accounts", "Equipment", "Inventory" and "General
-35-
Intangibles" shall be deemed to reference both the Borrower and the Parent.
SECTION 6.2. Accounts. If required by the Bank, the Borrower shall
--------
advise the Bank promptly of any Inventory items which are returned by or
repossessed from any Account Debtor, or otherwise recovered, shall receive them
in trust and, unless instructed to deliver them to the Bank, shall resell them
for the Bank. If required by the Bank, the Borrower shall notify the Bank
immediately of all disputes and claims by any Account Debtor and settle or
adjust them at no expense to the Bank. If the Bank directs after the occurrence
and during the continuance of an Event of Default, no discount or credit
allowance shall be granted by the Borrower to any Account Debtor. After the
occurrence and during the continuance of an Event of Default, all Account Debtor
payments and all net amounts received by the Bank in settlement, adjustment or
liquidation of any Accounts may be applied by the Bank to the Borrower's
indebtedness hereunder or credited to the Borrower's bank account (subject to
collection) with the Bank or any Affiliate of the Bank, as the Bank may deem
appropriate. If requested, the Borrower will have proper entries in its books,
disclosing the assignment of Accounts to the Bank.
SECTION 6.3. Account Warranties. The Borrower warrants and covenants
------------------
that: (1) all of the Accounts are and will be bona fide existing obligations
created by the sale and actual delivery of Inventory or other property or the
rendition of services or the furnishing of other good and sufficient
consideration to Account Debtors in the ordinary course of business consistent
with past practices; (2) all shipping or delivery receipts and other documents
furnished or to be furnished to the Bank in connection therewith are and will be
genuine; (3) none of the Accounts are or will be at any time subject to any Lien
except for Permitted Liens; and (4) the Borrower will not make any further
assignment of any thereof or create or permit to exist any further Lien therein,
nor permit any of the Bank's rights therein to be defeated by attachment, levy,
garnishment or other judicial process; and, except as the Borrower shall notify
the Bank, none of the Accounts are subject to setoff, credit, allowance or
adjustment by the Account Debtor thereon.
SECTION 6.4. Verification of Accounts. The Bank is authorized and
------------------------
empowered at any time or times hereafter in its sole discretion:
(1) To require the Borrower to notify, or the Bank itself
may notify, either in its own name, in the name of a nominee of
the Bank or in the Borrower's name, any Account Debtor obligated
in respect of any of
-36-
the Accounts or any party obligated under contracts involved in
any of the Contract Rights assigned to the Bank, of the fact of
this assignment or to request in the Bank's name, in the name of
a nominee of the Bank, in the Borrower's name or in the name of a
third party, confirmation from any such Account Debtor or party
of the amount shown by the Accounts to be payable or any other
matter stated therein;
(2) To demand, collect or compromise any and all sums which
are now or may hereafter become due or owning upon any of the
Accounts;
(3) To enforce payment or performance of any of the
Collateral in the Bank's own name, in the name of a nominee of
the Bank or in the name of the Borrower; and
(4) To endorse in the Borrower's name and to collect any
instruments tendered or received in payment of any obligation
owing to the Borrower. Under no circumstances shall the Bank be
under any duty to act in regard to any of the foregoing matters.
The costs of such collection and enforcement, including
Attorneys' Fees and out-of-pocket expenses, and the cost of any
special bank account or accounts which may be required hereunder,
shall be borne solely by the Borrower whether the same are
incurred by the Bank or the Borrower.
SECTION 6.5. Collection of Accounts and Payments. At the request
-----------------------------------
of the Bank, after the occurrence and during the continuance of an Event of
Default, the Borrower will forthwith upon receipt of all checks, drafts, cash
and other remittances in payment or on account of any of the Accounts, deposit
the same in a special bank account with the Bank or an Affiliate of the Bank,
over which the Bank alone has power of withdrawals, and will designate with each
such deposit the particular Accounts upon which the remittance was made. The
Borrower acknowledges that the maintenance of such a bank account will be solely
for the convenience of the Bank in facilitating its own operations and the
Borrower has not and shall not have any right, title or interest in any such
bank account or in the amount at any time appearing to the credit thereof. Said
proceeds shall be deposited in precisely the form received except for the
Borrower's endorsement where necessary to permit collection of items, which
endorsement the Borrower agrees to make. Pending such deposit, the Borrower
agrees not to commingle any such checks, drafts, case and other remittances with
any of its funds or property, but will hold them separate and apart therefrom
and upon and express trust for the Bank until deposit
-37-
thereof is made in the special bank account. Upon the full and final liquidation
of all Liabilities, the Bank will pay over to the Borrower any excess received
by the Bank from the Borrower, whether received by the Bank or an Affiliate of
the Bank as deposit in the special bank account or received by the Bank as a
direct payment on any of the sums due hereunder.
SECTION 6.6. Appointment as Attorney-in-Fact. The Borrower appoints
-------------------------------
the Bank, with full power of substitution, as the Borrower's attorney with
power: (1) to notify the post office authorities to change the address for
delivery of the Borrower's mail to an address designated by the Bank; to
receive, open and dispose of all mail addressed to the Borrower; (2) to send
requests for verification of Accounts to Account Debtors; (3) to open an escrow
account or assignee deposit account for the collection of Accounts, if not
required contemporaneously with the execution hereof; and (4) to do all things
necessary to carry out the terms of this Agreement. Neither the Bank nor its
attorney will be liable for any acts of commission or omission not for any error
in judgment or mistake of fact or law, unless the same shall have resulted from
the Bank's gross negligence or willful misconduct. This power, being coupled
with an interest, is irrevocable until either (a) all Liabilities are
indefeasibly paid in full, or (b) this Agreement is terminated, whichever shall
last occur. The Borrower expressly waives presentment, demand, notice of
dishonor and protest of all instruments and any other notice to which they or it
might otherwise be entitled. Notwithstanding anything contained in the foregoing
to the contrary, the Bank agrees that it will not exercise any of its rights
granted under this Section 6.6 prior to the occurrence of an Event of Default.
-----------
SECTION 6.7. Account Records. The Borrower will at all times keep
---------------
accurate and complete records of its Accounts and Inventory in accordance with
sound accounting practices and GAAP and will cause its books and records as at
the end of any calendar month to be posted and closed not more than thirty (30)
days after the last business day of such month. The Bank, or any of its agents,
shall have the right to call at the Borrower's place or places of business at
intervals to be determined by the Bank and without hindrance or delay, to
inspect the Borrower's Inventory and to inspect, audit, check and make copies
and/or extracts from the books, records, journals, orders, receipts,
correspondence and other data relating to Inventory, Accounts, Equipment,
Contract Rights, General Intangibles or to any other transactions between the
parties hereto. Any and all such inspections and/or audits shall be at the
Borrower's expense.
SECTION 6.8. Governmental Accounts. If any Accounts arise out of
---------------------
contracts with the United States or any department,
-38-
agency, or instrumentality thereof, the Borrower will immediately notify the
Bank in writing and execute any instruments and take any steps required by the
Bank in order that all monies due and to become due under such contracts shall
be assigned to the Bank and notice thereof given to the Government under the
Federal Assignment of Claims Act.
SECTION 6.9. Instruments and Chattel Paper. If any Accounts should
-----------------------------
be evidenced by promissory notes, trade acceptances, or other instruments or
chattel paper for the payment of money, the Borrower will, unless otherwise
directed by the Bank, deliver the same to the Bank appropriately endorsed to its
order and, regardless of the form of such endorsement, the Borrower hereby
expressly waives presentment, demand, notice of dishonor, protest and notice of
protest and all other notices with respect thereto.
SECTION 6.10. Inventory Warranties. The Borrower warrants and
--------------------
covenants that: (1) all of the Inventory is and at all times shall be owned by
it, free of all Liens (except Permitted Liens); (2) the Borrower will not make
any further assignment of any thereof or create or permit to exist any further
Lien therein, nor permit any of the Bank's rights therein to be defeated by
attachment, levy, garnishment or other judicial process; (3) that, subject to
the following sentence, all Inventory shall be kept by the Borrower only at the
address of the Borrower at the address or addresses shown in Schedule 6.10
-------------
attached hereto. The Borrower shall promptly advise the Bank of the removal of
such Inventory to any other location at which it shall be stored. If the
Borrower sells Inventory for cash, and if requested by the Bank, all full and
partial payments therefor shall immediately be delivered by the Borrower to the
Bank in their original form. All proceeds shall be held by the Borrower in
trust for the Bank and shall be remitted to the Bank at the end of the day
received, or at such other time as the Bank may designate.
SECTION 6.11. No Liability. The Bank shall not be liable or
------------
responsible in any way for the safekeeping of any Inventory delivered to it, to
any bailee appointed by or for it, to any warehouseman, or under any other
circumstances. The Bank shall not be responsible for collection of any proceeds
or for losses in collected proceeds held by the Borrower in trust for the Bank.
Any and all risk of loss for any or all of the foregoing shall be upon the
Borrower, except for such loss as shall result from the Bank's gross negligence
or willful misconduct. The Bank shall have the right, but shall not be
obligated, to discharge any Liens and any taxes at any time levied or placed
upon any of all Inventory, including, without limitation, those arising under
statute or in favor of landlords,
-39-
taxing authorities, government, public and/or private warehousemen, common
and/or private carriers, processors, finishers, draymen, coopers, dryers,
mechanics, artisans, laborers, attorneys, courts, or others; the Bank may also
pay for maintenance and preservation of Inventory. The Bank may charge to the
Borrower as a Revolving Loan any payment made or expense incurred by it under
this Section 6.11.
------------
SECTION 6.12. Equipment Warranties. The Borrower warrants and
--------------------
covenants: (1) that all of the Equipment is and at all times shall be owned by
it free of all Liens except for Permitted Liens; (2) that the Borrower will not
make any further assignment of any thereof or create or permit to exist any
further Lien therein, nor permit any of the Bank's rights therein to be defeated
by attachment, levy, garnishment or other judicial process; that all Equipment
shall be kept by the Borrower only at the address or addresses of Borrower shown
in Schedule 6.10 hereto, and shall not (without the Bank's prior written
-------------
approval) be removed therefrom. The Borrower shall at all times keep the
Equipment in good condition and repair (ordinary wear and tear expected), and
the Borrower shall not, without the prior written consent of the Bank, sell,
lease, or otherwise dispose of Equipment, or any part thereof, except in the
ordinary course of the Borrower's business. The Bank shall have the right, but
shall not be obligated, to discharge any Liens and any taxes at any time levied
or placed on any or all the Equipment, including, without limitation, those
arising under statue or in favor of landlords, taxing authorities, government,
public and/or private warehousemen, common and/or private carriers, processors,
finishers, draymen, coopers, dryers, mechanics, artisans, laborers, attorneys,
courts, or others; the Bank may also pay for the maintenance and preservation of
the Equipment. The Bank may charge to the Borrower as a Revolving Loan any
payment made or expense incurred by it under this Section 6.12.
------------
SECTION 6.13. Further Assurances. At the Bank's request, the
------------------
Borrower shall execute and/or deliver to the Bank, at any time or times
hereafter, such agreements, documents, financing statements, warehouse receipts,
bills of lading, notices of assignment of Accounts, schedules of Accounts
assigned, and other written matter necessary or requested by the Bank to perfect
and maintain perfected the Bank's security interest in the Collateral (all the
above hereinafter referred to as "Supplemental Documentation"), in form and
substance acceptable to the Bank, and pay the costs of any recording or filing
of the same. Upon the occurrence of an Event of Default, the Borrower hereby
irrevocably makes, constitutes and appoints the Bank (and all Persons designated
by the Bank for that purpose) as the Borrower's true and lawful attorney (and
agent-in-fact) to sign the name of the Borrower on any of the
-40-
Supplemental Documentation and to deliver any of the Supplemental Documentation
to such Persons as the Bank in its sole discretion, may elect. The Borrower
agrees that a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.1. Condition Precedent to Revolving Loan. The effectiveness
-------------------------------------
of this Agreement and the obligation of the Bank to continue to make Revolving
Loans or to continue to issue Letters of Credit to or for the account of the
Borrower is subject to the condition precedent that the Bank shall have received
on or before the day of such Revolving Loan or issuance of such Letter of Credit
(or with respect to any continuing Revolving Loan or Letter of Credit, on or
prior to the date hereof) each of the following, in form and substance
satisfactory to the Bank and its counsel (unless waived by the Bank):
(1) Revolving Note. The Revolving Note duly executed by the
--------------
Borrower;
(2) Trademark Agreement. The Trademark Agreement duly
-------------------
executed by the Borrower;
(3) Pledge Agreement. The Pledge Agreement duly executed by
----------------
the Parent, together with stock certificate(s) pledged thereunder
and related undated blank stock power(s);
(4) Guaranty. The Guaranty duly executed by the Parent;
--------
(5) Insurance. Evidence of the existence of insurance on
---------
all property of the Borrower, together with evidence establishing
the Bank as a loss payee and/or additional insured on all related
insurance policies;
(6) Certificate of the Parent. A certificate (dated as of
-------------------------
the date of this Agreement) of the Secretary of the Parent
certifying: (a) a copy of the Parent's Organic Documents as
theretofore amended; (b) copies of all corporate action taken by
the Parent, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of the Loan
Documents by the Parent and each other
-41-
document to be delivered pursuant to this Agreement (to the
extent the Parent is a party to such documents); (c) the names
and true signatures of the officers of the Parent authorized to
sign the Loan Documents to which it is a party and the other
documents to be delivered by the Parent under this Agreement; and
(d) an executed copy of the Recapitalization Agreement;
(7) Certificate of the Borrower. A certificate (dated as of
---------------------------
the date of this Agreement) of the Secretary of the Borrower
certifying: (a) a copy of the Borrower's Organic Documents as
theretofore amended; (b) copies of all corporate action taken by
the Borrower, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of the Loan
Documents by the Borrower and each other document to be delivered
pursuant to this Agreement (to the extent the Borrower is a party
to such documents) and authorizing borrowings by each of the
Authorized Officers; (c) the names and true signatures of the
officers of the Borrower authorized to sign the Loan Documents to
which it is a party and the other documents to be delivered by
the Borrower under this Agreement; (d) an executed copy of the
Assignment and Assumption Agreement consented to by the Bank; and
(e) an executed copy of the Indenture;
(8) Chief Financial Officers Certificate of the Parent.
--------------------------------------------------
Certificate of the Chief Financial Officer of the Parent
certifying as to (a) receipt of all proceeds in accordance with
the Recapitalization Agreement, and (b) receipt of $75,000,000 in
proceeds from the issuance of the Subordinated Debt;
(9) Certified Charter and Good Standing. A certificate of
-----------------------------------
the due formation, valid existence and good standing of the
Parent and the Borrower in its respective state of incorporation,
issued by the appropriate authorities of such jurisdictions, and
certificates of the Parent's and the Borrower's good standing and
due qualification to do business, issued by appropriate officials
in any states in which the Parent or the Borrower, as the case
may be, owns property subject to this Agreement;
(10) Opinion of Counsel for the Parent and the Borrower. (a)
--------------------------------------------------
A favorable opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, special counsel for the
Parent and the Borrower, in substantially the form of Exhibit C
---------
and as to such other matters as the Bank may reasonably request,
and
-42-
(b) reliance letter from ▇▇▇▇▇▇▇ & ▇▇▇▇▇ with respect to its
opinion delivered pursuant to the Recapitalization Agreement;
(11) Public Filings. Evidence of each filing, registration
--------------
or recordation (and payment of any necessary fee, tax or expense
relating thereto) with respect to each document (including,
without limitation, any UCC financing statement) required by the
Loan Documents or under law or requested by the Bank to be filed,
registered or recorded in order to create, in favor of the Bank a
perfected first Lien on the Collateral;
(12) Reimbursement Agreement. An amendment to the
-----------------------
Reimbursement Agreement (as such term is defined under the
Existing Loan and Security Agreement) as to such matters as the
Bank may request;
(13) Closing Fee. Payment to the Bank of a non-refundable
-----------
closing fee of $50,000; and
(14) Miscellaneous. Such other information and documents as
-------------
may reasonably be required by the Bank and the Bank's counsel.
SECTION 7.2. Conditions Precedent to All Revolving Loans and Letters
-------------------------------------------------------
of Credit. The obligation of the Bank to make each Revolving Loan and to issue
---------
each Letter of Credit shall be subject to the further conditions precedent that
on the date of such Revolving Loan or the issuance of such Letter of Credit:
(1) The Bank shall have received a Notice of Borrowing with
respect to each request for a Revolving Loan or an LC Application
with respect to each request for the issuance of a Letter of
Credit.
(2) No Default or Event of Default exists or will result
from the making of such Revolving Loan or issuance of such Letter
of Credit.
(3) The representations and warranties of the Borrower and
the Parent contained in the Loan Documents (including without
limitation, Article VIII of this Agreement) are true and correct
------------
with the same effect as though made on the date of the making of
such Revolving Loan or issuance of such Letter of Credit, except
to the extent such representation and warranty expressly speaks
to an earlier date.
-43-
(4) No Material Litigation exists except as disclosed on
Schedule 7.2, and since the Effective Date of this Agreement no
------------
Material Litigation Development has occurred with respect to any
Litigation so disclosed on Schedule 7.2.
------------
(5) No Material Adverse Change has occurred since the date
of the most recent financial statements delivered or required to
be delivered pursuant to the terms of this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
------------------------------
The Parent and the Borrower each represents and warrants to the Bank,
all of which shall survive the closing that
SECTION 8.1. Incorporation, Good Standing, and Due Qualification. It
---------------------------------------------------
and each of its Subsidiaries: (1) is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (2) has the corporate power and authority, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and to transact the business in which it is now engaged or proposed
to be engaged; and (3) is duly qualified as a foreign corporation and in good
standing under the laws of each other jurisdiction in which such qualification
is required. The Parent conducts business in its name exclusively and has no
trade names, styles or doing business forms. The Borrower conducts business in
its name exclusively and has no trade names, styles or doing business forms
other than the trade style "Pen-Tab" and "Vinylweld."
SECTION 8.2. Corporate Power and Authority. The execution, delivery,
-----------------------------
and performance by it of the Loan Documents to which it is a party have been
duly authorized by all necessary corporate and stockholder action (if required)
and do not and will not (1) contravene the Parent's or the Borrower's charter or
bylaws; (2) violate any provision of any law, rule, regulation (including,
without limitation, Regulation U of the FRB), order, writ, judgment, injunction,
decree, determination, or award presently in effect having applicability to the
Parent or the Borrower; (3) 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 the Parent or the Borrower is a party or by which it or its
properties may be bound or affected; (4) result in, or require, the creation or
imposition of any Lien (except Liens in favor of the Bank), upon or with respect
to any
-44-
of the properties now owned or hereafter acquired by the Parent or the
Borrower; or (5) cause the Parent or the Borrower to be in default
under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award or any such indenture,
agreement, lease, or instrument.
SECTION 8.3. Legally Enforceable Agreement. This Agreement is, and
-----------------------------
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid, and binding obligations of the Parent and the Borrower (to the
extent such Person is a party to such Loan Documents) enforceable against the
Parent and the Borrower in accordance with their respective terms.
SECTION 8.4. Financial Statements. Borrower's audited consolidated
--------------------
financial statements as at December 30, 1995 and its unaudited consolidated
financial statements as at November 24, 1996, copies of which have been
furnished to the Bank, have been prepared in conformity with GAAP and accurately
present the financial condition of the Borrower and its Subsidiaries as at such
dates and the results of operations for the periods then ended, and since
November 24, 1996, there has been no Material Adverse Change. There are no
liabilities of the Borrower or any Subsidiary, fixed or contingent, which are
material but are not reflected in the financial statements or in the notes
thereto, other than liabilities arising in the ordinary course of business since
November 24, 1996. No information, exhibit, or report furnished by the Parent
or the Borrower to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not materially
misleading.
SECTION 8.5. Other Agreements. Neither the Parent, the Borrower nor
----------------
any Subsidiary is a party to any indenture, loan, or credit agreement, or to any
lease or other agreement or instrument, or subject to any charter or corporate
restriction which could have a Material Adverse Effect, or restrict the ability
of the Parent or the Borrower to carry out their respective obligations under
the Loan Documents or the Other Agreements. Neither the Parent, the Borrower
nor any Subsidiary is in default in any respect in the performance, observance,
or fulfillment of any of the obligations, covenants, or conditions contained in
any agreement or instrument material to its business to which it is a party.
SECTION 8.6. Litigation. There is no pending or threatened action or
----------
proceeding against or affecting the Parent, the Borrower or any Subsidiary
before any court, governmental
-45-
agency, or arbitrator, which may, in any one case or in the aggregate have a
Material Adverse Effect.
SECTION 8.7. No Defaults on Outstanding Judgments or Orders. The
----------------------------------------------
Parent, the Borrower, and each Subsidiary has satisfied all judgments, and no
such Person is in default with respect to any judgment, writ, injunction,
decree, rule, or regulation of any court, arbitrator, or federal, state,
municipal, or other governmental authority, commission, board, bureau, agency,
or instrumentality, domestic or foreign.
SECTION 8.8. Approvals. Except for filings and recordings of Liens
---------
created pursuant to this Agreement, the Trademark Agreement and the Pledge
Agreement, no authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by the Borrower of the Loan
Documents or for the validity or enforceability thereof.
SECTION 8.9. Ownership and Liens. The Parent, the Borrower and each
-------------------
Subsidiary has title to, or valid leasehold interests in, all of its properties
and assets, real and personal, including the properties and assets and leasehold
interest reflected in the financial statements referred to in Section 8.4 (other
-----------
than any properties or assets disposed of in the ordinary course of business),
and none of the properties and assets owned by such Person and none of their
leasehold interests is subject to any Lien, except for Permitted Liens.
Notwithstanding the foregoing, the Parent has no properties or assets other than
its ownership of 100% of the stock of the Borrower.
SECTION 8.10. Subsidiaries. As of the date hereof, the Borrower has
------------
no Subsidiaries and, other than the Borrower which is a wholly owned Subsidiary
of the Parent, the Parent has no Subsidiaries.
SECTION 8.11. ERISA. The Parent, the Borrower and the ERISA
-----
Affiliates have fulfilled their respective obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and have not incurred any liability to the PBGC or any Plan or
Multiemployer Plan (other than to make contributions in the ordinary course of
business).
SECTION 8.12. Real Property. Schedule 8.12 hereto sets forth, as of
------------- -------------
the date hereof, a complete and accurate list of (1) the address and legal
descriptions of any real property owned or leased by the Borrower or on which
any Fixtures are
-46-
located and (2) in the case of Fixtures located on property not owned by the
Borrower, the name(s) and mailing addresses of the record owners of such
property. The Parent does not own or lease any real property.
SECTION 8.13. Hazardous Materials. The Parent, the Borrower and each
-------------------
Subsidiary has obtained all permits, licenses and other authorizations which are
required under all Environmental Laws, except to the extent failure to have any
such permit, license or authorization would not have a Material Adverse Effect.
The Parent, the Borrower and each Subsidiary is in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a Material Adverse Effect.
There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
the Parent, the Borrower or any Subsidiary in relation to any property or
facility now or previously owned or leased by the Parent, the Borrower or any
Subsidiary which have not been made available to the Bank.
SECTION 8.14. Taxes. Each of the Parent and the Borrower and each
-----
Subsidiary has filed all tax returns (federal, state, and local) required to be
filed and have paid all taxes, assessments, and governmental charges and levies
thereon to be due, including interest and penalties.
SECTION 8.15. Debt. As of the date hereof, Schedule 8.15 sets forth
---- -------------
a complete and correct list of all credit agreements, indentures, purchase
agreements, guaranties, Capital Leases, and other investments, agreements, and
arrangements presently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of letters of
credit or for acceptance financing) in respect of which the Parent, the Borrower
or any Subsidiary is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, which are
outstanding and which can be outstanding, are correctly stated, and all Liens of
any nature given or agreed to be given as security therefor are correctly
described or indicated in Schedule 10.1.
-------------
-47-
SECTION 8.16. Senior Obligations, etc. The Borrower has the power and
-----------------------
authority to incur the Subordinated Debt provided for under the Indenture and
has duly authorized, executed and delivered the Indenture and each note issued
pursuant thereto. The Indenture constitutes the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms. The subordination provisions of the Indenture will be enforceable
against the holders thereof by the Senior Debt (as defined in the Indenture).
All (i) Liabilities, including those to pay principal of and interest (including
post-petition interest) on the Revolving Loans and Letters of Credit (as such
term is defined in this Agreement and the Reimbursement Agreement) and fees and
expenses in connection therewith, constitute Senior Debt (as defined in the
Indenture) and all such Liabilities are entitled to the benefits of the
subordination created by the Indenture (ii) the subordination provisions of the
Indenture are enforceable by the Bank against the holders of Subordinated Debt
and (iii) payments of, or interest on, any Subordinated Debt made by Borrower
are subject to such subordination provisions. The Borrower acknowledges that
the Bank is entering into this Agreement, and is extending its Commitments in
reliance upon, the subordination provisions of the Indenture and this Section.
SECTION 8.17. Investment Company Act. Neither the Parent nor the
----------------------
Borrower is an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
SECTION 8.18. Public Utility Holding Company Act. Neither the Parent
----------------------------------
nor the Borrower is a "holding company," or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company," within the meaning of
the Public Utility Holding Company act of 1935, as amended.
ARTICLE IX
AFFIRMATIVE COVENANTS
---------------------
So long as the Bank has any Commitment hereunder or any of the
Liabilities remain unpaid or outstanding, the Parent and the Borrower will:
SECTION 9.1. Maintenance of Existence. Preserve and maintain, and
------------------------
cause each Subsidiary to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign
-48-
corporation in each jurisdiction in which such qualification is required.
SECTION 9.2. Maintenance of Records. Keep, and cause each Subsidiary
----------------------
to keep, adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Parent, the Borrower and each Subsidiary.
SECTION 9.3. Maintenance of Properties. Maintain, keep, and
-------------------------
preserve, and cause each Subsidiary to maintain, keep, and preserve, all of its
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
SECTION 9.4. Conduct of Business. Continue, and cause each
-------------------
Subsidiary to continue, to engage in the line of business in which it is
currently engaged, and in no other line of business unless consented to in
writing by the Bank.
SECTION 9.5. Compliance With Laws. Comply, and cause each Subsidiary
--------------------
to comply, in all respects with all applicable laws, rules, regulations, and
orders, such compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments, and governmental charges imposed upon
it or upon its property.
SECTION 9.6. Right of Inspection. At any reasonable time and from
-------------------
time to time, permit the Bank or any agent or representative thereof to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Parent, the Borrower and any Subsidiary, and to
discuss the affairs, finances, and accounts of the Parent, the Borrower and any
Subsidiary with any of their respective officers, directors and employees and
the Parent's and the Borrower's independent accountants. If the Bank has a duty
or obligation under applicable laws, regulations or legal requirements to
disclose any report or findings made as a result of, or in connection with, any
such inspection, the Bank may make such a disclosure; provided, that the Bank
agrees to notify the Borrower of such disclosure. The Borrower also understands
and agrees that the Bank makes no representation or warranty to the Borrower or
any other party regarding the truth, accuracy of completeness of any such report
or findings that may be disclosed. The Borrower also understands that depending
on any inspection by the Bank and disclosed to the Borrower, the Borrower may
have a legal obligation to notify one or more environmental agencies of the
results, that such reporting requirements are site-specific, and are to be
evaluated by the Borrower without advice or assistance from the Bank.
-49-
SECTION 9.7 Reporting Requirements. Furnish to the Bank:
----------------------
(1) Monthly Financial Statements. As soon as available and in any
----------------------------
event within thirty (30) days after the end of each month in each fiscal
year of the Borrower, consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such month, consolidated and
consolidating statements of income and retained earnings of the Borrower
and its Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such month, and consolidated and
consolidating cash flow statements of the Borrower and its Subsidiaries for
the portion of the fiscal year ended with the last day of such month, all
in reasonable detail and stating in comparative form the respective
consolidated and consolidating figures for the corresponding date and
period in the previous fiscal year and all prepared in accordance with GAAP
consistently applied and certified by the chief financial officer of the
Borrower (subject to year-end adjustments and absence of footnotes);
(2) Annual Financial Statements. (a) As soon as available and in
---------------------------
any event within ninety (90) days after the end of each fiscal year of the
Borrower, a consolidated and consolidating balance sheet of the Borrower
and its Subsidiaries as of the end of such fiscal year, consolidated and
consolidating statements of income and retained earnings of the Borrower
and its Subsidiaries for such fiscal year, and consolidated and
consolidating statements of cash flows of the Borrower and its Subsidiaries
for such fiscal year, all in reasonable detail and stating in comparative
form the respective consolidated figures for the corresponding date and
period in the prior fiscal year and all prepared in accordance with GAAP
consistently applied and as to the consolidated statements accompanied by
an opinion thereon acceptable to the Bank by Ernst & Young L.L.P. or other
independent accountants selected by the Borrower and acceptable to the
Bank, and (b) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Parent, a consolidated and
consolidating balance sheet of the Parent and its Subsidiaries as of the
end of such fiscal year, consolidated and consolidating statements of
income and retained earnings of the Parent and its Subsidiaries for such
fiscal year, and consolidated and consolidating statements of cash flows of
the Parent and its Subsidiaries for such fiscal year, all in
50
reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the prior
fiscal year and all prepared in accordance with GAAP consistently applied
and as to the consolidated statements accompanied by an opinion thereon
acceptable to the Bank by Ernst & Young L.L.P. or other independent
accountants selected by the Borrower and acceptable to the Bank;
(3) Certificate of no Default. Together with the financial
-------------------------
statements furnished by the Borrower under the preceding clause (1) with
----------
respect to the calendar months of March, June, September and December, and
clause (2), a certificate of the chief financial officer of the Borrower
----------
(a) certifying that to the best of his knowledge no Default or Event of
Default has occurred and is continuing, or if a Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof and
the action which is proposed to be taken with respect thereto, and (b) with
computations demonstrating compliance with the covenants contained in
Article XI;
----------
(4) Accountant's report. Simultaneously with the delivery of the
-------------------
annual financial statements referred to in Section 9.8(2), a certificate of
--------------
the independent public accountants who audited such statements to the
effect that, in making the examination necessary for the audit of such
statements, they have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default, or if such accountants shall
have obtained knowledge of any such condition or event, specify in such
certificate each such condition or event of which they have knowledge and
the nature and status thereof;
(5) Business Plan. As soon as available, but in any event: (a)
-------------
within 45 days after the beginning of each fiscal year of the Borrower, a
copy of the plan and forecast (including a projected closing consolidated
and consolidating balance sheet, income statement and funds flow
statements) of the Borrower for such fiscal year;
(6) Notice of Litigation; Government Disputes. Promptly after the
-----------------------------------------
commencement thereof, notice of all Litigation and/or disputes with any
governmental authority affecting the Parent, the Borrower or any
Subsidiary, which, if determined adversely to such Person, could have a
Material Adverse Effect;
51
(7) Notice of Defaults and Events of Default; Material Adverse
----------------------------------------------------------
Change. As soon as possible and in any event within two (2) Business Days
------
after any officer of the Parent or the Borrower becomes aware of the
occurrence of each Default or Event of Default or Material Adverse Change,
a written notice setting forth the details of such Default or Event of
Default or Material Adverse Change and the action which is proposed to be
taken by the Parent or the Borrower, as the case may be, with respect
thereto;
(8) ERISA reports. Promptly after the filing or receiving thereof,
-------------
copies of all reports, including annual reports, and notices which the
Parent, the Borrower or any Subsidiary files with or receives from the PBGC
or the U.S. Department of Labor under ERISA; and as soon as possible and in
any event within thirty (30) days after either the Parent, the Borrower or
any Subsidiary knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the
PBGC or the Parent, the Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Parent and/or the Borrower, as the case may be, will deliver to the Bank a
certificate of the chief financial officer of the Parent and/or the
Borrower, as the case may be, setting forth details as to such Reportable
Event or Prohibited Transaction or Plan termination and the action the
Parent or the Borrower, as the case may be, proposes to take with respect
thereto;
(9) Account Aging. Within fifteen (15) days after the end of each
-------------
month, an aging of all Accounts and an aging of all accounts payable as of
the end of such month, in form and content acceptable to the Bank;
(10) Inventory. Within fifteen (15) days after the end of each month,
---------
an Inventory certification report as of the end of such month for all
Inventory locations, in form and content acceptable to the Bank;
(11) Borrowing Base Certificate. On the fifteenth day (15th) day and
--------------------------
on the thirtieth (30th) of each month (unless such day is not a Business
Day, in which case on the next immediately succeeding Business Day
thereafter), a certificate, substantially in the form of Exhibit D attached
---------
hereto, containing a computation of the Borrowing Base;
52
(12) Proxy statements, etc. Promptly after the sending or filing
---------------------
thereof, (i) copies of all proxy statements, financial statements, and
reports which the Parent, the Borrower or any Subsidiary sends to its
stockholders, if any, and copies of all regular, periodic, and special
reports, and all registration statements which the Parent, the Borrower or
any Subsidiary files with the Securities and Exchange Commission (or any
governmental authority which may be substituted therefor) or with any
national securities exchange and (ii) copies of all notices and documents
sent to the holders of the Subordinated Debt and any holder of Debt for
borrowed money owing by the Borrower or any of its Subsidiaries (other than
routine notices sent in the ordinary course of business such as borrowing
requests, conversion notices and the like);
(13) Environmental Liabilities. Promptly upon learning thereof,
-------------------------
written notice (together with copies, if available) of all written claims,
complaints, notices or inquiries relating to the Borrower's or any
Subsidiary's (a) properties or facilities, or (b) compliance with
Environmental Laws, together with a description of the steps being taken by
the Borrower or such Subsidiary with respect thereto;
(14) General information. Such other information respecting the
-------------------
condition or operations, financial or otherwise, of the Parent, the
Borrower or any Subsidiary as the Bank may from time to time reasonably
request.
SECTION 9.8 Environmental Laws. Use and operate, and cause each
------------------
Subsidiary to use and operate, all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect and remain in material compliance therewith, and handle all
hazardous substances in material compliance with all applicable Environmental
Laws, except to the extent the failure to comply with the foregoing would not
have a Material Adverse Effect; and provide such information and certifications
which the Bank may reasonably request from time to time to evidence compliance
with this Section.
SECTION 9.9 Maintenance of Bank Accounts. Maintain all bank
----------------------------
accounts of the Parent and the Borrower with the Bank which accounts shall be
subject to the customary fees of the Bank; provided, however, that the Borrower
-------- -------
may maintain in the ordinary course of business one or more payroll and other
53
operating accounts with parties other than the Bank, provided, further, that the
-------- -------
aggregate deposit balances in all such accounts shall at no time exceed
$500,000.
SECTION 9.10 Inventory and Equipment Locations. Promptly notify the
---------------------------------
Bank if and when any of the Borrower's Inventory or Equipment is placed in
locations other than those identified in this Agreement.
SECTION 9.11 Places of Business. Promptly advise the Bank in
------------------
writing of the proposed opening of new places of business by the Borrower or any
Affiliate thereof, or the closing of any existing places of business of the
Borrower or any Affiliate thereof, of any changes in the name of Borrower or any
Affiliate thereof, or the use of any trade names by the Borrower or any
Affiliate thereof, or of any material change in the condition of the Collateral.
SECTION 9.12 Insurance. Keep the Collateral properly housed and
---------
insured for its full insurable value against loss or damage by fire, theft,
explosion, sprinklers, collision (in the case of motor vehicles) and such other
risks as are customarily insured against by persons engaged in business similar
to that of the Borrower, with such companies, in such amounts and under policies
in such form as shall be satisfactory to the Bank. Certificates of such policies
of insurance have been or will be delivered to the Bank within fifteen (15) days
after the date hereof, together with evidence of payment of all premiums
therefor, and shall contain an endorsement, in a form and substance acceptable
to the Bank, showing the Bank a loss payee and an additional insured. Such
endorsement or an independent instrument furnished to the Bank, shall provide
that the insurance companies will give the Bank at least thirty (30) days'
written notice before any such policy or policies of insurance shall be altered
or cancelled and that no act, whether willful or negligent, or default of the
Borrower or any other Person shall affect the right of the Bank to recover under
such policy or policies of insurance in case of loss or damage. After the
occurrence of an Event of Default, the Borrower hereby agrees to direct all
insurers under such policies of insurance to pay all proceeds payable thereunder
directly to the Bank. The Borrower irrevocably makes, constitutes and appoints
the Bank and any Person whom the Bank may from time to time designate (and all
officers, employees or agents designated by the Bank or such Person) as the
Borrower's true and lawful attorney (and agent-in-fact) for the purpose of
making, settling and adjusting claims under such policies of
54
insurance, endorsing the name of the Borrower on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. In the event the Borrower at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required herein or to pay
any premium in whole or in part relating thereto, then the Bank, without waiving
or releasing any obligations or Default by the Borrower hereunder, may at any
time or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which the Bank deems advisable. All sums so
disbursed by the Bank, including reasonable Attorneys' Fees, court costs,
expenses and other charges relating thereto, shall be payable on demand by the
Borrower to the Bank.
SECTION 9.13. Proceeds. Use all monies and other property obtained
--------
by the Borrower from the Bank pursuant to this Agreement solely for working
capital and general corporate purposes of the Borrower.
SECTION 9.14 Collateral Identification. At request of the Bank,
-------------------------
stamp on its records concerning the Collateral a notation, in form satisfactory
to the Bank, of the Lien of the Bank hereunder, and the Borrower will not
maintain duplicates or copies of such records at any address other than the
Borrower's principal place of business.
SECTION 9.15 Annual Clean-Up. For a period of not less than sixty
---------------
(60) consecutive days beginning September 30 of each fiscal year, reduce the
aggregate outstanding principal amount of Revolving Loans plus accrued interest
thereon to zero.
ARTICLE X
NEGATIVE COVENANTS
------------------
So long as the Bank shall have any Commitment hereunder or any of the
Liabilities remain unpaid or outstanding, neither the Parent nor the Borrower
will:
SECTION 10.1 Liens. Create, incur, assume, or suffer to exist, or
-----
permit any Subsidiary to create, incur, assume, or suffer to exist, any Lien
upon or with respect to any of its properties, now owned or hereafter acquired,
except Liens in favor of and granted to the Bank, or which arise by operation of
federal, state or local law and regulation with respect to sums not yet due, or
those Liens, security interest, mortgages, pledges and encumbrances listed on
Schedule 10.1 hereto or Liens arising in connection with Debt permitted pursuant
-------------
to Section 7.2.4(5), and other Liens, which have been disclosed and
----------------
55
consented to by the Bank in writing (collectively, "Permitted Liens").
SECTION 10.2 Debt. Create, incur, assume, or suffer to exist, or
----
permit any Subsidiary to create, incur, assume, or suffer to exist, any Debt,
except with respect to the Borrower:
(1) Debt under this Agreement, the Revolving Note and the Letters of
Credit;
(2) Debt described in Schedule 8.15, but no renewals, extensions, or
-------------
refinancings thereof;
(3) Accounts payable to trade creditors for goods or services which
are not aged more than sixty (60) days from billing date incurred in the
ordinary course of business and paid within the specified time, unless
contested in good faith and by appropriate proceedings;
(4) Debt under the Reimbursement Agreement, the IRB Letter of Credit
and the Bonds;
(5) Debt under Capital Leases; provided that the aggregate amount of
Capital Leases entered into during any one calendar year shall at no time
exceed $750,000;
(6) Subordinated Debt; provided, that the aggregate principal amount
--------
thereof shall at no time exceed $75,000,000;
(7) Other unsecured Debt of a type not otherwise permitted pursuant
to the preceding clauses (1) through (6) in an aggregate amount not to
----------- ---
exceed $250,000.
SECTION 10.3. Mergers, Etc. Merge or consolidate with, or sell,
------------
assign, lease, liquidate, dissolve or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, or acquire all
or substantially all of the assets or the business of any Person, or permit any
Subsidiary to do so; provided that any Subsidiary may merge with and into the
Borrower.
SECTION 10.4. Leases. Create, incur, assume, or suffer to exist, or
------
permit any Subsidiary to create, incur, assume, or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except leases between the Borrower and its Subsidiaries or between Subsidiaries
of the Borrower and, with respect to the Borrower and its
56
Subsidiaries, leases with aggregate annual rents in an amount not to exceed
$2,000,000.
SECTION 10.5. Sale and Leaseback. Sell, transfer, or otherwise
------------------
dispose of, or permit any Subsidiary to sell, transfer, or otherwise dispose of,
any real or personal property to any Person and thereafter directly or
indirectly lease back the same or similar property.
SECTION 10.6 Restricted Payments, etc. Solely with respect to the
------------------------
Borrower or any Subsidiary,
(a) declare or pay any dividends; or purchase, redeem, retire, or
otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as such
whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution
on, or for the purchase, redemption, or retirement of, any shares of its
capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or permit any of
its Subsidiaries to purchase or otherwise acquire for value any stock of
the Borrower or any Subsidiary; provided, that (1) the Borrower may declare
--------
and deliver dividends and make distributions payable solely in its common
stock, (2) the Borrower may make cash distributions ("Tax Distributions")
to the Parent from time to time in amounts not exceeding the amount of
Federal, state and local income taxes actually owed by the Parent on a
consolidated basis with respect to the consolidated net income of the
Parent, (3) so long as no Default or Event of Default shall have occurred
and be continuing or will result therefrom, (i) the Borrower may pay other
dividends during any fiscal year provided that the aggregate amount of such
other dividends shall not exceed 50% of the Borrower's cumulative
consolidated net income measured from the Effective Date until the end of
the fiscal quarter for which the Borrower delivered financial statements to
the Bank in accordance with Section 9.7, (ii) the Borrower may pay other
-----------
dividends to the Parent of up to $250,000 per year to the Parent, the
proceeds of which shall be used by the Parent to pay its bona fide
operating expenses, and (iii) the Borrower may pay other dividends to the
Parent of up to $2,000,000 in aggregate, the proceeds of which shall be
used by the Parent, in accordance with Section 5.8 of the Parent's 1997
Stock Option Plan (effective February 4, 1997), to repurchase shares of its
stock held by certain of its employees, (4) any Subsidiary may make
distributions to the Borrower, and (5) the Borrower
57
may pay other dividends to the Parent on the Effective Date in express
accordance with the Recapitalization Agreement.
(b) make (i) any payment of interest on any Subordinated Debt on any
day other than the stated, scheduled date (subject to any applicable grace
period) for such payment set forth in the Indenture, or which would violate
the subordination provisions of the Indenture, including, without
limitation, the provisions of Article 8 of the Indenture, or (ii make any
payment or voluntary or mandatory prepayment of principal of, or redeem,
purchase or defease, any Subordinated Debt. It being understood that this
clause (b) does not apply to payments on the Bonds.
----------
(c) if any payment of principal, interest or any other amount is
required to be paid or is paid on the same day with respect to any
Subordinated Debt, on the one hand, and with respect to this Agreement or
any other Loan Document, on the other hand, then all such amounts paid or
required to be paid with respect to this Agreement or such other Loan
Documents shall be paid in full in cash before any payments are made with
respect to the Subordinated Debt.
SECTION 10.7. Sale of Assets. Sell, lease, assign, transfer, or
--------------
otherwise dispose of (other than as a result of a Casualty Event for which any
resulting material loss is covered by insurance), or permit any Subsidiary to
sell, lease, assign, transfer, or otherwise dispose of (other than as a result
of a Casualty Event for which any resulting material loss is covered by
insurance), any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries,
receivables, and leasehold interests), except with respect to the Borrower and
its Subsidiaries: (1) for Inventory disposed of in the ordinary course of
business; (2) the sale or other disposition of assets no longer used or useful
in the conduct of its business; (3) that any Subsidiary may sell, lease, assign,
or otherwise transfer its assets to the Borrower; and (4) the Borrower or any
Subsidiary may trade in or trade up, in its ordinary course of business, any of
its Equipment for similar Equipment of another Person.
SECTION 10.8. Investments. Make, or permit any Subsidiary to make,
-----------
any loan or advance to any Person (other than an Account), or purchase or
otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire,
any capital stock, assets, obligations, or other securities of, make any capital
contribution to, or otherwise invest in or acquire any interest in any Person
except, with respect to the Borrower and its Subsidiaries: (1) direct
obligations of the United States or any agency thereof with maturities of one
year or less from the date
58
of acquisition; (2) certificates of deposit with maturities of one year or less
from the date of acquisition issued by any commercial bank having capital and
surplus in excess of Five-Hundred Million Dollars ($500,000,000); (3) short term
asset management accounts with the Bank or any other short term investments with
the Bank or another financial institution acceptable to the Borrower; (4) for
stock, obligations, or securities received in settlement of debts (created in
the ordinary course of business) owing to the Borrower or any Subsidiary; (5)
loans and advances made by the Borrower to an employee; provided, that such
--------
loans and advances are (a) consistent with ordinary business practices and (b)
do not exceed an aggregate principal amount at any one time outstanding of
$25,000 with respect to such employee or of $100,000 with respect to all
employees of the Borrower.
SECTION 10.9. Guaranties, Etc. Assume, guarantee, endorse, or
---------------
otherwise be or become directly or contingently responsible or liable, or permit
any Subsidiary to assume, guarantee, endorse, or otherwise be or become directly
or contingently responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods, or services, or to
supply or advance any funds, assets, goods, or services, or to maintain or cause
such Person to maintain a minimum working capital or net worth, or otherwise to
assure the creditors of any Person against loss) for obligations of any Person,
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business and the
Guaranty.
SECTION 10.10. Transaction With Affiliate. Except for the
--------------------------
transactions entered into in express accordance with the Recapitalization
Agreement on the Effective Date, enter into, directly or indirectly, or permit
any Subsidiary, directly or indirectly, to enter into any transaction with any
Affiliate, including, without limitation, the purchase, sale, lease or exchange
of property or the rendering of any service, or the making of any guarantee,
loan, advance or investment, except in the ordinary course of business of the
Borrower or any of its Subsidiaries and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate; provided, to
--------
the extent that any such transaction involves aggregate consideration in excess
of $1,000,000 then a majority of the disinterested directors of the Board of
Directors of the Borrower or the Subsidiary, as the case may, must determine, in
its good faith judgment evidenced by a resolution of such Board of Directors
filed with the Bank, that the terms of such transaction are at least as
favorable as the terms that could be obtained by the Borrower or such
Subsidiary, as the case
59
may be, in a comparable transaction made on an arms-length basis between
unaffiliated parties; provided, further, that if the aggregate consideration
-------- -------
is in excess of $5 million the Borrower shall also obtain, prior to the
consummation of the transaction, the favorable opinion as to the fairness of the
transaction to the Borrower or such Subsidiary, from a financial point of view
from an independent financial advisor. For the purposes of this Section 10.10,
-------------
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with any specified Person (For purposes of such definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
SECTION 10.11. Subsidiary, Etc. Create or otherwise acquire any
---------------
Subsidiary or acquire additional shares of the capital stock or other equity
interest of any existing Subsidiary; or sell or otherwise dispose of any shares
of capital stock of any Subsidiary or permit any Subsidiary to issue any
additional shares of its capital stock, except director's qualifying shares.
SECTION 10.12. Real Property. Purchase or otherwise acquire title to
-------------
any real property without the prior written consent of the Bank.
SECTION 10.13. Account Settlements. After the occurrence of an Event
-------------------
of Default and during the continuance thereof, permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto.
SECTION 10.14. Modification of Certain Agreements. Consent to any
----------------------------------
amendment, supplement or other modification of any of the terms or provisions
contained in, or applicable to, the Indenture or the Organic Documents of the
Parent, the Borrower or any Subsidiary, except to the extent that such
amendment, supplement or other modification (a) with respect to any Organic
Document would not reasonably be expected to have a Material Adverse Effect, or
(b) with respect to the Indenture, would extend the date or reduce the amount of
any required repayment or redemption or would amend, supplement or modify any
term or provision not relating to rates of interest, amortization or
subordination in a manner not adverse to the Bank.
60
SECTION 10.15. Assets of the Parent. Permit the Parent to have any
--------------------
assets other than its ownership of the stock of the Borrower.
ARTICLE XI
FINANCIAL COVENANTS
-------------------
So long as the Bank shall have any Commitment hereunder or any of the
Liabilities remain unpaid or outstanding, the Borrower will:
SECTION 11.1. Debt Service Coverage Ratio. Not permit, at the end of
---------------------------
any fiscal quarter, for the four consecutive fiscal quarter period then ended
(it being understood that with respect to any fiscal quarter ending prior to the
Effective Date the related components of this calculation shall be based on the
consolidated financials of the Parent), the ratio of (a) Consolidated EBITDA
minus Consolidated Capital Expenditures, to (b) Consolidated Fixed Charges to be
-----
less than the minimum amount set forth below for the applicable fiscal year of
such fiscal quarter.
Fiscal Quarter Minimum Debt Service
Ending Coverage Ratio
-------------- --------------------
1997 1.50:1.0
1998 2:00:1.0
1999 and thereafter 2.25:1.0
SECTION 11.2. Net Worth. Not permit Consolidated Net Worth, at any
---------
time, to be less than the Minimum Consolidated Net Worth.
SECTION 11.3. Current Ratio. Not permit, at the end of any fiscal
-------------
quarter, its Consolidated Current Ratio to be less than 1.5:1. For purposes
hereof, "Consolidated Current Ratio" shall mean the ratio of (a) consolidated
current assets of the Borrower and its consolidated Subsidiaries to (b) the sum
of (i) consolidated current liabilities of the Borrower and its consolidated
Subsidiaries, plus (ii) without duplication, the amount of all then outstanding
----
Revolving Loans, plus (iii) without duplication, the aggregate undrawn amount of
----
any then outstanding commercial Letters of Credit, plus (iv) without
----
duplication, the aggregate unreimbursed amounts drawn under any commercial
Letters of Credit.
61
ARTICLE XII
EVENTS OF DEFAULT
-----------------
SECTION 12.1. Events of Default.
-----------------
(1) The occurrence of any one or more of the following events shall
constitute a default ("Event of Default") by the Borrower under this Agreement:
(a) Non-Payment of Revolving Loans, Letters of Credit, etc. (i)
------------------------------------------------------
Default in the payment or prepayment when due of any principal on any
Revolving Loan; or (ii) default in the payment or prepayment when due of
any reimbursement obligation with respect to any LC Obligation and
continuance thereof for two (2) Business Days; or (iii) default in the
payment when due of any other amount owing by the Parent or the Borrower
pursuant to this Agreement or any other Loan Document and continuance
thereof for four (4) Business Days.
(b) Defaults of Other Debt. Default in the payment when due (subject
----------------------
to any applicable grace period), whether by acceleration or otherwise, of
any sums due in connection with Debt of the Parent or the Borrower or any
Subsidiary (other than Debt in respect of this Agreement), including
without limitation Subordinated Debt, in an aggregate principal amount in
excess of $250,000 or default in the performance or observance of any
obligation or condition with respect to any such Debt if the effect of such
default is to accelerate the maturity of any such Debt (including without
limitation such Subordinated Debt) or to permit the holder or holders
thereof, or any trustee or agent for such holders, to cause such Debt to
become due and payable prior to its expressed maturity.
(c) Bankruptcy, Insolvency, etc. The Parent, the Borrower or any
---------------------------
Subsidiary becomes insolvent or generally fails to pay, or admits in
writing its inability to pay, debts as they become due; or the Parent, the
Borrower or any Subsidiary applies for, consents to, or acquiesces in the
appointment of, a trustee, receiver or other custodian for such Person or
any property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence,
a trustee, receiver or other custodian is appointed for the Parent, the
Borrower or any Subsidiary or for a substantial part of the property of any
such Person and
62
is not discharged within 60 days; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding (except the voluntary
dissolution, not under any bankruptcy or insolvency law, of a Subsidiary),
is commenced in respect of the Parent, the Borrower or any Subsidiary and
if such case or proceeding is not commenced by such Person, it is consented
to or acquiesced in by such Person or remains for 60 days undismissed; or
the Parent, the Borrower or any Subsidiary takes any corporate action to
authorize, or in furtherance of, any of the foregoing.
(d) Defaults Under this Agreement. Failure by the Parent, the
-----------------------------
Borrower or any Subsidiary to comply with or perform (i) any of the
covenants or agreements applicable to it set forth in Sections 9.6 or 9.7,
------------ ---
or in Articles X (other than Section 10.1) or XI of this Agreement or (ii)
---------- ------------ --
any of the covenants or agreements applicable to it set forth in Section
-------
10.1 and continuance thereof for five (5) Business Days.
----
(e) Other Noncompliance with this Agreement or other Loan Documents.
---------------------------------------------------------------
Failure by the Parent, the Borrower or any Subsidiary to comply with or
perform any other provision of this Agreement or the other Loan Documents
applicable to it (other than those listed in Section 12.1(1)(d) or those
------------------
constituting an Event of Default under any of the other provisions of this
Article XII) and continuance of such failure for fifteen (15) Business Days
-----------
following notice thereof from the Bank.
(f) Representations and Warranties. Any representation or warranty
------------------------------
made by the Parent, the Borrower or any Subsidiary herein or in any of the
other Loan Documents is false or misleading in any material respect as of
the date hereof or as of the date hereafter certified, or any schedule,
certificate, financial statement, report, notice, or other writing
furnished by the Parent, the Borrower or any Subsidiary to the Bank is
false or misleading in any material respect on the date as of which the
facts therein set forth are stated or certified.
(g) Pension Plans and Welfare Plans. With respect to any Plan as to
-------------------------------
which the Parent, the Borrower or any Subsidiary may have any liability,
there shall exist a deficiency in the Plan assets
63
available to satisfy the benefits guaranteeable under ERISA with respect to
such Plan and steps are undertaken to terminate such Plan or such Plan is
terminated or such Person withdraws from or institutes steps to withdraw
from such Plan or any material Reportable Event with respect to such
Pension Plan shall occur. With respect to any welfare Plan as to which the
Parent or the Borrower may have any liability, there shall occur any event
which could result in the incurrence by such Person of any increase in the
vested or contingent liability of the Borrower with respect to any post-
retirement welfare Plan benefit.
(h) Adverse Judgment. One or more final judgments or decrees shall
----------------
be entered against the Parent, the Borrower or any Subsidiary involving, in
the aggregate, a liability (not covered by collectible insurance) of
$250,000 or more and all such judgments or decrees shall not have been
vacated, satisfied, discharged or stayed or bonded pending appeal within
thirty (30) consecutive days from the entry thereof.
(i) Loan Documents. Any of the Loan Documents shall fail to remain
--------------
in full force and effect; or any action shall be taken by the Parent, the
Borrower or any Subsidiary to discontinue any of the Loan Documents or to
assert the invalidity of any thereof.
(j) Change in Control. The occurrence of a Change in Control.
-----------------
(k) Collateral Matters. (i) This Agreement, the Trademark Agreement
------------------
or the Pledge Agreement shall at any time after its execution and delivery
and for any reason cease: (A) to create a valid security interest (subject
only to Permitted Liens) in and to the property purported to be subject to
this Agreement, the Trademark Agreement or the Pledge Agreement, as the
case may be, or (B) to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof shall be contested
by the Parent, the Borrower or any Subsidiary, or any such Person (to the
extent such Person is a party to such agreement) shall deny it has any
further liability or obligation under or shall fail to perform any of its
material obligations under this Agreement, Trademark Agreement, or the
Pledge Agreement, as the case may be (subject to any applicable grace
periods set forth therein), or (ii) the Bank's Lien granted under this
Agreement, the Trademark Agreement, the
64
Pledge Agreement or any Other Agreements shall cease to be a first-priority
Lien subject only to Permitted Liens.
(l) Guaranty. The Guaranty shall, at any time after its execution
--------
and delivery and for any reason cease to be in full force and effect or
shall be declared null and void, or the validity or enforceability thereof
shall be contested by the Parent, the Borrower or any Subsidiary or the
Parent shall deny it has any further liability or obligation under or shall
fail to perform its material obligations under such Guaranty (subject to
any applicable grace periods set forth therein).
(2) If any Event of Default described in Section 12.1(1)(c) shall
------------------
occur and be continuing, the Commitments (if they have not theretofore
terminated) shall immediately terminate and all Liabilities shall become
immediately due and payable, all without notice of any kind; and, in the case of
any other Event of Default, if such Event of Default has occurred and is
continuing, the Bank may declare the Commitments (if they have not theretofore
terminated) to be terminated and all Liabilities to be due and payable,
whereupon the Commitments (if they have not theretofore terminated) shall
immediately terminate and all Liabilities shall become immediately due and
payable, all without presentment, demand, protest or notice of any kind. The
Bank shall promptly advise the Borrower (and the Borrower shall promptly
thereafter advise the Parent) of any such declaration, but failure to do so
shall not impair the effect of such declaration. Notwithstanding the foregoing,
the effect as an Event of Default of any event described in this Article XII may
-----------
be waived by the Bank.
(3) In the event of the occurrence of any Event of Default and during
its continuance, the Bank may exercise any one or more or all of the following
remedies, all of which are cumulative and non-exclusive:
(a) Any remedy contained in this Agreement or in any of the other
Loan Documents or Other Agreements or any Supplemental Documentation;
(b) Any rights and remedies available to the Bank under the Uniform
Commercial Code as enacted in the State of Illinois as of the date of this
Agreement, and any other applicable law;
(c) Without notice, demand or legal process of any kind, the Bank may
take possession of any or all of the Collateral (in addition to Collateral
which it might already have in its possession), wherever it
65
might be found, and for that purpose may pursue the same wherever it may be
found, and may enter into any of the Parent's or the Borrower's or any
Subsidiary's premises where any of the Collateral may be or is supposed to
be, and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of, and the
Bank shall have the right to store the same in any of the Parent's, the
Borrower's or any Subsidiary's premises without costs to the Bank;
(d) At the Bank's request, the Parent and the Borrower will, at the
Parent's and the Borrower's expense, assemble the Collateral and make it
available to the Bank at a place or places to be designated by the Bank
which is reasonably convenient to the Bank and the Borrower; and
(e) The Bank at its option, and pursuant to notification given to the
Parent and/or the Borrower as provided for below, may sell any Collateral
actually or constructively in its possession at public or private sale and
apply the proceeds thereof as provided below.
(4) Any notification of intended disposition of any of the Collateral
required by law shall be deemed reasonably and properly given if given at least
five (5) calendar days before such disposition.
(5) Any proceeds of any disposition by the Bank of any of the
Collateral may be applied by the Bank to the payment of expenses in connection
with the taking possession of, storing, preparing for sale, and disposition of
Collateral, including Attorneys' Fees and legal expenses, and any balance of
such proceeds may be applied by the Bank toward the payment of such of the
Liabilities, and in such order of application, as the Bank may from time to time
elect.
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 13.1. Assignments and Participations. Nothing herein
------------------------------
contained shall affect the Bank's right to sell or grant assignments, or
participations to one or more banks or other financial institutions of, in or to
all or any part of the obligations owing to the Bank, the Commitment, the
Revolving Note and the Letters of Credit, and any assignee shall be deemed a
party hereto for all purposes of this Agreement and the Loan
66
Documents. The Parent and the Borrower hereby each consents to the disclosure of
any information obtained by the Bank in connection herewith to any bank or
financial institution to which the Bank now or hereafter sells, or proposes to
sell, any such assignment or participation interest.
SECTION 13.2. Amendments, Etc. No amendment, modification,
---------------
termination, or waiver of any provision of any Loan Document to which the Parent
or the Borrower is a party, nor consent to any departure by the Parent or the
Borrower from any Loan Document to which it is a party, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 13.3 Notices, Etc. All notices and other communications
------------
provided for under this Agreement and under the other Loan Documents or Other
Agreements to which the Parent or the Borrower is a party shall be in writing
(including telegraphic, telex or facsimile communication) and mailed or
telecommunicated or delivered, if to the Parent, at the Parent's address at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer, if to the Borrower, at the
Borrower's address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, facsimile
number (▇▇▇) ▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer, and if to
the Bank, at its address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇; or, as to each party,
at such other address as shall be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section 13.3.
------------
All such notices and communications shall, when mailed or telecommunicated, be
effective when deposited in the mails, transmitted by telex and the appropriate
answerback received, transmitted by facsimile or delivered to the telegraph
company, respectively, addressed as aforesaid, except that notices to the Bank
pursuant to the provisions of Article II and III shall not be effective until
---------- ---
received by the Bank.
SECTION 13.4. No Waiver; Remedies. No failure on the part of the
-------------------
Bank to exercise, and no delay in exercising, any right, power, or remedy under
any Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
67
SECTION 13.5. Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of the Parent, the Borrower and the Bank
and their respective successors and assigns, except that neither the Parent nor
the Borrower may assign or transfer any of its rights under any Loan Document to
which it is a party without the prior written consent of the Bank.
SECTION 13.6. Costs, Expenses, and Taxes. The Borrower agrees to
--------------------------
pay on demand all reasonable costs and expenses in connection with the
preparation, negotiation, execution, delivery, filing, recording, and
administration of any of the Loan Documents, including, without limitation, any
local counsel who may be retained by said counsel, with respect thereto and with
respect to advising the Bank as to its rights and responsibilities under any of
the Loan Documents, and all costs and expenses, if any, in connection with the
enforcement of any of the Loan Documents. In addition, the Borrower shall pay
any and all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing, and recording of any of the
Loan Documents and the other documents to be delivered under any such Loan
Documents, and agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
SECTION 13.7. Right of Setoff. Upon the occurrence and during the
---------------
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, without notice to the Parent or the Borrower (any such
notice being expressly waived by the Parent and Borrower), to setoff and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by the Bank to or for
the credit or the account of the Parent or the Borrower against any and all of
the respective obligations of the Parent or the Borrower now or hereafter
existing under this Agreement, the Revolving Note, any other Loan Document or
Other Agreement, irrespective of whether or not the Bank shall have made any
demand under this Agreement, the Revolving Note, such other Loan Document or
such Other Agreement and although such obligations may be unmatured. The Bank
agrees promptly to notify the Parent or the Borrower, as the case may be, after
any such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of the
Bank under this Section 13.7 are in addition to other rights and remedies
------------
(including, without limitation, other rights of setoff) which the Bank may have.
68
SECTION 13.8. Governing Law. This Agreement, the Revolving Note and
-------------
the Letters of Credit shall be governed by, and construed in accordance with,
the laws of the State of Illinois.
SECTION 13.9. Indemnity. The Borrower agrees to indemnify the Bank
---------
and hold the Bank harmless from and against any and all liabilities (including,
without limitation, any environmental liabilities), losses, damages, costs and
expenses of any kind (including, without limitation, the reasonable fees and
disbursements of counsel for the Bank) in connection with any investigative,
administrative or judicial proceedings whether or not the Bank shall be
designated a party thereto, which may be incurred by the Bank, relating to or
arising out of this Agreement or any other Loan Document or any actual or
proposed use of the proceeds of the Revolving Loans or LC Obligations hereunder;
provided that the Bank shall not have the right to be indemnified hereunder for
its own gross negligence or willful misconduct as determined by a court of
competent jurisdiction. All obligations of the Borrower provided for in this
Section 13.9 shall survive termination of this Agreement.
------------
SECTION 13.10. Severability of Provisions. Any provision of any Loan
--------------------------
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 13.11. Headings. Article and Section headings in the Loan
--------
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 13.12. Submission to Jurisdiction; Waiver of Venue; Service
----------------------------------------------------
of Process. The Parent and the Borrower each, on behalf of itself and each
----------
Subsidiary (1) hereby irrevocably submits to the jurisdiction of any Illinois
State or Federal court sitting in Chicago, Illinois over any action or
proceeding arising out of or relating to this Agreement or the Loan Documents,
and the Parent and the Borrower each hereby irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in such
Illinois State or Federal court and (2) agrees not to institute any legal action
or proceeding against the Bank or the directors, officers, employees, agents or
property of any thereof, arising out of or relating to this Agreement, in any
court other than as hereinabove specified in this Section 13.11. The Parent and
-------------
the Borrower each, on behalf of itself and each Subsidiary, hereby
69
irrevocably waives, to the fullest extent permitted by law, any objection it may
now or hereafter have to the laying of venue in any action or proceeding
(whether brought by the Parent, the Borrower, any Subsidiary, the Bank or
otherwise) in any court hereinabove specified in this Section 13.11 as well as
-------------
any right it may now or hereafter have, to remove any such action or proceeding,
once commenced, to another court on the grounds of forum non conveniens or
----- --- ----------
otherwise. The Parent and the Borrower each, on behalf of itself and each
Subsidiary, agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
SECTION 13.13. WAIVER OF JURY TRIAL. THE PARENT, THE BORROWER AND
--------------------
THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS AGREEMENT, ANY LOAN DOCUMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO THIS AGREEMENT.
SECTION 13.14. Reaffirmation and Restatement. This Agreement
-----------------------------
constitutes an amendment and restatement of the Existing Loan and Security
Agreement and the Debt evidenced by the Existing Loan and Security Agreement is
continuing Debt, and nothing herein shall be deemed to constitute a payment,
settlement or novation of the Debt evidenced by the Existing Loan and Security
Agreement, or to release or otherwise adversely affect any Lien, mortgage or
security interest securing such Debt or any rights the Bank against any
guarantor, surety or other party primarily or secondarily liable for such Debt.
70
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PEN-TAB INDUSTRIES, INC., a
Delaware corporation
By:_______________________________
Name:
Title:
BANK OF AMERICA ILLINOIS
By:_______________________________
Name:
Title:
Domestic Lending ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ Deluzen
Offshore Lending Office:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ Deluzen
ACCEPTANCE AND ACKNOWLEDGMENT
-----------------------------
PEN-TAB HOLDINGS, INC. (formerly known as Pen-Tab Industries, Inc.), a
Virginia Corporation hereby acknowledges and agrees to make such deliveries as
are required by it and comply with the covenants and other provisions applicable
to it contained in this Agreement.
PEN-TAB HOLDINGS, INC. (formerly
known as Pen-Tab Industries, Inc.),
a Virginia Corporation
By:________________________________________
Name:
Title:
SCHEDULE 6.10
INVENTORY LOCATIONS
Pen-Tab Industries, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pen-Tab Industries of California, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pen-Tab Industries, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 7.2
LITIGATION
None
SCHEDULE 8.12
REAL PROPERTY
Leased Owner
------ -----
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ c/o Crown Associates Realty Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Hawthorne Realty Group
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇