Exhibit 99.1
--------------------------------------------------
FALCON PRODUCTS, INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
SELLERS & ▇▇▇▇▇▇▇▇▇ INC.
AND EPIC FURNITURE GROUP, INC.
--------------------------------------------------
==================================================
SECOND
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
DATED: OCTOBER 6, 2004
$95,000,000
==================================================
--------------------------------------------------
FLEET CAPITAL CORPORATION
INDIVIDUALLY AND AS AGENT FOR ANY LENDER WHICH IS
OR BECOMES A PARTY HERETO
--------------------------------------------------
THIS AGREEMENT IS SUBJECT TO THE
INTERCREDITOR AGREEMENT REFERENCED HEREIN
TABLE OF CONTENTS
-----------------
Section 1. CREDIT FACILITY...............................................1
1.1. Loans............................................................1
1.2. Letters of Credit; LC Guaranties.................................4
1.3. Term Loan........................................................5
1.4. Borrowing Agent..................................................6
1.5. Effect of Amendment and Restatement..............................6
Section 2. INTEREST, FEES AND CHARGES....................................7
2.1. Interest.........................................................7
2.2. Computation of Interest and Fees.................................8
2.3. Fee Letters......................................................8
2.4. Letter of Credit and LC Guaranty Fees............................8
2.5. Unused Line Fee..................................................9
2.6. Prepayment Fee...................................................9
2.7. Audit Fees......................................................10
2.8. Reimbursement of Expenses.......................................10
2.9. Bank Charges....................................................11
2.10. Collateral Protection Expenses; Appraisals......................11
2.11. Payment of Charges..............................................12
2.12. No Deductions...................................................12
2.13. Joint and Several Obligations...................................12
Section 3. LOAN ADMINISTRATION..........................................14
3.1. Manner of Borrowing Revolving Credit Loans/LIBOR Option.........14
3.2. Payments........................................................18
3.3. Mandatory and Optional Prepayments..............................21
3.4. Application of Payments and Collections.........................25
3.5. All Loans to Constitute One Obligation..........................26
3.6. Loan Account....................................................27
3.7. Statements of Account...........................................27
3.8. Increased Costs.................................................27
3.9. Basis for Determining Interest Rate Inadequate..................28
-i-
3.10. Sharing of Payments, Etc........................................29
3.11. Post Event of Default Allocation................................30
Section 4. TERM AND TERMINATION.........................................31
4.1. Term of Agreement...............................................31
4.2. Termination.....................................................31
Section 5. SECURITY INTERESTS...........................................32
5.1. Security Interest in Collateral.................................32
5.2. Other Collateral................................................33
5.3. Lien Perfection; Further Assurances.............................34
5.4. Lien on Realty..................................................34
5.5. Pledge of Securities............................................35
Section 6. COLLATERAL ADMINISTRATION....................................35
6.1. General.........................................................35
6.2. Administration of Accounts......................................36
6.3. Administration of Inventory.....................................38
6.4. Records and Schedules of Equipment..............................38
6.5. Payment of Charges..............................................38
Section 7. REPRESENTATIONS AND WARRANTIES...............................39
7.1. General Representations and Warranties..........................39
7.2. Continuous Nature of Representations and Warranties.............63
7.3. Survival of Representations and Warranties......................64
Section 8. COVENANTS AND CONTINUING AGREEMENTS..........................64
8.1. Affirmative Covenants...........................................64
8.2. Negative Covenants..............................................72
8.3. Specific Financial Covenants....................................83
Section 9. CONDITIONS PRECEDENT.........................................83
9.1. Loan Documentation..............................................83
9.2. Other Documents, Certificates, etc..............................83
9.3. Representations True; No Default................................84
9.4. Other Conditions................................................84
-ii-
9.5. Availability....................................................84
9.6. No Litigation...................................................84
9.7. Fees............................................................84
9.8. Tranche B Loan Documents; Intercreditor Agreement...............84
9.9. No Material Adverse Change......................................85
9.10. Delivery of Financial Statements and Projections................85
9.11. Third-Party Consents............................................85
9.12. Actions Relating to the Collateral..............................85
Section 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT............86
10.1. Events of Default...............................................86
10.2. Acceleration of the Obligations and Other Remedies..............89
10.3. Other Remedies..................................................89
10.4. Set Off and Sharing of Payments.................................91
10.5. Remedies Cumulative; No Waiver..................................91
Section 11. THE AGENT; CERTAIN PROVISIONS RELATING TO LENDERS............92
11.1. Authorization and Action........................................92
11.2. Agent's Reliance, Etc...........................................92
11.3. Fleet and Affiliates............................................93
11.4. Lender Credit Decision..........................................93
11.5. Indemnification.................................................94
11.6. Rights and Remedies to be Exercised by Agent Only...............94
11.7. Agency Provisions Relating to Collateral........................94
11.8. Agent's Right to Purchase Commitments...........................95
11.9. Right of Sale, Assignment, Participations.......................95
11.10. Amendment.......................................................98
11.11. Resignation of Agent; Appointment of Successor..................99
11.12. Audit and Examination Reports; Disclaimer by Lenders...........100
11.13. Buyout Right...................................................101
Section 12. MISCELLANEOUS...............................................102
12.1. Power of Attorney..............................................102
12.2. Indemnity......................................................103
-iii-
12.3. Sale of Interest...............................................103
12.4. Severability...................................................104
12.5. Successors and Assigns.........................................104
12.6. Cumulative Effect; Conflict of Terms...........................104
12.7. Execution in Counterparts......................................104
12.8. Notice.........................................................104
12.9. Consent........................................................105
12.10. Credit Inquiries...............................................106
12.11. Time of Essence................................................106
12.12. Entire Agreement...............................................106
12.13. Interpretation.................................................106
12.14. Confidentiality................................................106
12.15. GOVERNING LAW; CONSENT TO FORUM................................106
12.16. WAIVERS BY BORROWERS...........................................107
12.17. Advertisement..................................................108
-iv-
EXHIBITS
Exhibit 1.1 - Form of Revolving Note
Exhibit 1.3 - Form of Term Note
Exhibit 6.1.1 - Business Locations
Exhibit 7.1.1 - States of Incorporation
Exhibit 7.1.4 - Subsidiaries of Borrowers
Exhibit 7.1.5 - Corporate Names
Exhibit 7.1.10 - Material Adverse Changes
Exhibit 7.1.13 - Surety Obligations
Exhibit 7.1.14 - Federal Tax Identification Numbers
Exhibit 7.1.15 - Broker's Fees
Exhibit 7.1.16 - Patents, Copyrights, Trademarks and Licenses
Exhibit 7.1.18 - Operating Licenses
Exhibit 7.1.19 - Restrictions on Indebtedness
Exhibit 7.1.20 - Litigation
Exhibit 7.1.21 - Defaults
Exhibit 7.1.22 - Personal Property Leases
Exhibit 7.1.23 - Pension Plans
Exhibit 7.1.25 - Labor Contracts
Exhibit 7.1.27 - Restricted and Unrestricted Subsidiaries
Exhibit 7.1.29(a) - Indebtedness
Exhibit 7.1.29(c) - Subordinated Debt
Exhibit 7.1.30(a) - Certain Changes
Exhibit 7.1.31(a) - Material Contracts
Exhibit 7.1.31(b) - Invalid Material Contracts
Exhibit 7.1.32 - Transactions with Affiliates
Exhibit 7.1.35 - Real Property
Exhibit 7.1.36 - Environmental Matters
Exhibit 7.1.37 - Insurance
Exhibit 7.1.38 - Suppliers
Exhibit 7.1.39 - Employment Agreements
Exhibit 7.1.41 - Depository and Other Accounts
Exhibit 8.1.3 - Form of Compliance Certificate
Exhibit 8.2.3 - Existing Indebtedness
Exhibit 8.2.4 - Affiliate Transactions
Exhibit 8.2.5 - Existing Liens
Exhibit 8.2.13 - Subsidiaries and Joint Ventures
Exhibit 8.3 - Financial Covenants
Exhibit 9.2 - Closing Agenda
Exhibit 11.9 - Form of Assignment and Acceptance Agreement
-v-
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT is made as of this 6th day of October, 2004, by and among FLEET
CAPITAL CORPORATION, individually ("Fleet") as a Lender and as Agent
("Agent") for itself and any other financial institution which is or becomes
a party hereto (each such financial institution, including Fleet, is
referred to hereinafter individually as a "Lender"), the LENDERS and FALCON
PRODUCTS, INC., a Delaware corporation with its chief executive office and
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Falcon"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC., a Delaware
corporation with its chief executive office and principal place of business
at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Shelby"),
SELLERS & ▇▇▇▇▇▇▇▇▇ INC., a New Jersey corporation with its chief executive
office and principal place of business at ▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ("Sellers & ▇▇▇▇▇▇▇▇▇") and EPIC FURNITURE GROUP, INC., a
Delaware corporation with its chief executive office and principal place of
business at ▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("Epic"). ▇▇▇▇▇▇,
▇▇▇▇▇▇, Sellers & ▇▇▇▇▇▇▇▇▇ and Epic are hereafter referred to collectively
as "Borrowers" and individually as a "Borrower". Capitalized terms used in
this Agreement have the meanings assigned to them in Appendix A, General
Definitions. Accounting terms not otherwise specifically defined herein
shall be construed in accordance with GAAP consistently applied. This
Agreement amends and restates in its entirety that certain Loan and Security
Agreement originally dated as of June 3, 2003 (the "Original Loan
Agreement") and amended and restated on January 15, 2004, as amended or
otherwise modified to the date hereof (the "Existing Loan Agreement"), in
each case among the Agent, the financial institutions party thereto and
certain of the Borrowers and the financing arrangements set forth in this
Agreement, together with the financing arrangements set forth in the Tranche
B Loan Documents, are intended to amend and restate the financing
arrangements set forth in the Existing Loan Agreement.
Section 1. CREDIT FACILITY
---------------
Subject to the terms and conditions of, and in reliance
upon the representations and warranties made in, this Agreement and the
other Loan Documents, Lenders agree to make a Total Credit Facility of up to
$95,000,000 available to Borrowers upon Borrowers' request therefor, as
follows:
1.1. Loans.
-----
1.1.1. Revolving Credit Loans. Each Revolving Credit
----------------------
Lender agrees, severally and not jointly, for so long as no Default or Event
of Default exists, to make Revolving Credit Loans to Borrowers from time to
time during the period from the date hereof up to but not including the last
day of the Term, as requested by Borrowers in the manner set forth in
subsection 3.1.1 hereof, up to a maximum principal amount at any time
-1-
outstanding equal to the lesser of (i) such Revolving Credit Lender's
Revolving Loan Commitment minus the product of such Revolving Credit
Lender's Revolving Loan Percentage and the LC Amount minus the product of
such Revolving Credit Lender's Revolving Loan Percentage and reserves, if
any, other than the Special Reserve, and (ii) the product of such Revolving
Credit Lender's Revolving Loan Percentage and an amount equal to the
Borrowing Base at such time minus the LC Amount minus reserves, if any,
including the Special Reserve. The aggregate amount of the Revolving Loan
Commitments is $25,000,000. Agent shall have the right to establish reserves
in such amounts, and with respect to such matters, as Agent shall deem
necessary or appropriate in its reasonable credit judgment, against the
amount of Revolving Credit Loans which Borrowers may otherwise request under
this subsection 1.1.1 including without limitation with respect to (i) price
adjustments, damages, unearned discounts, returned products or other matters
for which credit memoranda are issued in the ordinary course of a Borrower's
business; (ii) potential dilution related to Accounts; (iii) shrinkage,
spoilage and obsolescence of a Borrower's Inventory; (iv) slow moving
Inventory; (v) other sums chargeable against a Borrower's Loan Account as
Revolving Credit Loans under any section of this Agreement; (vi) amounts
owing by a Borrower to any Person to the extent secured by a Lien on, or
trust over, any Property of any Borrower (other than Permitted Liens
described in any of subsections 8.2.5(i), (iv), (v), (vi), (x), (xi), (xii)
or (xiii)); (vii) amounts owing by Borrowers in connection with Product
Obligations; (viii) an amount equal to one-half of the then accrued and
unpaid interest on the Subordinated Note Debt, with such amount to be
adjusted on a monthly basis, on the last day of each calendar month
(provided, that such reserve shall be released at the time of each payment
--------
of such interest); (ix) the Special Reserve; (x) the Rebuild Reserve; and
(xi) such other specific events, conditions or contingencies as to which
Agent, in its reasonable credit judgment, determines reserves should be
established from time to time hereunder. Notwithstanding the foregoing, (a)
the reserves described in clauses (viii), (ix) and (x) above shall be
implemented and maintained by Agent unless otherwise agreed by Majority
Lenders, (b) the reserves implemented under clause (x) shall be released as
necessary to permit replacement or repair of the subject Property, as
provided in subsection 3.3.1(a) or subsection 8.2.9(iv), as applicable, (c)
Agent shall not establish any reserves in respect of any matters relating to
any items of Collateral that have been taken into account in determining
Eligible Inventory or Eligible Accounts, as applicable and (d) the Special
Reserve shall no longer be required and shall be terminated upon the payment
in full of the Term Loan and the Tranche B Loans. The Revolving Credit Loans
shall be repayable in accordance with the terms of the Revolving Notes and
shall be secured by all of the Collateral.
1.1.2. Overadvances. Insofar as Borrowers may request and
------------
Agent or Revolving Credit Lenders (as provided below) may be willing in
their sole and absolute discretion to make Revolving Credit Loans to
Borrowers at a time when the unpaid balance
-2-
of Revolving Credit Loans plus the sum of the LC Amount plus the amount of
LC Obligations that have not been reimbursed by Borrowers or funded with a
Revolving Credit Loan, plus reserves, exceeds, or would exceed with the
making of any such Revolving Credit Loan, the Borrowing Base (such Loan or
Loans being herein referred to individually as an "Overadvance" and
collectively, as "Overadvances"), Agent shall enter such Overadvances as
debits in Borrowers' Loan Account. All Overadvances shall be repaid on
demand, shall be secured by the Collateral and shall bear interest as
provided in this Agreement for Revolving Credit Loans generally. Any
Overadvance made pursuant to the terms hereof shall be made by all Revolving
Credit Lenders ratably in accordance with their respective Revolving Loan
Percentages. Overadvances in the aggregate amount of $1,000,000 or less may,
unless a Default or Event of Default has occurred and is continuing, be made
in the sole and absolute discretion of Agent. Overadvances in an aggregate
amount of more than $1,000,000 but less than $2,000,000 may, unless a
Default or an Event of Default has occurred and is continuing, be made in
the sole and absolute discretion of Agent, with the consent of the Majority
Lenders. Overadvances in an aggregate amount of $2,000,000 or more and
Overadvances to be made after the occurrence and during the continuation of
a Default or an Event of Default shall require the consent of all Lenders.
The foregoing notwithstanding, in no event, unless otherwise consented to by
all Revolving Credit Lenders, (w) shall any Overadvances be outstanding for
more than sixty (60) consecutive days, (x) after all outstanding
Overadvances have been repaid, shall Agent or Revolving Credit Lenders make
any additional Overadvances unless sixty (60) days or more have expired
since the last date on which any Overadvances were outstanding, (y) shall
Overadvances be outstanding on more than ninety (90) days within any one
hundred eighty day (180) period or (z) shall Agent make Revolving Credit
Loans on behalf of Revolving Credit Lenders under this subsection 1.1.2 to
the extent such Revolving Credit Loans would cause a Revolving Credit
Lender's share of the Revolving Credit Loans to exceed such Revolving Credit
Lender's Revolving Loan Commitment minus such Revolving Credit Lender's
Revolving Loan Percentage of the LC Amount.
1.1.3. Use of Proceeds. The Revolving Credit Loans shall
---------------
be used solely (i) for Borrowers' general operating capital needs in a
manner consistent with the provisions of this Agreement and all applicable
laws, and (ii) for other purposes permitted under this Agreement.
1.1.4. Agent Loans. Upon the occurrence and during the
-----------
continuance of an Event of Default, Agent, in its sole discretion, may make
Revolving Credit Loans on behalf of Revolving Credit Lenders, in an
aggregate amount not to exceed $500,000, if Agent, in its reasonable
business judgment, deems that such Revolving Credit Loans are necessary or
desirable (i) to protect all or any portion of the Collateral, (ii) to
enhance the likelihood, or maximize the amount of, repayment of the Loans
and the other Obligations, or (iii) to pay any other amount chargeable to
any Borrower pursuant to this Agreement, including without limitation costs,
fees and expenses as described in Sections 2.8 and 2.9 (hereinafter, "Agent
Loans"); provided, that in no event shall (a) the maximum principal amount
--------
of the Revolving Credit Loans exceed the aggregate Revolving Loan
Commitments and (b) Majority Lenders may at any time revoke Agent's
authorization to make Agent Loans. Any such revocation
-3-
must be in writing and shall become effective prospectively upon Agent's
receipt thereof. Each Revolving Credit Lender shall be obligated to advance
its Revolving Loan Percentage of each Agent Loan. If Agent Loans are made
pursuant to the preceding sentence, then (a) the Borrowing Base shall be
deemed increased by the amount of such permitted Agent Loans, but only for
so long as Agent allows such Agent Loans to be outstanding, and (b) all
Revolving Credit Lenders that have committed to make Revolving Credit Loans
shall be bound to make, or permit to remain outstanding, such Agent Loans
based upon their Revolving Loan Percentages in accordance with the terms of
this Agreement.
1.2. Letters of Credit; LC Guaranties.
--------------------------------
1.2.1. Issuance of Letters of Credit and LC Guaranties.
-----------------------------------------------
Agent agrees, for so long as no Default or Event of Default exists and if
requested by Borrowers, to, as requested by a Borrower, (i) issue its, or
cause to be issued by Bank or another Affiliate of Agent, on the date
requested by a Borrower, Letters of Credit for the account of a Borrower or
(ii) execute LC Guaranties by which Agent, Bank, or another Affiliate of
Agent, on the date requested by a Borrower, shall guaranty the payment or
performance by a Borrower of its reimbursement obligations with respect to
letters of credit issued for a Borrower's account by other Persons; provided
--------
that the LC Amount shall not exceed $7,000,000 at any time. No Letter of
Credit or LC Guaranty may have an expiration date after the last day of the
Term. The parties hereto agree that the "Letters of Credit" and "LC
Guaranties" outstanding under and as defined in the Existing Loan Agreement
and as set forth on Exhibit 1.2.1, shall be Letters of Credit or LC
-------------
Guarantees (as the case may be) for all purposes of this Agreement and the
other Loan Documents.
1.2.2. Revolving Credit Lender Participation. Immediately
-------------------------------------
upon the issuance of a Letter of Credit or an LC Guaranty under this
Agreement, each Revolving Credit Lender shall be deemed to have irrevocably
and unconditionally purchased and received from Agent, without recourse or
warranty, an undivided interest and participation therein equal to the
applicable LC Obligations multiplied by such Revolving Credit Lender's
Revolving Loan Percentage. Agent will notify each Revolving Credit Lender on
a weekly basis, or if determined by Agent, a more frequent basis, upon
presentation to it of a draw under a Letter of Credit or a demand for
payment under a LC Guaranty. On a weekly basis, or more frequently if
requested by Agent, each Revolving Credit Lender shall make payment to Agent
in immediately available funds, of an amount equal to such Revolving Credit
Lender's pro rata share of the amount of any payment made by Agent in
respect to any Letter of Credit or LC Guaranty. The obligation of each
Revolving Credit Lender to reimburse Agent under this subsection 1.2.2 shall
be unconditional, continuing, irrevocable and absolute, except in respect of
indemnity claims arising out of Agent's willful misconduct. In the event
that any Revolving Credit Lender fails to make payment to Agent of any
amount due under this subsection 1.2.2, Agent shall be entitled to receive,
retain and apply against such obligation the principal and interest
otherwise payable to such Revolving Credit Lender hereunder until Agent
receives such payment from such Revolving Credit Lender or such obligation is
otherwise fully satisfied; provided, however, that nothing contained in this
-------- -------
-4-
sentence shall relieve such Revolving Credit Lender of its obligation to
reimburse the Agent for such amount in accordance with this subsection
1.2.2.
1.2.3. Reimbursement. Notwithstanding anything to the
-------------
contrary contained herein, Borrowers, Agent and Revolving Credit Lenders
hereby agree that all LC Obligations and all obligations of each Borrower
relating thereto shall be satisfied by the prompt issuance of one or more
Revolving Credit Loans that are Base Rate Portions, which Borrowers hereby
acknowledges are requested and Revolving Credit Lenders hereby agree to
fund. In the event that Revolving Credit Loans are not, for any reason,
promptly made to satisfy all then existing LC Obligations, each Revolving
Credit Lender hereby agrees to pay to Agent, on demand, an amount equal to
such LC Obligations multiplied by such Lender's Revolving Loan Percentage,
and until so paid, such amount shall be secured by the Collateral and shall
bear interest and be payable at the same rate and in the same manner as Base
Rate Portions. In no event shall Agent or any Revolving Credit Lender make
any Revolving Credit Loan in respect of any Obligation that has already been
satisfied by Borrowers.
1.3. Term Loan.
---------
Pursuant to the terms of the Original Loan Agreement,
"Revolving Credit" and "Term Loan A Lenders" thereunder made a loan to
certain of the Borrowers that was designated as "Term Loan A" under the
Original Loan Agreement and under the Existing Loan Agreement. The
outstanding principal balance of such "Term Loan A" on the date of this
Agreement is $4,893,000. From and after the effectiveness hereof, such "Term
Loan A" shall become part of what is referred to as the "Term Loan"
hereunder. Each Term Loan Lender, severally and not jointly, agrees to lend
to Borrowers on the Closing Date, its pro rata share, based on such Term
Lender's Term Loan Commitment, of an additional advance of $65,107,000 with
respect to the Term Loan such that after giving effect to such advance and
the inter-lender transfers referenced in the final sentence of this
subsection 1.3, such Term Lender will have made aggregate advances with
respect to the Term Loan equal to such Term Lender's Term Loan Commitment.
The proceeds of the additional advance under the Term Loan shall be used to
refinance a portion of the "Term Loan B" under and as defined in the
Existing Loan Agreement and to pay down $18,445,513.81 of the "Revolving
Credit Loans" under and as defined in the Existing Loan Agreement. The Term
Loan shall be repayable in accordance with the terms of the Term Notes and
shall be secured by all of the Collateral.
Fleet, in its capacity as Term Loan A Lender under the
Existing Loan Agreement, hereby sells and assigns to each Term Loan Lender,
without recourse, representation or warranty (except as set forth below),
and each such Term Loan Lender hereby purchases and assumes from Fleet, in
its capacity as Term Loan A Lender under the Existing Loan Agreement, a
percentage interest in the Term Loan hereunder as may be required to fully
reflect the Term Loan Commitments of the Term Loan Lenders. Fleet, in its
capacity as Term Loan A Lender under the Existing Loan Agreement, and the
Term Loan Lenders agree to make such inter-lender wire transfers as may be
required to give effect to the foregoing assignments and assumptions and, as
a result of such assignments and
-5-
assumptions, Fleet, in its capacity as Term Loan A Lender under the Existing
Loan Agreement shall be absolutely released from any obligations, covenants
or agreements with respect to the loan so assigned. With respect to such
loan so assigned, Fleet, in its capacity as Term Loan A Lender under the
Existing Loan Agreement, makes no representation or warranty whatsoever,
except that it represents and warrants that (i) it is the legal and
beneficial owner of the same, free and clear of any adverse claim and (ii)
the amount of the Term Loan A under the Existing Loan Agreement as of the
time of the assignment is $4,893,000.
1.4. Borrowing Agent.
---------------
For ease of administration of this Agreement, each
Borrower other than Falcon hereby appoints Falcon as the borrowing agent for
all Borrowers hereunder. In such capacity, Falcon will request all Revolving
Credit Loans to be made pursuant to Section 1.1, will request all Letters of
Credit and LC Guaranties to be issued pursuant to Section 1.2 and will
submit all LIBOR Requests with respect to obtaining any LIBOR Portion
pursuant to subsection 3.1.7, converting any Base Rate Portion into a LIBOR
Portion pursuant to subsection 3.1.8 or continuing any LIBOR Portion into a
subsequent Interest Period pursuant to subsection 3.1.9, in each case
pursuant to the procedures set forth in Section 3.1. Notwithstanding
anything to the contrary contained in this Agreement, no Borrower other than
Falcon shall be entitled to request any Revolving Credit Loans, Letters of
Credit or LC Guaranties or to submit any LIBOR Requests hereunder.
1.5. Effect of Amendment and Restatement.
-----------------------------------
Upon the execution and delivery of this Agreement and the
satisfaction of the conditions precedent set forth in Section 9, the
Obligations (as defined in the Existing Loan Agreement) of the Borrowers
previously governed by the Existing Loan Agreement (other than a portion of
Term Loan B, as defined therein) shall continue in full force and effect,
but shall be governed by the terms and conditions set forth in this
Agreement. Such Obligations, together with any and all additional
liabilities incurred by the Borrowers hereunder or under any of the Loan
Documents, shall continue to be secured by, among other things, the
Collateral, whether now existing or hereafter acquired and wheresoever
located, all as more specifically set forth herein and in the Security
Documents. Each Borrower hereby reaffirms such Borrower's Obligations (as
defined in the Existing Loan Agreement), liabilities, grants of security
interests, pledges and the validity of all covenants by such Borrower
contained in any and all Security Documents (other than Borrowers'
obligations in respect of Term Loan B, as defined in the Existing Loan
Agreement). The execution and delivery of this Agreement shall not
constitute a novation or repayment of the indebtedness outstanding under the
Existing Loan Agreement. Each Borrower hereby acknowledges and agrees that
any and all references in any Loan Documents to the Existing Loan Agreement
shall be deemed to be amended to refer to this Agreement. Each Borrower
hereby reaffirms its obligations, liabilities and indebtedness arising under
each of the Loan Documents existing on the Closing Date, in each case after
giving effect to the provisions of the preceding sentence. In addition,
Borrowers expressly acknowledge and agree that its obligations,
-6-
liabilities and indebtedness under this Agreement and the Tranche B Loan
Documents are intended to amend and restate their obligations, liabilities
and indebtedness under the Existing Loan Agreement and that together such
agreements are intended to constitute the Credit Agreement and are each
Credit Facilities.
Section 2. INTEREST, FEES AND CHARGES
--------------------------
2.1. Interest.
--------
2.1.1. Rates of Interest.
-----------------
(a) Revolving Credit Loans. Interest shall accrue on
----------------------
the principal amount of the Base Rate Revolving Portions
outstanding at the end of each day at a fluctuating rate per annum
equal to the Applicable Margin for Base Rate Revolving Portions
then in effect plus the Base Rate. Said rate of interest shall
increase or decrease by an amount equal to any increase or decrease
in the Base Rate, effective as of the opening of business on the
day that any such change in the Base Rate occurs. If a Borrower
exercises its LIBOR Option as provided in Section 3.1, interest
shall accrue on the principal amount of the LIBOR Revolving
Portions outstanding at the end of each day at a rate per annum
equal to the Applicable Margin for LIBOR Revolving Portions then in
effect plus the LIBOR applicable to each LIBOR Portion for the
corresponding Interest Period.
(b) Term Loan. Interest shall accrue on the principal
---------
amount of the Term Loan outstanding at the end of each day at a
rate per annum equal to the Applicable Margin for the Term Loan
plus the then applicable Term Loan Rate.
2.1.2. Default Rate of Interest. At the option of Agent or
------------------------
Majority Revolving Credit Lenders, upon and after the occurrence of an Event
of Default, and during the continuation thereof, the principal amount of all
Revolving Credit Loans shall bear interest at a rate per annum equal to 2.0%
plus the interest rate otherwise applicable thereto. At the option of
Majority Term Loan Lenders, upon and after the occurrence of an Event of
Default, and during the continuation thereof, the principal amount of all
Term Loans shall bear interest at a rate per annum equal to 2.0% plus the
interest rate otherwise applicable thereto.
2.1.3. Maximum Interest. In no event whatsoever shall the
----------------
aggregate of all amounts deemed interest hereunder or under the Notes and
charged or collected pursuant to the terms of this Agreement or pursuant to
the Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto. If any provisions of this Agreement or the Notes are in
contravention of any such law, such provisions shall be deemed amended to
conform thereto (the "Maximum Rate"). If at any time, the amount of interest
paid hereunder is limited by the Maximum Rate, and the amount at which
interest accrues hereunder is subsequently below the Maximum Rate, the rate
at which interest accrues hereunder shall remain at the Maximum Rate, until
-7-
such time as the aggregate interest paid hereunder equals the amount of
interest that would have been paid had the Maximum Rate not applied.
2.2. Computation of Interest and Fees.
--------------------------------
Interest, Letter of Credit and LC Guaranty fees and Unused
Line Fees hereunder shall be calculated daily and shall be computed on the
actual number of days elapsed over a year of three hundred sixty (360) days.
2.3. Fee Letters.
-----------
(a) Borrowers shall jointly and severally pay to the
Revolving Credit Lenders, certain fees and other amounts in
accordance with the terms of the fee letter of even date herewith
among Borrowers and the Revolving Credit Lenders (the "Revolving
Credit Fee Letter").
(b) Borrowers shall jointly and severally pay to the
Term Loan Lenders, certain fees and other amounts in accordance
with the terms of the fee letter of even date herewith from
Borrowers in favor of the Term Loan Lenders (the "Term Loan Fee
Letter").
2.4. Letter of Credit and LC Guaranty Fees.
-------------------------------------
Borrowers shall jointly and severally pay to Agent:
(a) for standby Letters of Credit and LC Guaranties
of standby letters of credit, for the ratable benefit of Revolving
Credit Lenders, a per annum fee equal to the Applicable Margin then
in effect for LIBOR Revolving Portions of the aggregate undrawn
face amount of such Letters of Credit and LC Guaranties outstanding
from time to time during the term of this Agreement, plus all
normal and customary charges associated with the issuance thereof,
which fees and charges shall be deemed fully earned upon issuance
of each such Letter of Credit or LC Guaranty, shall be due and
payable in arrears on the first Business Day of each month and
shall not be subject to rebate or proration upon the termination of
this Agreement for any reason;
(b) for documentary Letters of Credit and LC
Guaranties of documentary letters of credit a fee, for the account
of Agent only, in accordance with Agent's documentary letter of
credit fee schedule then in effect plus all normal and customary
charges associated with the issuance and administration of each
such Letter of Credit or LC Guaranty (which fees and charges shall
be fully earned upon issuance, renewal or extension (as the case
may be) of each such Letter of Credit or LC Guaranty, shall be due
and payable in arrears on the first Business Day of each month, and
shall not be subject to rebate or proration upon the termination of
this Agreement for any reason); and
-8-
(c) and with respect to all Letters of Credit and LC
Guaranties, for the account of Agent only, a per annum fronting fee
equal to 0.25% of the aggregate undrawn amount of such Letters of
Credit and LC Guaranties outstanding from time to time during the
term of this Agreement, which fronting fees shall be due and
payable monthly in arrears on the first Business Day of each month
and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
2.5. Unused Line Fee.
---------------
Borrowers shall jointly and severally pay to Agent, for
the ratable benefit of Revolving Credit Lenders, a fee (the "Unused Line
Fee") equal to 0.50% per annum multiplied by the average daily amount by
which the Revolving Credit Maximum Amount exceeds the sum of (i) the
outstanding principal balance of the Revolving Credit Loans plus (ii) the LC
Amount plus (iii) the amount of the Special Reserve. The Unused Line Fee
shall be payable monthly in arrears on the first day of each month
hereafter.
2.6. Prepayment Fee.
--------------
(a) At the effective date of termination of this
Agreement for any reason prior to October 1, 2007, or any reduction
of the Revolving Loan Commitments pursuant to subsection 3.3.6,
Borrowers shall jointly and severally pay to Agent, for the ratable
benefit of Revolving Credit Lenders (in addition to the then
outstanding principal, accrued interest and other charges then due
and owing under the terms of this Agreement and any of the other
Loan Documents and any amounts then due and owing pursuant to
subsection 3.2.5), as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to 1.50% of the sum
of the aggregate amount of the Revolving Loan Commitments then
being reduced or terminated; provided that if such termination
-------- ----
arose from a Change of Control, Borrowers shall, in lieu of such
prepayment fee, make the payments specified in subsection 3.3.8;
provided, further, that such termination fee shall be waived if the
-------- -------
prepayment occurs during the period from September 1, 2007 through
and including September 30, 2007, so long as Revolving Credit
Lenders are given a reasonable opportunity to provide any
applicable refinancing of the Revolving Loan Commitments on
substantially the same terms as those of the Indebtedness, if any,
proposed to refinance the Revolving Loan Commitments, and Revolving
Credit Lenders decline to provide such refinancing or Borrowers
decline to accept Revolving Credit Lenders' proposal.
(b) At the effective date of termination of this
Agreement for any reason prior to the Thirty Month Date, or any
prepayment of the Term Loan pursuant to subsection 3.3.5, Borrowers
shall jointly and severally pay to Agent, for the ratable benefit
of Term Loan Lenders (in addition to the then outstanding
principal, accrued interest and other charges then due and owing
under the terms of this Agreement and any of the other Loan
Documents and any amounts then due and owing pursuant to subsection
3.2.5), as liquidated damages for the loss of the bargain and not
as a
-9-
penalty, an amount equal to the lesser of (i) the Make Whole Amount
applicable to such prepayment amount and (ii) the Term Loan
Prepayment Fee applicable at such time; provided that if such
-------- ----
termination arose from a Change of Control, Borrowers shall, in
lieu of such prepayment fee, make the payments specified in
subsection 3.3.8.
2.7. Audit Fees.
----------
Borrowers shall jointly and severally pay to Agent audit
fees in accordance with Agent's current schedule of fees in effect from time
to time in connection with audits of the books and records and Properties of
each Borrower and its Subsidiaries and such other matters as Agent shall
deem appropriate in its reasonable credit judgment, plus all reasonable
out-of-pocket expenses incurred by Agent in connection with such audits;
provided, that so long as no Event of Default has occurred and is
--------
continuing, Borrowers shall not be liable for such audit fees incurred in
connection with more than four (4) such audits during any fiscal year or in
excess of $100,000 in any fiscal year, whether such audits are conducted by
employees of Agent or by third parties hired by Agent; provided, further,
--------
the limitation contained in the preceding proviso shall not restrict Agent's
right to conduct additional audits at Agent's expense. Such audit fees and
out-of-pocket expenses shall be payable on the first Business Day of the
month following the date of issuance by Agent of a request for payment
thereof to Borrowers. Agent may, in its discretion, provide for the payment
of such amounts by making appropriate Revolving Credit Loans to Borrowers
and charging the applicable Loan Account therefor.
2.8. Reimbursement of Expenses.
-------------------------
If, at any time or times regardless of whether or not an
Event of Default then exists, (a) Agent incurs legal or accounting expenses
or any other out-of-pocket costs or expenses in connection with (i) the
negotiation and preparation of this Agreement or any of the other Loan
Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents, or any syndication or attempted syndication of the
Obligations (including, without limitation, printing and distribution of
materials to prospective Lenders and all costs associated with bank
meetings, but excluding any closing fees paid to Lenders in connection
therewith) or (ii) the administration of this Agreement or any of the other
Loan Documents and the transactions contemplated hereby and thereby; or (b)
Agent or any Lender incurs legal or accounting expenses or any other
out-of-pocket costs or expenses in connection with (i) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by Agent,
any Lender, any Borrower or any other Person) relating to the Collateral,
this Agreement or any of the other Loan Documents or any Borrower's, any of
its Subsidiaries' or any Guarantor's affairs; (ii) any amendment or
modification of this Agreement or any of the other Loan Documents or the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any attempt to enforce
any rights of Agent or any Lender against any Borrower or any other Person
which may be obligated to Agent or any Lender by virtue of this Agreement or
any of the other Loan Documents, including, without limitation, the Account
Debtors; (iv) any
-10-
attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; or (v) the
insolvency or bankruptcy of any Borrower or any Subsidiary or in connection
with any work-out or restructuring of the Obligations under the Loan
Documents. All such legal and accounting expenses, other out-of-pocket costs
and expenses of Agent or any Lender, as applicable, shall be charged to
Borrowers on a joint and several basis; provided, that Borrowers shall not
--------
be responsible for such legal or accounting expenses and other out-of-pocket
costs or expenses of Agent or any Lender to the extent incurred because of
the gross negligence or willful misconduct of Agent or such Lender, as the
case may be. All amounts chargeable to Borrowers under this Section 2.8
shall be obligations secured by all of the Collateral, shall be payable on
demand to Agent or such Lender, as the case may be, and shall bear interest
from the date such demand is made until paid in full at the rate applicable
to Base Rate Revolving Portions from time to time. Borrowers shall also
jointly and severally reimburse Agent for expenses incurred by Agent in its
administration of the Collateral to the extent and in the manner provided in
Sections 2.9 and 2.10 hereof.
2.9. Bank Charges.
------------
Borrowers shall jointly and severally pay to Agent, on
demand, for the account of Agent or any applicable Lender, any and all fees,
costs or expenses which Agent or such Lender pays to a bank or other similar
institution arising out of or in connection with (i) the forwarding to any
Borrower or any other Person on behalf of any Borrower, by Agent or such
Lender, of proceeds of Loans made to any Borrower pursuant to this Agreement
and (ii) the depositing for collection by Agent or such Lender of any check
or item of payment received or delivered to Agent or such Lender on account
of the Obligations.
2.10. Collateral Protection Expenses; Appraisals.
------------------------------------------
All out-of-pocket expenses incurred in protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, and any and all excise, property, sales, and use taxes imposed
by any state, federal, or local authority on any of the Collateral or in
respect of the sale thereof shall be jointly and severally borne and paid by
Borrowers. If Borrowers fail to promptly pay any portion thereof when due,
Agent may, at its option, but shall not be required to, pay the same and
charge Borrowers therefor. Agent may, at Borrowers' joint and several
expense, obtain appraisals from appraisers (who may be personnel of Agent),
stating the then current fair market value of all or any portion of the real
Property or personal Property (including without limitation Inventory) of
any Borrower or any of its Domestic Subsidiaries, which appraisals may be
obtained (a) once in each calendar year, at Agent's determination, (b) at
any time (but no more often than once in each ninety (90) day period), that
a Default or an Event of Default is in existence or is reasonably likely to
occur and (c) at any time that Agent or any Lender reasonably determines
that obtaining such appraisal is necessary in order for it to comply with
applicable laws or regulations.
-11-
2.11. Payment of Charges.
------------------
All amounts chargeable to any Borrower under this
Agreement shall be Obligations secured by all of the Collateral, shall be,
unless specifically otherwise provided, payable on demand and shall bear
interest from the date demand was made or such amount is due, as applicable,
until paid in full at the rate applicable to Base Rate Revolving Portions
from time to time.
2.12. No Deductions.
-------------
Any and all payments or reimbursements made hereunder
shall be made free and clear of and without deduction for any and all taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto; excluding, however, the following: taxes imposed on
the income (including gross receipts taxes, income taxes, franchise taxes,
branch profits taxes and similar taxes) of Agent or any Lender by the
jurisdiction under the laws of which Agent or any Lender is organized or
doing business or engaged in business, or any political subdivision thereof
and taxes imposed on its income by the jurisdiction of Agent's or such
Lender's applicable lending office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges or
withholdings and all liabilities with respect thereto, herein "Tax
Liabilities"). If any Borrower shall be required by law to deduct any such
Tax Liabilities from or in respect of any sum payable hereunder to Agent or
any Lender, then the sum payable hereunder shall be increased as may be
necessary so that, after all required deductions are made, Agent or such
Lender receives an amount equal to the sum it would have received had no
such deductions been made; provided, however, that no Borrower shall be
--------
required under this Section 2.12 to increase any sum payable to Agent or any
Lender that is organized under the laws of any jurisdiction other than the
United States or any state thereof (and shall be allowed to withhold,
without gross-up, any Tax Liabilities from or in respect of any sum payable
thereunder to Agent or such Lender) to the extent Agent or such Lender fails
to establish a complete exemption from United States federal withholding tax
on all interest payments hereunder.
2.13. Joint and Several Obligations.
-----------------------------
Each Borrower acknowledges that it is jointly and
severally liable for all of the Obligations and as a result hereby
unconditionally guaranties the full and prompt payment when due, whether at
maturity or earlier, by reason of acceleration or otherwise, and at all
times thereafter, of all Obligations of every kind and nature of each other
Borrower to Agent and Lenders and, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, joint or several, now or
hereafter existing, or due or to become due, and howsoever owned, held or
acquired by Agent or any Lender. Each Borrower agrees that if this guaranty,
or any Liens securing this guaranty, would, but for the application of this
sentence, be unenforceable under applicable law, this guaranty and each such
Lien shall be valid and enforceable to the maximum extent that would not
cause this guaranty or such Lien to be unenforceable under applicable law,
and this guaranty shall automatically be deemed to have been amended
accordingly at all relevant times.
-12-
Each Borrower hereby agrees that its obligations under
this guaranty shall be unconditional, irrespective of (a) the validity or
enforceability of the obligations or any part thereof, or of any promissory
note or other document evidencing all or any part of the Obligations, (b)
the absence of any attempt to collect the obligations from any other
Borrower or any Guarantor or other action to enforce the same, (c) the
waiver or consent by Agent or any Lender with respect to any provision of
any agreement, instrument or document evidencing or securing all or any part
of the Obligations, or any other agreement, instrument or document now or
hereafter executed by any other Borrower and delivered to Agent or any
Lender (other than a waiver, forgiveness or consent by Agent and Lenders
that reduces the amount of any of the Obligations), (d) the failure by Agent
or any lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or Collateral for
the Obligations, for its benefit, (e) Agent's or any Lender's election, in
any proceeding instituted under the United States Bankruptcy Code or any
other similar bankruptcy or insolvency legislation, of the application of
Section 1111(b)(2) of the United States Bankruptcy Code or any other similar
bankruptcy or insolvency legislation, (f) any borrowing or grant of a
security interest by any Borrower as debtor-in-possession, under Section 364
of the United States Bankruptcy Code or any other similar bankruptcy or
insolvency legislation, (g) the disallowance, under ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code or any other similar bankruptcy or insolvency
legislation, of all or any portion of Agent's or any Lender's claim(s) for
repayment of the obligations or (h) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a borrower
or a guarantor.
Each Borrower hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of receivership or
bankruptcy of any other Borrower, protest or notice with respect to the
Obligations owed by any other Borrower and all demands whatsoever with
respect thereto, and covenants that this guaranty will be discharged, except
by complete and irrevocable payment and performance of the Obligations. No
notice to any Borrower or any other party shall be required for Agent or any
Lender to make demand hereunder. Such demand shall constitute a mature and
liquidated claim against the applicable Borrower. During the existence of
any Default, Agent and Lenders may, at their election, proceed directly and
at once, without notice, against all or any of the Borrowers to collect and
recover the full amount or any portion of the Obligations, without first
proceeding against any other Borrower or any other Person, or any security
or collateral for the Obligations.
Each Borrower hereby waives notice of acceptance of its
joint and several liability, notice of any and all Loans made under this
Agreement, notice of occurrence of any Event of Default, or of any demand
for any payment of any Obligations owed by any other Borrower under this
Agreement, notice of any action at any time taken or omitted by Agent or any
Lender under or in respect of any of the Obligations, any requirement of
diligence and, generally, all formalities of every kind in connection with
Agreement. Each Borrower hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the
obligations hereunder, the acceptance of any partial payment thereon, any
waiver, consent or other action or acquiescence by Agent or any Lender at
any time or
-13-
times in respect of any default by any Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this
Agreement, any and all other indulgences whatsoever by Agent or any Lender
in respect of any of the Obligations hereunder, and the taking, addition,
substitution or release, in whole or in part, at any time or times, of any
security for any of such Obligations or the addition, substitution or
release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of Agent or any Lender,
including, without limitation, any failure strictly or diligently to assert
any right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder which might, but for the provisions of this Section
2.13, afford grounds for terminating, discharging or releasing such
Borrower, in whole or in part, from any of its obligations under this
Section 2.13, it being the intention of each Borrower that, so long as any
of the Obligations hereunder remain unsatisfied, the obligations of such
Borrower under this Section 2.13 shall not be discharged except by
performance and then only to the extent of such performance. Each Borrower
hereby waives all suretyship and similar defenses to its absolute and
unconditional liability on the Obligations. The obligations of each Borrower
under this Section 2.13 shall not be diminished or rendered unenforceable by
any winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to any Borrower, Agent or any Lender. The
joint and several liability of the Borrowers hereunder shall continue in
full force and effect notwithstanding any absorption, merger, amalgamation
or any other change whatsoever in the name, membership, constitution or
place of formation of any Borrower, Agent or any Lender.
Notwithstanding anything to the contrary set forth in this
Section 2.13, it is the intent of the parties hereto that the liability
incurred by each Borrower in respect of the Obligations of the other
Borrowers (and any Lien granted by each Borrower to secure such
Obligations), not constitute a fraudulent conveyance under Section 548 of
the United States Bankruptcy Code or a fraudulent conveyance or fraudulent
transfer under the provisions of any applicable law of any state or other
governmental unit ("Fraudulent Conveyance"). Consequently, each Borrower,
Agent and each Lender hereby agree that if a court of competent jurisdiction
determines that the incurrence of liability by any Borrower in respect of
the Obligations of any other Borrower (or any Liens granted by such Borrower
to secure such Obligations) would, but for the application of this sentence,
constitute a Fraudulent Conveyance, such liability (and such Liens) shall be
valid and enforceable only to the maximum extent that would not cause the
same to constitute a Fraudulent Conveyance, and this Agreement and the other
Loan Documents shall automatically be deemed to have been amended
accordingly.
Section 3. LOAN ADMINISTRATION.
--------------------
3.1. Manner of Borrowing Revolving Credit Loans/LIBOR
------------------------------------------------
Option.
------
Borrowings under the credit facilities established
pursuant to subsections 1.1 and 1.2 hereof shall be as follows:
-14-
3.1.1. Loan Requests. A request for a Revolving Credit
-------------
Loan shall be made, or shall be deemed to be made, in the following manner:
(a) a Borrower may give Agent notice of its intention to borrow, in which
notice such Borrower shall specify the amount of the proposed borrowing of a
Revolving Credit Loan and the proposed borrowing date, which shall be a
Business Day, no later than 11:00 a.m. (Chicago, Illinois time) on the
proposed borrowing date (or in accordance with subsection 3.1.7, 3.1.8 or
3.1.9, as applicable, in the case of a request for a LIBOR Revolving
Portion), provided, however, that no such request may be made at a time when
-------- -------
there exists a Default or an Event of Default; and (b) the becoming due of
any amount required to be paid under this Agreement, or the Notes, whether
as interest or for any other obligation, shall be deemed irrevocably to be a
request by a Borrower for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation.
3.1.2. Disbursement. Each Borrower hereby irrevocably
------------
authorizes Agent to disburse the proceeds of each Revolving Credit Loan
requested, or deemed to be requested, pursuant to subsection 3.1.1 as
follows: (i) the proceeds of each Revolving Credit Loan requested under
subsection 3.1.1(a) shall be disbursed by Agent in lawful money of the
United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from Borrowers, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrowers and Agent
from time to time or elsewhere if pursuant to a written direction from
Borrowers and (ii) the proceeds of each Revolving Credit Loan deemed
requested under subsection 3.1.1(b) shall be disbursed by Agent by way of
direct payment of the relevant interest or other Obligation. If at any time
any Loan is funded by Agent or Revolving Credit Lenders in excess of the
amount requested or deemed requested by Borrowers, Borrowers jointly and
severally agree to repay the excess to Agent immediately upon the earlier to
occur of (a) Borrowers' discovery of the error and (b) notice thereof to
Borrowers from Agent or any Revolving Credit Lender.
3.1.3. Payment by Revolving Credit Lenders. Agent shall
-----------------------------------
give to each Revolving Credit Lender prompt written notice by facsimile,
telex or cable of the receipt by Agent from Borrowers of any request for a
Revolving Credit Loan. Each such notice shall specify the requested date and
amount of such Revolving Credit Loan, whether such Revolving Credit Loan
shall be subject to the LIBOR Option, and the amount of each Revolving
Credit Lender's advance thereunder (in accordance with its applicable
Revolving Loan Percentage). Each Revolving Credit Lender shall, not later
than 12:00 p.m. (Chicago time) on such requested date, wire to a bank
designated by Agent the amount of that Revolving Credit Lender's Revolving
Loan Percentage of the requested Revolving Credit Loan. The failure of any
Revolving Credit Lender to make the Revolving Credit Loans to be made by it
shall not release any other Revolving Credit Lender of its obligations
hereunder to make its Revolving Credit Loan. Neither Agent nor any other
Revolving Credit Lender shall be responsible for the failure of any other
Revolving Credit Lender to make the Revolving Credit Loan to be made by such
other Revolving Credit Lender. The foregoing notwithstanding, Agent, in its
sole discretion, may from its own funds make a Revolving Credit Loan on
behalf of any Revolving Credit Lender. In such event, the Revolving Credit
-15-
Lender on behalf of whom Agent made the Revolving Credit Loan shall
reimburse Agent for the amount of such Revolving Credit Loan made on its
behalf, on a weekly (or more frequent, as determined by Agent in its sole
discretion) basis. On each such settlement date, Agent will pay to each
Revolving Credit Lender the net amount owing to such Revolving Credit Lender
in connection with such settlement, including without limitation amounts
relating to Loans, fees, interest and other amounts payable hereunder. The
entire amount of interest attributable to such Revolving Credit Loan for the
period from the date on which such Revolving Credit Loan was made by Agent
on such Revolving Credit Lender's behalf until Agent is reimbursed by such
Revolving Credit Lender, shall be paid to Agent for its own account.
3.1.4. Authorization. Each Borrower hereby irrevocably
-------------
authorizes Agent, in Agent's sole discretion, to advance to Falcon or
another Borrower, and to charge to the applicable Borrower's Loan Account
hereunder as a Revolving Credit Loan (which shall be a Base Rate Portion), a
sum sufficient to pay all interest accrued on the obligations during the
immediately preceding month, to pay all principal due and payable at any
time and to pay all fees, costs and expenses and other Obligations at any
time owed by Borrowers to Agent or any Lender hereunder.
3.1.5. Letter of Credit and LC Guaranty Requests. A
-----------------------------------------
request for a Letter of Credit or LC Guaranty shall be made in the following
manner: a Borrower may give Agent and Bank a written notice of its request
for the issuance of a Letter of Credit or LC Guaranty, not later than 11:00
a.m. (Chicago time), one Business Day before the proposed issuance date
thereof, in which notice Borrowers shall specify the proposed issuer,
issuance date and format and wording for the Letter of Credit or LC Guaranty
being requested (which shall be satisfactory to Agent and the Person being
asked to issue such Letter of Credit or LC Guaranty); provided, that no such
--------
request may be made at a time when there exists a Default or Event of
Default. Such request shall be accompanied by an executed application and
reimbursement agreement in form and substance reasonably satisfactory to
Agent and the Person being asked to issue the Letter of Credit or LC
Guaranty, as well as any required corporate resolutions or other documents
reasonably requested by Agent. In the event of any inconsistency or conflict
between any such application and reimbursement agreement between a Borrower
and Bank, and this Agreement, the terms and provisions of this Agreement
shall govern and control.
3.1.6. Method of Making Requests. As an accommodation to
-------------------------
Borrowers, unless a Default or an Event of Default is then in existence, (i)
Agent shall permit telephonic or electronic requests for Revolving Credit
Loans to Agent, (ii) Agent and Bank may, in their discretion, permit
electronic transmittal of requests for Letters of Credit and LC Guaranties
to them, and (iii) Agent may, in Agent's discretion, permit electronic
transmittal of instructions, authorizations, agreements or reports to Agent.
Unless a Borrower specifically directs Agent or Bank in writing not to
accept or act upon telephonic or electronic communications from such
Borrower, neither Agent nor Bank shall have any liability to any Borrower
for any loss or damage suffered by any Borrower as a result of Agent's or
Bank's honoring, in good faith, of any requests, execution of any
instructions, authorizations or
-16-
agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Agent or Bank by any
Borrower, and neither Agent nor Bank shall have any duty to verify the
origin of any such communication or the authority of the Person sending it.
Each telephonic request for a Letter of Credit or LC Guaranty accepted by
Agent and Bank hereunder shall be promptly followed by a written
confirmation of such request from the applicable Borrower to Agent and Bank.
3.1.7. LIBOR Portions. Provided that as of both the date
--------------
of the LIBOR Request and the first day of the Interest Period, no Default or
Event of Default exists, in the event a Borrower desires to obtain a LIBOR
Portion, such Borrower shall give Agent a LIBOR Request no later than 11:00
a.m. (Chicago time) on the third Business Day prior to the requested
borrowing date. Each LIBOR Request shall be irrevocable and binding on
Borrowers. In no event shall Borrowers be permitted to have outstanding at
any one time LIBOR Portions with more than six (6) different Interest
Periods.
3.1.8. Conversion of Base Rate Portions. Provided that as
--------------------------------
of both the date of the LIBOR Request and the first day of the Interest
Period, no Default or Event of Default exists, a Borrower may, on any
Business Day, convert any Base Rate Portion into a LIBOR Portion. If a
Borrower desires to convert a Base Rate Portion, a Borrower shall give Agent
a LIBOR Request no later then 11:00 a.m. (Chicago time) on the third
Business Day prior to the requested conversion date. After giving effect to
any conversion of Base Rate Portions to LIBOR Portions, Borrowers shall not
be permitted to have outstanding at any one time LIBOR Portions with more
than six (6) different Interest Periods.
3.1.9. Continuation of LIBOR Portions. Provided that as of
------------------------------
both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, a Borrower may, on any Business Day,
continue any LIBOR Portions into a subsequent Interest Period of the same or
a different permitted duration. If a Borrower desires to continue a LIBOR
Portion, such Borrower shall give Agent a LIBOR Request no later than 11:00
a.m. (Chicago time) on the second Business Day prior to the requested
continuation date. After giving effect to any continuation of LIBOR
Portions, Borrowers shall not be permitted to have outstanding at any one
time LIBOR Portions with more than six (6) different Interest Periods. If a
Borrower shall fail to give timely notice of its election to continue any
LIBOR Portion or portion thereof as provided above, or if such continuation
shall not be permitted, such LIBOR Portion or portion thereof, unless such
LIBOR Portion shall be repaid, shall automatically be converted into a Base
Rate Portion at the end of the Interest Period then in effect with respect
to such LIBOR Portion.
3.1.10. Inability to Make LIBOR Portions. Notwithstanding
--------------------------------
any other provision hereof, if any applicable law, treaty, regulation or
directive, or any change therein or in the interpretation or application
thereof, shall make it unlawful for any Revolving Credit Lender (for
purposes of this subsection 3.1.10, the term "Revolving Credit Lender")
shall include the office or branch where such Revolving Credit Lender or any
corporation or bank then controlling such Revolving Credit Lender makes or
maintains any LIBOR Portions) to make or maintain its LIBOR Portions, or if
with respect to any Interest Period,
-17-
Agent is unable to determine the LIBOR relating thereto, or adverse or
unusual conditions in, or changes in, applicable law relating to, the London
interbank market make it, in the reasonable judgment of Agent, impractical
to fund therein any of the LIBOR Portions, or make the projected LIBOR
unreflective of the actual costs of funds therefor to any Revolving Credit
Lender, the obligation of Agent and Revolving Credit Lenders to make or
continue LIBOR Portions or convert Base Rate Portions to LIBOR Portions
hereunder shall forthwith be suspended during the pendency of such
circumstances and the applicable Borrower shall, if any affected LIBOR
Portions are then outstanding, promptly upon request from Agent, convert
such affected LIBOR Portions into Base Rate Portions. Agent shall promptly
notify Borrowers in writing if and when the circumstances giving rise to
such suspension no longer apply.
3.2. Payments.
--------
The Obligations shall be payable as follows:
3.2.1. Principal.
---------
(a) Revolving Credit Loans. Principal on account of
----------------------
Revolving Credit Loans shall be jointly and severally payable by
Borrowers to Agent for the ratable benefit of Revolving Credit
Lenders immediately upon the earliest of (i) the receipt by Agent
or any Borrower of any proceeds of any of the Collateral (except as
otherwise provided herein), including without limitation pursuant
to subsections 3.3.1, 3.3.2, 3.3.3, 3.4.2 and 6.2.4, to the extent
of said proceeds, subject to Borrowers' rights to reborrow such
amounts in compliance with subsection 1.1.1 hereof; (ii) the
occurrence of an Event of Default in consequence of which Agent,
Majority Revolving Credit Lenders or Majority Term Loan Lenders (to
the extent permitted under Section 10.2), elect to accelerate the
maturity and payment of the Obligations, or (iii) the expiration of
the Term or termination of this Agreement pursuant to Section 4
hereof; provided, however, that, if an Overadvance shall exist at
--------
any time, Borrowers shall, on demand, jointly and severally repay
the Overadvance. Each payment (including principal prepayment) by a
Borrower on account of principal of the Revolving Credit Loans
shall be applied first to Base Rate Revolving Portions and then to
LIBOR Revolving Portions.
(b) The Term Loan. Principal on account of the Term
-------------
Loan shall be payable by Borrowers as follows: (i) as required
pursuant to subsections 3.3.1, 3.3.2 and 3.3.3, and (ii) in the
amount of the remaining principal balance of the Term Loan on
October 1, 2007. Notwithstanding the foregoing, the entire unpaid
principal balance of the Term Loan shall be due and payable upon
the occurrence of an Event of Default in consequence of which
Agent, Majority Revolving Credit Lenders or Majority Term Loan
Lenders (to the extent permitted under Section 10.2) elect to
accelerate the maturity and payment of the Obligations or the
termination of this Agreement.
-18-
3.2.2. Interest.
--------
(a) Revolving Credit Loans. Interest accrued on
----------------------
Revolving Credit Loans shall be due and payable as follows:
(i) Base Rate Portions. Interest accrued on Base
------------------
Rate Portions shall be due and payable on the earliest of
(1) the first calendar day of each month (for the
immediately preceding month), computed through the last
calendar day of such month, (2) the occurrence of an Event
of Default in consequence of which Agent, Majority
Revolving Credit Lenders or Majority Term Loan Lenders (to
the extent permitted under Section 10.2) elect to
accelerate the maturity and payment of the obligations, or
which causes an automatic acceleration, (3) the date of
any required prepayment of the Revolving Credit Loans (or
any portion thereof) following the occurrence of a Change
of Control pursuant to subsection 3.3.8; provided that
-------- ----
only the interest accrued on the portion of the Revolving
Credit Loans required to be so prepaid shall be due and
payable at such time, or (4) termination of this Agreement
pursuant to Section 4 hereof.
(ii) LIBOR Revolving Portion. Interest accrued on
-----------------------
each LIBOR Revolving Portion shall be due and payable on
each applicable LIBOR Interest Payment Date and on the
earlier of (1) the occurrence of an Event of Default in
consequence of which Agent, Majority Revolving Credit
Lenders or Majority Term Loan Lenders (to the extent
permitted under Section 10.2) elect to accelerate the
maturity and payment of the obligations, or which causes
an automatic acceleration, (2) the expiration of the Term
or the date of any required prepayment of the Revolving
Credit Loans (or any portion thereof) following the
occurrence of a Change of Control pursuant to subsection
3.3.8; provided that only the interest accrued on the
-------- ----
portion of the Revolving Credit Loans required to be so
prepaid shall be due and payable at such time, or (3) the
expiration of the Term or termination of this Agreement
pursuant to Section 4 hereof.
(b) The Term Loan. Interest accrued on the Term Loan
-------------
shall be due and payable on the first calendar day of each month
(for the immediately preceding month) and on the earlier of (1) the
occurrence of an Event of Default in consequence of which Agent,
Majority Revolving Credit Lenders or Majority Term Loan Lenders (to
the extent permitted under Section 10.2) elect to accelerate the
maturity and payment of the Obligations, (2) the date of any
required prepayment of the Term Loan (or any portion thereof)
following the occurrence of a Change of Control pursuant to
subsection 3.3.8; provided that only the interest accrued on the
--------
portion of the Term Loan required to be so prepaid shall be due and
payable at such time, or (3)
-19-
the expiration of the Term or termination of this Agreement
pursuant to Section 4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges
-----------------------
payable pursuant to this Agreement shall be jointly and severally payable by
Borrowers to Agent, as and when provided in Section 2 or Section 3 hereof,
as applicable, for payment to Agent or a Lender, as applicable, or to any
other Person designated by Agent or such Lender in writing.
3.2.4. Other Obligations. The balance of the obligations
-----------------
requiring the payment of money, if any, shall be jointly and severally
payable by Borrowers to Agent for distribution to Lenders, as appropriate
and pursuant to the application provisions set forth herein, as and when
provided in this Agreement, the Other Agreements or the Security Documents,
or on demand, whichever is later.
3.2.5. Prepayment of/Failure to Borrow LIBOR Portions.
----------------------------------------------
Borrowers may prepay a LIBOR Portion only upon at least three (3) Business
Days prior written notice to Agent (which notice shall be irrevocable).
Borrowers shall jointly and severally pay to each Revolving Credit Lender,
as applicable, upon request of such Revolving Credit Lender, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Revolving
Credit Lender) to compensate such Revolving Credit Lender for any loss,
cost, or expense incurred as a result of: (i) any payment of a LIBOR Portion
on a date other than the last day of the Interest Period for such LIBOR
Portion; (ii) any failure by Borrowers to borrow a LIBOR Revolver Portion on
the date specified by Borrowers' LIBOR Request; or (iii) any failure by
Borrowers to pay a LIBOR Portion on the date for payment specified in
Borrowers' written notice. Without limiting the foregoing, Borrowers shall
jointly and severally pay to each Revolving Credit Lender, as applicable, a
"yield maintenance fee" in an amount computed as follows: the current rate
for United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the Interest
Period of the LIBOR Portion as to which the prepayment is made, shall be
subtracted from the LIBOR in effect at the time of prepayment. If the result
is zero or a negative number, there shall be no yield maintenance fee. If
the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The
resulting amount shall be divided by 360 and multiplied by the number of
days remaining in the Interest Period of the LIBOR Portion as to which the
prepayment is made. Said amount shall be reduced to present value calculated
by using the above referenced United States Treasury securities rate and the
number of days remaining in the term chosen pursuant to the LIBOR Portion as
to which prepayment is made. The resulting amount shall be the yield
maintenance fee due to the applicable Revolving Credit Lender upon the
prepayment of a LIBOR Portion. If by reason of an Event of Default, Agent,
Majority Revolving Credit Lenders or Majority Term Loan Lenders (to the
extent permitted under Section 10.2) elect to declare the Obligations to be
immediately due and payable, then any yield maintenance fee with respect to
a LIBOR Portion shall become due and payable in the same manner as though
Borrowers had exercised such right of prepayment.
-20-
3.3. Mandatory and Optional Prepayments.
----------------------------------
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation
---------------------------------------------------
of Collateral. Except for dispositions of assets permitted by subsections
-------------
8.2.9(ii) and 8.2.9(iii) and except as provided in subsection 8.2.9(v), if
any Borrower or any of its Domestic Subsidiaries sells any of its Property
or if any of its Property is lost or destroyed or taken by condemnation, the
applicable Borrower or Domestic Subsidiary shall, unless otherwise agreed by
Majority Lenders, pay to Agent for the benefit of Lenders as and when
received by such Borrower or such Domestic Subsidiary and as a mandatory
prepayment of the Loans, as herein provided and subject to the Intercreditor
Agreement, a sum equal to the proceeds (including insurance payments but net
of costs and taxes incurred in connection with such sale or event) received
by such Borrower or such Domestic Subsidiary from such sale, loss,
destruction or condemnation. To the extent that the Property sold, lost,
destroyed or condemned consists of Equipment, real Property, or other
Property other than Accounts or Inventory, the applicable prepayment shall
be applied, subject to Section 3.11 and the Intercreditor Agreement, first,
-----
to Agent's costs and expenses relating to the relevant transaction, second,
------
to the principal due under the Term Notes, third, to repay outstanding
-----
principal of Revolving Credit Loans (but without permanently reducing the
Revolving Loan Commitments) and with a corresponding imposition of a Special
Reserve against the Borrowing Base, unless otherwise agreed by the Majority
Lenders, and fourth, to repay any other Obligations then due and payable and
------
to cash collateralize any LC Obligations (in the amount of 105% of the LC
Amount); provided, that notwithstanding the foregoing, if Availability
--------
immediately after making any such prepayment would be less than $10,000,000,
unless the Majority Lenders otherwise agree, such prepayment shall be
applied to the Obligations, first, to Agent's costs and expenses relating to
-----
the relevant transaction, second, to reduce the outstanding principal
------
balance of the Revolving Credit Loans (with a corresponding imposition of a
Special Reserve against the Borrowing Base, unless otherwise agreed by the
Majority Lenders) until Availability is not less than $10,000,000, third, to
-----
the principal of the Term Notes, fourth, to reduce any remaining outstanding
------
principal balance of the Revolving Credit Loans (but not to permanently
reduce the Revolving Loan Commitments) and fifth, to repay other Obligations
-----
then due and payable and to cash collateralize any LC Obligations (in the
amount of 105% of the LC Amount).
To the extent that the Property sold, lost, destroyed or condemned consists
of Accounts or Inventory, the applicable prepayment shall be applied,
subject to Section 3.11, to reduce the outstanding principal balance of the
Revolving Credit Loans, but shall not permanently reduce the Revolving Loan
Commitments. Notwithstanding the foregoing and subject in each case to the
Intercreditor Agreement:
(a) If the proceeds of insurance (net of costs and
taxes incurred) with respect to any loss or destruction of
Equipment or real Property of any Borrower or any Domestic
Subsidiary (i) are less than $250,000, unless an Event of Default
is then in existence, Agent shall apply such amounts to reduce the
outstanding principal balance of the Revolving Credit Loans
(without permanently reducing the Revolving Loan Commitments), (ii)
are greater than or equal to $250,000 and less than
-21-
$1,000,000, unless an Event of Default is then in existence, such
amounts shall be provisionally applied to reduce the outstanding
principal balance of the Revolving Credit Loans (and a Rebuild
Reserve shall be created in the amount of such proceeds), until the
earlier of (1) Borrowers' decision not to repair or replace the
damaged Property (in which case such amount shall be applied to the
Obligations in the manner specified in the second sentence of this
subsection 3.3.1 until payment thereof in full) or (2) the
expiration of one hundred eighty (180) days from the receipt of
such amount, or (iii) are equal to or greater than $1,000,000, and
upon Borrowers request, Agent and the Majority Lenders agree to
permit the applicable Borrower or such Domestic Subsidiary to
repair or replace the damaged Property, such amounts shall be
provisionally applied to reduce the outstanding principal balance
of the Revolving Credit Loans (and a Rebuild Reserve shall be
created in the amount of such proceeds), until the earliest of (1)
Agent's and the Majority Lenders' decision with respect thereto,
(2) the expiration of one hundred twenty (120) days from the date
of such request, unless the applicable Borrower or Domestic
Subsidiary has commenced action to replace or rebuild the damaged
Property, or (3) the expiration of one hundred eighty (180) days
from such request. If Borrowers decide to repair or replace the
applicable Property under clause (ii) above or if Agent and the
Majority Lenders agree, in their reasonable judgment, to permit any
such repair or replacement under clause (iii) above, the applicable
amount shall, unless an Event of Default is in existence, be
released from the Rebuild Reserve to the applicable Borrower or
Domestic Subsidiary as needed for use in replacing or repairing the
damaged Property during such one hundred eighty (180) day period,
with any remaining amount at the end of such one hundred eighty
(180) day period applied to the Obligations in the manner specified
in the second sentence of this subsection 3.3.1 until payment
thereof in full; and in the case of clause (iii) above, if Agent
declines to permit any such repair or replacement or fails to
respond to Borrowers within such one hundred eighty (180) day
period, such amount shall be released from the Rebuild Reserve and
applied to the obligations in the manner specified in the second
sentence of this subsection 3.3.1 until payment thereof in full.
(b) If any proceeds of insurance with respect to any
loss or destruction of Equipment or real Property of any Foreign
Subsidiary are repatriated to the United States, such amounts (net
of any costs or taxes incurred with respect thereto) shall be
applied to the Obligations as set forth in the second sentence of
subsection 3.3.1. If the proceeds of any sale or other disposition
of Property of any Foreign Subsidiary are repatriated to the United
States, such amounts (net any costs or taxes incurred with respect
thereto) shall be applied to the Obligations in the manner set
forth for Property of such type in the second or third sentence of
this subsection 3.3.1, as applicable.
(c) If any sale of Collateral involves both Fixed
Assets and Other Assets or if such sale involves a sale of all or
substantially all of the capital stock or Properties of any
Borrower or any Subsidiary, or of any business line of such
Borrower or such Subsidiary, then the proceeds thereof will be
allocated as follows
-22-
for the purposes of this subsection 3.3.1: (i) first, to Accounts
and Inventory, to the extent of the book value thereof, (ii)
second, to Equipment and real Property, to the extent of the
greater of the book value or fair market appraised value thereof
(if an appraisal reasonably acceptable to Agent exists) and (iii)
third, to goodwill. Subject to Section 3.11, amounts so allocated
to Accounts and Inventory shall be applied to the Obligations as
set forth in the third sentence of subsection 3.3.1. Subject to
Section 3.11, amounts so allocated to Equipment and real Property
shall be applied to the obligations as set forth in the second
sentence of subsection 3.3.1. Subject to Section 3.11, amounts so
allocated to goodwill shall be applied to the Obligations as set
forth in the second sentence of subsection 3.3.1.
3.3.2. Excess Cash Flow Recapture. Borrowers shall make an
--------------------------
offer to prepay the Term Loans in amounts equal to 25% of Borrowers' Excess
Cash Flow for each fiscal year of Borrowers during the Term hereof
commencing with the fiscal year ending on or about November 1, 2005, each
such prepayment to be based upon, and made within five (5) Business Days
following the due date for delivery by Borrowers to Agent of, the applicable
annual financial statements required by subsection 8.1.3(i) hereof;
provided, that notwithstanding the foregoing, such prepayments shall only be
made by Borrowers and received by Term Loan Lenders if and to the extent
that (i) Availability immediately after making such prepayment is at least
$10,000,000, (ii) the aggregate outstanding balance of the Revolving Credit
Loans plus the LC Amount immediately after making such prepayment is at
least $10,000,000 and (iii) no Default or Event of Default is in existence
at the time of such prepayment or would be caused by the making of such
prepayment. Each such prepayment shall be without premium or penalty and
shall be applied to the principal outstanding under the Term Notes ratably
until paid in full. Notwithstanding the foregoing, each Term Loan Lender
shall have the right to decline the receipt of a prepayment pursuant to this
subsection 3.3.2, in which event such declined amount shall, at Borrowers'
election, be retained by Borrowers or applied ratably to the principal
amount of the Term Loans held by the Term Loan Lenders that have accepted
the prepayment offered by Borrowers pursuant to this subsection 3.3.2.
3.3.3. Other Mandatory Prepayments. If any Borrower or any
---------------------------
Subsidiary receives any proceeds from any tax refunds, indemnity payments,
pension plan reversions, business interruption insurance, or the Tranche A
Keyman Insurance, Borrowers shall jointly and severally pay to Agent for the
benefit of Lenders, when and as received by such Borrower or such
Subsidiary, and as a mandatory prepayment of the Obligations, a sum equal to
100% of such proceeds of such tax refund, indemnity payment, pension plan
reversions, business interruption insurance or the Tranche A Keyman
Insurance. Any such prepayment shall be applied, subject to the
Intercreditor Agreement, to the Obligations in the manner specified in the
second sentence of subsection 3.3.1 until payment thereof in full.
3.3.4. LIBOR Portions. If the application of any payment
--------------
made in accordance with the provisions of this Section 3.3 at a time when no
Event of Default has occurred and is continuing would result in termination
of a LIBOR Portion prior to the last day of the Interest Period for such
LIBOR Portion, the amount of such prepayment shall not
-23-
be applied to such LIBOR Portion, but will, at Borrowers' option, be held by
Agent in a non-interest bearing account at a Lender or another bank
satisfactory to Agent in its discretion, which account is in the name of
Agent and from which account only Agent can make any withdrawal, in each
case to be applied as such amount would otherwise have been applied under
this Section 3.3 at the earlier to occur of (i) the last day of the relevant
Interest Period or (ii) the occurrence of a Default or an Event of Default.
3.3.5. Optional Prepayments. Borrowers may, at their
--------------------
option from time to time after the First Anniversary Date upon not less than
three (3) Business Days' prior written notice to Agent, prepay principal of
the Term Notes (on a ratable basis), in each case so long as (i)
Availability immediately after making such prepayment is at least
$10,000,000, (ii) no Default or Event of Default is in existence at the time
of such prepayment or would be caused by the making of such prepayment,
(iii) the amount of any such prepayment is at least $500,000 and in integral
multiples of $100,000 above $500,000 and (iv) such prepayments are made
ratably with respect to all Term Notes. Except for fees under Section 2.6
applicable to prepayments of the Term Notes, such prepayments shall be
without premium or penalty.
3.3.6. Optional Reductions of Revolving Loan Commitments.
-------------------------------------------------
Borrowers may, at their option from time to time but not more than once in
any 12-month period upon not less than three (3) Business Days' prior
written notice to Agent, terminate in whole or permanently reduce ratably in
part, the unused portion of the Revolving Loan Commitments, provided,
--------
however, that (i) each such partial reduction shall be in an amount of
$2,000,000 or integral multiples of $1,000,000 in excess thereof and (ii)
the aggregate of all optional reductions to the Revolving Loan Commitments
may not exceed $5,000,000 during any 12-month period or $10,000,000 during
the Term. Except for charges under subsection 3.2.5 applicable to
prepayments of LIBOR Revolving Portions and except for fees under Section
2.6 applicable to reduction or termination of the Revolving Loan
Commitments, such reductions and terminations shall be without premium or
penalty.
3.3.7. No Term Loan Reborrowing. No amounts repaid or
------------------------
prepaid with respect to the Term Loan may be reborrowed.
3.3.8. Change of Control Prepayment.
----------------------------
(a) If a Change of Control shall occur at any time,
each Revolving Credit Lender may, at its sole election, terminate
its Revolving Loan Commitment, in whole or in part, and/or require
Borrowers to prepay the Revolving Credit Loans owing to such
Revolving Credit Lender, in whole or in part, at any time during
the twelve (12) month period following the occurrence of the Change
of Control, by paying to such Revolving Credit Lender (in addition
to the outstanding principal required to be prepaid, accrued
interest through the date of repayment on such principal amount and
all other charges then due and owing under the terms of this
Agreement and the other Loan Documents and any amounts then due and
owing pursuant to subsection 3.2.5), as liquidated damages for the
loss of the bargain and
-24-
not as a penalty, an amount equal to 0.75% of the aggregate amount
of the Revolving Loan Commitment so terminated.
(b) If a Change of Control shall occur at any time,
each Term Loan Lender may, at its sole election, require the
Borrowers to prepay the portion the Term Loan owing to such Term
Loan Lender, in whole or in part, at any time during the twelve
(12) month period following the occurrence of the Change of
Control, by paying to such Term Loan Lender (in addition to the
outstanding principal required to be prepaid, accrued interest
through the date of repayment on such principal amount and all
other charges then due and owing under the terms of this Agreement
and the other Loan Documents and any amounts then due and owing
pursuant to subsection 3.2.5), as liquidated damages for the loss
of the bargain and not as a penalty, an amount equal to 1.0% of the
outstanding principal amount of the Term Loan required to be
prepaid.
(c) The Borrowers shall notify the Agent and each of
the Term Loan Lenders in writing, if possible, of any Change of
Control at least five (5) days prior to the date that such Change
of Control is scheduled to occur. The Borrowers shall also notify
the Agent, each of the Revolving Credit Lenders and each of the
Term Loan Lenders of the date on which any Change of Control has
actually occurred within one (1) Business Day after such date and
shall inform the Revolving Credit Lenders and Term Loan Lenders of
their right to terminate Commitments and require the prepayment of
Loans as provided above in this subsection 3.3.8 and of the date on
which such right shall terminate.
(d) If any Revolving Credit Lender or any Term Loan
Lender elects to terminate Commitments and/or to require the
Borrowers to prepay Loans pursuant to this subsection 3.3.8, it
shall furnish a written notice to Falcon advising the Borrowers of
such election and the outstanding principal to be prepaid. The
Borrowers agree to make such prepayment in accordance with this
subsection 3.3.8 within three (3) Business Days after their receipt
of such written notice, and failure to make any such prepayment
shall be an Event of Default under subsection 10.1.1. Following
such failure any payments made or to be made to any Lender in
respect of such Change of Control shall be applied in accordance
with subsection 3.11.1 as if such payments were the proceeds of
Collateral.
3.4. Application of Payments and Collections.
---------------------------------------
3.4.1. Collections. All items of payment received by Agent
-----------
by 12:00 noon, Chicago time, on any Business Day shall be deemed received on
that Business Day. All items of payment received after 12:00 noon, Chicago
time, on any Business Day shall be deemed received on the following Business
Day. If as the result of collections of Accounts as authorized by subsection
6.2.4 hereof or otherwise, a credit balance exists in any Loan Account, such
credit balance shall not accrue interest in favor of Borrowers, but shall be
disbursed to a Borrower or otherwise at a Borrower's direction in the manner
set forth in
-25-
subsection 3.1.2, upon a Borrower's request at any time, so
long as no Default or Event of Default then exists. Agent may at its option,
offset such credit balance against any of the Obligations upon and during
the continuance of an Event of Default.
3.4.2. Apportionment, Application and Reversal of
------------------------------------------
Payments. Principal and interest payments shall be apportioned ratably among
--------
Lenders (according to the unpaid principal balance of the Loans to which
such payments relate held by each Lender). All payments hereunder shall be
remitted to Agent. All proceeds of equity obtained by any Borrower or any
Subsidiary, all payments in respect of Guaranty Agreements and all other
cash obtained by any Borrower or any Domestic Subsidiary shall be
immediately deposited into a Dominion Account. Except as provided in Section
3.11, all proceeds of Collateral not relating to principal or interest of
specific Loans, or not constituting payment of specific fees, all proceeds
of Accounts, or, except as provided in Section 3.3.1, other Collateral
received by Agent, including without limitation all amounts deposited in a
Dominion Account, shall be applied, ratably, subject to the provisions of
this Agreement and the Intercreditor Agreement, first, to pay any fees,
-----
indemnities, or expense reimbursements (other than amounts related to
Product Obligations) then due to Agent or Lenders from Borrowers; second, to
------
pay interest due from Borrowers in respect of all Loans, including Agent
Loans; third, to pay or prepay principal of Agent Loans; fourth, to pay or
----- ------
prepay principal of the Revolving Credit Loans (other than Agent Loans) and
unpaid reimbursement in respect of Letter of Credit Obligations; fifth, if
-----
an Event of Default is in existence, to pay an amount to Agent equal to all
outstanding Letter of Credit Obligations to be held as cash Collateral for
such Obligations (in the amount of 105% of the LC Amount); sixth, to pay any
-----
amounts due with respect to Product Obligations; seventh, to the payment of
-------
principal then due in respect of the Term Loan; and eighth, to the payment
------
of any other obligation (other than amounts related to Product Obligations)
due to Agent or any Lender by any Borrower. After the occurrence and during
the continuance of an Event of Default, Agent shall have the continuing
exclusive right to apply and reapply (without requiring any turnover) any
and all such payments and collections received at any time or times
hereafter by Agent or its agent against the Obligations, as set forth in
Section 3.11, notwithstanding any entry by Agent or any Lender upon any of
its books and records.
3.5. All Loans to Constitute One Obligation.
--------------------------------------
The Loans, the LC Amount and the other Obligations shall
constitute one general joint and several obligation of Borrowers, and shall
be secured by Agent's Lien upon all of the Collateral. All of the
Obligations are and shall be deemed to be pari passu with each other and
none of the Revolving Credit Loans, the Term Loan or any of the other
Obligations are or shall be deemed to be subordinate or junior in right of
payment to any other of such facilities or Obligations. All of the
Obligations and the Tranche B Loans are and shall be deemed to be pari passu
with each other and none of the Revolving Credit Loans, the Term Loans, any
of the other Obligations and the Tranche B Loans are or shall be deemed to
be subordinate or junior in right of payment to any other of the foregoing.
-26-
3.6. Loan Account.
------------
Agent shall enter all Loans as debits to one or more loan
accounts (each, a "Loan Account") and shall also record in the appropriate
Loan Account all payments made by each Borrower on any obligations and all
proceeds of Collateral which are finally paid to Agent, and may record
therein, in accordance with customary accounting practice, other debits and
credits, including interest and all charges and expenses properly chargeable
to each Borrower.
3.7. Statements of Account.
---------------------
Agent will account to Borrowers monthly with a statement
of Loans, charges and payments made pursuant to this Agreement during the
immediately preceding month, and such account rendered by Agent shall be
deemed final, binding and conclusive upon Borrowers absent demonstrable
error unless Agent is notified by Borrowers in writing to the contrary
within thirty (30) days of the date each accounting is received by
Borrowers. Such notice shall only be deemed an objection to those items
specifically objected to therein.
3.8. Increased Costs.
---------------
If any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force
of law) adopted or implemented after the date of this Agreement and having
general applicability to all banks or finance companies within the
jurisdiction in which any Lender operates (excluding, for the avoidance of
doubt, the effect of and phasing in of capital requirements or other
regulations or guidelines passed prior to the date of this Agreement), or
any interpretation or application thereof by any governmental authority
charged with the interpretation or application thereof, or the compliance of
such Lender therewith, shall:
(1) subject such Lender to any tax with respect to this Agreement
(other than (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital,
net worth or comparable basis for measurement and (b) any tax
collected by a withholding on payments and which neither is
computed by reference to the net income of the payee nor is in the
nature of an advance collection of a tax based on or measured by
the net income of the payee) or (2) change the basis of taxation of
payments to such Lender of principal, fees, interest or any other
amount payable hereunder or under any Loan Documents (other than in
respect of (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital,
net worth or comparable basis for measurement and (b) any tax
collected by a withholding on payments and which neither is
computed by reference to the net income of the payee nor is in the
nature of an advance collection of a tax based on or measured by
the net income of the payee); impose, modify or hold applicable any
reserve (except any reserve taken into account in the determination
of the applicable LIBOR),
-27-
special deposit, assessment or similar requirement against assets
held by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of such Lender,
including (without limitation) pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or impose on such
Lender or the London interbank market any other condition with
respect to any Loan Document; and the result of any of the
foregoing is to increase the cost to such Lender of making,
renewing or maintaining Loans hereunder or the result of any of the
foregoing is to reduce the rate of return on such Lender's capital
as a consequence of its obligations hereunder, or the result of any
of the foregoing is to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Loans,
then, in any such case, Borrowers shall jointly and severally pay
such Lender, not later than sixty (60) days following its receipt
of notice of the imposition of such increased costs and the
certification set forth below, such additional amount as will
compensate such Lender for such additional cost or such reduction,
as the case may be, to the extent such Lender has not otherwise
been compensated, with respect to a particular Loan, for such
increased cost as a result of an increase in the Base Rate or the
LIBOR. An officer of the applicable Lender shall determine the
amount of such additional cost or reduced amount using reasonable
averaging and attribution methods and shall certify the amount of
such additional cost or reduced amount to Borrowers, which
certification shall include a written explanation of such
additional cost or reduction to Borrowers. Such certification shall
be conclusive absent demonstrable error. If a Lender claims any
additional cost or reduced amount pursuant to this Section 3.8,
then such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different lending
office or to file any certificate or document reasonably requested
by Borrowers if the making of such designation or filing would
avoid the need for, or reduce the amount of, any such additional
cost or reduced amount and would not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to such Lender.
3.9. Basis for Determining Interest Rate Inadequate.
----------------------------------------------
In the event that Agent or any Revolving Credit Lender
shall have determined that:
(i) reasonable means do not exist for
ascertaining the LIBOR for any Interest Period; or
(ii) Dollar deposits in the relevant amount, and
for the relevant maturity are not available in the London
interbank market with respect to a proposed LIBOR Portion,
or a proposed conversion of a Base Rate Portion into a
LIBOR Portion; then
-28-
Agent or such Revolving Credit Lender shall give Borrowers prompt written,
telephonic or electronic notice of the determination of such effect. If such
notice is given, (i) any such requested LIBOR Portion shall be made as a
Base Rate Portion, unless Borrowers shall notify Agent no later than 10:00
a.m. (Chicago time) one (1) Business Day prior to the date of such proposed
borrowing that the request for such borrowing shall be canceled or made as
an unaffected type of LIBOR Portion, and (ii) any Base Rate Portion which
was to have been converted to an affected type of LIBOR Portion shall be
continued as or converted into a Base Rate Portion, or, if Borrowers shall
notify Agent, no later than 10:00 a.m. (Chicago, Illinois time) one (1)
Business Day prior to the proposed conversion, shall be maintained as an
unaffected type of LIBOR Portion. Agent shall give Borrowers prompt notice
if and when any such determination is no longer in effect.
3.10. Sharing of Payments, Etc.
------------------------
Subject to Section 3.11 and the other provisions of this
Agreement relating to the application of funds received by Agent and the
Lenders, if any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any Obligations owing to it in excess of its ratable share of
payments on account of Obligations owing to all Lenders (including
prepayment fees to the extent then due and owing), such Lender shall
forthwith purchase from each other Lender such participation in such
Obligations as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each other Lender; provided, that if all or
--------
any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lenders the purchase price to the
extent of such recovery, together with an amount equal to such Lender's
ratable share (according to the proportion of (i) the amount of such
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. Borrowers
agree that any Lender so purchasing a participation from another Lender
pursuant to this Section 3.10 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of each Borrower in the amount of such participation.
Notwithstanding anything to the contrary contained herein, all purchases and
repayments to be made under this Section 3.10 shall be made through Agent.
Each Lender agrees with each other Lender that if an amount to be set off by
such Lender or an Affiliate of such Lender as described herein (other than
any amount held by such Lender or such Affiliate specifically as collateral
security for Indebtedness (other than the obligations) of a Borrower or a
Subsidiary to such Lender) is to be applied by such Lender to Indebtedness
(other than the Obligations) of any Borrower or any Subsidiary to such
Lender, such amount shall be applied ratably to such other Indebtedness and
to the portion of the obligations held by such Lender, and, as to the
portion of such amount applied to the Obligations, shall be subject to the
provisions of this section 3.10 regarding purchases of participations.
-29-
3.11. Post Event of Default Allocation.
--------------------------------
3.11.1. Allocation. After the occurrence and during the
----------
continuance of an Event of Default under this Agreement (and until all such
Events of Default are cured or waived in accordance with the provisions
hereof), Agent shall apply all proceeds of the Collateral, including all
amounts held in any Dominion Account, and all other amounts received by
Agent under this Agreement, subject to the provisions of this Agreement and
the Intercreditor Agreement, and all payments under subsection 3.3.3 hereof,
(i) first, ratably to pay any fees, expense reimbursements, indemnities and
other amounts then due to Agent (other than in respect of Product
Obligations) until paid in full; (ii) second, ratably to pay any fees,
expense reimbursements and indemnities then due to Revolving Credit Lenders
(other than prepayment fees payable under subsection 2.6(a)) until paid in
full; (iii) third, ratably to pay interest due in respect of the Revolving
Credit Loans (other than Excess Advances) until paid in full; (iv) fourth,
ratably to pay the principal of the Revolving Credit Loans (other than
Excess Advances) and unpaid reimbursements in respect of Letter of Credit
Obligations (other than Excess Advances) until paid in full, with a
corresponding permanent reduction in the Revolving Loan Commitments and the
imposition of a corresponding Special Reserve against the Borrowing Base);
(v) fifth, ratably to pay any amounts then due with respect to Product
Obligations; (vi) sixth, to the extent not funded by a Revolving Credit
Loan, to pay any amounts Borrowers are required to deposit with Agent
pursuant to subsection 10.3.5 hereof (other than Excess Advances), with a
corresponding permanent reduction in the Revolving Loan Commitments; (vii)
seventh, ratably to pay any fees, expense reimbursements and indemnities
then due to Term Loan Lenders (other than prepayment fees payable under
subsection 2.6(b)) until paid in full; (viii) eighth, ratably to pay
interest due in respect of the Term Loan until paid in full; (ix) ninth,
ratably to pay the principal of the Term Loan until paid in full; (x) tenth,
ratably to pay prepayment fees owing to Revolving Credit Lenders under
subsection 2.6(a); (xi) eleventh, ratably to pay prepayment fees owing to
Term Loan Lenders under subsection 2.6(b); and (xii) twelfth, to the ratable
payment of all other Obligations then due and payable.
3.11.2. Rights of Holders of Obligations. One or more of
--------------------------------
the holders of Revolving Credit Obligations and/or the Term Loan Obligations
may at any time freely hold or from time to time acquire other Loans or
commitments to make other Loans hereunder and related rights and benefits
arising under this Agreement, including voting power as a Lender entitled to
be counted for purposes of determining whether an action has been taken or
approved by Majority Revolving Credit Lenders, Majority Term Loan Lenders or
Majority Lenders, as applicable, and as such shall be in all respects
entitled to fully participate in, enjoy and enforce all of the rights,
privileges and benefits accorded to the holders of such Loans and
commitments to make Loans to the extent of its interests in such Loans or
commitments, including the right to exercise such voting power and otherwise
act as it may see fit to protect and enhance its own interests (including
any potentially conflicting interest as a holder of Revolving Credit
Obligations and/or the Term Loan Obligations) on any basis elected by it,
without any limitation or restriction whatsoever.
-30-
3.11.3. Conflict of Terms. In the event of a direct
-----------------
conflict between the application provisions of this Section 3.11 and other
provisions contained in any other Loan Document, it is the intention of the
parties hereto that all such application provisions shall be read together
and construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of this Section 3.11 shall
control and govern.
Section 4. TERM AND TERMINATION
--------------------
4.1. Term of Agreement.
-----------------
Subject to Agent's and Revolving Credit Lenders' right to
cease making Loans to Borrowers during the continuance of any Default or
Event of Default, this Agreement shall be in effect for the period from the
date hereof, through and including October 1, 2007 (the "Term"), unless
terminated as provided in Section 4.2 hereof.
4.2. Termination.
-----------
4.2.1. Termination by Lenders. Agent may, and at the
----------------------
direction of Majority Revolving Credit Lenders or Majority Term Loan Lenders
(to the extent permitted under Section 10.2) shall, terminate this Agreement
without notice upon or after the occurrence and during the continuance of an
Event of Default.
4.2.2. Termination by Borrowers. Upon at least thirty
------------------------
(30) days' prior written notice to Agent and Lenders, Borrowers may, at their
option, terminate this Agreement; provided, however, no such termination
--------
shall be effective until Borrowers have paid or collateralized to Agent's
reasonable satisfaction all of the Obligations in immediately available
funds, all Letters of Credit and LC Guaranties have expired, terminated or
have been cash collateralized to Agent's reasonable satisfaction and
Borrowers have complied with Section 2.6 and subsection 3.2.5. Any notice of
termination given by Borrowers shall be irrevocable unless all Lenders
otherwise agree in writing and no Revolving Credit Lender shall have any
obligation to make any Loans or issue or procure any Letters of Credit or LC
Guaranties on or after the termination date stated in such notice. Borrowers
may elect to terminate this Agreement in its entirety only. No section of
this Agreement or type of Loan available hereunder may be terminated singly.
4.2.3. Effect of Termination. All of the Obligations shall
---------------------
be immediately due and payable upon the termination date stated in any
notice of termination of this Agreement. All undertakings, agreements,
covenants, warranties and representations of Borrowers contained in the Loan
Documents shall survive any such termination and Agent shall retain its
Liens in the Collateral and Agent and each Lender shall retain all of its
rights and remedies under the Loan Documents notwithstanding such
termination until all Obligations have been discharged or paid, in full, in
immediately available funds, including, without limitation, all Obligations
under Section 2.6 and subsection 3.2.5 resulting from such termination.
Notwithstanding the foregoing or the payment in full of the obligations,
Agent shall not be required to terminate its Liens in the Collateral unless,
with respect to any loss or
-31-
damage Agent may incur as a result of dishonored checks or other items of
payment received by Agent from any Borrower or any Account Debtor and
applied to the Obligations, Agent shall, at its option, (i) have received a
written agreement reasonably satisfactory to Agent, executed by Borrowers
and by any Person whose loans or other advances to Borrowers are used in
whole or in part to satisfy the obligations, indemnifying Agent and each
Lender from any such loss or damage or (ii) have retained cash Collateral or
other Collateral for such period of time as Agent, in its reasonable
discretion, may deem necessary to protect Agent and each Lender from any
such loss or damage.
Section 5. SECURITY INTERESTS
------------------
5.1. Security Interest in Collateral.
-------------------------------
To secure the prompt payment and performance to Agent and
each Lender of the Obligations, each Borrower hereby grants to Agent, for
the benefit of itself and each Lender in accordance with the priorities set
forth herein, a continuing Lien upon all of such Borrower's assets,
including all of the following Property and interests in Property of such
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located, but excluding any Excluded Property of such
Borrower:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all
rights with respect thereto, including, any and all
licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights,
improvement rights, renewal rights and indemnifications,
and any substitutions, replacements, additions or model
conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment
Intangibles and Software;
-32-
(xii) Goods (including all of its Equipment,
Fixtures and Inventory), and all accessions, additions,
attachments, improvements, substitutions and replacements
thereto and therefor;
(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property; money (of every
jurisdiction whatsoever);
(xvii) Letter of Credit Rights;
(xviii) Payment Intangibles;
(xix) Security Entitlements;
(xx) Software;
(xxi) Supporting Obligations;
(xxii) Uncertificated Securities; and to the
extent not included in the foregoing, all other personal
property of any kind or description; together with all
books, records, writings, data bases, information and
other property relating to, used or useful in connection
with, or evidencing, embodying, incorporating or referring
to any of the foregoing, and all Proceeds, products,
offspring, rents, issues, profits and returns of and from
any of the foregoing.
5.2. Other Collateral.
----------------
5.2.1. Commercial Tort Claims. The applicable Borrower
----------------------
shall promptly notify Agent in writing upon incurring or otherwise obtaining
after the Closing Date a Commercial Tort Claim against any third party with
a value in excess of $100,000 or upon a Responsible Officer obtaining
knowledge of any other Commercial Tort Claim against any third party and,
upon request of Agent, promptly enter into an amendment to this Agreement
and do such other acts or things reasonably deemed appropriate by Agent to
give Agent a security interest in any such Commercial Tort Claim. Each
Borrower represents and warrants that as of the date of this Agreement, to
its knowledge, it does not possess any Commercial Tort Claims.
5.2.2. Other Collateral. The applicable Borrower shall
----------------
promptly notify Agent in writing upon acquiring or otherwise obtaining any
Collateral after the date hereof consisting of Letter-of-Credit Rights or
Electronic Chattel Paper with a value in excess of $100,000 or upon a
Responsible officer obtaining knowledge of any other such Collateral,
-33-
and, upon the request of Agent, promptly execute such other documents, and
do such other acts or things reasonably deemed appropriate by Agent to
deliver to Agent control with respect to such Collateral; promptly notify
Agent in writing upon acquiring or otherwise obtaining any Collateral after
the date hereof consisting of Deposit Accounts or Investment Property with a
value in excess of $100,000 or upon a Responsible Officer obtaining
knowledge of any other such Collateral and promptly execute such other
documents, and do such other acts or things reasonably deemed appropriate by
Agent to deliver to Agent control with respect to such Collateral; promptly
notify Agent in writing upon acquiring or otherwise obtaining any Collateral
after the date hereof consisting of Documents or Instruments with a value in
excess of $100,000 or upon a Responsible Officer obtaining knowledge of any
other such Collateral and, upon the request of Agent, will promptly execute
such other documents, and do such other acts or things reasonably deemed
appropriate by Agent to deliver to Agent possession of such Documents which
are negotiable and Instruments, and, with respect to non-negotiable
Documents, to have such non-negotiable Documents issued in the name of
Agent; and with respect to Collateral in the possession of a third party,
other than Certificated Securities and Goods covered by a Document, upon
Agent's request, use its best efforts to obtain an acknowledgement from the
third party that it is holding the Collateral for the benefit of Agent.
5.3. Lien Perfection; Further Assurances.
-----------------------------------
Each Borrower shall, upon the request of Agent, execute
such instruments, assignments or documents as are necessary to perfect
Agent's Lien upon any of the collateral, and take such other action as may
be required to perfect or to continue the perfection of Agent's Lien upon
the Collateral. Unless prohibited by applicable law, each Borrower hereby
authorizes Agent to execute and file any such financing statement,
including, without limitation, financing statements that indicate the
Collateral (i) as all assets of such Borrower or words of similar effect, or
(ii) as being of an equal or lesser scope, or with greater or lesser detail,
than as set forth in Section 5.1, on such Borrower's behalf. Each Borrower
also hereby ratifies its authorization for Agent to have filed in any
jurisdiction any like financing statements or amendments thereto if filed
prior to the date hereof. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof. At
Agent's request, each Borrower shall also promptly execute or cause to be
executed and shall deliver to Agent any and all documents, instruments and
agreements reasonably deemed necessary by Agent, to give effect to or carry
out the terms or intent of the Loan Documents.
5.4. Lien on Realty.
--------------
The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by Mortgages upon all
real Property of each Borrower or Domestic Subsidiary now or hereafter
owned, including without limitation any real Property purchased pursuant to
a purchase option, and upon Falcon's leased real Property located in
Belmont, Mississippi. Each mortgage shall be executed by the applicable
Borrower or a Domestic Subsidiary in favor of Agent. Each Mortgage shall be
duly recorded, at Borrowers'
-34-
joint and several expense, in each office where such recording is required
to constitute a fully perfected first Lien on the real Property covered
thereby. Except to the extent Agent may not require the following for any
particular property, the applicable Borrower or a Subsidiary shall deliver
to Agent, at Borrowers' joint and several expense, mortgagee title insurance
policies issued by a title insurance company satisfactory to Agent, which
policies shall be in form and substance satisfactory to Agent and shall
insure a valid first Lien in favor of Agent, for the benefit of itself and
the Lenders, on the Property covered by each Mortgage, subject only to those
exceptions reasonably acceptable to Agent and its counsel. The applicable
Borrower or a Subsidiary shall deliver to Agent such other documents,
including, without limitation, as-built survey prints of the real Property,
as Agent and its counsel may reasonably request relating to the real
Property subject to the Mortgages.
5.5. Pledge of Securities.
--------------------
Each Borrower agrees to, or cause its applicable Domestic
Subsidiary to, execute a Pledge Agreement and such other agreements,
instruments and documents as Agent determines are reasonably necessary, by
which it pledges to Agent and grants to Agent a Lien on (i) 100% of the
Securities of each Domestic Subsidiary owned by such Borrower or such
Domestic Subsidiary, as the case may be (which, in the case of Epic,
constitute 80% of the Securities of Epic), and (ii) 65% of the Securities of
each Foreign Subsidiary owned by such Borrower or such Domestic Subsidiary,
as applicable, designated by Agent from time to time. On the Closing Date,
Agent agrees not to so designate any Foreign Subsidiary that has immaterial
assets and operations.
Section 6. COLLATERAL ADMINISTRATION
-------------------------
6.1. General.
-------
6.1.1. Location of Collateral. All Collateral, other than
----------------------
Inventory in transit and motor vehicles, will at all times be kept by a
Borrower or one of its Subsidiaries at one or more of the business locations
set forth in Exhibit 6.1.1 hereto, as updated by Borrowers providing prior
-------------
written notice to Agent of any new location.
6.1.2. Insurance of Collateral. Borrowers shall maintain
-----------------------
and pay for insurance upon all Collateral wherever located and with respect
to the business of each Borrower and each of its Subsidiaries, covering
casualty, hazard, fire and extended coverage, product liability and recall,
property damage, public liability, general liability, workers' compensation,
flood insurance, earthquake loss insurance (if required by Agent),
environmental liability insurance, business interruption and such other
risks in such amounts and with such insurance companies as are reasonably
customary for similarly situated companies and are reasonably satisfactory
to Agent. Borrowers shall deliver certified copies of such policies to Agent
as promptly as practicable, with satisfactory lender's loss payable
endorsements, naming Agent as a loss payee, assignee or additional insured,
as appropriate, as its interest may appear, showing only such other loss
payees, assignees and additional insureds as are satisfactory to Agent and
with respect to business interruption insurance, an executed collateral
assignment thereof. Each policy of insurance or endorsement shall
-35-
contain a clause requiring the insurer to give not less than ten (10) days'
prior written notice to Agent in the event of cancellation of the policy for
nonpayment of premium and not less than thirty (30) days' prior written
notice to Agent in the event of cancellation of the policy for any other
reason whatsoever and a clause specifying that the interest of Agent shall
not be impaired, or invalidated by any act or neglect of any Borrower, any
of its Subsidiaries or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy.
Borrowers agree to deliver to Agent, promptly as rendered, true copies of
all reports made in any reporting forms to insurance companies. All proceeds
of business interruption insurance (if any) of a Borrower and its
Subsidiaries shall be remitted to Agent for application to the outstanding
balance of the Revolving Credit Loans.
Unless Borrowers provide Agent with evidence of the
insurance coverage required by this Agreement, Agent may purchase insurance
at Borrowers' joint and several expense to protect Agent's interests in the
Properties of each Borrower and its Subsidiaries. This insurance may, but
need not, protect the interests of each Borrower and its Subsidiaries. The
coverage that Agent purchases may not pay any claim that a Borrower or any
Subsidiary of such Borrower makes or any claim that is made against a
Borrower or any such Subsidiary in connection with said Property. Borrowers
may later cancel any insurance purchased by Agent, but only after providing
Agent with evidence that Borrowers and their Subsidiaries have obtained
insurance as required by this Agreement. If Agent purchases insurance,
Borrowers will be jointly and severally responsible for the costs of that
insurance, including interest and any other charges Agent may impose in
connection with the placement of insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may
be added to the Obligations. The costs of the insurance may be more than the
cost of insurance that Borrowers and the Subsidiaries may be able to obtain
on their own.
6.1.3. Protection of Collateral. None of Agent and Lenders
------------------------
shall be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except for reasonable care in
the custody thereof while any Collateral is in Agent's or any Lender's
actual possession) or for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency, or other
person whomsoever, but the same shall be at Borrowers' sole risk.
6.2. Administration of Accounts.
--------------------------
6.2.1. Records, Schedules and Assignments of Accounts.
----------------------------------------------
Each Borrower shall keep accurate and complete records of its Accounts and
all payments and collections thereon and shall submit to Agent on such
periodic basis as Agent shall request a sales and collections report for the
preceding period, in form acceptable to Agent. Concurrently with the
delivery of each Borrowing Base Certificate described in subsection 8.1.4,
or more frequently as reasonably requested by Agent, from and after the date
hereof, Borrowers shall deliver to Agent a detailed aged trial balance of
all of each Borrower's Accounts, specifying the names, addresses, face
values, dates of invoices and due dates for each Account Debtor obligated on
an Account so listed ("Schedule of Accounts"), and upon Agent's request
-36-
therefor, copies of proof of delivery and the original copy of all
documents, including, without limitation, repayment histories and present
status reports relating to the Accounts so scheduled and such other matters
and information relating to the status of then existing Accounts as Agent
shall reasonably request.
6.2.2. Discounts, Allowances, Disputes. If a Borrower
-------------------------------
grants any discounts, allowances or credits that are not shown on the face
of the invoice for the Account involved, such Borrower shall report such
discounts, allowances or credits, as the case may be, to Agent as part of
the next required Schedule of Accounts.
6.2.3. Account Verification. Any of Agent's officers,
--------------------
employees or agents shall have the right, at any time or times hereafter, in
the name of Agent, any designee of Agent or a Borrower, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, electronic communication or otherwise. Each Borrower shall
cooperate fully with Agent in an effort to facilitate and promptly conclude
any such verification process.
6.2.4. Maintenance of Dominion Account. Each Borrower
-------------------------------
shall maintain a Dominion Account or Accounts pursuant to lockbox and
blocked account arrangements acceptable to Agent with such banks as may be
selected by such Borrower and be reasonably acceptable to Agent. Each
Borrower shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances received
in the lockbox and blocked accounts to the Dominion Account for application
on account of the Obligations as provided in subsection 3.2.1. All funds
deposited in any Dominion Account shall immediately become the property of
Agent, for the ratable benefit of Lenders as provided in this Agreement, and
each Borrower shall obtain the agreement by the applicable banks in favor of
Agent to waive any recoupment, setoff rights, and any security interest in,
or against, the funds so deposited. Agent assumes no responsibility for such
lockbox and blocked account arrangements, including, without limitation, any
claim of accord and satisfaction or release with respect to deposits
accepted by any bank thereunder.
6.2.5. Collection of Accounts, Proceeds of Collateral.
----------------------------------------------
Each Borrower agrees that all invoices rendered and other requests made by
such Borrower for payment in respect of Accounts shall contain a written
statement directing payment in respect of such Accounts to be paid to a
lockbox established pursuant to subsection 6.2.4. To expedite collection,
each Borrower shall endeavor in the first instance to make collection of its
Accounts for Agent. All remittances received by each Borrower on account of
Accounts, together with the proceeds of any other Collateral, shall be held
as Agent's property, for its benefit and the benefit of Lenders as provided
in this Agreement, by such Borrower as trustee of an express trust for
Agent's benefit and such Borrower shall immediately deposit same in kind in
the Dominion Account. Agent retains the right at all times after the
occurrence and during the continuance of an Event of Default to notify
Account Debtors that each Borrower's Accounts have been assigned to Agent
and to collect each Borrower's Accounts directly in its own name, or in the
name of Agent's agent, and to charge the collection costs and expenses,
including attorneys' fees, jointly and severally to Borrowers.
-37-
6.2.6. Taxes. If an Account includes a charge for any tax
-----
payable to any governmental taxing authority, Agent is authorized, in its
sole discretion, to pay the amount thereof to the proper taxing authority
for the account of the applicable Borrower and to charge any Borrower
therefor, except for taxes that (i) are being actively contested in good
faith and by appropriate proceedings and with respect to which the
applicable Borrower maintains reasonable reserves on its books therefor and
(ii) would not reasonably be expected to result in any Lien other than a
Permitted Lien. In no event shall Agent or any Lender be liable for any
taxes to any governmental taxing authority that may be due by any Borrower.
6.3. Administration of Inventory.
---------------------------
Each Borrower shall keep records of its Inventory which
records shall be complete and accurate in all material respects. Each
Borrower shall furnish to Agent monthly Inventory reports on the tenth
Business Day of each fiscal month, for the preceding fiscal month, or more
frequently as reasonably requested by Agent, which reports will be in such
other format and detail as Agent shall reasonably request and shall include
a current list of all locations of such Borrower's Inventory. Each Borrower
shall conduct a physical inventory no less frequently than annually and
shall provide to Agent a report based on each such physical inventory
promptly thereafter, together with such supporting information as Agent
shall reasonably request.
6.4. Records and Schedules of Equipment.
----------------------------------
Each Borrower shall keep records of its Equipment which
shall be complete and accurate in all material respects itemizing and
describing the kind, type, quality, quantity and book value of its Equipment
and all dispositions made in accordance with subsection 8.2.9 hereof, and
each Borrower shall, and shall cause each of its Domestic Subsidiaries to,
furnish Agent with a current schedule containing the foregoing information
on at least an annual basis and more often (but, unless Default or an Event
of Default has occurred and is continuing or is reasonably likely to occur,
not more frequently than once per calendar quarter) if reasonably requested
by Agent. Promptly after the request therefor by Agent, each Borrower shall
deliver to Agent any and all evidence of ownership, if any, of any of its
Equipment.
6.5. Payment of Charges.
------------------
All amounts chargeable to Borrowers under Section 6 hereof
shall be Obligations secured by all of the Collateral, shall be payable on
demand and shall bear interest from the date such advance was made until
paid in full at the rate applicable to Base Rate Revolving Portions from
time to time.
-38-
Section 7. REPRESENTATIONS AND WARRANTIES
------------------------------
7.1. General Representations and Warranties.
--------------------------------------
To induce Agent and each Lender to enter into this
Agreement and to make advances hereunder, each Borrower warrants, represents
and covenants to Agent and each Lender, on a joint and several basis, that:
7.1.1. Qualification. Each Borrower and each of its
-------------
Subsidiaries is a corporation, limited partnership or limited liability
company duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization. Each Borrower and
each of its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign limited liability company, limited
partnership or corporation, as applicable, in (a) as of the date hereof,
each state or jurisdiction listed on Exhibit 7.1.1 hereto and (b) all states
-------------
and jurisdictions in which the failure of such Borrower or any of its
Subsidiaries to be so qualified could reasonably be expected to have a
Material Adverse Effect.
7.1.2. Power and Authority. Each Borrower and each of its
-------------------
Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly authorized by
all necessary corporate or other relevant action and do not and will not (i)
require any consent or approval of the shareholders of such Borrower or any
of the shareholders, partners or members, as the case may be, of any
Subsidiary of such Borrower (other than any such consents or approvals which
have been obtained); (ii) contravene such Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation, partnership
agreement, certificate of formation, by-laws, limited liability agreement,
operating agreement or other organizational documents (as the case may be);
(iii) violate, or cause such Borrower or any of its Subsidiaries to be in
default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to such Borrower or any of its Subsidiaries, the violation of
which could reasonably be expected to have a Material Adverse Effect; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which such
Borrower or any of its Subsidiaries is a party or by which it or its
Properties may be bound or affected, including without limitation any
Subordinated Note Document and the Convertible Subordinated Debentures, the
breach of or default under which could reasonably be expected to have a
Material Adverse Effect; or (v) result in, or require, the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to
any of the Properties now owned or hereafter acquired by such Borrower or
any of its Subsidiaries.
7.1.3. Legally Enforceable Agreement. This Agreement is,
-----------------------------
and each of the other Loan Documents when delivered under this Agreement
will be, a legal, valid and
-39-
binding obligation of each Borrower and each of its Subsidiaries party
thereto, enforceable against it in accordance with its respective terms.
7.1.4. Capital Structure.
-----------------
(a) Exhibit 7.1.4 hereto states, as of the date
-------------
hereof, (i) the correct name of each of the Subsidiaries of each
Borrower, its jurisdiction of incorporation or organization and the
percentage of its Voting Stock owned by such Borrower, (ii) the
name of each Borrower's and each of its Subsidiaries' corporate or
joint venture Affiliates and the nature of the relationship, (iii)
the number, nature and holder of all outstanding Securities of each
Borrower and of each Subsidiary of such Borrower, (iv) the number
of authorized, issued and treasury Securities of each Borrower and
(v) the number of shares of Voting Stock of each Borrower reserved
for issuance upon exercise of warrants, options or other rights to
acquire Voting Stock. Each Borrower has good title to all of the
Securities it purports to own of each of such Subsidiaries, free
and clear in each case of any Lien (including any restrictions on
the right to vote, sell or otherwise dispose of such Securities)
other than Permitted Liens of any preemptive or other similar
rights to subscribe for or to purchase any such Securities except
as set forth on Exhibit 7.1.4. All such Securities have been duly
-------------
issued and are fully paid and non-assessable.
(b) Exhibit 7.1.4 hereto states all outstanding
-------------
options to purchase, all equity appreciation and phantom equity
rights or plans, all rights and warrants to subscribe for, all
commitments and agreements to issue or sell any Securities or
obligations convertible into, and any powers of attorney relating
to any Securities of any Borrower or any Subsidiary, including the
holder, the number of shares covered, the exercise price and the
expiration date.
(c) Except as set forth on Exhibit 7.1.4, there are
-------------
no outstanding agreements or instruments binding upon any of any
Borrower's or any of its Subsidiaries' partners, members or
shareholders, as the case may be, relating to the ownership of its
Securities.
(d) Except as set forth on Exhibit 7.1.4, none of the
-------------
Borrowers or any of their Subsidiaries will be subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its shares of capital stock, or other
securities.
(e) Except as set forth on Exhibit 7.1.4, there are
-------------
no statutory or contractual preemptive rights or rights of first
offer or refusal or "drag-along," "tag-along" or similar rights
with respect to the issuance or transfer of the Warrant or the
Voting Stock issuable upon exercise of the Warrant, or with respect
to any other issuance or transfer of capital stock (including,
without limitation, the Tranche B Lender Shares), or other equity
securities, of any Borrower or any of its Subsidiaries.
-40-
(f) None of the Borrowers or any of their
Subsidiaries has violated any applicable securities laws in
connection with the offer, sale or issuance of any of its shares of
capital stock (including, without limitation, the Tranche B Lender
Shares); the offer, sale and issuance of the Warrant and the Voting
Stock issuable upon exercise of the Warrant do not and will not
require registration under any applicable securities laws.
(g) Except as set forth on Exhibit 7.1.4, no
-------------
additional shares of capital stock of any Borrower or any of its
Subsidiaries will become issuable to any Person pursuant to any
"anti-dilution" provisions of any issued and outstanding capital
stock of such Borrower or such Subsidiary on account of the
issuance of the Tranche B Lender Shares, the Warrant, the exercise
of the Warrant or the application of the "anti-dilution" provisions
contained in the Warrant or the Equity Documents.
(h) There are no agreements among any of the
stockholders of Falcon with respect to the voting or transfer of
Falcon's Voting Stock or with respect to any other aspect of
Falcon's affairs, except as set forth on Exhibit 7.1.4.
-------------
(i) Except as set forth on Exhibit 7.1.4, there are
-------------
no contractual restrictions or limitations which prohibit the
issuance and sale by Falcon of the Tranche B Lender Shares as
contemplated hereunder.
7.1.5. Names; Organization. As of the date hereof, neither
-------------------
any Borrower nor any of its Subsidiaries has been known as or has used any
legal, fictitious or trade names except those listed on Exhibit 7.1.5
-------------
hereto. Except as set forth on Exhibit 7.1.5, as of the date hereof, during
-------------
the ten-year period preceding the date hereof, neither any Borrower nor any
of its Subsidiaries has been the surviving entity of a merger or
consolidation or has acquired all or substantially all of the assets of any
Person. As of the date hereof, each Borrower's and each of its Subsidiaries'
state(s) or jurisdiction(s) of incorporation or organization, Type of
Organization and Organizational I.D. Number is set forth on Exhibit 7.1.5.
-------------
As of the date hereof, the exact legal name of each Borrower and each of its
Subsidiaries is set forth on Exhibit 7.1.5.
-------------
7.1.6. Business Locations; Agent for Process. Each
-------------------------------------
Borrower's and each of its Subsidiary's chief executive office, location of
books and records and other places of business are as listed on Exhibit 6.1.1
-------------
hereto, as updated from time to time by Borrowers in accordance with the
provisions of subsection 6.1.1. During the one-year period preceding the
date hereof, neither any Borrower nor any of its Subsidiaries has had an
office, place of business or agent for service of process, other than as
listed on Exhibit 6.1.1. All tangible Collateral is and will at all times be
-------------
kept by a Borrower and its Subsidiaries in accordance with subsection 6.1.1.
Except as shown on Exhibit 6.1.1, as of the date hereof, no Inventory is
-------------
stored with a bailee, processor, distributor, warehouseman or similar party,
nor is any Inventory consigned to any Person. At no time is Inventory of
Borrowers and the Subsidiaries with an aggregate value in excess of $750,000
located with third party processors.
-41-
7.1.7. Title to Properties; Priority of Liens. Each
--------------------------------------
Borrower and each of its Subsidiaries has good, indefeasible and marketable
title to and fee simple ownership of, or valid and subsisting leasehold
interests in, all of its real Property, and good title to all of the
Collateral and all of its other Property, in each case, free and clear of
all Liens except Permitted Liens. Each Borrower and each of its Subsidiaries
has paid or discharged all lawful claims which, if unpaid, might become a
Lien against any of such Borrower's or such Subsidiary's Properties that is
not a Permitted Lien, except for claims being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves
have been provided in accordance with GAAP, unless Agent has determined that
such claims could reasonably be expected to materially and adversely effect
the Collateral or the value thereof. The Liens granted to Agent under
Section 5 hereof are first priority Liens, subject only to Permitted Liens.
7.1.8. Accounts. Agent may rely, in determining which
--------
Accounts are Eligible Accounts, on all statements and representations made
by each Borrower with respect to any Account or Accounts. With respect to
each of each Borrower's Accounts arising in the ordinary course of business
from the sale of goods or the rendition of services, whether or not such
Account is an Eligible Account, unless otherwise disclosed to Agent in
writing:
(i) It is genuine and in all respects what it
purports to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale
and delivery of goods or rendition of services by such
Borrower, in the ordinary course of its business and in
accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and
forming a part of the contract between such Borrower and
the Account Debtor;
(iii) It is for a liquidated amount maturing as
stated in the duplicate invoice covering such sale or
rendition of services, a copy of which has been furnished
or is available to Agent;
(iv) To the best of such Borrower's knowledge,
there are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or
tend to reduce the amount payable thereunder from the face
amount of the invoice and statements delivered or made
available to Agent with respect thereto; and
(v) To the best of such Borrower's knowledge, the
Account Debtor thereunder (1) had the capacity to contract
at the time any contract or other document giving rise to
the Account was executed and (2) such Account Debtor is
Solvent; and to the best of such Borrower's knowledge,
there are no proceedings or actions which are threatened
or pending against the Account Debtor thereunder which
-42-
might result in any material adverse change in such
Account Debtor's financial condition or the collectibility
of such Account.
7.1.9. Equipment. The Equipment of each Borrower and its
---------
Subsidiaries is in good operating condition and repair, and all necessary
replacements of and repairs thereto shall be made so that the operating
efficiency thereof shall be maintained and preserved, reasonable wear and
tear excepted. Neither any Borrower nor any of its Domestic Subsidiaries
will permit any Equipment to become affixed to any real Property leased to
any Borrower or any of its Domestic Subsidiaries so that an interest arises
therein under the real estate laws of the applicable jurisdiction unless the
landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form reasonably acceptable to Agent, and no
Borrower will permit any of the Equipment of any Borrower or any of its
Domestic Subsidiaries to become an accession to any personal Property other
than Equipment that is subject to first priority (except for Permitted
Liens) Liens in favor of Agent.
7.1.10. Financial Statements; Fiscal Year.
---------------------------------
(a) The Consolidated and consolidating (showing all
Borrowers and Domestic Subsidiaries as a Consolidated entity and
the Foreign Subsidiaries on a consolidating basis) balance sheets
of Falcon and its Subsidiaries (including the accounts of all
Subsidiaries of Falcon and their respective Subsidiaries for the
respective periods during which a Subsidiary relationship existed)
as of November 1, 2003, and the related statements of income,
changes in shareholder's equity, and changes in financial position
for the periods ended on such dates, have been prepared in
accordance with GAAP, and present fairly in all material respects
the financial positions of Falcon and such Persons, taken as a
whole, at such dates and the results of Falcon's and such Person's
operations, taken as a whole, for such periods. As of the date
hereof except as disclosed on Exhibit 7.1.10, since November 1,
--------------
2003, there has been no material adverse change in the financial
position of Falcon and such other Persons, taken as a whole, as
reflected in the Consolidated balance sheet as of such date. As of
the date hereof, the fiscal year of Falcon and each of its
Subsidiaries ends on the Saturday closest to October 31st of each
year.
(b) The Borrowers have furnished to the Agent and
each Lender, a Consolidated balance sheet of the Borrowers and the
Domestic Subsidiaries as of the Closing Date, as adjusted to give
pro forma effect to the consummation of the transactions
contemplated by this Agreement and the Tranche B Loan Documents as
if such transactions had occurred on such date (the "Pro Forma
---------
Closing Balance Sheet"). Exhibit 7.1.10 sets forth a true, correct
--------------------- --------------
and complete copy of the Pro Forma Closing Balance Sheet, together
with footnotes describing the pro forma adjustments and the
assumptions underlying the Pro Forma Closing Balance Sheet. The Pro
Forma Closing Balance Sheet fairly presents in all material
respects the pro forma consolidated financial position of Borrowers
and the Domestic Subsidiaries as of the Closing Date, and properly
gives effect to the application of the pro forma
-43-
adjustments described therein and contemplated herein. All
assumptions underlying the Pro Forma Closing Balance Sheet were
made in good faith and are reasonable under the circumstances and
no Borrower is aware of any facts or information that would lead it
to believe that such pro forma adjustments are incorrect or
misleading in any respect.
7.1.11. Full Disclosure. After due inquiry of the
---------------
directors, officers and employees of Borrowers having knowledge of the
matters represented, warranted or stated herein, neither this Agreement nor
any other Loan Document, nor any certificate, report, questionnaire
(including, without limitation any management questionnaire), statement
(including the financial statements referred to in subsection 7.1.10) or
document furnished by or on behalf of any Borrower or Subsidiary (including,
without limitation, all statements and materials prepared or furnished to
Agent or any Lender in connection with its due diligence inquiries,
including all materials delivered in response to any due diligence request),
nor any representation or warranty contained in any of the foregoing,
whether included in any materials provided to the Agent or any Lender prior
to the date hereof or included in this Agreement or any other Loan Document
or in any other document or instrument delivered at any time on or prior to
the Closing Date, is, or will be, untrue with respect to any material fact
or omits, or will omit, to state a material fact necessary in order to make
the statement made herein or therein, in light of the circumstances in which
such statement was made, not misleading; provided that no statement or
--------
document delivered prior to the date of this Agreement shall be the basis
for any claim or breach under this subsection 7.1.11 if such statement or
document was clearly updated by the representations and warranties contained
in this Agreement. There are not facts or circumstances existing which would
reasonably be expected to have a Material Adverse Effect, either
individually or in the aggregate.
7.1.12. Solvent Financial Condition. Each Borrower and
---------------------------
each of its Subsidiaries is, as of the date hereof, and, after giving effect
to the initial Loans to be made and the initial Letters of Credit and LC
Guaranties to be issued hereunder and all related transactions (including
the making of the Tranche B Loans), will be, Solvent.
7.1.13. Surety Obligations. Except as set forth on Exhibit
------------------ -------
7.1.13, as of the date hereof, neither any Borrower nor any of its
------
Subsidiaries is obligated as surety or indemnitor under any surety or
similar bond or other contract or has issued or entered into any agreement
to assure payment, performance or completion of performance of any
undertaking or obligation of any Person.
7.1.14. Taxes. As of the date hereof, the federal tax
-----
identification number of each Borrower and Domestic Subsidiary of each
Borrower is shown on Exhibit 7.1.14 hereto. Each Borrower and each of its
--------------
Subsidiaries has filed all federal or other national, state and local tax
returns and other reports relating to taxes it is required by law to file,
other than returns and reports with respect to taxes in an aggregate amount
not in excess of $100,000 at any time, and has paid, or made provision for
the payment of, all taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties as and when such taxes,
assessments, fees, levies and charges are due and payable, unless and to the
extent any
-44-
thereof are being actively contested in good faith and by appropriate
proceedings and each Borrower and each of its Subsidiaries maintains
reasonable reserves on its books therefor, other than taxes in an aggregate
amount not in excess of $100,000 at any time. The provision for taxes on the
books of each Borrower and its Subsidiaries is adequate for all years not
closed by applicable statutes, and for the current fiscal year.
7.1.15. Brokers. Except as shown on Exhibit 7.1.15 hereto,
------- --------------
there are no claims for brokerage commissions, finder's fees or investment
banking fees payable by Borrowers in connection with the transactions
contemplated by this Agreement, the Existing Loan Agreement or any prior
transaction whether consummated or not.
7.1.16. Patents, Trademarks, Copyrights and Licenses. Each
--------------------------------------------
Borrower and each of its Subsidiaries owns, possesses or licenses or has the
right to use all the patents, trademarks, service marks, trade names,
copyrights, licenses and other Intellectual Property necessary for the
present and planned future conduct of its business without any known
conflict with the rights of others, except for such conflicts as could not
reasonably be expected to have a Material Adverse Effect. All such patents,
trademarks, service marks, tradenames, copyrights, licenses, and other
similar rights as of the date hereof are listed on Exhibit 7.1.16 hereto. As
--------------
of the date hereof, no claim has been asserted to any Borrower or any of its
Subsidiaries which is currently pending that their use of their Intellectual
Property or the conduct of their business does or may infringe upon the
Intellectual Property rights of any third party. To the knowledge of each
Borrower and except as set forth on Exhibit 7.1.16 hereto, as of the date
--------------
hereof, no Person is engaging in any activity that infringes in any material
respect upon any Borrower's or any of its Subsidiaries material Intellectual
Property. Except as set forth on Exhibit 7.1.16, each Borrower's and each of
--------------
its Subsidiary's (i) material United States trademarks, service marks, and
copyrights are registered with the U.S. Patent and Trademark office or in
the U.S. Copyright Office, as applicable and (ii) material license
agreements and similar arrangements relating to its Inventory (1) permits,
and does not restrict, the assignment by any Borrower or any of its Domestic
Subsidiaries to Agent, or any other Person designated by Agent, of all of
such Borrower's or such Domestic Subsidiary's, as applicable, rights, title
and interest pertaining to such license agreement or such similar
arrangement and (2) would permit the continued use by such Borrower or such
Domestic Subsidiary, or Agent or its assignee, of such license agreement or
such similar arrangement and the right to sell Inventory subject to such
license agreement for a period of no less than six (6) months after a
default or breach of such agreement or arrangement. The consummation and
performance of the transactions and actions contemplated by this Agreement
and the other Loan Document, including without limitation, the exercise by
Agent of any of its rights or remedies under Section 10, will not result in
the termination or impairment of Borrower's or any Subsidiary's ownership or
rights relating to its Intellectual Property, except for such Intellectual
Property rights the loss or impairment of which could not reasonably be
expected to have a Material Adverse Effect. Except as listed on Exhibit
-------
7.1.16 and except as could not reasonably be expected to have a material
------
Adverse Effect, (i) neither any Borrower nor any of its Subsidiaries is in
breach of, or default under, any term of any license or sublicense with
respect to any of its Intellectual Property and (ii) to the
-45-
knowledge of each Borrower, no other party to such license or sublicense is
in breach thereof or default thereunder, and such license is valid and
enforceable.
7.1.17. Governmental and Third Party Consents. Each
-------------------------------------
Borrower and each of its Subsidiaries has, and is in good standing with
respect to, all governmental and (as applicable) third party Consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it, except where the failure to possess
or so maintain such rights could not reasonably be expected to have a
Material Adverse Effect. Except for the Consents that have already been
obtained or made, no Borrower or Subsidiary is required to obtain any
material consent from, or is required to make any declaration or filing
with, any governmental authority or any other Person in connection with the
execution, delivery and performance of this Agreement or any other Loan
Document, or for the purpose of maintaining in full force and effect any
operating licenses. Each of the Consents which have been obtained or made in
connection with the execution, delivery and performance of this Agreement,
any other Loan Document is in full force and effect. The time within which
any administrative or judicial appeal, reconsideration, rehearing or other
review of any such Consent may be taken or instituted has lapsed, and no
such appeal, reconsideration or rehearing or other review has been taken or
instituted.
7.1.18. Compliance with Laws; Operating Licenses. Each
----------------------------------------
Borrower and each of its Subsidiaries has duly complied, and its Properties,
business operations and leaseholds are in compliance with, the provisions of
all federal, state and local laws, rules and regulations applicable to such
Borrower or such Subsidiary, as applicable, its Properties or the conduct of
its business, except for such non-compliance as could not reasonably be
expected to have a Material Adverse Effect, and there have been no
citations, notices or orders of noncompliance issued to any Borrower or any
of its Subsidiaries under any such law, rule or regulation, except where
such noncompliance could not reasonably be expected to have a Material
Adverse Effect. Each Borrower and each of its Subsidiaries has established
and maintains an adequate monitoring system to insure that it remains in
compliance in all material respects with all federal, state and local rules,
laws and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. Section 201 et seq.),
as amended. Exhibit 7.1.18 sets forth a true, correct and complete list of
--------------
all material Operating Licenses held by the Borrowers and their Subsidiaries
in connection with the ownership of its or their assets or the conduct of
its or their businesses (which Exhibit 7.1.18 shall set forth, with respect
--------------
to each material Operating License, its name, the issuing Person, the date
it was issued and the date of expiration), and such Operating Licenses
constitute all of the material Operating Licenses required under applicable
laws to own their respective assets or conduct their respective businesses
as now conducted and as proposed to be conducted. All of the material
Operating Licenses obtained by the Borrowers and their Subsidiaries are
validly issued and in full force and effect, and the Borrowers and their
Subsidiaries have fulfilled and performed in all material respects their
obligations with respect thereto and have full power and authority to
operate thereunder. Except as set forth on Exhibit 7.1.18, no Borrower or
--------------
Subsidiary is aware of any law, rule,
-46-
regulation, decree, order or position issued, enacted or published by any
governmental authority to the effect that the business of the Borrowers and
their Subsidiaries or any aspect thereof is unlawful or is being or will be
challenged.
7.1.19. Restrictions. Neither any Borrower nor any of its
------------
Subsidiaries is a party to or subject to any contract or agreement which
restricts its right or ability to incur Indebtedness, other than as set
forth on Exhibit 7.1.19 hereto, none of which prohibit the execution of or
--------------
compliance with this Agreement or the other Loan Documents by any Borrower
or any of its Subsidiaries, as applicable.
7.1.20. Litigation. Except as set forth on Exhibit 7.1.20
---------- --------------
hereto, there are no actions, suits, proceedings or investigations pending,
or to the knowledge of each Borrower, threatened, against or affecting any
Borrower or any of its Subsidiaries, or the business, operations,
Properties, prospects, profits or condition of any Borrower or any of its
Subsidiaries which, singly or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. Neither any Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal, which, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
7.1.21. No Defaults. No event has occurred and no
-----------
condition exists which would, upon or after the execution and delivery of
this Agreement or any Borrower's performance hereunder, constitute a Default
or an Event of Default under this Agreement, or a default or event of
default under and as described in any of the Subordinated Note Documents or
Convertible Subordinated Debentures. Except as described on Exhibit 7.1.21,
--------------
neither any Borrower nor any of its Subsidiaries is in default in (and no
event has occurred and no condition exists which constitutes, or which the
passage of time or the giving of notice or both would constitute, a default
in) the payment of any Indebtedness to any Person for Money Borrowed,
including without limitation any Indebtedness under the Subordinated Note
Documents and the Convertible Subordinated Debentures.
7.1.22. Personal Property Leases. Exhibit 7.1.22 hereto is
------------------------ --------------
a complete listing of all capitalized and operating personal property leases
of each Borrower and its Subsidiaries as of the date hereof. Each Borrower
and each of its Subsidiaries is in full compliance with all of the terms of
each of its respective capitalized and operating leases, except where the
failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
7.1.23. Pension Plans. For purposes of this subsection
-------------
7.1.23, the term "Company" shall include all Borrowers, Domestic
Subsidiaries and any Person that is aggregated with the Borrowers and the
Domestic Subsidiaries under Section 414(b), (c), (m), or (o) of the Internal
Revenue Code of 1986, as amended, or any successor statute, and the treasury
regulations promulgated thereunder (the "Code"). However, this subsection
7.1.23 will not apply to a "Multiemployer Plan" (as defined in Section
4001(a)(3) of ERISA), except as expressly referred to herein.
-47-
(a) Exhibit 7.1.23 sets forth a true, correct and
--------------
complete list of:
(i) Each termination or severance agreement
involving (A) any Company, on the one hand, and any of its
respective employees whose annual compensation is at a
base rate equal to or exceeding $50,000, on the other hand
or (B) total payments in excess of $50,000;
(ii) All employee benefit plans, as defined in
ERISA Section 3(3); and
(iii) All other profit-sharing, bonus, stock
option, stock purchase, stock bonus, restricted stock,
stock appreciation right, phantom stock, vacation pay,
holiday pay, tuition reimbursement, scholarship,
severance, deferred compensation, dependent care
assistance, excess benefit, incentive compensation, salary
continuation, supplemental retirement, employee loan or
loan guarantee program, split dollar, cafeteria plan,
group or individual health, dental, medical, life
insurance, survivor benefit or similar plan, policy or
arrangement, whether formal or informal, written or oral;
in each case maintained or contributed to by any Company for the benefit of
its current or former directors, employees or other service providers and/or
their beneficiaries. All of these types of arrangements shall be
collectively referred to as "Plans". An arrangement will not fail to be a
Plan simply because it only covers one individual, or because the
obligations of a Company under the plan arise by reason of its being a
"successor employer" under applicable laws. Furthermore, a Voluntary
Employees' Beneficiary Association under Section 501(c)(9) of the Code will
be considered a Plan for this purpose.
(b) The Borrowers have delivered to the Agent a true
and complete copy of the following documents, to the extent that
they are applicable:
(i) Each Plan and any related funding agreements
(e.g., trust agreements, custodial agreements or insurance
----
contracts), including all amendments (and Exhibit 7.1.23
--------------
includes a description of any such amendment that is not
in writing);
(ii) The current summary plan description and all
subsequent summaries of material modifications of each
Plan;
(iii) The most recent Internal Revenue Service
determination letter or opinion letter for each Plan that
is intended to qualify for favorable income tax treatment
under Section 401(a) or 501(c)(9) of the Code, which
letter reflects all amendments that have been made to the
plan (except as set forth in Exhibit 7.1.23) and any
--------------
-48-
other governmental advisory opinions, rulings, compliance
statements, closing agreements or similar materials
specific to each Plan; and
(iv) The annual reports (including all applicable
Schedules and the opinions of the independent
accountants), actuarial reports or disclosure materials
submitted to any governmental agency in the current or any
of the two preceding plan years; and
(v) any services agreement.
(c) All costs of administering and contributions
required to be made to each Plan under the terms of that Plan,
ERISA, the Code, or any other applicable law have been timely made,
and are fully deductible in the year for which they were paid,
except as set forth on Exhibit 7.1.23. All other amounts that
--------------
should be accrued to date as liabilities of the Company under or
with respect to each Plan (including administrative expenses and
incurred but not reported claims) for the current plan year of the
Plan have been recorded on the books of the Company. There will be
no liability of the Company (i) with respect to any Plan that has
previously been terminated, or (ii) under any insurance policy or
similar arrangement procured in connection with any Plan in the
nature of a retroactive rate adjustment, loss sharing arrangement,
or other liability arising wholly or partially out of events
occurring before the Closing Date.
(d) Each Plan has been operated at all times in
accordance with its terms, and complies currently in all material
respects, and has complied in the past in all material respects,
both in form and in operation, with all applicable laws, including
ERISA and the Code, except as set forth on Exhibit 7.1.23. Except
--------------
as set forth on Exhibit 7.1.23, the Internal Revenue Service has
--------------
issued a favorable determination letter or opinion letter with
respect to each Plan that is intended to qualify under Section
401(a) or 501(c)(9) of the Code, and nothing has occurred (either
before or after the date of the letter) which has resulted or is
likely to result in the revocation of such qualification or which
requires or could require action under the compliance resolution
programs of the Internal Revenue Service to preserve such
qualification.
(e) The Company does not maintain any Plan that
provides (or will provide) medical or death benefits following
termination of employment, other than benefits that are required to
be provided under COBRA or any state law continuation coverage or
conversion rights. The Company has complied in all material
respects with the continuation coverage requirements of COBRA.
(f) There are no investigations, proceedings,
lawsuits or claims pending (other than claims pending in the
ordinary course of the administration of a Plan) or, to the best
knowledge of the Company, threatened relating to any Plan and to
the best knowledge of the Company there is no basis for any such
investigation, proceeding, lawsuit or claim, except as set forth on
Exhibit 7.1.23.
--------------
-49-
(g) No Company has any intention or commitment,
whether legally binding or not, to create any additional Plan, or
to modify any existing Plan so as to increase benefits to
participants or the cost of maintaining the Plan. The benefits
under all Plans are as represented, and have not been, and will not
be increased subsequent to the date documents are provided to the
Agent except in the ordinary course of business and consistent with
competitive business standards. No statement, either oral or
written, has been made by a Company (or any agent of a Company) to
any Person regarding any Plan that did not accurately reflect the
terms and operations of such Plan. Company has not undertaken to
maintain any Plan for any period of time and each such Plan is
terminable at the sole discretion of the sponsor thereof, subject
only to such constraints as may be imposed by applicable law.
(h) None of the persons performing services for a
Company is improperly classified as being independent contractors,
leased employees, or as being exempt from the payment of wages for
overtime.
(i) None of the Plans provide any benefits that (i)
become payable or become vested solely as a result of the
consummation of the transactions contemplated by this Agreement or
(ii) would result in excess parachute payments (within the meaning
of Section 280G of the Code), either (A) solely as a result of the
consummation of the transactions contemplated by this Agreement or
(B) as a result of the consummation of the transactions
contemplated by this Agreement and any actions taken by the Lenders
after the Closing Date. Furthermore, the consummation of the
transactions contemplated by this Agreement will not require the
funding (whether formal or informal) of the benefits under any Plan
(e.g., contributions to a "rabbi trust").
----
(j) None of the assets of any Plan that is a "pension
plan" within the meaning of Section 3(2) of ERISA are invested in a
group annuity contract or other insurance contract that is subject
to any surrender charge, interest rate adjustment, or other similar
expense upon its premature termination.
(k) No Plan has any interest in any annuity contract
or other investment or insurance contract issued by an insurance
company that is the subject of bankruptcy, conservatorship,
rehabilitation, or similar proceeding.
(l) No Plan is a Multiemployer Plan.
(m) In the case of each Plan that is subject to Code
Section 412, there is no accumulated funding deficiency (within the
meaning of Code Section 4971), whether or not such deficiency has
been waived, except as set forth on Exhibit 7.1.23.
--------------
(n) No liability (contingent or otherwise) to the
Pension Benefit Guaranty Corporation or any Multiemployer Plan has
been incurred by Company or any Affiliate thereof (other than
insurance premiums satisfied in due course).
-50-
(o) No Termination Event has occurred nor has any
other event occurred that may result in such a Termination Event.
For purposes of the foregoing, "Termination Event" means (1) any
Reportable Event with respect to any Plan; (2) any event that could
cause Company to incur liability under Sections 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 4971 of the Internal
Revenue Code; (3) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA; (4) the institution of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Plan; or (5)
any other event or condition which could constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan.
(p) Neither any Plan nor any party in interest with
respect thereof, has engaged in a prohibited transaction which
could subject Company directly or indirectly to liability under
Section 409 or 502(i) of ERISA or Section 4975 of the Code.
(q) Neither any Borrower nor any of its Subsidiaries
is a "party in interest" within the meaning of Section 3(14) of
ERISA, as amended, with respect to either the General Motors
Welfare Benefit Trust or any employee benefit plan having an
interest therein.
7.1.24. Trade Relations. There exists no actual or, to
---------------
each Borrower's knowledge, threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship
between any Borrower or any of its Subsidiaries and any customer or any
group of customers whose purchases individually or in the aggregate are
material to the business of such Borrower and its Subsidiaries, or with any
material supplier, except in each case, where the same could not reasonably
be expected to have a Material Adverse Effect, and there exists no present
condition or state of facts or circumstances which would prevent any
Borrower or any of its Subsidiaries from conducting such business after the
consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted.
7.1.25. Labor Relations. Except as described on Exhibit
--------------- -------
7.1.25 hereto, as of the date hereof, neither any Borrower nor any of its
------
Subsidiaries is a party to any collective bargaining agreement. There are no
material grievances, disputes or controversies with any union or any other
organization of any Borrower's or any of its Subsidiaries employees, or
threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organization, except those that could
not reasonably be expected to have a Material Adverse Effect.
7.1.26. Common Enterprise. Borrowers are engaged in the
-----------------
businesses of the manufacturing of furniture for the commercial market, as
well as in certain other businesses. These operations require financing on a
basis such that the credit supplied can be made available from time to time
to Borrowers, as required for the continued successful operation
-51-
of Borrowers taken as a whole. Borrowers have requested the Lenders to make
credit available hereunder for the purposes set forth herein and generally
for the purposes of financing the operations of Borrowers. Each Borrower and
each Subsidiary of each Borrower expects to derive benefit (and the Board of
Directors of each Borrower and each Subsidiary of each Borrower has
determined that such Borrower or Subsidiary may reasonably be expected to
derive benefit), directly or indirectly, from a portion of the credit
extended by Lenders hereunder, both in its separate capacity and as a member
of the group of companies, since the successful operation and condition of
each Borrower and each Subsidiary of each Borrower is dependent on the
continued successful performance of the functions of the group as a whole.
Each Borrower acknowledges that, but for the agreement of each of the other
Borrowers to execute and deliver the Loan Documents to which it is a party,
Agent and Lenders would not have made available the credit facilities
established hereby on the terms set forth herein.
7.1.27. Disclosures re: Subordinated Note Indenture. As of
-------------------------------------------
the Closing Date, (a) all Restricted Subsidiaries and all Unrestricted
Subsidiaries are listed on Exhibit 7.1.27 hereto, (b) all Subordinated Note
--------------
Guarantors are listed on Exhibit 7.1.27, (c) the aggregate amount applied by
--------------
Borrowers and their Subsidiaries during the period commencing on June 17,
1999 and ending on the Closing Date to permanently repay Indebtedness for
Money Borrowed (and, if any such Indebtedness was revolving credit
Indebtedness, to reduce commitments with respect thereto) under a Credit
Facility as a result of asset dispositions is $150,500, and such reductions
are described on Exhibit 7.1.27 and (d) the aggregate amount of investments
--------------
made in Foreign Subsidiaries during the period commencing on June 17, 1999
and ending on the Closing Date is 100 Hong Kong Dollars, together with such
Investments as are described on Exhibit 7.1.27, (i) other than the loan
--------------
facilities evidenced by this Agreement and the Tranche B Loan Documents,
there are no Credit Facilities in existence, (ii) other than the Obligations
and the obligations under the Tranche B Loan Documents, there is no
Designated Senior Debt in existence and (iii) this Agreement and the Tranche
B Loan Documents are included in the terms "Credit Agreement" and "Credit
Facility" for purposes of, and as each term is defined in, the Subordinated
Note Indenture and the Obligations constitute "Permitted Indebtedness", a
"Credit Facility", "Senior Debt" and "Designated Senior Debt" for purposes
of, and as each such term is defined in, the Subordinated Note Indenture and
"Specified Senior Debt" and "Senior Debt" for purposes of, and as each such
term is defined in the Convertible Subordinated Debentures. Before giving
effect to the loans and transactions contemplated hereunder and under the
Tranche B Loan Agreement, there is at least $2,500,000 of unused
availability under subclause (ix) of the definition of "Permitted
Indebtedness" set forth in the Subordinated Note Indenture.
7.1.28. Non-Operating Subsidiaries. As of the date hereof,
--------------------------
none of Shelby FSC Corp., Madison Furniture Industries, Inc., Thonet
International (UK) Limited, Fundiciones Tecnicas, S.A., Falcon de Baja
California, S.A. de C.V., The Falcon Companies International, Inc., The
Falcon Companies HK Limited, or Falcon Holdings, Inc., each a Subsidiary of
Falcon, has any material assets, operations, business, liabilities or
contingent liabilities.
-52-
7.1.29. Existing Indebtedness; Existing Liens;
--------------------------------------
Investments; Etc.
----------------
(a) Exhibit 7.1.29(a) sets forth a true, correct and
-----------------
complete list, and describes, as of the date or dates indicated
therein, as applicable:
(i) all Indebtedness of each of the Borrowers and
their Subsidiaries immediately prior to the Closing Date
(other than trade payables), showing, as to each
Indebtedness, the payee thereof, the total amount
outstanding (by principal, interest and other amounts, if
applicable) and the maturity date;
(ii) all Liens immediately prior to the Closing
Date (other than Permitted Liens) in respect of any
property or assets of any Borrower or Subsidiary, showing,
as to each Lien, the name of the grantor and secured
party, the Indebtedness secured thereby, the name of the
debtor (if different from the grantor) and the assets or
other property covered by such Lien;
(iii) all Permitted Liens;
(iv) all Investments of the Borrowers and their
Subsidiaries outstanding immediately prior to the Closing
Date;
(v) all UCC financing statements existing as of
October 5, 2004, naming any Borrower or Subsidiary as a
debtor, showing, as to each financing statement, the basis
for the filing; and
(vi) the trade payables aging schedule (the
"Payables Aging Schedule") for each of the Borrowers and
their Subsidiaries identifying, among other things, all
Past Due Payables as of September 30, 2004.
(b) No Borrower or Subsidiary has on the Closing
Date, any Contingent Obligations, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or
reflected in the Pro Forma Closing Balance Sheet.
(c) Exhibit 7.1.29(c) sets forth a true, correct and
-----------------
complete list of all Subordinated Debt of any of the Borrowers of
their Subsidiaries.
7.1.30. Absence of Certain Changes. Except as set forth on
--------------------------
Exhibit 7.1.30(a), and as contemplated as part of the transactions evidenced
-----------------
by this Agreement and the Tranche B Loan Documents, since November 1, 2003,
there has not been, and there is no agreement, commitment or obligation to
do, any of the following:
-53-
(a) Any transaction involving any Borrower or
Subsidiary not in the ordinary course of business, including,
without limitation, any sale of any assets or properties (other
than inventory in the ordinary course of business);
(b) Any declaration, setting aside or payment of any
dividend or other distribution or payment (whether in cash, stock
or property) with respect to the capital stock of Falcon, or any
redemption, purchase or other acquisition of securities of any
Borrower or Subsidiary, or any payment to any equity holder of
Falcon not in his, her or its capacity as an equity holder;
(c) Any damage, destruction or loss over $50,000 in
value, whether or not covered by insurance, to any material assets
or properties of any Borrower or any Subsidiary;
(d) Any Material Adverse Effect;
(e) Any loan or advance made by any Borrower or
Subsidiary to any Person, except normal travel advances or other
reasonable business expense advances made in the ordinary course of
business to its own employees;
(f) Any Indebtedness for Money Borrowed incurred by
any Borrower or Subsidiary or any commitment to incur Indebtedness
for Money Borrowed entered into by any Company Party (other than as
contemplated by this Agreement or the Tranche B Loan Documents);
(g) Any Capital Expenditures or commitments to make
Capital Expenditures in excess of the amount reflected in the
Initial Financial Projections;
(h) Any indemnity or other claims made by or against
any Borrower or Subsidiary with respect to or in connection with
any acquisition or sale or other disposition, whether direct or
indirect, of the capital stock or assets of any other Person;
(i) Any amendment or other modification to the
organizational documents of any Borrower or any Subsidiary;
(j) The formation or creation of any direct or
indirect Subsidiary of any Borrower or Subsidiary, or the
disposition of the capital stock or assets of any Borrower or
Subsidiary;
(k) Any waiver by any Borrower or Subsidiary of a
valuable right or of Indebtedness owed to it in excess of $50,000;
(l) Any payment, satisfaction, discharge or
cancellation of any debts or claims of any Borrower or Subsidiary
in excess of $50,000 other than in the ordinary course of business
consistent with past practices;
-54-
(m) Any material amendment or modification or any
termination of (i) any material contract or any material agreement
to which any Borrower or Subsidiary is a party or by which any such
Person or any of its assets or properties may be bound or subject
or (ii) any employment or consulting agreement;
(n) Any change in the Contingent Obligations of any
Borrower or Subsidiary, by way of guarantee or otherwise;
(o) Any mortgage, pledge or Lien (other than
Permitted Liens) encumbering any of the assets or properties of any
Borrower or Subsidiary, or any assumption of, or taking any assets
or properties subject to, any liability;
(p) Any resignation by, or termination of the
employment of, any director or officer of any Borrower or
Subsidiary;
(q) Any Investment by any Borrower or Subsidiary in
the capital stock of any Person;
(r) Any payment of management, consulting or similar
fees by any Borrower or Subsidiary to any of its Affiliates;
(s) Any offer, issuance or sale of any shares of
capital stock of any Borrower or Subsidiary;
(t) Any alteration or change in any Borrower's or
Subsidiary's credit guidelines and policies, charge-off policies or
accounting methods, quality control procedures or policies or
manner of preparing its financial statements or maintaining its
books of account;
(u) Any increase in, or commitment to increase, the
salaries, wages, bonuses or other compensation payable or to become
payable to any officer or other employee of any Borrower or
Subsidiary, other than increases in salaries and wages in the
ordinary course of business consistent with past practices;
(v) Any adoption by any Borrower or Subsidiary of any
new benefit or incentive plan or amendment to any existing benefit
or incentive plan to provide any new or additional plans, programs,
contracts, benefits or arrangements involving direct or indirect
compensation to any officer, director, employee, former employee,
or their dependents or beneficiaries, of any Borrower or
Subsidiary;
(w) Any settlement of any litigation, entry of a
consent decree or entry of any judgment against any Borrower or
Subsidiary with a value of $50,000 or more;
(x) Any revaluation by any Borrower or Subsidiary of
any of its assets, including without limitation, any write-offs,
increases in any reserves except in
-55-
the ordinary course of business consistent with past practice or
any write-up or write-down of the value of inventory, property,
plant, equipment or any other asset;
(y) The occurrence of any other event or the
development of any other condition which has had or would
reasonably be expected to have a Material Adverse Effect.
7.1.31. Material Contracts.
------------------
(a) Exhibit 7.1.31(a) sets forth a true, correct and
-----------------
complete list of all contracts, commitments, licenses, agreements,
obligations or binding arrangements, whether oral or written, to
which any Borrower or Subsidiary is a party (or intends to become a
party) or to which any of its assets or properties is bound:
(i) under which any Borrower or Subsidiary
is indemnified for or against any liability in excess of
$50,000 or under which any Borrower or Subsidiary is or
could be obligated to indemnify any Person in excess of
$50,000;
(ii) under which any Borrower or Subsidiary
leases personal property from or to third parties under
capital leases which involve rental payments of at least
$25,000 per annum or under operating leases which involve
rental payments of at least $25,000 per annum;
(iii) for the purchase or sale of products or
other personal property or for the furnishing or receipt
of services (A) which calls for performance over a period
of more than one (1) year and which involves payments of
more than the $50,000 per year in the aggregate or (B) in
which any Borrower or Subsidiary has agreed to purchase a
minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from any Person;
(iv) (A) granting representation, marketing or
distribution rights or (B) relating to Intellectual
Property (including, without limitation, license,
franchise, development or similar agreements other than
those listed in response to item (xiv) below);
(v) under which any Borrower or Subsidiary has
created, incurred, assumed or guaranteed (or may create,
incur, assume or guarantee) Indebtedness in excess of
$25,000;
(vi) establishing or maintaining any partnership,
joint venture or strategic alliance;
-56-
(vii) under which there is or may be imposed a
security interest or other Lien on any of its assets,
whether tangible or intangible, the net book value or fair
market value of which is in excess of $50,000 (other than
the security interests or Liens granted in favor of the
Agent);
(viii) concerning any confidentiality or
non-solicitation obligations entered into outside the
ordinary course of business;
(ix) under which any Borrower or Subsidiary is
restricted from carrying on its business or any part
thereof, or from competing in any line of business or with
any Person;
(x) with officers, directors, employees,
consultants or independent contractors of any Borrower or
Subsidiary;
(xi) involving any Affiliates of any Borrower or
Subsidiary;
(xii) under which the consequences of a default
or termination would reasonably be expected to have a
Material Adverse Effect;
(xiii) under which any Borrower or Subsidiary
will (A) receive aggregate payments from customers, (B)
make aggregate payments to vendors or other suppliers or
(C) make or receive aggregate payments to or from any
other Persons, in each case in excess of $50,000 per
annum;
(xiv) which are franchise agreements or
development agreements; and
(xv) not entered into in the ordinary course of
business and not otherwise disclosed on Exhibit 7.1.31(b)
-----------------
in response to any of the foregoing clauses.
All of the contracts, commitments, licenses, agreements,
obligations or arrangements described in clauses (i) through (xv)
above, together with the Loan Documents, the Tranche B Loan
Documents, the Subordinated Debt Documents and the Convertible
Subordinated Debentures, the real property leases, subleases,
licenses and other interests described in subclause 7.1.35, whether
entered into prior to, on or after the Closing Date, and the
Agreements with officers, are collectively referred to herein as
the "Material Contracts". The Borrowers have delivered or made
------------------
available to the Agent true and complete copies of each Material
Contract in existence as of the date hereof.
-57-
(b) Except as disclosed on Exhibit 7.1.31(b), each
-----------------
Material Contract existing as of the date hereof is a legal, valid
and binding obligation of the applicable Borrowers and Subsidiaries
that are party thereto, on the one hand, and the other parties
thereto, on the other hand, enforceable against each of them in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability, and is in full force and effect. The Borrowers and
Subsidiaries, and to their knowledge, each other party to each
Material Contract existing as of the date hereof are in substantial
compliance with the terms thereof, and no default or event of
default by any Borrower or Subsidiary or, to their best knowledge,
any other party thereto exists thereunder.
7.1.32. Transactions with Affiliates.
----------------------------
(a) Except as set forth on Exhibit 7.1.29(a), there
-----------------
is no Indebtedness owing by any Borrower or Subsidiary or any of
their Affiliates to any other Borrower or Subsidiary or any of
their respective Affiliates.
(b) Except as set forth on Exhibit 7.1.32,
--------------
immediately following the Closing Date:
(i) no Borrower or Subsidiary will be indebted,
directly or indirectly, to any of its own officers,
directors, managers, members, partners, shareholders or
employees, or the officers, directors, managers, members,
partners, shareholders or employees of its Affiliates, or
to any members of the immediate families of such officers,
directors, managers, members, partners, shareholders or
employees except for, in the case of employees,
compensation payable in the ordinary course of business
and reasonable travel advances accrued in the ordinary
course of business consistent with past practices;
(ii) no officer, director, manager, member,
partner, shareholder or employee of any Borrower or
Subsidiary, and no members of their immediate families,
will (A) be indebted to any Borrower or Subsidiary in any
amount whatsoever or (B) have any direct or indirect
ownership interests in any Person which competes, directly
or indirectly, with any Borrower or Subsidiary, other than
the ownership of less than two percent of any class of
publicly-traded securities; and
(iii) there are no voting or similar agreements
between or among the partners or members of any Borrower
or Subsidiary.
-58-
(c) Except for the matters set forth on Exhibit
-------
7.1.32 or Exhibit 7.1.39 and the entry by Falcon into the Tranche B
------ --------------
Loan Documents and the performance of its obligations thereunder,
no officer, director, manager, member, partner, shareholder or
employee of any Borrower or Subsidiary, and no member, or Affiliate
of a member, or the immediate families of any of the foregoing, has
any direct or indirect interest in any contract (including, without
limitation, franchise agreements, development agreements and supply
agreements (whether oral or written)), commitment, license,
agreement, obligation or arrangement to which any Borrower or
Subsidiary is a party.
(d) No Borrower or Subsidiary is a party to any
agreement relating to the voting or disposition of the capital
stock of any other Borrower or any Subsidiary.
(e) Since November 1, 2003, except as disclosed on
Exhibit 7.1.23 or Exhibit 7.1.32, no shareholder, employee,
-------------- --------------
officer, director, member, manager, partner or Affiliate of any
Borrower or Subsidiary, and no member, or Affiliate of a member, of
the immediate family of any such Person, has engaged in any
transaction or relationship with any Borrower or Subsidiary (other
than with respect to compensation payable to its employees and
reasonable travel advances accrued in the ordinary course of
business).
(f) No Borrower or Subsidiary has any outstanding
loan or advance of funds to any of its or their Affiliates'
officers, directors, employees, members, managers, partners or
shareholders, or to any member of the immediate families of any of
the foregoing.
7.1.33. Investment Company Act. No Borrower or Subsidiary
----------------------
is an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
7.1.34. Governmental Regulation. No Borrower or Subsidiary
-----------------------
is (i) a "holding company" or a "subsidiary company" of a "holding company,"
or an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company
Act of 1935, or (ii) subject to regulations under the Federal Power Act, the
Interstate Commerce Act, any state public utilities code or any other
federal or state statute or regulation limiting its ability to incur
Indebtedness.
7.1.35. Real Property.
-------------
(a) Exhibit 7.1.35 sets forth a true, correct and
--------------
complete list of all real Property in which any Borrower or
Domestic Subsidiary owns or holds a fee interest, which list
includes, as to each parcel of such real Property, the legal owner,
its common name, a legal description and the name of any mortgagee
or trustee thereof.
-59-
(b) Exhibit 7.1.35 sets forth a true, correct and
--------------
complete list of all real Property leases, subleases or licenses
pursuant to which any Borrower or Domestic Subsidiary is a lessor,
lessee, sublessor, sublessee, licensor or licensee, in each case as
amended through the date hereof, which list includes the street
address, the identity of the lessors, lessees, sublessors,
sublessees, licensors or licensees, or with respect to which a
Borrower or Domestic Subsidiary has guarantied the obligations of
any other Person, the term thereof (referencing applicable
extension or renewal periods, the rent payment terms, maximum
potential exposure and the current use). The Borrowers and Domestic
Subsidiaries have delivered to the Agent true, correct and complete
copies of each such lease, sublease or license. The real Property
interests described or listed on Exhibit 7.1.35 constitute all of
--------------
the interests in real Property owned, leased or otherwise held for
use by any Borrower or Domestic Subsidiary. With respect to each
such lease, sublease and license, except as set forth on Exhibit
-------
7.1.35:
------
(i) there are no disputes, oral agreements or
forbearance programs in effect as to any such lease,
sublease or license; and
(ii) no Borrower or Domestic Subsidiary has
assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest therein.
(c) No consent of any party to any lease, sublease,
license or mortgage is required in connection with the consummation
of the transactions contemplated by this Agreement or the other
Loan Documents, and no such event shall be prohibited by, or shall
constitute a default under, any such lease, sublease, license or
mortgage.
7.1.36. Environmental Matters. Except as set forth in
---------------------
Exhibit 7.1.36:
--------------
(a) Each Borrower and Domestic Subsidiary and each
Site is in compliance with all, and no Borrower or Domestic
Subsidiary has any liability under, any Environmental Laws, and no
Hazardous Materials are being used by any Borrower or Domestic
Subsidiary on any real Property in violation of Environmental Laws.
(b) There are no present or past material
Environmental Conditions in any way relating to any Borrower or
Domestic Subsidiary, any Site or the business or operations of any
Borrower or Domestic Subsidiary.
(c) Exhibit 7.1.36 sets forth a true, correct and
--------------
complete list of all environmental site assessments, audits,
studies or reports relating to any Environmental Condition or
relating to the property, business, condition or operations of all
Borrowers and Domestic Subsidiaries. The Borrowers have delivered
to the
-60-
Agent true, correct and complete copies of all such environmental
site assessments, audits, studies or reports.
(d) No Borrower or Subsidiary has received notice of
any alleged, actual or potential responsibility, inquiry,
investigation or administrative or judicial proceeding regarding
(i) any Release directly or indirectly by any Borrower or
Subsidiary at any Site or other location or (ii) any violation of
or non-compliance by any Borrower or Subsidiary with the conditions
of any license or permit required under any Environmental Laws or
the provisions of any Environmental Laws. No Borrower or Subsidiary
has received notice of any other claim, demand or action by any
Person alleging any actual or threatened material injury or damage
to any Person, property, natural resources or the environment
arising from or relating to any release of any Hazardous Materials.
(e) Each Borrower and Subsidiary has furnished all
notices and warnings, made all reports and has kept and maintained
all records required by, and in compliance with, all Environmental
Laws.
7.1.37. Insurance. There is in full force and effect one
---------
or more policies of insurance issued by insurers of recognized national
standing insuring the properties and business of each Borrower and its
Subsidiaries, and the directors and officers of each Borrower and its
Subsidiaries, against such losses and risks and in such amounts as are usual
and customary in the industry in which any Borrower and its Subsidiaries
operates or conducts business, as required pursuant to subclauses 6.1.2 and
8.1.11. Exhibit 7.1.37 identifies the policies of insurance currently
--------------
maintained by, or on behalf of, each Borrower and its Subsidiaries, its
business and properties (including flood, workers' compensation insurance,
director's and officer's liability insurance, employment practice liability
insurance and such other types of coverage, in each case, to the extent
required to be maintained pursuant to the terms of this Agreement), setting
forth the name of the insurer, the holder of each such policy, the nature of
coverage, the amount of such coverage, the expiration dates thereof and
other material information. None of the Borrowers or their Subsidiaries nor
any other insured named on Exhibit 7.1.37 is in default with respect to its
--------------
obligations under any of such outstanding insurance policies and all
premiums with respect thereto are current. None of the Borrowers or their
Subsidiaries nor any other name insured has failed to give any notice or to
present any material claim under any such policy in a due and timely
fashion. Such policies are in full force and effect on the date hereof and
will continue to be kept in full force and effect on substantially
equivalent terms, except to the extent policies expire and are replaced in
the ordinary course of business with policies on substantially equivalent
terms. All premiums due under the policies identified on Exhibit 7.1.37 have
--------------
been paid and none of the Borrowers or their Subsidiaries nor any such
insured has been issued or has received any notice of cancellation, material
modification or termination in respect of any such policy or is in default
thereunder, except as disclosed on Exhibit 7.1.37. None of the Borrowers or
--------------
their Subsidiaries nor any such insured has been issued or has received
notice that any insurer under any policy referred to on Exhibit 7.1.37 is
--------------
denying liability with respect to a claim in excess of $25,000 thereunder or
defending under a
-61-
reservation of rights clause. The insurance policies listed on Exhibit
-------
7.1.37 constitute insurance protection against all liability, claims and
------
risks occurring in the ordinary course of business customarily included
within comprehensive liability coverage and at amounts and levels
customarily maintained for a business of this type. Exhibit 7.1.37 also sets
--------------
forth all claims made by the Borrowers and their Subsidiaries under such
policies during the past three (3) years.
7.1.38. Suppliers. Exhibit 7.1.38 lists the ten (10)
--------- --------------
largest suppliers of any products or services to the Borrowers and their
Subsidiaries during each of their three last fiscal years and the six-month
period ended May 30, 2004, and the amount of purchases made by the Borrowers
and their Subsidiaries from each during each such period. No material
purchase order or commitment of the Borrowers and their Subsidiaries is in
excess of normal requirements, nor are prices provided therein in excess of
current market prices for the products or services to be provided
thereunder. Except as set forth on Exhibit 7.1.38, all such contracts can be
--------------
terminated upon ninety (90) days notice without payment of more than
$50,000.
7.1.39. Employment Agreements. Exhibit 7.1.39 sets forth a
--------------------- --------------
true, correct and complete list of all employment contracts or agreements
(including, without limitation, any confidentiality and non-competition
agreements), agency, independent contractor and sales representative
agreements involving annual compensation at a base rate equal to or
exceeding $50,000, golden parachute agreements, change of control agreements
and employee-related non-competition and non-solicitation agreements, in
each case to which any Borrower or Subsidiary is a party. The Borrowers have
previously delivered to the Agent and the Tranche B Agent true, correct and
complete copies of all such agreements, including all amendments thereto.
Each such agreement is in writing, is a valid and binding agreement
enforceable against the respective parties thereto in accordance with its
terms, and no Borrower or Subsidiary nor any other Person that is a party to
any such agreement is in breach of, or in default with respect to, any of
its material obligations thereunder, nor is any Borrower or Subsidiary aware
of any facts or circumstances which might give rise to any breach or default
thereunder which would reasonably be expected to have a Material Adverse
Effect.
7.1.40. Use of Proceeds; Margin Stock. The proceeds to be
-----------------------------
received by the Borrowers from the Loans as contemplated hereunder shall be
used solely for the purposes set forth in subsections 1.1.3 and 1.3 of this
Agreement and applied in accordance with the uses described therein. No
Borrower or Subsidiary is engaged in extending credit for the purposes of
purchasing or carrying margin stock. No Borrower or Subsidiary has any
margin stock, as determined in accordance with the margin regulations. None
of the proceeds of the Loans will be used to buy or carry any margin stock.
7.1.41. Depository and Other Accounts. Exhibit 7.1.41 sets
----------------------------- --------------
forth a true and complete list of all banks and other financial institutions
and depositories at which any Borrower or Subsidiary maintains (or has
caused to be maintained) deposit accounts, spread accounts, yield supplement
reserve accounts, operating accounts, trust accounts, trust
-62-
receivable accounts or other accounts of any kind or nature into which funds
of any Borrower or Subsidiary is deposited from time to time. Such Exhibit
-------
7.1.41 correctly identifies the name and address of each depository, the
------
name in which each account is held, the purpose of the account, the account
number, the contact person at such depository and his or her telephone
number.
7.1.42. Epic Capital Contributions. The obligations of
--------------------------
Falcon to make capital contributions of not less than $3,000,000 to Epic
pursuant to the Stockholders Agreement, dated June 7, 2000, among Epic,
Falcon, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and R. ▇▇▇▇▇ ▇▇▇▇▇, have been
fully satisfied.
7.1.43. Ranking. The Obligations rank, and at all times
-------
after the Closing Date will rank, (a) senior to the obligations of the
Borrowers and their Subsidiaries under the Subordinated Note Documents, the
Convertible Subordinated Debenture and all other documents or agreements in
respect of Subordinated Debt, and (b) at least pari passu with all other
outstanding unsubordinated obligations of the Borrowers and their
Subsidiaries.
7.1.44. Books and Records. The minute books and other
-----------------
similar records of Borrowers contain true and complete records of all
actions taken at any meeting of each Borrower's stockholders, directors, or
any committees thereof, as the case may be, and of all written consents
executed in lieu of the holding of any such meeting. Except as disclosed in
Exhibit 7.1.10, the books and records of Borrowers accurately reflect in all
--------------
material respects the assets, liabilities, business, financial condition and
results of operations of Borrowers, as the case may be, and have been
maintained in accordance with GAAP (to the extent applicable) and good
business, accounting and bookkeeping practices.
7.2. Continuous Nature of Representations and Warranties.
---------------------------------------------------
Each representation and warranty contained in this
Agreement and the other Loan Documents shall be continuous in nature and
shall remain accurate, complete and not misleading in all material respects
at all times during the term of this Agreement, except for changes in the
nature of a Borrower's or one of such Borrower's Subsidiary's business or
operations that would render the information in any exhibit attached hereto
or to any other Loan Document either inaccurate, incomplete or misleading,
so long as Majority Lenders or Majority Lenders, as applicable pursuant to
subsection 11.10, have consented to such changes or such changes are
expressly permitted by this Agreement and except to the extent that such
representations and warranties relate solely to an earlier date. Without
limiting the generality of the foregoing, each Loan request made or deemed
made pursuant to subsection 3.1.1 hereof shall constitute each Borrower's
reaffirmation, as of the date of each such Loan request, of each
representation, warranty or other statement made or furnished to Agent or
any Lender by or on behalf of any Borrower, any Subsidiary of such Borrower,
or any Guarantor in this Agreement, any of the other Loan Documents, or any
instrument, certificate or financial statement furnished in compliance with
or in reference thereto, except to the extent that such representations and
warranties relate solely to an earlier date.
-63-
7.3. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties of each Borrower
contained in this Agreement or any of the other Loan Documents shall survive
the execution, delivery and acceptance thereof by Agent and each Lender and
the parties thereto, the making of Loans and the issuance of any Letter of
Credit or LC Guaranties and the closing of the transactions described
therein or related thereto.
Section 8. COVENANTS AND CONTINUING AGREEMENTS
-----------------------------------
8.1. Affirmative Covenants.
---------------------
During the Term, and thereafter for so long as there are
any obligations outstanding, Borrowers jointly and severally covenant that
they shall:
8.1.1. Visits and Inspections; Lender Meeting. Permit (i)
--------------------------------------
representatives of Agent and any Lender, from time to time, as often as may
be reasonably requested, but only during normal business hours, to visit and
inspect the Properties of each Borrower and each of its Subsidiaries,
inspect, audit and make extracts from its books and records, and discuss
with its officers, its employees and its independent accountants, each
Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations and (ii)
appraisers engaged pursuant to Section 2.10 (whether or not personnel of
Agent or any Lender), from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
Properties of each Borrower and each of its Subsidiaries, for the purpose of
completing appraisals pursuant to Section 2.10. Agent or such Lender, if no
Default or Event of Default then exists or is reasonably likely to occur,
shall give the applicable Borrower reasonable prior notice of any such
inspection or audit. Without limiting the foregoing, Borrowers will
participate and will cause their key management personnel to participate in
meetings with Agent and Lenders periodically during each year, which
meeting(s) shall be held at such times and such places as may be reasonably
requested by Agent.
8.1.2. Notices. Promptly notify Agent and each Lender in
-------
writing of the occurrence of any event or the existence of any fact which
renders any representation or warranty in this Agreement or any of the other
Loan Documents inaccurate, incomplete or misleading in any material respect
as of the date made or remade. In addition, each Borrower agrees to provide
Agent and each Lender with prompt written notice of (a) any change in the
information disclosed in any Exhibit hereto, in each case after giving
effect to the materiality limits and Material Adverse Effect qualifications
contained therein and (b) any amendments, waivers or other modifications of
the Tranche B Loan Documents, together with copies thereof, and the terms
and amounts of any fees paid or payable in connection therewith.
8.1.3. Financial Statements. Keep, and cause each
--------------------
Subsidiary to keep, adequate records and books of account with respect to
its business activities in which proper entries are made in accordance with
customary accounting practices reflecting all its financial transactions;
and cause to be prepared and furnished to Agent and each Lender, the
-64-
following, all to be prepared in accordance with GAAP applied on a
consistent basis, unless Borrowers' certified public accountants concur in
any change therein and such change is disclosed to Agent and Lenders and is
consistent with GAAP:
(i) not later than ninety (90) days after the
close of each fiscal year of Borrowers, unqualified
(except for a qualification for a change in accounting
principles with which the accountant concurs) audited
financial statements of Borrowers and the Subsidiaries as
of the end of such year, on a Consolidated basis,
certified by Rubin, Brown, Gornstein & Co. LLP, or another
firm of independent certified public accountants of
recognized national standing selected by Borrowers but
reasonably acceptable to Agent and, within a reasonable
time thereafter a copy of any management letter issued in
connection therewith;
(ii) not later than thirty (30) days after the
end of each fiscal month hereafter, including the last
fiscal month of each fiscal year of Borrowers, unaudited
interim financial statements of Borrowers and the
Subsidiaries as of the end of such fiscal month and of the
portion of the fiscal year then elapsed, on a Consolidated
and consolidating basis (showing all Borrowers and
Domestic Subsidiaries as a Consolidated entity and the
Foreign Subsidiaries on a consolidating basis), certified
by the chief financial officer of Falcon as prepared in
accordance with GAAP and fairly presenting in all material
respects the financial position and results of operations
of Borrowers and the Subsidiaries for such fiscal month
and period subject only to changes from audit and year-end
adjustments and except that such statements need not
contain notes;
(iii) together with each delivery of financial
statements pursuant to clauses (i) and (ii) of this
subsection 8.1.3, a management report (1) setting forth in
comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the
corresponding figures from the most recent Projections for
the current fiscal year delivered pursuant to subsection
8.1.6 and (2) identifying the reasons for any significant
variations. The information above shall be presented in
reasonable detail and shall be certified by the chief
financial officer of Falcon to the effect that such
information fairly presents in all material respects the
results of operation and financial condition of Borrowers
and the Subsidiaries as at the dates and for the periods
indicated;
(iv) promptly after the sending or filing
thereof, as the case may be, copies of any proxy
statements, financial statements or reports which any
Borrower or any Subsidiary has made available to its
-65-
Securities holders and copies of any regular, periodic and
special reports or registration statements which any
Borrower or any Subsidiary files with the Securities and
Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities
exchange;
(v) upon request of Agent, copies of any annual
report to be filed with the Pension Benefit Guaranty
Corporation or the Internal Revenue Service in connection
with each Plan; and such other data and information
(financial and otherwise) as Agent or any Lender, from
time to time, may reasonably request, bearing upon or
related to the Collateral or any Borrower's or any
Subsidiary's financial condition or results of operations;
(vi) not later than thirty (30) days after the
Closing Date, a trade payables payment plan in form and
substance acceptable to the Majority Lenders;
(vii) concurrently with the delivery of the
financial statements described in clause (i) of this
subsection 8.1.3, Borrowers shall forward to Agent and
each Lender a copy of the accountants' letter to any
Borrowers' management that is prepared in connection with
such financial statements; and
(viii) concurrently with the delivery of the
financial statements described in paragraph (i) and (ii)
of this subsection 8.1.3 (subject to the proviso set forth
below), Borrowers shall cause to be prepared and furnished
to Agent and each Lender a Compliance Certificate in the
form of Exhibit 8.1.3 hereto executed by the chief
-------------
financial officer of Falcon (a "Compliance Certificate");
----------------------
provided, however, that with respect to the fiscal year
-------- -------
ending October 30, 2005, Borrowers shall deliver to Agent
and each Lender a Compliance Certificate (a) not later
than December 1, 2005, which Borrowers shall use their
best efforts to cause their accountants to have reviewed
prior to such delivery and (b) concurrently with the
delivery of audited financial statements for such fiscal
year end.
8.1.4. Borrowing Base Certificates. On or before the
---------------------------
second Business Day of each week from and after the date hereof, Borrowers
shall deliver to Agent, in form acceptable to Agent, a Borrowing Base
Certificate as of the last day of the immediately preceding week,
accompanied by weekly backlog reports and such supporting materials as Agent
shall reasonably request from time to time. If Borrowers deem it advisable,
or if Agent shall request, Borrowers shall execute and deliver to Agent
Borrowing Base Certificates more frequently than weekly.
-66-
8.1.5. Landlord, Processor and Storage Agreements. Provide
------------------------------------------
Agent with copies of all agreements between any Borrower or any Domestic
Subsidiary and any landlord, processor, distributor, warehouseman or
consignee which owns any premises at which any Collateral may, from time to
time, be kept. In respect of any lease or warehousing arrangement existing
on or entered into by a Borrower or a Domestic Subsidiary after the Closing
Date (other than leases for showrooms or sales offices), Borrowers shall
provide Agent with landlord waivers or bailee letters with respect to such
leased premises (otherwise, any Inventory located at such leased premises
shall be excluded from Eligible Inventory in Agent's discretion). Such
landlord waivers or bailee letters shall be in a form supplied by Agent to
Borrowers with such reasonable revisions as are customarily accepted by
Agent or by similar financial institutions in similar financing
transactions.
8.1.6. Projections. No later than the last day of each
-----------
fiscal year of Borrowers, deliver to Agent Projections of Borrowers and the
Subsidiaries for the forthcoming fiscal year, month by month, which shall be
prepared on a Consolidated basis and consistent with Borrowers' year-end
financial statements, and which shall include, without limitation, a balance
sheet, income statement and statement of cash flow.
8.1.7. Domestic Subsidiaries. Cause each Domestic
---------------------
Subsidiary, whether now or hereafter in existence, promptly upon Agent's
request therefor, and, in any event, contemporaneously with the formation or
acquisition of any such Domestic Subsidiary formed or acquired after the
date hereof, to execute and deliver to Agent a Guaranty Agreement and a
security agreement, in each case satisfactory in form and substance to the
Agent, pursuant to which such Domestic Subsidiary guaranties the payment of
all obligations and grants to Agent a first priority Lien (subject only to
Permitted Liens) on all of its Properties of the types described in Section
5. Additionally, the applicable Person shall execute and deliver to Agent a
Pledge Agreement, satisfactory in form and substance to the Agent, pursuant
to which such Person grants to Agent a first priority Lien (subject only to
Permitted Liens) with respect to all of the issued and outstanding
Securities of each such Domestic Subsidiary owned by such Person.
8.1.8. Deposit and Brokerage Accounts. For each deposit
------------------------------
account or brokerage account that any Borrower at any time opens or
maintains, such Borrower shall, at Agent's request and option,
contemporaneously with the opening of such account, pursuant to an agreement
in form and substance reasonably satisfactory to Agent, cause the depository
bank or securities intermediary, as applicable, to agree to comply at any
time with instructions from Agent to such depository bank or securities
intermediary, as applicable, directing the disposition of funds from time to
time credited to such deposit or brokerage account, without further consent
of such Borrower.
8.1.9. Updated Information. Promptly notify Agent in
-------------------
writing of (a) each state or jurisdiction in which any Borrower or any
Subsidiary qualifies to do business after the date hereof, (b) the use by
any Borrower or any Subsidiary of a legal, fictitious or trade name not
listed on Exhibit 7.1.5 hereto, (c) any change after the date hereof in the
-------------
tax identification number of any Borrower or any Domestic Subsidiary, (d)
the ownership by any
-67-
Borrower or any Subsidiary of any patent, trademark, service ▇▇▇▇,
tradename, copyright, license or other similar rights not listed on Exhibit
-------
7.1.16, (e) the assertion by any Person of a claim against any Borrower or
------
any Subsidiary that its use of its Intellectual Property or the conduct of
its business does or may infringe upon the Intellectual Property rights of
any third party, (f) any change after the date hereof in the list of
capitalized and operating personal property leases and real property leases
of any Borrower or any Subsidiary listed on Exhibit 7.1.22 hereto, (g) any
--------------
change after the date hereof in the list of Plans listed on Exhibit 7.1.23
--------------
hereto and (h) any change after the date hereof in the representation
contained in subsection 7.1.28; provided, that Borrowers shall only be
--------
required to provide the foregoing information regarding the Foreign
Subsidiaries at such time as such information becomes known to a Responsible
Officer.
8.1.10. Financial Advisor. Borrowers shall cause any third
-----------------
party consultants retained by Borrowers to provide to the Lenders a
comprehensive review of Borrowers' cash flows and pro-forma financial
statements, review and assist in Borrowers' cash and working capital
management (liquidity management), review Borrowers' general operating
procedures, make recommendations as necessary, assist Borrowers' management
in preparing and developing reports to the Agent and the Lenders and to
perform such other advisory functions as are reasonably requested by the
Agent. Borrowers shall provide the Agent and the Lenders with access to such
consultant and shall cause such consultant to provide the Agent and the
Lenders with such reports as shall be reasonably requested by the Agent.
Notwithstanding the foregoing, Borrowers shall retain the ultimate decision
as to the supervision of such consultant and shall have the power to
terminate the services of such consultant at any time. The Borrowers
acknowledge and agree that the management of their businesses is within
their sole control, and nothing in this Agreement shall obligate Borrowers
to follow the recommendations of any consultant described in this subsection
8.1.10.
8.1.11. Certain Insurance. In addition to the insurance
-----------------
required to be maintained pursuant to subsections 6.1.2 and 8.1.17, within
sixty (60) days of the Closing Date, Borrowers shall obtain and at all times
thereafter maintain in full force and effect (i) directors and officers
liability insurance, employment practice liability insurance and flood
insurance in such coverage amounts and with such insurers as are reasonably
acceptable to the Agent and deliver to Agent and Lenders the certificates
evidencing the existence of such coverage including such loss payable
endorsements as are acceptable to Agent, (ii) key man life and disability
insurance on the lives of each of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in
a minimum aggregate coverage amount of $10,000,000, which policies may be
second-to-die policies if so approved by the Majority Lenders (the "Tranche
A Keyman Insurance") and, subject to the Intercreditor Agreement, providing
that the full amount of any proceeds thereof shall be payable to the Agent,
who shall be loss payee and certificate holder in respect thereof, and (iii)
a pollution legal liability select policy from AIG, or a comparable
environmental liability insurance policy reasonably acceptable to Agent,
with a term of five (5) or more years and limits of $5,000,000, naming Agent
as a loss payee, assignee or additional insured, as appropriate, providing
coverage for pre-existing and new environmental liabilities and conditions
at the Real Property located at ▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇,
-▇▇-
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇ shall have furnished to Agent and Lenders evidence
of an environmental indemnification made by the owner(s) of such Real
Property in favor of the applicable Borrower or Subsidiary which shall be
acceptable to Agent.
8.1.12. Payment of Notes and Other Obligations. Fully and
--------------------------------------
timely pay, and ensure that each of their Subsidiaries fully and timely
pays, all Obligations owing pursuant to the terms of this Agreement, the
Notes (including, without limitation, all principal thereof, premium, if
any, and interest thereon), and the other Loan Documents to which they are
parties, in each case on the dates and in the manner provided for herein and
therein.
8.1.13. Compliance with Laws; Consents. Comply, and ensure
------------------------------
that each of their Subsidiaries complies, at all times with all applicable
laws (including, without limitation, Environmental Laws, ERISA and the Code)
in respect of the conduct of its or their businesses and the ownership of
its or their Properties in the states or other jurisdictions in which it or
they conduct their respective businesses, except to the extent that
non-compliance could not reasonably be expected to have a Material Adverse
Effect. The Borrowers shall obtain and maintain and shall ensure that each
of their respective Subsidiaries obtains and maintains all Consents
necessary in connection with the execution, delivery and performance of this
Agreement, the other Loan Documents and the Equity Documents, the
consummation of the transactions herein and therein contemplated and all
material Consents necessary in connection with the conduct of their business
and the ownership of their properties.
8.1.14. Legal Existence. At all times do or cause to be
---------------
done all things necessary to (a) maintain and preserve its and its
Subsidiaries legal existence organizational and tax structure and its and
their material rights and privileges, (b) become or remain duly qualified
and in good standing in each jurisdiction in which the character of the
properties owned or leased by it or its Subsidiaries or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect and (c) preserve, renew and keep in full force and
effect all of its and its Subsidiaries Operating Licenses, except where the
failure to maintain such Operating Licenses would not reasonably be expected
to have a Material Adverse Effect.
8.1.15. Maintenance of Properties. Maintain and preserve
-------------------------
all of its or their and their respective Subsidiaries' Properties which are
necessary or materially useful in the conduct of their respective businesses
in good working order and condition, ordinary wear and tear excepted, and
comply in all material respects at all times with the provisions of all
material personal Property leases to which each of them is a party as lessee
or under which each of them occupies Property, so as to prevent any loss or
forfeiture thereof or thereunder. The Borrowers shall, and shall cause their
respective Subsidiaries to, make all payments and otherwise perform all of
their obligations under all leases of real Property, and all leases of
material personal Property, to which any such Person is a party, keep such
leases in full force and effect and not permit such leases to lapse or be
terminated (or any rights to renew such leases to be forfeited or canceled),
notify the Agent of any material default by any party
-69-
thereto and cooperate with the Agent in all respects to cure any such
default. Notwithstanding anything to the contrary contained in this
subsection 8.1.16, the Borrowers may determine in good faith that any of
their or their respective Subsidiaries' assets or Properties, whether owned
or leased, is obsolete or has been damaged and the cost of repair makes it
inadvisable to repair such asset or Property. The Borrowers shall, and shall
cause their respective Subsidiaries to, pay and discharge each lawful claim
which, if unpaid, would by law become a Lien (other than a Permitted Lien)
upon their Property.
8.1.16. Communication with Accountants. The Borrowers
------------------------------
hereby authorize the Agent and each Lender to communicate directly with the
Borrowers' independent certified public accountants, and authorize such
accountants to disclose to Agent and each Lender any and all financial
statements and other supporting financial documents, workpapers and
schedules as Agent and/or any Lender may request, without any restrictions
being placed on such communications.
8.1.17. Environmental Matters.
---------------------
(a) The Borrowers shall, and shall use commercially
reasonable efforts to cause all tenants and other Persons who may
come upon any real Property to comply in all material respects,
with all Environmental Laws, including those requiring disclosures
to prospective and actual buyers or tenants of all or any portion
of the real Property. The Borrowers will not, and will not permit
their Subsidiaries to, install or allow to be installed any
underground storage tanks on any real Property.
(b) The Borrowers shall each promptly (and in any
event within five (5) Business Days) notify the Agent in writing
(i) if it knows, suspects or believes there may be any Hazardous
Materials in violation of applicable Environmental Laws in or
around any part of the real Property, any improvements constructed
on the real Property, or the soil, groundwater or soil vapor on or
under the real Property, or knows that any Borrower or Subsidiary
or the real Property is subject to any threatened or pending
investigation by any governmental authority under any applicable
laws pertaining to any Hazardous Materials, and (ii) of any claim
made or threatened by any Person arising out of or resulting from
any Hazardous Materials being present or released in, on or around
any part of the real Property, any improvements constructed on the
real Property or the soil, groundwater or soil vapor on or under
the real Property in which the amount involved is $100,000 or more
and not covered by insurance or in which injunctive or similar
relief is sought (any of the matters described in clauses (i) and
(ii) above being referred to as a "Hazardous Materials Claim").
-------------------------
(c) The Borrowers shall promptly undertake any and
all remedial work in response to Hazardous Materials Claims
("Remedial Work") to the extent required by any governmental
-------------
authority involved or as recommended by prudent business practices,
if such standard requires a higher degree of remediation, and in
all events to minimize any impairment to the real Property. All
Remedial Work must be
-70-
conducted in a diligent and timely fashion by licensed contractors
acting under the supervision of a consulting environmental engineer
following receipt of any required permits, licenses or approvals.
The selection of the Remedial Work contractors and consulting
environmental engineer, the contracts entered into with such
parties, any disclosures to or agreements with any public or
private agencies or parties relating to Remedial Work and the
written plan for the Remedial Work (and any changes thereto) at the
Agent's option, are subject to prior written notice being given to
the Agent.
8.1.18. Further Assurances. Promptly after request by the
------------------
Agent, from time to time after the date hereof, the Borrowers shall, shall
cause their Subsidiaries to, and shall use reasonable commercial efforts to
cause any other Persons who are required to give their Consent to, execute
and deliver such instruments, certificates and documents, and will take all
such actions, for the purposes of implementing or effectuating the
provisions of this Agreement and the other Loan Documents. Upon exercise by
the Agent or any Lender (as applicable) of any power, right, privilege or
remedy pursuant to this Agreement or any other Loan Document which requires
any Consent, the Borrowers shall, shall cause their Subsidiaries to, and
will use reasonable commercial efforts to cause any other Persons to,
execute and deliver all applications, certifications, instruments and other
documents and papers that may be required to be obtained for such Consent.
Promptly upon ten (10) Business Days' request by the Agent, the Borrowers
shall correct any material defect or error that may exist or be discovered
in this Agreement or any other Loan Document or in the execution,
acknowledgment, filing or recordation thereof. Promptly upon request by the
Agent, the Borrowers shall do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further
acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust,
trust deeds, notices of assignment, transfers, certificates, assurances and
other instruments as the Agent may require from time to time in order to (A)
carry out more effectively the purposes of the Loan Documents, (B) to the
fullest extent permitted by applicable law, subject each Borrowers' and
their Subsidiaries' properties, assets, rights or interest to the Liens now
or hereafter intended to be covered by any of the Security Documents, (C)
perfect and maintain the validity, effectiveness and priority of any of the
Security Documents and any of the Liens intended to be created thereunder
and (D) assure, convey, grant, assign, transfer, preserve, protect and
confirm more effectively unto the rights granted or now or hereafter
intended to be granted to the Agent under any Loan Document or under any
other instrument executed in connection with any Loan Document to which any
Borrower or any Subsidiary is to be a party. Each Borrower hereby appoints
the Agent the attorney-in-fact of such Borrower solely for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest.
8.1.19. Delivery of Phase I Reports and Other Matters.
---------------------------------------------
Within thirty (30) days of the Closing Date Borrowers shall deliver to Agent
copies of Phase I reports, together with ALTA surveys certified to Agent
with respect to each of the Properties subject to a Mortgage, in each case
in form and substance satisfactory to Majority Lenders. As soon as
-71-
practicable after the Closing Date, Borrowers shall instruct the title
company to deliver original signed title insurance policies for each of the
Properties subject to a Mortgage.
8.1.20. Ranking. Borrowers shall ensure that the
-------
Obligations rank, and at all times after the Closing Date will rank (a)
senior in right of payment to the obligations of Falcon and its Subsidiaries
under the Subordinated Note Documents, the Convertible Subordinated
Debenture and all other documents or agreements in respect of Subordinated
Debt, (b) pari passu in right of payment with the obligations evidenced by
the Tranche B Loan Documents, and (c) at least pari passu in right of
payment with all other outstanding unsubordinated obligations of Falcon and
its Subsidiaries.
8.1.21. Compliance with Trade Payables Plan. Borrowers
-----------------------------------
shall use their best efforts to comply with the trade payables payment plan
furnished to Agent and Lenders pursuant to subsection 8.1.3(vi).
8.2. Negative Covenants.
------------------
During the Term, and thereafter for so long as there are
any obligations outstanding, Borrowers jointly and severally covenant that
it shall not:
8.2.1. Mergers; Consolidations; Acquisitions; Structural
-------------------------------------------------
Changes. Merge or consolidate, or permit any Subsidiary to merge or
-------
consolidate, with any Person; nor, without giving Agent at least ten (10)
days prior written notice thereof, change its or any Subsidiary's state of
incorporation or organization, Type of organization or Organizational I.D.
Number; nor, without giving Agent at least ten (10) days prior written
notice thereof, change its or any Subsidiary's legal name; nor acquire, nor
permit any Subsidiary to acquire, all or any substantial part of the
Properties of any Person; nor make any change in its or its Subsidiaries'
business objectives, purposes, structure on operations, except for:
(i) mergers or consolidations of any Borrower
(other than Falcon) or any Domestic Subsidiary of a
Borrower into a Borrower or a wholly-owned Domestic
Subsidiary of a Borrower;
(ii) mergers or consolidations of any Foreign
Subsidiary of a Borrower into any other Foreign Subsidiary
of a Borrower; and
(iii) acquisitions of assets consisting of fixed
assets or real property that constitute Capital
Expenditures permitted under subsection 8.2.8.
8.2.2. Loans. Make, or permit any Subsidiary to make, any
-----
loans or other advances of money to any Person, including any Foreign
Subsidiary, except:
-72-
(i) travel advances, advances against commissions
and other similar advances to employees in the ordinary
course of business;
(ii) extensions of trade credit in the ordinary
course of business;
(iii) deposits with financial institutions
permitted under this Agreement;
(iv) prepaid expenses and deposits with vendors
made in the ordinary course of business;
(v) loans by a Borrower or a Domestic Subsidiary
of a Borrower to a Borrower or to a Domestic Subsidiary of
a Borrower that is a Guarantor;
(vi) so long as no Default or Event of Default is
then in existence or is reasonably likely to occur, loans
made after the Closing Date by a Borrower or a Domestic
Subsidiary of a Borrower to a Foreign Subsidiary of a
Borrower the Securities of which are subject to a Pledge
Agreement, in an aggregate amount at any time outstanding
for all such Foreign Subsidiaries, together with all
equity investments permitted under clause (ii) of the
definition of the term Restricted Investments, made by a
Borrower or a Domestic Subsidiary of a Borrower after the
Closing Date in such Foreign Subsidiaries, not in excess
of $1,000,000 in any fiscal year; provided, that any
--------
unused portion of such amount may be carried over to the
next fiscal year; and
(vii) loans by a Foreign Subsidiary of a Borrower
to another Foreign Subsidiary of Borrower the Securities
of which are subject to a Pledge Agreement, in each case
so long as such loans are evidenced by a written agreement
and subordinated to the prior repayment in full of the
Obligators on terms satisfactory to the Majority Lenders.
8.2.3. Total Indebtedness. Create, incur, assume, issue,
------------------
or suffer to exist, or permit any Subsidiary to create, incur, assume,
issue, or suffer to exist, any Indebtedness or Disqualified Stock unless the
Fixed Charge Coverage Ratio for Falcon's most recently ended period of four
full fiscal quarters for which financial statements have been delivered in
accordance with subsection 8.1.3 preceding the date on which such additional
Indebtedness is incurred or Disqualified Stock is issued would have been at
least 2.5 to 1.0 determined on a pro forma basis (including a pro forma
--- ----- --- -----
application of the net proceeds therefrom) as if the additional Indebtedness
had been incurred or Disqualified Stock had been issued at the beginning of
such four-quarter period. Notwithstanding the foregoing, the Borrowers may
-73-
create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, or suffer to exist (without duplication):
(i) Obligations owing to Agent or any Lender
under this Agreement or any of the other Loan Documents;
(ii) Indebtedness under the Tranche B Loan
Documents;
(iii) Indebtedness existing on the date of this
Agreement and listed on Exhibit 8.2.3 and any renewals,
-------------
extensions, refinancings or replacements thereof, but only
if (a) the principal amount of such new Indebtedness does
not exceed the principal amount of the existing
Indebtedness at the time of such transaction, and (b) such
new Indebtedness does not contain terms materially more
restrictive to Borrowers and their Subsidiaries than those
contained in the existing Indebtedness;
(iv) the Subordinated Note Debt and the
Convertible Subordinated Debt;
(v) Subordinated Debt (other than the
Subordinated Note Debt and the Convertible Subordinated
Debt) so long as the aggregate principal amount of such
Subordinated Debt does not exceed $5,000,000 at any time;
(vi) Permitted Purchase Money Indebtedness and
Permitted Capital Lease Obligations, in an aggregate
principal amount not in excess of $3,000,000;
(vii) intentionally omitted;
(viii) contingent liabilities arising out of
endorsements of checks and other negotiable instruments
for deposit or collection in the ordinary course of
business;
(ix) guaranties of any Indebtedness permitted
under this subsection 8.2.3; provided that in the case of
-------- ----
any Subordinated Debt such guaranties are subordinated to
the Obligations (including any guaranty thereof) on terms
satisfactory to the Majority Lenders;
(x) Indebtedness in respect of intercompany loans
permitted under subsections 8.2.2(v), (vi) and (vii);
(xi) obligations to pay Rentals permitted by
subsection 8.2.19;
-74-
(xii) Past Due Payables existing on the Closing
Date as set forth on the Payables Aging Schedule, the
aggregate amount of which shall not exceed $7,000,000 as
at July 31, 2005, or $5,000,000 as at the last day of the
fiscal year ending on or about October 31, 2005;
(xiii) trade payables, accruals and accounts
payable, in each case, in each case incurred after the
Closing Date in the ordinary course of business and not
for Money Borrowed) to the extent such payables are not
past the due date set forth on the original invoices
therefor, unless being contested in good faith by
appropriate proceedings being diligently conducted and for
which adequate reserves have been provided in accordance
with GAAP; provided, that Borrowers and their Subsidiaries
--------
may permit to exist payables that would not otherwise
qualify as Indebtedness permitted under this clause (xiii)
in an aggregate amount not to exceed $100,000 at any time;
and
(xiv) Indebtedness (other than trade payables,
accruals and accounts payable permitted under clauses
(xii) and (xiii)) of any Foreign Subsidiary in an
aggregate amount for all of the Foreign Subsidiaries not
to exceed $7,500,000 at any time outstanding.
8.2.4. Affiliate Transactions. Enter into, or be a party
----------------------
to, or permit any Subsidiary to enter into or be a party to, any transaction
with any Affiliate of any Borrower or any holder of more than 5% of the
Securities of any Borrower or any Subsidiary (other than, subject to the
limitations contained in subsections 8.2.2 and 8.2.12, any Borrower or any
Subsidiary), including without limitation any management, consulting or
similar fees, except (i) in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's or such Subsidiary's business and
upon fair and reasonable terms which are (1) approved in writing in advance
by a majority of the disinterested directors of the Board of Directors of
such or such Subsidiary (2) fully disclosed to Agent and (3) are no less
favorable to such Borrower or such Subsidiary than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate or
Security holder of such Borrower, (ii) other Affiliate transactions that are
specifically permitted under other provisions of this Agreement, (iii) the
sale of Inventory by a Borrower or a Borrower's Subsidiary to a Borrower or
a Borrower's Subsidiary, in a manner, at pricing and with payment terms no
more disadvantageous to such Borrower than those currently in effect, (iv)
the entry by a Borrower and its Subsidiaries into the Tranche B Loan
Documents and the performance of their respective obligations thereunder,
and (v) as described on Exhibit 8.2.4 hereto.
-------------
8.2.5. Limitation on Liens. Create or suffer to exist, or
-------------------
permit any Subsidiary to create or suffer to exist, any Lien upon its
Property, income or profits, whether now owned or hereafter acquired,
except:
-75-
(i) Liens at any time granted in favor of Agent
for the benefit of Lenders, pursuant to the priorities
provided for herein;
(ii) Liens securing the Tranche B Loans and
arising under the Tranche B Loan Documents, so long as
such Liens remain subject at all times to the provisions
of the Intercreditor Agreement;
(iii) Liens for taxes, assessments or
governmental charges (excluding any Lien imposed pursuant
to any of the provisions of ERISA) not yet due, or being
contested in the manner described in subsection 7.1.14
hereto, but only if in Agent's reasonable judgment such
Lien would not reasonably be expected to adversely effect
Agent's rights or the priority of Agent's lien on any
Collateral;
(iv) Liens arising in the ordinary course of the
business of such Borrower or any Subsidiary by operation
of law or regulation (such as statutory and common law
Liens of landlords, carriers, warehousemen, mechanics,
materialmen and suppliers), but only if payment in respect
of any such Lien is not at the time required (or is being
contested in good faith by appropriate proceedings being
diligently conducted, so long as the aggregate amount of
such payments being so contested does not exceed $100,000)
and such Liens do not, in the aggregate, materially
detract from the value of the Property of such Borrower or
any Subsidiary or materially impair the use thereof in the
operation of the business of such Borrower or any
Subsidiary;
(v) Purchase Money Liens securing Permitted
Purchase Money Indebtedness;
(vi) Liens securing Permitted Capital Lease
Obligations;
(vii) such other Liens outstanding on the Closing
Date and described on Exhibit 8.2.5 hereto;
-------------
(viii) Liens incurred or deposits made in the
ordinary course of business in connection with (1)
worker's compensation, social security, unemployment
insurance and other like laws or (2) sales contracts,
leases, statutory obligations, work in progress advances,
bids, licenses, surety bonds, performance bonds and other
similar obligations not incurred in connection with the
borrowing of money or the payment of the deferred purchase
price of property;
(ix) reservations, covenants, zoning and other
land use regulations, title exceptions or encumbrances
granted in the ordinary course of business, affecting real
Property owned or leased by a
-76-
Borrower or a Subsidiary; provided, that such exceptions
--------
do not in the aggregate materially interfere with the use
of such Property in the ordinary course of such Borrower's
or such Subsidiary's business;
(x) judgment Liens on Properties (other than
Property subject to a Mortgage) in respect of judgments or
awards in place for less than the applicable period for
taking an appeal so long as execution is not levied
thereunder or in respect of which the applicable Borrower
or Subsidiary shall at the time in good faith be
prosecuting an appeal and in respect of which a stay of
execution shall have been obtained pending such appeal;
(xi) Liens on the assets of Foreign Subsidiaries
securing Indebtedness of Foreign Subsidiaries permitted
under subsection 8.2.3(xi);
(xii) any interest of title of a lessor under,
and Liens arising from financing statements (or equivalent
filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this
Agreement;
(xiii) Liens of a collection bank arising under
the Uniform Commercial Code (or similar provisions of
applicable law) on items in the course of collection;
(xiv) normal and customary rights of setoff upon
cash deposits in favor of banks and other depository
institutions (subject to limitations on such rights
contained in any applicable control agreement or Dominion
Account agreement);
(xv) matters appearing on lender's mortgagee
title insurance policies delivered to and accepted by
Agent; and
(xvi) such other Liens as Majority Lenders may
hereafter approve in writing.
8.2.6. Payments and Amendments of Certain Debt.
---------------------------------------
(i) make or permit any Subsidiary to make any
payment of any part or all of the Subordinated Note Debt
or take any other action or omit to take any other action
in respect of the Subordinated Note Debt, except in
accordance with the subordination provisions thereof;
provided, that at no time shall any Borrower or any
--------
Subsidiary (a) make any interest payment in respect of the
Subordinated Notes, except on any "Interest Payment Date"
(as defined in the Subordinated Note Indenture, as in
existence on the Closing
-77-
Date), and then only to the extent permitted under
Articles 8 and 11 of the Subordinated Note Indenture (as
in existence on the Closing Date), and in any event not
make any such payment in the event an Event of Default
under subsection 10.1.1 has occurred and is continuing,
(b) make any redemption or offer of redemption, or
defeasance payment in respect of the Subordinated Notes
under Article 3 of the Subordinated Note Indenture (as in
existence on the Closing Date) or otherwise, (c) permit to
exist conditions that would require any Borrower or any
Subsidiary to make any "Change of Control Offer" (as
defined in the Subordinated Note Indenture, as in
existence on the Closing Date) pursuant to Section 4.14 of
the Subordinated Note Indenture (as in existence on the
Closing Date) or (d) permit to exist conditions that would
require any Borrower or any Subsidiary to make any "Net
Proceeds Offer" (as defined in the Subordinated Note
Indenture as in existence on the Closing Date), pursuant
to Section 4.05 of the Subordinated Note Indenture (as in
existence on the Closing Date);
(ii) make or permit any Subsidiary to make any
payment of any part or all of the Convertible Subordinated
Debt or take any other action or omit to take any action
in respect of the Convertible Subordinated Debt, except in
accordance with the subordination terms thereof; provided,
--------
that at no time shall any Borrower or any Subsidiary (a)
make any interest payment in respect of the Convertible
Subordinated Debentures, except on or after any "Interest
Payment Date" (as defined in the Convertible Subordinated
Debentures, as in existence on the Closing Date), and then
only to the extent permitted under the subordination terms
of the Convertible Subordinated Debentures (as in
existence on the Closing Date), and in any event not make
any such payment in the event an Event of Default under
subsection 10.1.1 has occurred and is continuing, or (b)
make any redemption or offer of redemption or defeasance
payment in respect of the Convertible Subordinated
Debentures, except by means of conversion to common stock
Securities of Falcon, or consent to any assignment,
pledge, disposal or other transfer of all or any portion
of the Convertible Subordinated Debt without the prior
written consent of Agent except for assignments and
transfers to family members, trusts or other entities for
estate planning purposes;
(iii) make or permit any Subsidiary to make (1)
any voluntary prepayment or redemption of any portion of
the principal amount of the Tranche B Loans, (2) any
voluntary payments in cash of any interest on the Tranche
B Loans that is payable in kind pursuant to the terms of
the Tranche B Loan Documents, or (3) at any time that the
Term Loans have been paid in full, any mandatory
prepayments in
-78-
respect of Excess Cash Flow required by the terms of the
Tranche B Loan Agreement (as in effect on the date
hereof);
(iv) amend or modify any of the Tranche B Loan
Documents, except in compliance with the provisions of the
Intercreditor Agreement; notwithstanding the foregoing and
any other provision of this Agreement, if any such
amendment or modification to any Tranche B Loan Document
is effected, a conforming amendment or modification to the
counterpart provision in this Agreement shall be deemed to
have been made automatically without any further action
necessary on the part of any Lender or any Borrower,
unless the Majority Lenders expressly agree in writing and
notify Falcon otherwise;
(v) make or permit any Subsidiary to make any
payment of any part or all of the Subordinated Debt (other
than Subordinated Note Debt and the Convertible
Subordinated Debt) or take any other action or omit to
take any other action in respect of the Subordinated Debt
(other than Subordinated Note Debt and the Convertible
Subordinated Debt), except in accordance with the
subordination provisions thereof; or
(vi) amend or modify any agreement, instrument or
document evidencing or relating to any Subordinated Debt,
except for the issuance of supplemental indentures from
time to time in order to add a Subsidiary as a
Subordinated Note Guarantor.
8.2.7. Distributions. Declare or make, or permit any
-------------
Subsidiary to declare or make, any Distributions, except for:
(i) Distributions by any Borrower (other than
Falcon) or any Subsidiary of a Borrower to Falcon or a
Subsidiary of Falcon;
(ii) Distributions paid solely in Securities of a
Borrower or any Subsidiary provided that no Default or
-------- ----
Event of Default has occurred and is continuing or is
reasonable likely to occur; and
(iii) Distributions by Epic to repurchase, and/or
Distributions by Falcon to purchase, Epic's Securities
from Epic shareholders to the extent required by the
Stockholders Agreement of Epic dated June 7, 2000, as in
existence on the Closing Date; provided, that no default
--------
or event of default has occurred or would be caused by the
making of such Distributions under the terms of the
Subordinated Note Indenture.
-79-
8.2.8. Capital Expenditures. Make Capital Expenditures
--------------------
(including, without limitation, by way of capitalized leases) which, in the
aggregate, as to all Borrowers and all of the Subsidiaries, exceed (i)
$2,000,000 for the fiscal year ending on or about October 31, 2005, (ii)
$2,500,000 for the fiscal year ending on or about October 31, 2006, and
(iii) $3,000,000 for the fiscal year ending on or about October 31, 2007,
except that 50% of the unused portion of the Capital Expenditure allowance
for any fiscal year may be carried over to the immediately succeeding fiscal
year only, to be used in such succeeding fiscal year after all of the
Capital Expenditure allowance for that year has been used.
8.2.9. Disposition of Assets. Sell, lease or otherwise
---------------------
dispose of any of, or permit any Subsidiary to sell, lease or otherwise
dispose of any of, its Properties, including any disposition of Property as
part of a sale and leaseback transaction, to or in favor of any Person,
except for:
(i) sales of Inventory in the ordinary course
of business;
(ii) transfers of Property by a Borrower or a
Subsidiary to a Borrower or a Domestic Subsidiary that is
also a Guarantor;
(iii) transfers of Property by a Foreign
Subsidiary to another Foreign Subsidiary whose Securities
are subject to a Pledge Agreement;
(iv) dispositions of investments described in
paragraphs (v), (vi), (vii) and (viii) of the definition
of the term "Restricted Investments";
(v) sales, leases or other dispositions of
Equipment or other fixed assets with a fair market value
of up to $750,000 in the aggregate in any one calendar
year, that are substantially worn, damaged or obsolete and
that are replaced with Equipment or other fixed assets of
like kind, function and value; provided, that (a) no
--------
Default or Event of Default is then in existence or is
reasonably likely to occur or would result from such
transaction, (b) until so replaced, the proceeds of each
such disposition shall be applied against the Revolving
Credit Loans (but shall not permanently reduce the
Revolving Loan Commitments), (c) a Rebuild Reserve shall
be established in the amount thereof, until such time as
such amounts are to be used by Borrowers to replace the
Property sold, (d) the replacement Property shall be
acquired within one hundred eighty (180) days after the
disposition of the Property to be replaced and (e) the
replacement Property shall be free and clear of Liens
other than Permitted Liens that are not Purchase Money
Liens; and provided further, that, subject to the terms of
-------- -------
the Intercreditor Agreement, any
-80-
such amount that it is not timely used to purchase
replacement Property as provided herein shall be applied
to the Obligations as provided in the second sentence of
subsection 3.3.1;
(vi) sales, leases and other dispositions of
Property not included within clause (v) above, with a fair
market value of up to $750,000 in the aggregate in any one
calendar year, so long as (a) no Default or Event of
Default is then in existence or is reasonably likely to
occur or would result from such transaction and (b)
subject to the terms of the Intercreditor Agreement, the
proceeds thereof are applied to the Obligations in
accordance with subsection 3.3.1;
(vii) sales, leases and other dispositions of
Property with a fair market value in excess of $750,000
and not in excess of $3,000,000 in the aggregate in any
one calendar year, so long as (a) no Default or Event of
Default is then in existence or is reasonably likely to
occur or would result from such transaction, (b) subject
to the terms of the Intercreditor Agreement, the proceeds
thereof are applied to the obligations in accordance with
subsection 3.3.1 and (c) the Majority Lenders have
consented in writing to such transaction; and
(viii) sales, leases and other dispositions of
Property with a fair market value in excess of $3,000,000
in the aggregate in any one calendar year, so long as (a)
no Default or Event of Default is then in existence or is
reasonably likely to occur or would result from such
transaction, (b) subject to the terms of the Intercreditor
Agreement, the proceeds thereof are applied to the
obligations in accordance with subsection 3.3.1 and (c)
each Lender has consented in writing to such transaction.
8.2.10. Securities of Subsidiaries. Permit any of its
--------------------------
Domestic Subsidiaries to issue any additional Securities except to a
Borrower or a Domestic Subsidiary and except for director's qualifying
Securities; or permit any of its Foreign Subsidiaries to issue any
additional Securities except to a Borrower or a Subsidiary and except for
director's qualifying Securities.
8.2.11. ▇▇▇▇-and-Hold Sales, Etc. Make, or permit any
------------------------
Subsidiary to make, a sale to any customer on a ▇▇▇▇-and-hold, guaranteed
sale, sale and return, sale on approval, repurchase or return or consignment
basis, except for consignment sales of Inventory that does not constitute
Eligible Inventory with an aggregate value not in excess of $250,000 at any
time outstanding.
8.2.12. Restricted Investment. Make or have, or permit any
---------------------
Subsidiary of such Borrower to make or have, any Restricted Investment.
-81-
8.2.13. Subsidiaries and Joint Ventures. Create, acquire
-------------------------------
or otherwise suffer to exist, or permit any Subsidiary of such Borrower to
create, acquire or otherwise suffer to exist, any Subsidiary or joint
venture arrangement or limited partnership or limited liability company not
in existence on the Closing Date and described in Exhibit 8.2.13, or become
--------------
a general partner of any such Person.
8.2.14. Tax Consolidation. File or consent to the filing
-----------------
of any consolidated income tax return with any Person other than the other
Borrowers and the Subsidiaries of Borrowers.
8.2.15. Organizational Documents. Agree to, or suffer to
------------------------
occur, any amendment, supplement or addition to its or any Subsidiary's
charter, articles or certificate of incorporation, certificate of formation,
limited partnership agreement, bylaws, limited liability agreement,
operating agreement or other organizational documents (as the case may be),
that could reasonably be expected to have a Material Adverse Effect.
8.2.16. Fiscal Year End. Change, or permit any Subsidiary
---------------
to change, its fiscal year end.
8.2.17. Negative Pledges. After the date hereof, enter
----------------
into any agreement (other than (x) limitations on Foreign Subsidiaries
contained in any agreement or agreements evidencing Indebtedness of Foreign
Subsidiaries permitted under subsection 8.2.3(xi) and (y) limitations sent
forth in the Tranche B Loan Documents), limiting the ability of such
Borrower or any Subsidiary to (i) voluntarily create Liens upon any of its
Property (other than limitations on junior Liens on Property subject to
Liens permitted by subsections 8.2.5(iv) and (v)); (ii) pay dividends or
make any other Distributions on its Securities; (iii) make loans or advances
to any Borrower or any Subsidiary; or (iv) transfer any of its Property to
any Borrower or any Subsidiary.
8.2.18. Covenants re: Subordinated Note Indenture. Take
-----------------------------------------
any of the following actions, or permit any Subsidiary to take any of the
following actions: (i) designate any Indebtedness (other than the
Obligations and the obligations under the Tranche B Loan Documents) as
Designated Senior Debt, (ii) enter into any Credit Facility (other than the
facility evidenced by this Agreement and the Tranche B Loan Documents),
(iii) permit any Subsidiary to be newly designated or redesignated as a
Restricted Subsidiary or an Unrestricted Subsidiary under the terms of the
Subordinated Note Indenture without having provided at least ten (10) days
prior written notice thereof to Agent or (iv) permit any Domestic Subsidiary
to not be a "Subordinated Debt Guarantor" for purposes of the Subordinated
Note Debt.
8.2.19. Leases. Become, or permit any Subsidiary to
------
become, a lessee under any operating lease (other than a lease under which a
Borrower or any Subsidiary is lessor) of Property if the aggregate Rentals
payable during any current or future period of twelve (12) consecutive
months under the lease in question and all other leases under which
Borrowers or any Subsidiary is then lessee would exceed $4,500,000. The term
"Rentals"
-82-
means, as of the date of determination, all payments which the lessee is
required to make by the terms of any lease.
8.3. Specific Financial Covenants.
----------------------------
During the Term, and thereafter for so long as there are
any Obligations outstanding, Borrowers covenant jointly and severally that,
unless otherwise consented to by Majority Lenders in writing, they shall
comply with all of the financial covenants set forth in Exhibit 8.3 hereto.
-----------
If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in this Agreement, and either the
Borrowers or the Majority Lenders shall so request, Agent, the Lenders and
the Borrowers shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change
in GAAP (subject to the approval of the Borrowers and the Majority Lenders);
provided, that until so amended, (i) such ratio or requirement shall
--------
continue to be computed in accordance with GAAP prior to such change therein
and (ii) Borrowers shall provide to the Agent and the Lenders financial
statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving
effect to such change in GAAP.
Section 9. CONDITIONS PRECEDENT
--------------------
Notwithstanding any other provision of this Agreement or
any of the other Loan Documents, and without affecting in any manner the
rights of Agent or any Lender under the other sections of this Agreement, no
Lender shall be required to make any Loan, nor shall Agent be required to or
issue or procure any Letter of Credit or LC Guaranty unless and until each
of the following conditions has been and continues to be satisfied:
9.1. Loan Documentation.
------------------
Agent shall have received, in form and substance
satisfactory to the Lenders and their respective counsel, a duly executed
copy of this Agreement and the other Loan Documents, together with such
additional documents, instruments, opinions and certificates as each Lender
and their respective counsel shall reasonably require in connection
therewith from time to time.
9.2. Other Documents, Certificates, etc.
----------------------------------
Agent shall have received, in form and substance
satisfactory to Lenders and their respective counsel, without duplication,
each of the documents, instruments, opinions and certificates set forth on
the closing agenda attached as Exhibit 9.2 hereto, each in form and
-----------
substance satisfactory to them.
-83-
9.3. Representations True; No Default.
--------------------------------
Each of the representations and warranties made by the
Borrowers in this Agreement shall be true and correct in all respects as of
the date made, and shall be true and correct in all respects as of the
Closing Date, with the same effect as if made on and as of the Closing Date;
each of the covenants, agreements and obligations of the Borrowers under
this Agreement to be performed or satisfied by it or them on or prior to the
Closing Date shall have been performed or satisfied by it or them on or
before the Closing Date; and no Default or Event of Default shall exist or
result from the transactions contemplated by this Agreement, the other Loan
Documents or the Tranche B Loan Documents.
9.4. Other Conditions.
----------------
Each of the conditions precedent set forth in the other
Loan Documents shall have been satisfied.
9.5. Availability.
------------
Agent shall have determined that immediately after Lenders
have made the initial Loans and after Agent has issued or procured the
initial Letters of Credit and LC Guaranties contemplated hereby, and
Borrowers have paid (or, if accrued, treated as paid), all closing costs
incurred in connection with the transactions contemplated hereby,
Availability shall not be less than $10,000,000.
9.6. No Litigation.
-------------
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or the consummation of the transactions
contemplated hereby.
9.7. Fees.
----
Borrowers shall have paid the respective closing fees
provided for in the Revolving Credit Fee Letter and the Term Loan Fee Letter
and the fees of special counsel to the Agent and the Term Loan Lenders.
9.8. Tranche B Loan Documents; Intercreditor Agreement.
-------------------------------------------------
The Tranche B Loan Documents and the Intercreditor
Agreement shall have been finalized, executed and delivered, in each case in
form and substance satisfactory to Agent and each Lender. The Tranche B
Loans shall have been funded in accordance with the terms of the Tranche B
Loan Documents.
-84-
9.9. No Material Adverse Change.
--------------------------
No Material Adverse Effect shall have occurred since
November 1, 2003, except as disclosed on Exhibit 7.1.10.
9.10. Delivery of Financial Statements and Projections.
------------------------------------------------
The Borrowers shall have finalized and delivered to the
Agent prior to the Closing Date, and the Agent shall have approved, the
financial projections of Borrowers and their Subsidiaries for the period of
three (3) fiscal years ending on or about November 1, 2007 (the "Initial
Financial Projections"). The Initial Financial Projections shall specify the
assumptions on which they are based and shall be made in good faith. The
Initial Financial Projections shall be accompanied by an officer's
certificate, in form and substance satisfactory to the Agent, duly executed
on behalf of the Borrowers and their Subsidiaries by the Chief Financial
Officer of Falcon, specifying, among other things, the assumptions on which
the Initial Financial Projections are based. The Borrowers shall have
delivered to the Agent prior to the Closing Date the financial statements
described in subsection 7.1.10 of this Agreement.
9.11. Third-Party Consents.
--------------------
The Borrowers and their Subsidiaries shall have obtained
all other Consents required to be obtained from all governmental authorities
and other Persons in connection with the transactions contemplated by this
Agreement, the other Loan Documents and the Equity Documents, and the Agent
shall have approved the terms and conditions thereof, and all applicable
waiting periods shall have expired.
9.12. Actions Relating to the Collateral.
----------------------------------
Agent shall have received the following in form and
substance satisfactory to the Lenders:
(a) the Securities subject to the Pledge Agreements,
together with stock powers duly executed by the appropriate
Borrower or Subsidiary in blank;
(b) Evidence that all filings, registrations and
recordings have been made in the appropriate governmental offices,
and all other action has been taken, which shall be necessary to
create, in favor of the Agent, a perfected first priority Lien on
the Collateral (subject only to Permitted Liens);
(c) Evidence that the Liens on the Collateral are
subject only to the Permitted Liens, such evidence including,
without limitation, the results of searches conducted in the UCC
filing records in each of the governmental offices in which UCC
financing statements have been, or shall be, filed;
-85-
(d) Landlord waivers, in form and substance
satisfactory to the Agent, duly executed by a Borrower or
Subsidiary, as applicable, and the respective landlord/lessees
(otherwise Inventory at such location shall be excluded from
Eligible Inventory in Agent's discretion); and
(e) Such other documents relating to the Collateral
as the Agent may request.
Section 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
10.1. Events of Default.
-----------------
The occurrence of one or more of the following events
shall constitute an "Event of Default":
10.1.1. Payment of Obligations. Borrowers shall fail to
----------------------
pay any of the Obligations hereunder or under any Note on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise).
10.1.2. Misrepresentations. Any representation, warranty
------------------
or other statement made or furnished to Agent or any Lender by or on behalf
of any Borrower, any Subsidiary or any Guarantor in this Agreement, any of
the other Loan Documents or any instrument, certificate or financial
statement furnished in compliance with or in reference thereto proves to
have been false or misleading in any material respect when made, furnished
or reaffirmed pursuant to Section 7.2 hereof.
10.1.3. Breach of Specific Covenants. Any Borrower shall
----------------------------
fail or neglect to perform, keep or observe any covenant contained in
Section or subsection 5, 6, 8.1 (except 8.1.3 and 8.1.6), 8.2 or 8.3 hereof
on the date that such Borrower is required to perform, keep or observe such
covenant or shall fail or neglect to perform, keep or observe any covenant
contained in Section 8.1.3 or 8.1.6 hereof within five (5) days following
the date on which Borrowers are required to perform, keep or observe such
covenant.
10.1.4. Breach of Other Covenants. Any Borrower shall fail
-------------------------
or neglect to perform, keep or observe any covenant contained in this
Agreement (other than a covenant which is dealt with specifically elsewhere
in Section 10.1 hereof) and the breach of such other covenant is not cured
to Agent's satisfaction within ten (10) Business Days after the sooner to
occur of Borrowers' receipt of notice of such breach from Agent or the date
on which such failure or neglect first becomes known to any officer of any
Borrower.
10.1.5. Default Under Security Documents or Other
-----------------------------------------
Agreements. Any event of default shall occur under, or any Borrower, any
----------
Subsidiary or any Guarantor shall default in the performance or observance
of any term, covenant, condition or agreement contained in, any of the
Security Documents, or the Other Agreements and such default shall continue
beyond any applicable grace or cure period.
-86-
10.1.6. Other Defaults. (a) There shall occur any default
--------------
or event of default on the part of any Borrower, any Subsidiary or any
Guarantor under any agreement, document or instrument to which such
Borrower, such Subsidiary or such Guarantor is a party or by which such
Borrower, such Subsidiary or such Guarantor or any of its Property is bound,
evidencing or relating to any Indebtedness for Money Borrowed (other than
the Obligations), including without limitation the Indebtedness evidenced by
the Tranche B Loan Documents, or any Indebtedness under any operating lease,
in any case with an outstanding principal balance or total remaining amount
of payments, as applicable, in excess of $250,000, if the payment or
maturity of such Indebtedness for Money Borrowed or operating lease, as
applicable, is or could be accelerated in consequence of such event of
default or demand for payment of such Indebtedness for Money Borrowed or
operating lease, as applicable, is made or could be made in accordance with
the terms thereof, unless and until such event is cured or waived, or (b)
any default or event of default occurs under the Subordinated Note
Documents, the Convertible Subordinated Debentures or any documents or
agreements in respect of other Subordinated Debt, unless and until such
event is cured or waived.
10.1.7. Uninsured Losses. Any material loss, theft, damage
----------------
or destruction of any portion of the Collateral having a fair market value
of $500,000, in the aggregate, if not fully covered (subject to such
deductibles and self-insurance retentions as Agent shall have permitted) by
insurance.
10.1.8. Insolvency and Related Proceedings. Any Borrower,
----------------------------------
any Subsidiary or any Guarantor shall cease to be Solvent or shall admit in
writing its inability to pay or generally fail to pay its debts as they
mature or become due, or shall petition or apply for the appointment of a
receiver, trustee, custodian, liquidator or similar fiduciary in respect of
itself or any substantial part of its assets, or shall make an assignment
for the benefit of creditors, or shall commence any case or other proceeding
or any petition for an order for relief shall be filed by or against any
such Person under applicable bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law
of any jurisdiction, now or hereafter in effect or shall take any action to
authorize or in furtherance of any of the foregoing (or if any such petition
or application shall be filed or any such case or other proceeding shall be
commenced against such Person, such Person shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within sixty (60) days following
the filing thereof); or a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating any Borrower or
any of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of any Borrower or any of its Subsidiaries in an
involuntary case under federal bankruptcy laws as now or hereafter
constituted.
10.1.9. Business Disruption; Condemnation. There shall
---------------------------------
occur a cessation of a substantial part of the business of any Borrower, any
Subsidiary or any Guarantor for a period which materially adversely affects
such Borrower's, such Subsidiary's or such Guarantor's capacity to continue
its business on a profitable basis; or any Borrower, any
-87-
Subsidiary or any Guarantor shall suffer the loss or revocation of any
material license or permit now held or hereafter acquired by such Borrower,
such Subsidiary or such Guarantor which is necessary to the continued or
lawful operation of its business; or any Borrower, any Subsidiary or any
Guarantor shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material
part of its business affairs; or any material lease or agreement pursuant to
which any Borrower, any Subsidiary or any Guarantor leases, uses or occupies
any Property shall be canceled or terminated prior to the expiration of its
stated term, except any such lease or agreement the cancellation or
termination of which could not reasonably be expected to have a Material
Adverse Effect; or any material portion of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
10.1.10. ERISA. A Reportable Event shall occur which, in
-----
Agent's reasonable determination, constitutes grounds for the termination by
the Pension Benefit Guaranty Corporation of any Plan or for the appointment
by the appropriate United States district court of a trustee for any Plan,
or if any Plan shall be terminated or any such trustee shall be requested or
appointed, or any Borrower, any Subsidiary or any Guarantor is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from such Borrower's, such Subsidiary's or such
Guarantor's complete or partial withdrawal from such Plan and, in each case,
any such event could reasonably be expected to have a Material Adverse
Effect.
10.1.11. Challenge to Agreement. Any Borrower, any
----------------------
Subsidiary or any Guarantor, or any Affiliate of any of them, shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Agent.
10.1.12. Repudiation of or Default Under Guaranty
----------------------------------------
Agreement. Any Guarantor shall revoke or attempt to revoke the Guaranty
---------
Agreement signed by such Guarantor, or shall repudiate such Guarantor's
liability thereunder or shall be in default under the terms thereof.
10.1.13. Criminal Forfeiture. Any Borrower, any Subsidiary
-------------------
or any Guarantor shall be criminally indicted or convicted under any law
that could lead to a forfeiture of any material Property of such Borrower,
such Subsidiary or such Guarantor.
10.1.14. Judgments. Any money judgments, writ of
---------
attachment or similar processes (collectively, "Judgments") are issued or
rendered against any Borrower, any Subsidiary or any Guarantor, or any of
their respective Property (i) in the case of money judgments, in an amount
of $100,000 or more for any single judgment, attachment or process or
$250,000 or more for all such judgments, attachments or processes in the
aggregate, in each case in excess of any applicable insurance with respect
to which the insurer has admitted liability, and (ii) in the case of
non-monetary Judgments, such Judgment or Judgments (in the aggregate) could
reasonably be expected to have a material Adverse
-88-
Effect, in each case which Judgment is not stayed, released or discharged
within thirty (30) days.
10.2. Acceleration of the Obligations and Other Remedies.
--------------------------------------------------
(a) Upon or at any time after the occurrence and
during the continuance of an Event of Default, (i) the Revolving
Loan Commitments shall, at the option of Agent, Majority Revolving
Credit Lenders or Majority Term Loan Lenders be terminated and/or
(ii) Agent, Majority Revolving Credit Lenders or Majority Term Loan
Lenders may terminate this Agreement and/or declare all or any
portion of the Obligations at once due and payable without
presentment, demand protest or further notice by Agent or any
Lender, and Borrowers shall forthwith pay to Agent, the full amount
of such Obligations, provided, that upon the occurrence of an Event
--------
of Default specified in subsection 10.1.8 hereof, the Revolving
Loan Commitments shall automatically be terminated and all of the
Obligations shall become automatically due and payable, in each
case without declaration, notice or demand by Agent or any Lender.
(b) Agent shall take such action with respect to any
Default or Event of Default as shall be directed by the Majority
Term Loan Lenders; provided, that unless and until Agent shall have
--------
received such directions, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and
in the best interests of Agent and Lenders, including any action
(or the failure to act) pursuant to the Loan Documents.
(c) Subject to the Intercreditor Agreement, and
notwithstanding clauses (a) and (b) of this Section 10.2, upon or
at any time after the occurrence and during the continuance of an
Event of Default, the Majority Term Loan Lenders shall have the
right to direct Agent to issue a blocking notice with respect to
any Subordinated Debt, and Agent shall promptly pursue such action
as directed by the Majority Term Loan Lenders in good faith and in
a commercially reasonable manner.
10.3. Other Remedies.
--------------
Upon the occurrence and during the continuance of an Event
of Default, Agent shall have and may exercise from time to time the
following other rights and remedies:
10.3.1. All of the rights and remedies of a secured party
under the UCC or under other applicable law, and all other legal and
equitable rights to which Agent or Lenders may be entitled, all of which
rights and remedies shall be cumulative and shall be in addition to any
other rights or remedies contained in this Agreement or any of the other
Loan Documents, and none of which shall be exclusive.
10.3.2. The right to take immediate possession of the
Collateral, and to (i) require each Borrower and each of its Subsidiaries to
assemble the Collateral, at Borrowers'
-89-
joint and several expense, and make it available to Agent at a place
designated by Agent which is reasonably convenient to both parties, and (ii)
enter any premises where any of the Collateral shall be located and to keep
and store the Collateral on said premises until sold (and if said premises
be the Property of any Borrower or any Subsidiary, such Borrower agrees not
to charge, or permit any Subsidiary to charge, Agent for storage thereof).
10.3.3. Subject to subsection 11.13, the right to sell or
otherwise dispose of all or any Collateral in its then condition, or after
any further manufacturing or processing thereof, at public or private sale
or sales, with such notice as may be required by law, in lots or in bulk,
for cash or on credit, all as Agent, in its sole discretion, may deem
advisable. Agent may, at Agent's option, disclaim any and all warranties
regarding the Collateral in connection with any such sale. Each Borrower
agrees that ten (10) days' written notice to such Borrower or any of its
Restricted Subsidiaries of any public or private sale or other disposition
of Collateral shall be reasonable notice thereof, and such sale shall be at
such locations as Agent may designate in said notice. Agent shall have the
right to conduct such sales on any Borrower's or any of its Subsidiaries'
premises, without charge therefor, and such sales may be adjourned from time
to time in accordance with applicable law. Agent shall have the right to
sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Agent, on behalf of Lenders,
may purchase all or any part of the Collateral at public or, if permitted by
law, private sale and, in lieu of actual payment of such purchase price, may
set off the amount of such price against the obligations. The proceeds
realized from the sale of any Collateral may be applied, after allowing two
(2) Business Days for collection, as provided in Section 3.11. If any
deficiency shall arise, each Borrower and each Guarantor shall remain
jointly and severally liable to Agent and Lenders therefor.
10.3.4. To the maximum extent such Borrower has the lawful
right to do so, Agent is hereby granted a license or other right to use,
without charge, (a) each Borrower's and each Subsidiary's labels, patents,
copyrights, licenses, rights of use of any name, trade secrets, tradenames,
trademarks and advertising matter, or any Property of a similar nature, as
it pertains to the Collateral, in completing, advertising for sale and
selling any Collateral and (b) each Borrower's and each Subsidiary's rights
under all licenses and all franchise agreements shall inure to Agent's
benefit.
10.3.5. Agent may, at its option, require Borrowers to
deposit with Agent funds equal to 105% of the LC Amount and, if Borrowers
fail to promptly make such deposit, Agent may advance such amount as a
Revolving Credit Loan (whether or not an Overadvance is created thereby).
Each such Revolving Credit Loan shall be secured by all of the Collateral
and shall constitute a Base Rate Portion. Any such deposit or advance shall
be held by Agent as a reserve to fund future payments on such LC Guaranties
and future drawings against such Letters of Credit. At such time as all LC
Guaranties have been paid or terminated and all Letters of Credit have been
drawn upon or expired, any amount remaining in such reserve shall be applied
against any outstanding Obligations, or, if all obligations have been
indefeasibly paid in full, returned to Borrowers.
-90-
10.4. Set Off and Sharing of Payments.
-------------------------------
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, during the
continuance of any Event of Default, each Lender is hereby authorized by
each Borrower at any time or from time to time, with prior written consent
of Agent and with reasonably prompt subsequent notice to such Borrower (any
prior or contemporaneous notice to such Borrower being hereby expressly
waived) to set off and to appropriate and to apply any and all (i) balances
held by such Lender at any of its offices for the account of such Borrower
or any of its Subsidiaries (regardless of whether such balances are then due
to such Borrower or its Subsidiaries), and (ii) other property at any time
held or owing by such Lender to or for the credit or for the account of such
Borrower or any of its Subsidiaries, against and on account of any of the
Obligations. Each Borrower agrees, to the fullest extent permitted by law,
that any Lender may exercise its right to set off with respect to amounts in
excess of its pro rata share of the Obligations and upon doing so shall
deliver such excess to Agent for the benefit of all Lenders in accordance
with the priorities set forth herein. Any such setoff shall be subject to
the provisions of Section 3.10.
10.5. Remedies Cumulative; No Waiver.
------------------------------
All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of each Borrower contained
in this Agreement and the other Loan Documents, or in any document referred
to herein or contained in any agreement supplementary hereto or in any
schedule or in any Guaranty Agreement given to Agent or any Lender or
contained in any other agreement between any Lender and such Borrower or
between Agent and such Borrower heretofore, concurrently, or hereafter
entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
such Borrower herein contained. The failure or delay of Agent or any Lender
to require strict performance by any Borrower of any provision of this
Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens,
rights, powers, and remedies shall continue in full force and effect until
all Loans and other Obligations owing or to become owing from such Borrower
to Agent and each Lender have been fully satisfied. None of the
undertakings, agreements, warranties, covenants and representations of any
Borrower contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Borrower under this Agreement or any
other Loan Documents shall be deemed to have been suspended or waived by
Lenders, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of Agent and Majority Lenders or all Lenders (in any case, as
applicable) and directed to Borrowers.
-91-
Section 11. THE AGENT; CERTAIN PROVISIONS RELATING TO LENDERS
-------------------------------------------------
11.1. Authorization and Action.
------------------------
Each Lender hereby appoints and authorizes Agent to take
such action on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to Agent by the terms hereof
and thereof, together with such powers as are reasonably incidental thereto.
Each Lender hereby acknowledges that Agent shall not have by reason of this
Agreement assumed a fiduciary relationship in respect of any Lender. In
performing its functions and duties under this Agreement, Agent shall act
solely as agent of Lenders and shall not assume, or be deemed to have
assumed, any obligation toward, or relationship of agency or trust with or
for, any Borrower. As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including without limitation
enforcement and collection of the Notes), Agent may, but shall not be
required to, exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of Majority
Lenders, whenever such instruction shall be requested by Agent or required
hereunder, or a greater or lesser number of Lenders if so required
hereunder, and such instructions shall be binding upon all Lenders;
provided, that Agent shall be fully justified in failing or refusing to take
--------
any action which exposes Agent to any liability or which is contrary to this
Agreement, the other Loan Documents or applicable law, unless Agent is
indemnified to its satisfaction by the other Lenders against any and all
liability and expense which it may incur by reason of taking or continuing
to take any such action. If Agent seeks the consent or approval of Majority
Lenders, or a greater or lesser number of Lenders as required in this
Agreement, with respect to any action hereunder, Agent shall send notice
thereof to each Lender and shall notify each Lender at any time that
Majority Lenders, or such greater or lesser number of Lenders have
instructed Agent to act or refrain from acting pursuant hereto.
11.2. Agent's Reliance, Etc.
---------------------
Neither Agent, any Affiliate of Agent, nor any of their
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality
of the foregoing, Agent: (i) may treat each Lender party hereto as the
holder of Obligations until Agent receives written notice of the assignment
or transfer or such lender's portion of the Obligations signed by such
Lender and in form reasonably satisfactory to Agent; (ii) may consult with
legal counsel, independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants
or experts, (iii) makes no warranties or representations to any Lender and
shall not be responsible to any Lender for any recitals, statements,
warranties or representations made in or in connection with this Agreement
or any other Loan Documents; (iv) shall not have any duty beyond Agent's
customary practices in respect of loans in which Agent is the only lender,
to ascertain or to inquire as to the
-92-
performance or observance of any of the terms, covenants or conditions of
this Agreement or the other Loan Documents on the part of any Borrower, to
inspect the property (including the books and records) of any Borrower, to
monitor the financial condition of any Borrower or to ascertain the
existence or possible existence or continuation of any Default or Event of
Default; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of
this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (vi) shall not be liable to
any Lender for any action taken, or inaction, by Agent upon the instructions
of Majority Lenders or a greater or lesser number of Lenders, as required
pursuant to Section 11.1 hereof or refraining to take any action pending
such instructions; (vii) shall not be liable for any apportionment or
distributions of payments made by it in good faith pursuant to Section 3
hereof; (viii) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate, message or other instrument or writing (which may be by
telephone, facsimile, telegram, cable or telex) believed in good faith by it
to be genuine and signed or sent by the proper party or parties; and (ix)
may assume that no Event of Default has occurred and is continuing, unless
Agent has actual knowledge of the Event of Default, has received notice from
a Borrower or a Borrower's independent certified public accounts stating the
nature of the Event of Default, or has received notice from a Lender stating
the nature of the Event of Default and that such Lender considers the Event
of Default to have occurred and to be continuing. In the event any
apportionment or distribution described in clause (vii) above is determined
to have been made in error, the sole recourse of any Person to whom payment
was due but not made shall be to recover from the recipients of such
payments any payment in excess of the amount to which they are determined to
have been entitled.
11.3. Fleet and Affiliates.
--------------------
With respect to its commitment hereunder to make Loans,
Fleet shall have the same rights and powers under this Agreement and the
other Loan Documents as any other Lender and may exercise the same as though
it were not Agent; and the terms "Lender," "Lenders," "Revolving Credit
Lenders," "Term Loan Lenders" (if applicable) and "Majority Lenders" shall,
unless otherwise expressly indicated, include Fleet in its individual
capacity as a Lender. Fleet and its Affiliates may lend money to, and
generally engage in any kind of business with, Borrowers, and any Person who
may do business with or own Securities of Borrowers, in each case, to the
extent not in violation of this Agreement, all as if Fleet were not Agent
and without any duty to account therefor to any other Lender.
11.4. Lender Credit Decision.
----------------------
Each Lender acknowledges that it has, independently and
without reliance upon Agent or any other Lender and based on the financial
statements referred to herein and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own
-93-
credit decisions in taking or not taking action under this Agreement. Agent
shall not have any duty or responsibility, either initially or on an ongoing
basis, to provide any Lender with any credit or other similar information
regarding Borrowers.
11.5. Indemnification.
---------------
Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers), in accordance with their respective Aggregate
Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any action taken or omitted
by Agent under this Agreement; provided, that no Lender shall be liable for
--------
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence or willful misconduct. Without limitation of the
foregoing; each Lender agrees to reimburse Agent promptly upon demand for
its ratable share, as set forth above, of any out-of-pocket expenses
(including attorneys' fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiation, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Borrowers. The obligations of Lenders under
this Section 11.5 shall survive the payment in full of all obligations and
the termination of this Agreement. If after payment and distribution of any
amount by Agent to Lenders, any Lender or any other Person, including
Borrowers, any creditor of Borrowers, a liquidator, administrator or trustee
in bankruptcy, recovers from Agent any amount found to have been wrongfully
paid to Agent or disbursed by Agent to Lenders, then Lenders, in accordance
with their respective Aggregate Percentages, shall reimburse Agent for all
such amounts.
11.6. Rights and Remedies to be Exercised by Agent Only.
-------------------------------------------------
Each Lender agrees that, except as set forth in Sections
10.2 and 10.4, no Lender shall have any right individually (i) to realize
upon the security created by this Agreement or any other Loan Document, (ii)
to enforce any provision of this Agreement or any other Loan Document that
does not run directly to the benefit of such Lender, or (iii) directly to
make demand of Borrowers under this Agreement or any other Loan Document.
11.7. Agency Provisions Relating to Collateral.
----------------------------------------
Each Lender authorizes and ratifies Agent's entry into
this Agreement and the Security Documents for the benefit of Lenders. Each
Lender agrees that any action taken by Agent with respect to the Collateral
in accordance with the provisions of this Agreement or the Security
Documents, and the exercise by Agent of the powers set forth herein or
therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders. Agent is hereby
authorized on behalf of all Lenders, without the necessity of any notice to
or further consent from any Lender to take any action with respect
-94-
to any Collateral or the Loan Documents which may be necessary to perfect
and maintain perfected Agent's Liens upon the Collateral, for its benefit
and the ratable benefit of Lenders. Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to release any Lien granted to
or held by Agent upon any Collateral (i) upon termination of the Agreement
and payment and satisfaction of all obligations; or (ii) constituting
property being sold or disposed of if Borrowers certify to Agent that the
sale or disposition is made in compliance with subsection 8.2.9 hereof, as
it may be amended from time to time (and Agent may rely conclusively on any
such certificate, without further inquiry); or (iii) constituting property
in which no Borrower owned any interest at the time the Lien was granted or
at any time thereafter; or (iv) subject to subsection 11.13, in connection
with any foreclosure sale or other enforcement action with respect to
Collateral or in connection with the other exercise by Agent of remedies
hereunder, in each case after the occurrence and during the continuation of
an Event of Default or (v) if approved, authorized or ratified in writing by
Agent at the direction of all Lenders. Upon request by Agent at any time,
Lenders will confirm in writing Agent's authority to release particular
types or items of Collateral pursuant hereto. Agent shall have no obligation
whatsoever to any Lender or to any other Person to assure that the
Collateral exists or is owned by a Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent herein or
pursuant to the Security Documents have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or
under any duty of care, disclosure or fidelity, or to continue exercising,
any of its rights, authorities and powers granted or available to Agent in
this Section 11.7 or in any of the Loan Documents, it being understood and
agreed that in respect of the Collateral, or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
sole discretion, but consistent with the provisions of this Agreement,
including given Agent's own interest in the Collateral as a Lender and that
Agent shall have no duty or liability whatsoever to any Lender, except as
otherwise provided herein. Borrowers and each Lender agrees that Agent shall
be the joint and several creditor of each and every obligation of Borrowers
towards each Lender under the Loan Documents, and that, accordingly, Agent
will have its own independent right to demand performance by Borrowers of
those obligations.
11.8. Agent's Right to Purchase Commitments.
-------------------------------------
Agent shall have the right, but shall not be obligated, at
any time upon written notice to any Lender and with the consent of such
Lender, which may be granted or withheld in such Lender's sole discretion,
to purchase for Agent's own account all of such Lender's interests in this
Agreement, the other Loan Documents and the obligations, for the face amount
of the outstanding obligations owed to such Lender, including without
limitation all accrued and unpaid interest and fees.
11.9. Right of Sale, Assignment, Participations.
-----------------------------------------
Borrowers hereby consent to any Lender's participation,
sale, assignment, transfer or other disposition, at any time or times
hereafter, of this Agreement and any of the
-95-
other Loan Documents to any bank or other institutional lender, or of any
portion hereof or thereof, including, without limitation, such Lender's
rights, title, interests, remedies, powers, and duties hereunder or
thereunder subject to the terms and conditions set forth below:
11.9.1. Sales, Assignments. Each Revolving Credit Lender
------------------
and Term Loan Lender hereby agrees that, with respect to any sale or
assignment by it (i) no such sale or assignment shall be for an amount of
less than $1,000,000 or, if less, the aggregate outstanding amount of
Revolving Credit Loans or the Term Loan owing to it (except that no such
minimum amount shall apply to an assignment by a Revolving Credit Lender or
Term Loan Lender to an Affiliate of such Revolving Credit Lender or Term
Loan Lender, as the case may be, or a fund or account managed by such
Revolving Credit Lender or Term Loan Lender or an Affiliate of such
Revolving Credit Lender or Term Loan Lender, as the case may be), (ii) each
such sale or assignment shall be made on terms and conditions which are
customary in the industry at the time of the transaction, (iii) Agent must
consent, such consent not to be unreasonably withheld, to each such
assignment of all or any part of the Revolving Loan Commitments or Revolving
Credit Loans to a Person that is not an original signatory to this
Agreement, (iv) the assigning Revolving Credit Lender or Term Loan Lender,
as the case may be, shall pay to Agent a processing and recordation fee of
$3,500 (except that no such fee shall be required in connection with an
assignment by a Revolving Credit Lender or Term Loan Lender to an Affiliate
of such Revolving Credit Lender or Term Loan Lender, as the case may be, or
a fund or account managed by such Revolving Credit Lender or Term Loan
Lender, as the case may be, or an Affiliate of such Revolving Credit Lender
or Term Loan Lender, as the case may be,) and any out-of-pocket attorneys'
fees and expenses incurred by Agent in connection with any such sale or
assignment and (v) the assigning Revolving Credit Lender or Term Loan
Lender, as the case may be, and the assignee Revolving Credit Lender or Term
Loan Lender shall each have executed and delivered an Assignment and
Acceptance Agreement, pursuant to which, among other things, the assignee
Lender shall agree to be bound by the terms of the Intercreditor Agreement.
After such sale or assignment has been consummated (x) the assignee
Revolving Credit Lender or Term Loan Lender thereupon shall become a
"Lender" and a "Revolving Credit Lender" or "Term Loan Lender," as the case
may be, for all purposes of this Agreement and (y) the assigning Revolving
Credit Lender shall have no further liability for funding the portion of
Revolving Loan Commitments assumed by such other Revolving Credit Lender.
11.9.2. Participations. Any Lender may grant
--------------
participations in its extensions of credit hereunder to any other Lender or
other lending institution (a "Participant"), provided that (i) no such
--------
participation shall be for an amount of less than $1,000,000 (except that no
such minimum amount shall apply to a participation by a Lender to an
Affiliate of such Lender or to a fund or account managed by such Lender or
an Affiliate of such Lender), (ii) no Participant shall thereby acquire any
direct rights under this Agreement, (iii) no Participant shall be granted
any right to consent to any amendment, except to the extent any of the same
pertain to (1) reducing the aggregate principal amount of, or interest rate
on, or fees applicable to, any Loan, (2) extending the final stated maturity
of any Loan or the stated maturity of any portion of any payment of
principal of, or interest or fees applicable to, any of the Loans, (3) any
amendment that pursuant to the terms of subsection 11.10 requires the
-96-
vote of all Lenders or (4) any amendment to subsection 8.2.8 or Section 8.3;
provided, that the rights described in this subclause (2) shall not be
--------
deemed to include the right to consent to any amendment with respect to or
which has the effect of requiring any mandatory prepayment of any portion of
any Loan or any amendment or waiver of any Default or Event of Default, (iv)
no sale of a participation in extensions of credit shall in any manner
relieve the originating Lender of its obligations hereunder, (v) the
originating Lender shall remain solely responsible for the performance of
such obligations, (vi) Borrowers and Agent shall continue to deal solely and
directly with the originating Lender in connection with the originating
Lender's rights and obligations under this Agreement and the other Loan
Documents, and (vii) all amounts payable by Borrowers hereunder shall be
determined as if the originating Lender had not sold any such participation.
11.9.3. Certain Agreements of Borrowers. Each Borrower
-------------------------------
agrees that (i) it will use its best efforts to assist and cooperate with
each Lender in any manner reasonably requested by such Lender to effect the
sale of participation in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation,
assisting in the preparation of appropriate disclosure documents and making
members of management available at reasonable times to meet with and answer
questions of potential assignees and Participants; and (ii) subject to the
provisions of Section 12.14 hereof, such Lender may disclose credit
information regarding Borrowers to any potential Participant or assignee.
11.9.4. Non U.S. Resident Transferees. If, pursuant to
-----------------------------
this Section 11.9, any interest in this Agreement or any Loans is
transferred to any transferee which is organized under the laws of any
jurisdiction other than the United States or any state thereof, the
transferor Lender shall cause such transferee (other than any Participant),
and may cause any Participant, concurrently with and as a condition
precedent to the effectiveness of such transfer, to (i) represent to the
transferor Lender (for the benefit of the transferor Lender, Agent, and
Borrowers) that under applicable law and treaties no taxes will be required
to be withheld by Agent, Borrowers or the transferor Lender with respect to
any payments to be made to such transferee in respect of the interest so
transferred, (ii) furnish to the transferor Lender, Agent and Borrowers
either United States Internal Revenue Service Form W-8BEN or United States
Internal Revenue Service Form W-8ECI (wherein such transferee claims
entitlement to complete exemption from United States federal withholding tax
on all interest payments hereunder), and (iii) agree (for the benefit of the
transferor Lender, Agent and Borrowers) to provide the transferor Lender,
Agent and Borrowers a new Form W-8BEN or Form W-8ECI upon the obsolescence
of any previously delivered form and comparable statements in accordance
with applicable United States laws and regulations and amendments duly
executed and completed by such transferee, and to comply from time to time
with all applicable United States laws and regulations with regard to such
withholding tax exemption.
-97-
11.10. Amendment.
---------
No amendment or waiver of any provision of this Agreement
(including without limitation, any waiver of any Event of Default or
Default) or any other Loan Document (including without limitation any Note),
nor consent to any departure by any Borrower therefrom, shall in any event
be effective unless the same shall be in writing and signed by Majority
Lenders and Borrowers, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, that no amendment, waiver or consent shall:
--------
(i) do any of the following, unless in writing
and signed by each Lender: (1) increase any Term Loan
Lender's Term Loan Commitment, (2) reduce the number of
Revolving Credit Lenders and/or Term Loan Lenders which
shall be required for Lenders, any class of Lenders or any
Lender to take any action hereunder, (3) amend any
provision of this Agreement that requires the consent of
all Lenders or consent to or waive any breach thereof, (4)
amend the definition of the term "Majority Lenders", (5)
amend Section 3.11 or this Section 11.10, (6) share the
Lien of the Collateral with any other obligations of
Borrowers, (7) release or subordinate Agent's Lien on any
Collateral other than releases permitted pursuant to
Section 11.7, or (8) except as specifically provided in
subsection 11.10(iv) below, amend, modify, waive or
consent to any departure from the amortization schedule or
any mandatory or required prepayment (whether or not
scheduled) of the principal of the Term Loan;
(ii) do any of the following, unless in writing
and signed by all Revolving Credit Lenders and Term Loan
Lenders holding 75% or more of the outstanding Term Loan:
(1) increase the aggregate Loan Commitments or any
Revolving Credit Lender's Revolving Loan Commitment, (2)
increase the amount of Overadvances permitted under
subsection 1.1.2 or the amount of Agent Loans permitted
under subsection 1.1.4, (3) increase any advance
percentage contained in the definition of the term
"Borrowing Base" or (4) amend the definitions of the terms
"Borrowing Base," "Eligible Account" or "Eligible
Inventory" in a manner that increases the amount of
Revolving Credit Loans available thereunder;
(iii) do any of the following, unless in writing
and signed by all Revolving Credit Lenders (it being
agreed and understood that no approval from any Term Loan
Lender shall be required for the following): (1) decrease
any interest rate payable hereunder in respect of the
Revolving Credit Loans (including the Default Rate), (2)
reduce the principal of, or interest on, any amount
payable hereunder in respect of the Revolving Credit
Loans, or under any Revolving Note, or reduce
-98-
the amount of any fee or expense reimbursement payable to
Agent or Revolving Credit Lenders, other than those
payable only to Fleet in its capacity as Agent, which may
be reduced by Fleet unilaterally, or (3) postpone any date
fixed for any payment of principal of, or interest on, any
amounts payable hereunder in respect of the Revolving
Credit Loans or under any Revolving Note, or any date
fixed for any payment of any fees or expense
reimbursements owing to Agent or Revolving Credit Lenders,
other than those payable only to Fleet in its capacity as
Agent, which may be postponed by Fleet unilaterally;
(iv) so any of the following, unless in writing
and signed by all Term Loan Lenders (it being agreed and
understood that no approval from any Revolving Credit
Lender shall be required for the following): (1) decrease
any interest rate payable hereunder in respect of the Term
Loan (including the Default Rate), (2) reduce the
principal of, or interest on, any amount payable hereunder
in respect of the Term Loan, or under any Term Note or
reduce the amount of any fee or expense reimbursement
payable to Term Loan Lenders, or (3) postpone any date
fixed for any payment of principal of, or interest on, any
amounts payable hereunder in respect of the Term Loan or
under any Term Note, or any date fixed for any payment of
any fees or expense reimbursements owing to Term Loan
Lenders;
(v) affect the rights or duties of Agent under
this Agreement, any Note or any other Loan Document unless
in writing and signed by Agent in addition to Majority
Lenders; and
(vi) In addition, no amendment or waiver of any
provision of this Agreement, the Notes or any other Loan
Document or any consent to any departure by Borrowers
therefrom, which requires or includes a voting threshold
other than Majority Lenders, shall be effective unless
signed by Lenders constituting at least the necessary
number or percentage of Lenders required hereby for any
such amendment, waiver, departure or consent.
If a fee is to be paid by Borrowers in connection with any
waiver or amendment hereunder, the agreement evidencing such amendment or
waiver may, at the discretion of Agent (but shall not be required to),
provide that only Lenders executing such agreement by a specified date may
share in such fee (and in such case, such fee shall be divided among the
applicable Lenders on a pro rata basis without including the interests of
any Lenders who have not timely executed such agreement).
11.11. Resignation of Agent; Appointment of Successor.
----------------------------------------------
(a) Subject to the appointment of a successor Agent
in the manner set forth below, and the acceptance of such
appointment by such successor Agent,
-99-
Agent may resign as Agent by giving not less than thirty (30) days'
prior written notice to Lenders and Borrowers. If Agent shall
resign under this Agreement, then, (i) subject to the consent of
Borrowers (which consent shall not be unreasonably withheld and
which consent shall not be required during any period in which a
Default or an Event of Default exists), Majority Lenders shall
appoint from among Lenders a successor agent for Lenders or (ii) if
a successor agent shall not be so appointed and approved within the
thirty (30) day period following Agent's notice to Lenders and
Borrowers of its resignation, then Agent shall appoint a successor
agent who shall serve as Agent until such time as Majority Lenders
appoint a successor agent, subject to Borrowers' consent as set
forth above.
(b) If Agent shall fail or refuse to act or refrain
from acting upon and in accordance with instructions given in
accordance with the provisions of this Agreement by Majority Term
Loan Lenders, and such failure or refusal is not occasioned by the
inability or unwillingness of such Majority Term Loan Lenders to
provide Agent with satisfactory indemnification to which Agent is
entitled pursuant to subsection 11.1, then Majority Term Loan
Lenders may, upon notice in writing to Agent, remove Agent (which
removal shall be effective as of the date specified such notice)
and appoint from among the Term Loan Lenders a successor agent for
Lenders. It is agreed and understood that Agent shall not be
required to resign its position except pursuant to the terms of
this subsection 11.11(b). It is further agreed and understood that
in connection with, and at the time of, the removal of Agent
pursuant to the terms of this subsection 11.11(b) Designated Term
Buyout Lender shall be required to purchase all of the Revolving
Loan Commitments held by, and all of the Revolving Credit Loans and
other Obligations owing to, Agent in its capacity as a Revolving
Credit Lender hereunder in accordance with the provisions of
subsection 11.13.
(c) Upon its appointment, any such successor agent
shall succeed to the rights, powers and duties of Agent and the
term "Agent" shall mean such successor effective upon its
appointment, and the former Agent's rights, powers and duties as
Agent shall be terminated without any other or further act or deed
on the part of such former Agent or any of the parties to this
Agreement. After the resignation or removal of any Agent hereunder,
the provisions of this Section 11 shall inure to the benefit of
such former Agent and such former Agent shall not by reason of such
resignation or removal be deemed to be released from liability for
any actions taken or not taken by it while it was an Agent under
this Agreement.
11.12. Audit and Examination Reports; Disclaimer by
--------------------------------------------
Lenders.
-------
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish
such Lender, promptly after it becomes available, a copy of each
audit or examination report (each a "Report" and collectively,
"Reports") prepared by or on behalf of Agent;
-100-
(b) expressly agrees and acknowledges that Agent (i)
does not make any representation or warranty as to the accuracy of
any Report, and (ii) shall not be liable for any information
contained in any Report;
(c) expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or
other party performing any audit or examination will inspect only
specific information regarding each Borrower and will rely
significantly upon each Borrower's books and records, as well as on
representations of each Borrower's personnel;
(d) agrees to keep all Reports confidential and
strictly for its internal use, and not to distribute except to its
participants, or use any Report in any other manner, in accordance
with the provisions of Section 12.14; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i)
to hold Agent and any such other Lender preparing a Report harmless
from any action the indemnifying Lender may take or conclusion the
indemnifying Lender may reach or draw from any Report in connection
with any loans or other credit accommodations that the indemnifying
Lender has made or may make to any Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of any Borrower; and (ii) to pay and protect,
and indemnify, defend and hold Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses and other amounts (including
attorney's fees and expenses) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through
the indemnifying Lender.
11.13. Buyout Right.
------------
(a) Designated Term Buyout Lender shall have the
right at any time to deliver to Agent a Buyout Notice, and, within
ten (10) Business Days after delivery to Agent of any such Buyout
Notice, to consummate a Buyout. Any Buyout Notice given by
Designated Term Buyout Lender shall be irrevocable. The failure of
Designated Term Buyout Lender to timely consummate a Buyout in any
instance shall constitute a waiver by Designated Term Buyout Lender
of its rights under this subsection 11.13. In addition, if
Designated Term Buyout Lender fails to timely consummate a Buyout
that is the subject of a Buyout Notice, Agent and Revolving Credit
Lenders shall be entitled to bring legal action against Designated
Term Buyout Lender for equitable relief (including specific
performance) in respect thereof. Notwithstanding anything to the
contrary contained herein, Agent shall be entitled to pursue any
enforcement action available to Agent under the Loan Documents and
applicable law regardless of Designated Term Buyout Lender's rights
under this subsection 11.13 or the receipt by Agent of a Buyout
Notice.
(b) Upon consummation of a Buyout, Agent will assign
all of its Liens to Designated Term Buyout Lender and resign as
Agent hereunder and Designated Term
-101-
Buyout Lender will succeed to the role as Agent in accordance with
the provisions of subsection 11.11.
(c) Notwithstanding the foregoing, (i) Designated
Term Buyout Lender's right to consummate a Buyout shall be
immediately terminated, regardless of whether Designated Term
Buyout Lender has previously delivered a Buyout Notice, at such
time as a "Purchase Notice" (as defined in the Intercreditor
Agreement) has been delivered in order to effect a purchase of the
Revolving Credit Commitments and (ii) if a Buyout is consummated by
Designated Term Buyout Lender in connection with which the
prepayment fees payable to Revolving Credit Lenders pursuant to
Section 2.6(a) were not payable, and a Purchase Notice is delivered
in order to effect a purchase of the Revolving Loan Commitments
within thirty (30) days after the date of such consummation,
Designated Term Buyout Lender shall remit to the Persons from whom
Designated Term Buyout Lender purchased such Revolving Loan
Commitments, the amount of any prepayment fee in respect of the
Revolving Loan Commitments actually received by Designated Term
Buyout Lender in connection with the purchase described in such
Purchase Notice.
Section 12. MISCELLANEOUS
-------------
12.1. Power of Attorney.
-----------------
Each Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as such
Borrower's true and lawful attorney (and agent-in-fact), solely with respect
to the matters set forth in this Section 12.1, and Agent, or Agent's agent,
may, without notice to any Borrower and in such Borrower's or Agent's name,
but at the cost and expense of such Borrower:
12.1.1. At such time or times as Agent or said agent, in
its sole discretion, may determine, endorse such Borrower's name on any
checks, notes, acceptances, drafts, money orders or any other evidence of
payment or proceeds of the Collateral which come into the possession of
Agent or under Agent's control.
12.1.2. At such time or times upon or after the occurrence
and during the continuance of an Event of Default (provided that the
occurrence of an Event of Default shall not be required with respect to
clauses (iv), (vi), (ix) and (x) below), as Agent or its agent in its sole
discretion may determine: (i) demand payment of the Accounts from the
Account Debtors, enforce payment of the Accounts by legal proceedings or
otherwise, and generally exercise all of such Borrower's rights and remedies
with respect to the collection of the Accounts; (ii) settle, adjust,
compromise, discharge or release any of the Accounts or other Collateral or
any legal proceedings brought to collect any of the Accounts or other
Collateral; (iii) sell or assign any of the Accounts and other Collateral
upon such terms, for such amounts and at such time or times as Agent deems
advisable, and at Agent's option, with all warranties regarding the
Collateral disclaimed; (iv) take control, in any manner, of any item of
payment or proceeds relating to any Collateral; (v) prepare, file and sign
such Borrower's name to a proof of claim in bankruptcy or similar document
against any Account Debtor or to any notice of lien, assignment or
satisfaction of lien or similar document in connection
-102-
with any of the Collateral; (vi) receive and open all mail received by Agent
and addressed to such Borrower, (vii) notify postal authorities to change
the address for delivery thereof to such address as Agent may designate;
(viii) endorse the name of such Borrower upon any of the items of payment or
proceeds relating to any Collateral and deposit the same to the account of
Agent on account of the Obligations; (ix) endorse the name of such Borrower
upon any chattel paper, document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of
lading or similar document or agreement relating to the Accounts, Inventory
and any other Collateral; (x) use such Borrower's stationery and sign the
name of such Borrower to verifications of the Accounts and notices thereof
to Account Debtors; (xi) use the information recorded on or contained in any
data processing equipment and Computer Hardware and Software relating to the
Accounts, Inventory, Equipment and any other Collateral; (xii) make and
adjust claims under policies of insurance; and (xiii) do all other acts and
things necessary, in Agent's reasonable determination, to fulfill such
Borrower's obligations under this Agreement.
The power of attorney granted hereby shall constitute a
power coupled with an interest and shall be irrevocable.
12.2. Indemnity.
---------
Borrowers hereby agree to jointly and severally indemnify
Agent and each Lender (and each of their Affiliates) and hold Agent and each
Lender (and each of their Affiliates) harmless from and against any
liability, loss, damage, suit, action or proceeding ever suffered or
incurred by any such Person (including reasonable attorneys fees and legal
expenses) as the result of such Borrower's failure to observe, perform or
discharge such Borrower's duties hereunder. In addition, Borrowers shall
jointly and severally defend Agent and each Lender (and each of their
Affiliates) against and save it harmless from all claims of any Person with
respect to the Collateral (except those resulting from the gross negligence
or intentional misconduct of any such indemnified Person). Without limiting
the generality of the foregoing, these indemnities shall extend to any loss,
damage, cost, expense or liability incurred by Agent or any Lender (or any
of their Affiliates) or any claim asserted against Agent or any Lender (or
any of their Affiliates) by any Person, directly or indirectly arising out
of or attributable to (i) the use, generation, storage, release, threatened
release, discharge, disposal or presence of any solid or hazardous waste on,
under or about the Collateral or (ii) any Borrower's or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials
or other toxic substances. Notwithstanding any contrary provision in this
Agreement, the obligation of Borrowers under this Section 12.2 shall survive
the payment in full of the Obligations and the termination of this
Agreement.
12.3. Sale of Interest.
----------------
No Borrower may sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations,
or any portion thereof, including, without limitation, such Borrower's
rights, title, interests, remedies, powers, and duties hereunder or
thereunder.
-103-
12.4. Severability.
------------
Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
12.5. Successors and Assigns.
----------------------
This Agreement, the Other Agreements and the Security
Documents shall be binding upon and inure to the benefit of the successors
and assigns of each Borrower, Agent and each Lender permitted under Section
11.9 hereof.
12.6. Cumulative Effect; Conflict of Terms.
------------------------------------
The provisions of the Other Agreements and the Security
Documents are hereby made cumulative with the provisions of this Agreement.
Except as otherwise provided in Section 3.2 hereof and except as provided in
any of the other Loan Documents by specific reference to the applicable
provision of this Agreement, if any provision contained in this Agreement is
in direct conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern
and control.
12.7. Execution in Counterparts.
-------------------------
This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and
the same instrument.
12.8. Notice.
------
Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing,
and be sent by registered or certified mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been
validly served, given, delivered or received immediately when delivered
against receipt, one Business Day after deposit with an overnight courier
or, in the case of facsimile notice, when sent, addressed as follows:
-104-
If to Agent or Fleet: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Loan Administration Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Goldberg, Kohn, Bell, Black,
▇▇▇▇▇▇▇▇▇▇ & Moritz, Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Borrower: c/o Falcon Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any other Lender, at its address indicated on the signature pages
hereof or in a notice to Borrowers of an assignment of a Note, or to such
other address or facsimile number as each party may designate for itself by
notice given in accordance with this Section 12.8; provided, however, that
--------
any notice, request or demand to or upon Agent or a Lender pursuant to
subsection 3.1.1 or 4.2.2 hereof shall not be effective until received by
Agent or such Lender.
12.9. Consent.
-------
Whenever Agent's, Majority Lenders', or all Lenders'
consent is required to be obtained under this Agreement, any of the Other
Agreements or any of the Security Documents as a condition to any action,
inaction, condition or event, except as otherwise specifically provided
herein, Agent, Majority Lenders or all Lenders, as applicable, shall be
authorized to give or withhold such consent in their sole and absolute
discretion and to condition its consent upon the giving of additional
Collateral security for the Obligations, the payment of money or any other
matter.
-105-
12.10. Credit Inquiries.
----------------
Each Borrower hereby authorizes and permits Agent and each
Lender to respond to usual and customary credit inquiries from third parties
concerning such Borrower or any of its Subsidiaries.
12.11. Time of Essence.
---------------
Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
12.12. Entire Agreement.
----------------
This Agreement and the other Loan Documents, together with
all other instruments, agreements and certificates executed by the parties
in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral
or written.
12.13. Interpretation.
--------------
No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated
such provision.
12.14. Confidentiality.
---------------
Agent and each Lender shall hold all nonpublic information
obtained pursuant to the requirements of this Agreement in accordance with
Agent's and such Lender's customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices and in any event may make disclosure reasonably required by a
prospective participant or assignee in connection with the contemplated
participation or assignment or as required or requested by any governmental
authority or representative thereof or pursuant to legal process and shall
require any such participant or assignee to agree to comply with this
Section 12.14.
12.15. GOVERNING LAW; CONSENT TO FORUM.
-------------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT
THE PERFECTION, THE EFFECT OF THE PERFECTION OR NON-PERFECTION AND THE
PRIORITY OF THE SECURITY INTERESTS AND LIENS CREATED BY THIS AGREEMENT SHALL
IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE
WITH THE
-106-
SUBSTANTIVE LAWS OF THE APPLICABLE JURISDICTION AND THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN THE STATE OF
ILLINOIS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND
PROCEDURE FOR FORECLOSURE OF AGENT'S LIEN UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF AGENT'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF THE STATE OF ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW
VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR
PRINCIPAL PLACE OF BUSINESS OF BORROWERS, AGENT OR ANY LENDER, EACH BORROWER
HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF ▇▇▇▇ COUNTY, ILLINOIS,
OR, AT AGENT'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE NON-EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS
ON THE ONE HAND AND AGENT OR ANY LENDER ON THE OTHER HAND PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY
WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY LEGAL PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
OF SUCH LEGAL PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED
TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE
SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY
LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM
OR JURISDICTION.
12.16. WAIVERS BY BORROWERS.
--------------------
EACH BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL;
(II) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON PAYMENT, MATURITY,
-107-
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR ANY LENDER ON WHICH SUCH
BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER
AGENT OR ANY LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR TO AGENT'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR, TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY
ANY COURT PRIOR TO ALLOWING AGENT TO EXERCISE ANY OF AGENT'S REMEDIES; (IV)
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (V) NOTICE OF ACCEPTANCE HEREOF
AND (VI) EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM OR RECOVER ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON
THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER. EACH
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE COURT.
12.17. Advertisement.
-------------
Each Borrower hereby authorizes each of Agent and each
Lender, following consultation with Borrowers, to publish the name of such
Borrower and the amount of the credit facility provided hereunder in any
"tombstone" or comparable advertisement which Agent or such Lender, as
applicable, elects to publish.
-108-
IN WITNESS WHEREOF, this Agreement has been duly executed
on the day and year specified at the beginning of this Agreement.
FALCON PRODUCTS, INC.
By:
--------------------------------------
Title:
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
By:
--------------------------------------
Title:
-----------------------------------
SELLERS & ▇▇▇▇▇▇▇▇▇ INC.
By:
--------------------------------------
Title:
-----------------------------------
EPIC FURNITURE GROUP, INC.
By:
--------------------------------------
Title:
-----------------------------------
FLEET CAPITAL CORPORATION, as
Agent and as Revolving Credit Lender
By:
--------------------------------------
Title:
-----------------------------------
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
GMAM INVESTMENT FUNDS TRUST II
By: DDJ Capital Management, LLC, on
behalf of GMAM Investment Funds
Trust II, in its capacity as
investment manager
By:
--------------------------------------
Name:
Title: Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
GMAM INVESTMENT FUNDS TRUST
By: DDJ Capital Management, LLC, on
behalf of GMAM Investment Funds
Trust, in its capacity as
investment manager
By:
--------------------------------------
Name:
Title: Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
State Street Bank and Trust Company,
solely in its capacity as Trustee for
GENERAL MOTORS WELFARE BENEFIT TRUST
(VEBA) as directed by DDJ Capital
Management, LLC, and not in its
individual capacity
By:
--------------------------------------
Name:
Title:
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
THE OCTOBER FUND, LIMITED PARTNERSHIP
By: October GP, LLC, its General Partner
By: DDJ Capital Management, LLC, Manager
By:
--------------------------------------
Name:
Title: Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
DDJ U.S. HIGH YIELD TRUST
By: DDJ Capital Management, LLC, its
attorney in fact
By:
--------------------------------------
Name:
Title: Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
MULTI-STYLE, MULTI-MANAGER FUNDS PLC,
The Global High Yield Fund
By: DDJ Capital Management, LLC, on
behalf of Multi-Style, Multi-Manager
Funds, PLC, The Global High Yield
Fund, in its capacity as Money
Manager
By:
--------------------------------------
Name:
Title: Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
ORE HILL HUB FUND LTD
By:
--------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
RIVER RUN SENIOR INCOME FUND, LLC
By:
--------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
MAST CREDIT OPPORTUNITIES I,
(MASTER) LTD
By:
--------------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
AIRLIE OPPORTUNITY MASTER FUND, LTD
By:
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
QVT FUND, LP
By: QVT Associates GP LLC,
Its General Partner
By:
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Authorized Signatory
By:
--------------------------------------
Name: ▇▇▇▇▇ ▇▇
Title: Managing Member
Signature Page to Loan Agreement
TERM LOAN LENDERS:
-----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, INC.,
on behalf of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CAPITAL
PARTNERS III, LP
By:
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Signature Page to Loan Agreement
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of
October 6, 2004, by and among Fleet Capital Corporation, individually and as
Agent, the other financial institutions which are or become parties thereto
and FALCON PRODUCTS, INC., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC., SELLERS &
▇▇▇▇▇▇▇▇▇ INC. and EPIC FURNITURE GROUP, INC. (a) the terms Account,
-------
Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit
--------------------- ------------- ---------------------- -------
Account, Document, Electronic Chattel Paper, Equipment, Asset, Fixture,
------- -------- ------------------------ --------- ----- -------
General Intangibles, Goods, Instruments, Inventory, Investment Property,
------------------- ----- ----------- --------- -------------------
Letter-of-Credit Rights, Payment Intangibles, Proceeds, Security, Security
----------------------- ------------------- -------- -------- --------
Entitlement, Software, Supporting Obligations, Tangible Chattel Paper and
----------- -------- ---------------------- ----------------------
Uncertificated Security have the respective meanings assigned thereto under
-----------------------
the UCC; (b) all terms reflecting Collateral having the meanings assigned
thereto under the UCC shall be deemed to mean such Property, whether now
owned or hereafter created or acquired by any Borrower or in which such
Borrower now has or hereafter acquires any interest; (c) capitalized terms
which are not otherwise defined have the respective meanings assigned
thereto in said Loan and Security Agreement; and (d) the following terms
shall have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated
--------------
under or on account of any Account, Contract Right, Chattel Paper or General
Intangible.
Affiliate - a Person (other than a Subsidiary): (i) which
---------
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of a
Person; or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by a Person or a Subsidiary of a Person.
Notwithstanding anything to the contrary, for purposes of this Agreement
(other than subsection 8.2.4), none of the Tranche B Lenders nor any of
their Affiliates, officers, directors, members, partners or employees shall
be deemed to be an Affiliate of any Borrower.
Agent - Fleet Capital Corporation in its capacity as agent
-----
for the Lenders under the Agreement and any successor in that capacity
appointed pursuant to subsection 11.11 of the Agreement.
Agent Loans - as defined in subsection 1.1.4 of the
-----------
Agreement.
Aggregate Percentage - with respect to each Lender, the
--------------------
percentage equal to the quotient of (i) such Lender's Loan Commitment
divided by (ii) the aggregate of all Loan Commitments.
-1-
Agreement - the Loan and Security Agreement referred to in
---------
the first sentence of this Appendix A, all Exhibits thereto and this
Appendix A, as each of the same may be amended from time to time.
Applicable Margin - the percentages set forth below with
-----------------
respect to the Base Rate Revolving Portion, the Base Rate Term A Portion and
the Term Loan:
-------------------------------------------------
Base Rate Revolving Portion 1.00%
-------------------------------------------------
LIBOR Revolving Portion 2.75%
-------------------------------------------------
Term Loan 9.00%
-------------------------------------------------
Assignment and Acceptance Agreement - an assignment and
-----------------------------------
acceptance agreement in the form attached hereto as Exhibit 11.9 pursuant to
------------
which a Lender assigns to another Person all or any portion of any of such
Lender's Revolving Loan Commitment, the Term Loan Commitment and/or Loans,
as permitted pursuant to the terms of this Agreement.
Availability - the amount of additional money which
------------
Borrowers are entitled to borrow from time to time as Revolving Credit
Loans, such amount being the difference derived when the sum of (i) the
principal amount of Revolving Credit Loans then outstanding (including any
amounts which Agent or any Revolving Credit Lender may have paid for the
account of any Borrower pursuant to any of the Loan Documents and which have
not been reimbursed by Borrowers), (ii) the LC Amount, (iii) any reserves
(other than the Specified Reserve), and (iv) the aggregate amount of the
trade payables of each Borrower and each Subsidiary that are outstanding
more than thirty (30) days past the due date thereof not rescheduled or
subject to payment compromise, is subtracted from the lesser of (a)
Borrowing Base minus the Specified Reserve or (b) the aggregate amount of
Revolving Loan Commitments then in effect. If the amount outstanding is
equal to or greater than the lesser of (a) Borrowing Base or (b) the
aggregate amount of Revolving Loan Commitments then in effect, Availability
is 0.
Bank - Bank of America, N.A.
----
Bankruptcy Code - the United States Bankruptcy Code of
---------------
1986, as amended.
Base Rate - the rate of interest announced or quoted by
---------
Bank from time to time as its prime rate for commercial loans, whether or
not such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such prime rate for commercial loans is discontinued by
Bank as a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
Base Rate Portion - a Base Rate Revolving Portion.
-----------------
Base Rate Revolving Portion - that portion of the
---------------------------
Revolving Credit Loans that is not subject to a LIBOR Option.
-2-
Borrowing Base - as at any date of determination thereof,
--------------
an amount equal to the lesser of:
(i) the Revolving Credit Maximum Amount; or
(ii) an amount equal to the sum of:
(a) 85% of the net amount of Eligible Accounts
outstanding at such date; plus
(b) the least of (i) $17,500,000, (ii) the sum of (A)
70% of the value of Eligible Inventory consisting
of finished goods at such date, plus
----
(B) 40% of the value of Eligible Inventory consisting
of work in process at such date, plus (C) 25% of
----
Eligible Inventory consisting of raw materials at
such date, or (iii) the sum of (A) 85% of the net
orderly liquidation percentage of each category
or type of Eligible Inventory consisting of
finished goods and raw materials at such date,
plus (B) 75% of the net orderly liquidation
----
percentage of each category or type of Eligible
Inventory consisting of work in process at such
date; provided, that in no event shall the
--------
portion of the Borrowing Base predicated on
Eligible Inventory consisting of (x) finished
goods exceed $7,500,000, (y) raw materials exceed
$7,500,000 or (z) work-in-process exceed
$6,000,000.
For purposes hereof, (1) the net amount of Eligible
Accounts at any time shall be the face amount of such Eligible Accounts less
any and all returns, rebates, discounts (which may, at Agent's option, be
calculated on shortest terms), credits, allowances or excise taxes of any
nature at any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with such Accounts at such time, (2)
the amount of Eligible Inventory shall be determined on a first-in,
first-out, lower of cost or market basis in accordance with GAAP, and (3)
the net orderly liquidation percentage of each category or type of Eligible
Inventory shall be determined by Hilco Appraisal Services LLC or another
appraiser reasonably acceptable to Majority Lenders and shall be as
reflected in the most recent Inventory appraisal delivered to Agent under
this Agreement. In addition, for purposes of computing the amount of the
Borrowing Base, the gross amount of Eligible Accounts shall be reduced by
the aggregate amount of cash proceeds of Eligible Accounts received by any
Borrower but not yet applied to specific Eligible Accounts.
Borrowing Base Certificate - a certificate by a
--------------------------
responsible officer of Falcon, substantially in the form of Exhibit 8.1.4
-------------
(or another form reasonably acceptable to Agent) setting forth the
calculation of the Borrowing Base, including a calculation of each component
thereof, all in such detail as shall be reasonably satisfactory to Agent.
All calculations of the Borrowing Base, in connection with the preparation
of any Borrowing Base Certificate shall originally be made by Falcon and
certified to Agent; provided, that Agent shall have the right to review and
--------
adjust, in the exercise of its reasonable credit
-3-
judgment, any such calculation after giving notice thereof to Falcon, (1) to
reflect its reasonable estimate of declines in value of any of the
Collateral described therein, and (2) to the extent that Agent determines
that such calculation is not in accordance with this Agreement.
Business Day - any day excluding Saturday, Sunday and any
------------
day which is a legal holiday under the laws of the State of Illinois or the
State of Wisconsin or is a day on which banking institutions located in such
states are closed.
Buyout - the purchase by Designated Term Buyout Lender
------
(and such other Term Loan Lenders as may be agreed and allocated among Term
Loan Lenders) at face amount, of 100% of the Obligations owing to Revolving
Credit Lenders, excluding any prepayment fees payable to Revolving Credit
Lenders pursuant to Section 2.6(a) of the Agreement with respect to a
purchase made (i) in connection with a removal of the Agent pursuant to the
terms of subsection 11.11(b) of the Agreement, (ii) at a time that an Event
of Default has occurred and is continued under subsection 10.1.1 of the
Agreement or subsection 10.1.8 of the Agreement or (iii) at a time that (1)
an Event of Default has occurred and is continued under subsection 10.1.3 of
the Agreement due to a violation of subsection 8.3 of the Agreement, (2)
Majority Term Loan Lenders have agreed to waive such Event of Default and
(3) Majority Revolving Credit Lenders have refused to waive such Event of
Default; provided, that such exclusions shall not be applicable at any time
--------
after consummation of a "Buyout" of the Term Loans pursuant to the terms of
the Intercreditor Agreement.
Buyout Notice - a written notice by Designated Term Buyout
-------------
Lender to Agent stating that Designated Term Buyout Lender wishes to
exercise its option to consummate a Buyout.
Capital Expenditures - expenditures made or liabilities
--------------------
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year, including the total principal portion of Capitalized
Lease Obligations.
Capitalized Lease Obligation - any Indebtedness
----------------------------
represented by obligations under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
Change of Control - the occurrence of one or more of the
-----------------
following events: (a) any Person or affiliated group of Persons other than
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the spouse, lineal descendants and spouses of lineal
descendants of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the estates of one or more of the
foregoing individuals and trusts established solely for the benefit of one
or more of the foregoing individuals, shall own and control, beneficially
and of record either (i) in excess of 51% of the issued and outstanding
Voting Stock of Falcon or (ii) a sufficient percentage of the issued and
outstanding Voting Stock of Falcon to control the board of directors of
Falcon, (b) Falcon shall cease to own and control, beneficially and of
record (directly or indirectly), 100% of the issued and outstanding
Securities and Voting Stock of
-4-
each of the other Borrowers and each of the Domestic Subsidiaries other than
Epic, (c) Falcon shall cease to own and control, beneficially and of record
(directly or indirectly), at least 80% of the issued and outstanding
Securities and Voting Stock of Epic, (d) Falcon shall cease to own and
control, beneficially and of record (directly or indirectly), the same
percentage of the issued and outstanding Securities and Voting Stock of each
of the Foreign Subsidiaries that Falcon owns (directly or indirectly) on the
Closing Date, (e) a "Change of Control" (as defined in the Subordinated Note
Indenture, as in existence on the Closing Date) shall occur, or (f) the
employment of any of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
shall be terminated by Falcon without the consent of the Majority Lenders,
or (g) any of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall
cease to function in his current capacity as an executive officer of Falcon
and shall not be replaced with a Person or Persons reasonably satisfactory
to Majority Lenders within one hundred twenty (120) days thereafter.
Closing Date - the date on which all of the conditions
------------
precedent in Section 9 of the Agreement are satisfied or waived and the
initial Loans are made or the initial Letters of Credit or LC Guaranties are
issued under the Agreement.
Collateral - all of the Property and interests in Property
----------
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
Compliance Certificate - as defined in subsection 8.1.3 of
----------------------
the Agreement.
Computer Hardware and Software - all of each Borrower's
------------------------------
rights (including rights as licensee and lessee) with respect to (i)
computer and other electronic data processing hardware, including all
integrated computer systems, central processing units, memory units, display
terminals, printers, computer elements, card readers, tape drives, hard and
soft disk drives, cables, electrical supply hardware, generators, power
equalizers, accessories, peripheral devices and other related computer
hardware; (ii) all Software and all software programs designed for use on
the computers and electronic data processing hardware described in clause
(i) above, including all operating system software, utilities and
application programs in any form (source code and object code in magnetic
tape, disk or hard copy format or any other listings whatsoever); (iii) any
firmware associated with any of the foregoing; and (iv) any documentation
for hardware, Software and firmware described in clauses (i), (ii) and (iii)
above, including flow charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes.
Consent - any consent, approval, authorization, waiver,
-------
permit, grant, franchise, license, exemption or order of, or any
registration, certificate, qualification, declaration or filing with, or any
notice to, any Person, including, without limitation, any governmental
authority.
Consolidated - the consolidation in accordance with GAAP
------------
of the accounts or other items as to which such term applies.
-5-
Contract Right - any right of a Borrower to payment under
--------------
a contract for the sale or lease of goods or the rendering of services,
which right is at the time not yet earned by performance.
Contingent Obligations - with respect to any Person, any
----------------------
obligation, or arrangement, direct or indirect, contingent or otherwise, of
such Person (i) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation ("Primary Obligations") of another Person,
including, without limitation, any direct or indirect guarantee of such
Indebtedness (other than any endorsement for collection or deposit in the
ordinary course of business) or any other direct or indirect obligation, by
agreement or otherwise, to purchase or repurchase any such Primary
Obligation or any property constituting direct or indirect security
therefor, or to provide funds for the payment or discharge of any such
Primary Obligation (whether in the form of loans, advances, or purchases of
property, securities or services, capital contributions, dividends or
otherwise), letters of credit and reimbursement obligations for letters of
credit, (ii) to provide funds to maintain the financial condition of any
other Person, (iii) otherwise to indemnify or hold harmless the holders of
Primary Obligations of another Person against loss in respect thereof (other
than pursuant to customary indemnification provisions included in contracts
entered into in the ordinary course of business which do not obligate a
specified Person for the obligations of a third party) or (iv) in connection
with any synthetic lease or other off-balance sheet lease transaction. The
amount of any Contingent Obligation under clauses (i) and (ii) above shall
be the maximum amount guaranteed or otherwise supported by the Contingent
Obligation.
Convertible Subordinated Debentures - the 12% Junior
-----------------------------------
Subordinated Convertible Debentures due 2010 issued by Falcon on December
15, 2003, as in effect on the Closing Date and as the same may be amended,
modified or supplemented from time to time if and to the extent permitted
under this Agreement.
Convertible Subordinated Debt - Falcon's Indebtedness for
-----------------------------
Money Borrowed in the aggregate principal amount of $4,150,000 incurred
pursuant to the Convertible Subordinated Debentures.
Credit Agreement - as defined in the Subordinated Note
----------------
Indenture, as in existence on the Closing Date.
Credit Facilities - as defined in the Subordinated Note
-----------------
Indenture, as in existence on the Closing Date.
Current Assets - at any date means the amount at which all
--------------
of the current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date in accordance with GAAP.
Default - an event or condition the occurrence of which
-------
would, with the lapse of time or the giving of notice, or both, become an
Event of Default.
-6-
Default Rate - the rate of interest charged on the
------------
Revolving Credit Loans or the Term Loan (as the case may be) pursuant to
subsection 2.1.2.
Derivative Obligations - every obligation of a Person
----------------------
under any forward contract, futures contract, exchange contract, swap,
option or other financing agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreement), the value of which
is dependent upon interest rates, currency exchange rates, commodities or
other indices.
Designated Senior Debt - as defined in the Subordinated
----------------------
Note Indenture, as in existence on the Closing Date.
Designated Term Buyout Lender - a Term Loan Lender or other
-----------------------------
Person (including any Person not party to this Agreement) selected by the
Majority Term Loan Lenders in their discretion.
Discount Rate - a rate per annum equal to the sum of (x)
-------------
the average yield on a United States Treasury Note having a term as close as
possible to the remaining term of the Term Loans, as quoted by two
nationally recognized investment brokers selected by Agent on the third
Business Day preceding any prepayment date, plus (y) 0.50%.
Distribution - in respect of any Person means and
------------
includes: (i) the payment of any dividends or other distributions on
Securities of such Person (except distributions in such Securities), (ii)
the redemption, restriction, retirement, sinking fund or similar payment,
purchase or other acquisition of Securities of such Person, including the
acquisition of Securities of Epic by Falcon, as the case may be, unless made
contemporaneously from the net proceeds of the sale of Securities, and (iii)
any management, consulting or similar fees payable by any Borrower or
Subsidiary to any other Borrower or Subsidiary or any Affiliate of any
Borrower or Subsidiary (other than the Tranche B Lenders pursuant to the
Tranche B Loan Documents).
Disqualified Stock - any capital stock that, by its terms
------------------
(or by the terms of any security into which it is convertible. or for which
it is exchangeable, in each case at the option of the holder thereof), or
upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior to the date
that is ninety-one (91) days after the last day of the Term.
Domestic Subsidiary - any now or hereafter existing
-------------------
Subsidiary of any Borrower that is incorporated under the laws of a State of
the United States or the District of Columbia.
Dominion Account - a special bank account or accounts of
----------------
Agent established by such Borrower pursuant to subsection 6.2.4 of the
Agreement at a depository institution acceptable to each of Agent and
Tranche B Collateral Agent in its reasonable discretion, and over which
Agent and Tranche B Collateral Agent shall have sole and exclusive access
and
-7-
control for withdrawal purposes, subject to the terms of an account control
agreement entered into by the applicable depository institution, Agent,
Tranche B Collateral Agent and Borrowers, and subject to the terms of the
Intercreditor Agreement.
EBITDA - as defined in Exhibit 8.3 to the Agreement.
------ -----------
Eligible Account - an Account arising in the ordinary
----------------
course of the business of a Borrower from the sale of goods or rendition of
services which Agent, in its reasonable credit judgment, deems to be an
Eligible Account. Without limiting the generality of the foregoing, no
Account shall be an Eligible Account if:
(i) it arises out of a sale made or services rendered
by a Borrower to a Subsidiary of a Borrower or an
Affiliate of a Borrower or to a Person controlled
by an Affiliate of a Borrower and does not arise
from installation work or constitute a retainage;
or
(ii) it remains unpaid more than ninety (90) days
after the original invoice date shown on the
invoice; or
(iii) the total unpaid Accounts of the Account Debtor
exceed 20% of the net amount of all Eligible
Accounts, but only to the extent of such excess;
or
(iv) any covenant, representation or warranty
contained in the Agreement with respect to such
Account has been breached; or
(v) the Account Debtor is also a creditor or supplier
of a Borrower or any Subsidiary of a Borrower or
has provided an advance deposit in respect of any
order to a Borrower or any Subsidiary of a
Borrower, or the Account Debtor has disputed
liability with respect to such Account, or the
Account Debtor has made any claim with respect to
any other Account due from such Account Debtor to
a Borrower or any Subsidiary of a Borrower, or
the Account otherwise is or may become subject to
right of setoff by the Account Debtor, provided,
--------
that any such Account shall be eligible to the
extent such amount thereof exceeds such contract,
deposit, dispute, claim, setoff or similar right;
or
(vi) the Account Debtor has commenced a voluntary case
under the federal bankruptcy laws, as now
constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a
decree or order for relief has been entered by a
court having jurisdiction in the premises in
respect of the Account Debtor in an involuntary
case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other
petition or other application for relief under
the federal bankruptcy laws, as now constituted
or hereafter amended, has been filed against the
Account Debtor, or if the Account Debtor has
failed, suspended
-8-
business, ceased to be Solvent, or consented to
or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a
significant portion of its assets or affairs; or
(vii) it arises from a sale made or services rendered
to an Account Debtor outside the United States,
unless the sale is either (1) to an Account
Debtor located in Ontario or any other province
of Canada in which the Personal Property Security
Act has been adopted in substantially the same
form as currently in effect in Ontario or (2) on
letter of credit, guaranty or acceptance terms,
in each case acceptable to Agent in its
reasonable credit judgment; or
(viii) it arises from a sale to the Account Debtor on a
▇▇▇▇-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment, or any other
repurchase or return basis; or (2) it is subject
to a reserve established by a Borrower for
potential returns or refunds, to the extent of
such reserve; or
(ix) the Account Debtor is the United States of
America or any department, agency or
instrumentality thereof, unless the applicable
Borrower assigns its right to payment of such
Account to Agent, in a manner satisfactory to
Agent, in its reasonable credit judgment, so as
to comply with the Assignment of Claims Act of
1940 (31 U.S.C. Section 203 et seq., as amended);
or
(x) it is not at all times subject to Agent's duly
perfected, first priority security interest or is
subject to a Lien that is not a Permitted Lien;
or
(xi) the goods giving rise to such Account have not
been delivered to and accepted by the Account
Debtor or the services giving rise to such
Account have not been performed by the applicable
Borrower and accepted by the Account Debtor or
the Account otherwise does not represent a final
sale; or
(xii) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to
judgment; or
(xiii) a Borrower or a Subsidiary of a Borrower has made
any agreement with the Account Debtor for any
extension, compromise, settlement or modification
of the Account or deduction therefrom, except for
discounts or allowances which are made in the
ordinary course of business for prompt payment
and which discounts or allowances are reflected
in the calculation of the face value of each
invoice related to such Account; or
-9-
(xiv) 25% or more of the Accounts owing from the
Account Debtor are not Eligible Accounts
hereunder; or
(xv) a Borrower has made an agreement with the Account
Debtor to extend the time of payment thereof; or
(xvi) it represents service charges, late fees or
similar charges; or
(xvii) it consists of installation charges or fees; or
(xviii) the applicable Borrower was required to post a
performance or other surety bond (other than a
bid bond) in connection with such Account; or
(xix) it is not otherwise acceptable to Agent in its
reasonable credit judgment.
Eligible Inventory - Inventory of a Borrower (other than
------------------
packaging materials and supplies, shipping containers, tooling, samples,
displays and literature) which Agent, in its reasonable credit judgment,
deems to be Eligible Inventory. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory if:
(i) it is not raw materials, work in process or
finished goods which meet the specifications of
the purchase order or contract for such
Inventory, if any; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any
governmental agency or authority; or
(v) it does not conform in all material respects to
any covenants, warranties and representations set
forth in the Agreement; or
(vi) it is not at all times subject to Agent's duly
perfected, first priority security interest or is
subject to a Lien that is not a Permitted Lien;
or
(vii) it is not situated at a location in compliance
with the Agreement, provided that Inventory
--------
situated at a location not owned by a Borrower
will be Eligible Inventory only if Agent has
received a satisfactory landlord's agreement,
bailee's letter or processor's letter, as
applicable, with respect to such location; or
(viii) it is located outside of the continental United
States of America; or
-10-
(ix) it is in transit; or
(x) it is work in process Inventory of Sellers &
▇▇▇▇▇▇▇▇▇; or
(xi) it is not otherwise acceptable to Agent in its
reasonable credit judgment.
Environmental Conditions - any release of any Hazardous
------------------------
Materials (whether or not such Release constituted at the time thereof a
violation of any Environmental Laws) or any violation of any Environmental
Law as a result of which any Borrower or Subsidiary has or may become liable
to any Person or by reason of which the business, condition or operations of
such Borrower or Subsidiary or any of its assets or properties may suffer or
be subjected to any Lien or liability.
Environmental Laws - all federal, state and local laws,
------------------
rules, regulations, ordinances, orders and consent decrees relating to
Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting,
investigating or remediating releases or threatened releases of Hazardous
Materials into the environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials. Without limiting the generality of the foregoing, the
term Environmental Laws shall include the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.)
------
("CERCLA"), the Hazardous Materials Transportation Act (49 U.S.C. Section
------
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section
------
6901 et seq.) ("RCRA"), the Federal Clean Water Act (33 U.S.C. Section 1251
------ ----
et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.) and the Toxic
------ ------
Substances Control Act (15 U.S.C. Section 2601 et seq.), as such laws may be
------
amended from time to time, and any other present or future federal, state,
local or foreign statute, ordinance, rule, regulation, order, judgment,
decree, permit, license or request or binding determination of, or agreement
with, any governmental authority relating to or imposing liability or
establishing standards of conduct for the protection of human health or
safety or the environment.
Epic - as defined in the introductory sentence to the
----
Agreement.
ERISA - the Employee Retirement Income Security Act of
-----
1974, as amended, and any successor statute, and all rules and regulations
from time to time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the
----------------
Agreement.
Excess Advance - any Revolving Credit Loan advanced by
--------------
Agent or any Lender at a time when Availability (calculated without
reference to clause (iv) of the definition of such term) is zero and Agent
is not permitted to make any additional Overadvances under subsection 1.1.2
of the Agreement.
-11-
Excess Cash Flow - with respect to any fiscal year of
----------------
Borrowers, commencing with the fiscal year ending on or about November 1,
2005, the amount equal to the result of (i) EBITDA for such period, minus
(ii) Interest Expense paid or required to be paid in cash during such
period, minus (iii) the non-financed portion of Capital Expenditures made
during such period, minus (iv) income taxes paid or required to be paid in
cash during such period, minus (v) scheduled principal payments on
Indebtedness made or required to be made during such period, minus (vi) cash
payments made during such period in respect of non-cash reserves taken in
prior periods, minus (vii) Distributions made during such period, minus
(viii) pension or retirement benefit payments in excess of expense.
Excluded Property - with respect to any Person, (a) any
-----------------
Property which is subject to a Purchase Money Lien permitted by subsection
8.2.5(iv) of the Agreement or a Permitted Capital Lease Obligation permitted
by subsection 8.2.5(v) of the Agreement, in any case pursuant to agreements
that prohibit such Person from granting any other Liens in such Property,
(b) any Property leased by such Person (as lessee) under a lease to the
extent such lease prohibits such Person from granting any Liens on such
Property, (c) any general intangible, instrument, software, license, permit,
lease, contract, governmental approval or franchise (but not the proceeds
thereof), if the grant of a Lien in such general intangible, instrument,
software, license, permit, lease, contract, governmental approval or
franchise in the manner contemplated by the Loan Documents is prohibited by
the terms of such general intangible, instrument, software, license, permit,
lease, contract, governmental approval or franchise and would result in the
termination of such general intangible, instrument, software, license,
permit, lease, contract, governmental approval or franchise, but only to the
extent that any such prohibition is not rendered ineffective pursuant to the
Uniform Commercial Code or any other applicable law, (d) "intent-to-use"
trademarks at all times prior to the first use thereof, whether by the
actual use thereof in commerce, the recording of a statement of use with the
United States Patent and Trademark Office or otherwise, and, (e) any
Securities of any Foreign Subsidiary owned by such Person to the extent they
exceed 65% of the outstanding Securities of such Foreign Subsidiary owned by
such Person.
Existing Loan Agreement - as defined in the introductory
-----------------------
language to this Agreement.
First Anniversary Date - October 1, 2005.
----------------------
Fixed Assets - Equipment and real Property of each
------------
Borrower and each Subsidiary.
Fixed Change Coverage Ratio - as defined on Exhibit 8.3.
--------------------------- -----------
Foreign Subsidiary - any Subsidiary that is not a Domestic
------------------
Subsidiary.
GAAP - generally accepted accounting principles in the
----
United States of America in effect from time to time.
-12-
Guarantors - each present and future Domestic Subsidiary
----------
of any Borrower, which are, as of the Closing Date, (a) ▇▇▇▇ Furniture
Corporation, a New York corporation, (b) Falcon Holdings, Inc., a Missouri
Corporation, (c) The Falcon Companies International, Inc., a Missouri
corporation, (d) Madison Furniture Industries, Inc., a Mississippi
corporation, and (e) ▇▇▇▇▇▇▇ Industries, Inc., an Illinois corporation, and
any other Person who hereafter guarantees payment or performance of the
whole or any part of the Obligations.
Guaranty Agreements - that certain Amended and Restated
-------------------
Guaranty, dated as of the date hereof, made by each of the Guarantors in
favor of Agent for the benefit of Lenders and Agent, and any other guaranty
hereafter executed by any Guarantor, in each case, as amended or otherwise
modified, supplemented or restated and in effect from time to time.
Hazardous Materials - any substance (i) the presence of
-------------------
which requires investigation or remediation under any Environmental Laws;
(ii) that is defined or becomes defined as a "hazardous waste" or "hazardous
substance" under any Environmental Laws; (iii) that is toxic, explosive,
corrosive, inflammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is or becomes regulated under any Environmental
Laws; (iv) the presence of which on any real property causes or threatens to
cause a nuisance upon the real property or to adjacent properties or poses
or threatens to pose a hazard to any real property or to the health or
safety of Persons on or about any real property; or (v) that contains
gasoline or other petroleum hydrocarbons, polychlorinated biphenyls or
asbestos.
Indebtedness - as applied to a Person means, without
------------
duplication:
(i) all items which in accordance with GAAP would be
included in determining total liabilities as
shown on the liability side of a balance sheet of
such Person as at the date as of which
Indebtedness is to be determined, including,
without limitation, Capitalized Lease
Obligations;
(ii) all obligations of other Persons which such
Person has guaranteed;
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties
issued for the account of such Person;
(iv) Derivative Obligations; and
(v) in the case of Borrowers (without duplication),
the Obligations.
Initial Financial Projections - has the meaning provided
-----------------------------
in Section 9.10 of the Agreement.
Insolvency Proceeding - any proceeding commenced by or
---------------------
against any Person under any provision of the Bankruptcy Code, as amended,
or any successor statute or under
-13-
any other applicable bankruptcy or insolvency law, assignments for the
benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
Intercreditor Agreement - the intercreditor agreement
-----------------------
dated on or about the Closing Date by and among the Agent, the Lenders, the
Tranche B Collateral Agent and the Tranche B Lenders, as amended in
accordance with the terms thereof and in effect from time to time.
Intellectual Property - all past, present and future:
---------------------
trade secrets, know-how and other proprietary information; trademarks,
internet domain names, service marks, trade dress, trade names, business
names, designs, logos, slogans (and all translations, adaptations,
derivations and combinations of the foregoing) indicia and other source
and/or business identifiers, and the goodwill of the business relating
thereto and all registrations or applications for registrations which have
heretofore been or may hereafter be issued thereon throughout the world;
copyrights (including copyrights for computer programs) and copyright
registrations or applications for registrations which have heretofore been
or may hereafter be issued throughout the world and all tangible property
embodying the copyrights, unpatented inventions (whether or not patentable);
patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the
right to ▇▇▇ for all past, present and future infringements of any of the
foregoing; all other intellectual property; and all common law and other
rights throughout the world in and to all of the foregoing.
Intellectual Property Security Agreements - that certain
-----------------------------------------
Amended and Restated Copyright, Patent, Trademark and License Mortgage,
dated as of the Closing Date, by and among each of the Borrowers and the
Guarantors in favor of the Agent, for the benefit of itself and Lenders, and
any other similar document or agreement hereafter executed by any Person,
whereby such Person grants to Agent, for the benefit of itself and Lenders,
as security for the Obligations, a Lien upon any portion of the Intellectual
Property of such Person.
Interest Period - as applicable to any LIBOR Revolving
---------------
Portion, a period commencing on the date such LIBOR Revolving Portion is
advanced, continued or converted, and ending on the date which is one (1)
month, two (2) months, or three (3) months later, as may then be requested
by a Borrower; provided, that (i) any Interest Period which would otherwise
--------
end on a day which is not a Business Day shall end in the next preceding or
succeeding Business Day as is Agent's custom in the market to which such
LIBOR Portion relates, as communicated to Borrowers from time to time; (ii)
in the case of any LIBOR Revolving Portion, there remains a minimum of one
(1) month, two (2) months or three (3) months (depending upon which Interest
Period a Borrower selects) in the Term;
-14-
and (iii) all Interest Periods of the same duration which commence on the
same date shall end on the same date.
LC Amount - at any time, the aggregate undrawn face amount
---------
of all Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Agent or any
-----------
Affiliate of Agent shall guaranty the payment or performance by a Borrower
of its reimbursement obligation under any letter of credit.
LC Obligations - Any Obligations that arise from any draw
--------------
against any Letter of Credit or against any letter of credit supported by an
LC Guaranty.
Letter of Credit - any standby or documentary letter of
----------------
credit issued by Agent or any Affiliate of Agent for the account of a
Borrower.
LIBOR - as applicable to any LIBOR Portion, for the
-----
applicable Interest Period, the rate per annum (rounded upward, if
necessary, to the nearest 1/8 of one percent) as determined on the basis of
the offered rates for deposits in U.S. dollars, for a period of time
comparable to such Interest Period which appears on the Telerate page 3750
as of 11:00 a.m. (London time) on the day that is two (2) London Banking
Days preceding the first day of such Interest Period; provided, however, if
-------- -------
the rate described above does not appear on the Telerate System on any
applicable interest determination date, the LIBOR shall be the rate (rounded
upwards as described above, if necessary) for deposits in U.S. dollars for a
period substantially equal to the Interest Period on the Reuters Page "LIBO"
(or such other page as may replace the LIBO Page on that service for the
purpose of displaying such rates), as of 11:00 a.m. (London Time), on the
day that is two (2) London Banking Days prior to the first day of such
Interest Period. If both the Telerate and Reuters systems are unavailable,
then the rate for that date will be determined on the basis of the offered
rates for deposits in U.S. dollars for a period of time comparable to such
Interest Period which are offered by four (4) major banks in the London
interbank market at approximately 11:00 a.m. (London time), on the day that
is two (2) London Banking Days preceding the first day of such Interest
Period as selected by Agent. The principal London office of each of the
major London banks so selected will be requested to provide a quotation of
its U.S. dollar deposit offered rate. If at least two (2) such quotations
are provided, the rate for that date will be the arithmetic mean of the
quotations. if fewer than two quotations are provided as requested, the rate
for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to
such Interest Period offered by major banks in New York City at
approximately 11:00 a.m. (New York City time), on the day that is two (2)
London Banking Days preceding the first day of such Interest Period. In the
event that Agent is unable to obtain any such quotation as provided above,
it will be determined that LIBOR pursuant to a Interest Period cannot be
determined. In the event that the Board of Governors of the Federal Reserve
System shall impose a Reserve Percentage with respect to LIBOR deposits of
Bank then for any period during which such Reserve Percentage shall
-15-
apply, LIBOR shall be equal to the amount determined above divided by an
amount equal to 1 minus the Reserve Percentage.
LIBOR Interest Payment Date - the first day of each
---------------------------
calendar month during and immediately following the applicable Interest
Period.
LIBOR Option - the option granted pursuant to Section 3.1
------------
of the Agreement to have the interest on all or any portion of the principal
amount of the Revolving Credit Loans based on the LIBOR.
LIBOR Portion - a LIBOR Revolving Portion or a LIBOR Term
-------------
Portion.
LIBOR Request - a notice in writing (or by telephone
-------------
confirmed electronically or by telecopy or other facsimile transmission on
the same day as the telephone request) from a Borrower to Agent requesting
that interest on a Revolving Credit Loan be based on the LIBOR, specifying:
(i) the first day of the Interest Period (which shall be a Business Day);
(ii) the length of the Interest Period; (iii) whether the LIBOR Portion is a
new Loan, a conversion of a Base Rate Portion, or a continuation of a LIBOR
Portion, and (iv) the dollar amount of the LIBOR Revolving Portion, which
shall be in an amount not less than $1,000,000 or an integral multiple of
$100,000 in excess thereof.
LIBOR Revolving Portion - that portion of the Revolving
-----------------------
Credit Loans specified in a LIBOR Request (including any portion of
Revolving Credit Loans which is being borrowed by a Borrower concurrently
with such LIBOR Request) which, as of the date of the LIBOR Request
specifying such LIBOR Revolving Portion, has met the conditions for basing
interest on the LIBOR in Section 3.1 of the Agreement and the Interest
Period of which has not terminated.
LIBOR Term Portion - the Term Loan.
------------------
Lien - any lien (statutory or other), pledge, mortgage,
----
deed of trust, assignment, deposit arrangement, priority, security interest,
or other charge or encumbrance or other preferential arrangement of any kind
or nature whatsoever (including, without limitation, the interest of a
lessor under a Capital Lease having substantially the same economic effect
in property security an obligation owed to, or a claim by, a Person other
than the owner of the property, whether such interest is based on common
law, statute or contract), any lease in the nature thereof and the filing or
existence of any financing statement or other similar form of notice under
the laws of any jurisdiction or any security agreement authorizing any
Person to file such a financing statement, whether arising by contract,
operation of law, or otherwise. The term "Lien" shall include rights of
seller under conditional sales contracts or title retention agreements,
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting property. For the purpose of the Agreement, a
Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to
-16-
which title to the Property has been retained by or vested in some other
Person for security purposes.
Loan Account - each loan account established on the books
------------
of Agent pursuant to Section 3.6 of the Agreement.
Loan Commitment - with respect to any Lender, the amount
---------------
of such Lender's Revolving Loan Commitment plus such Lender's the Term Loan
----
Commitment.
Loan Documents - the Agreement, the Other Agreements, the
--------------
Security Documents and the Intercreditor Agreement.
Loans - all loans and advances of any kind made by Agent,
-----
any Lender, or any Affiliate of Agent or any Lender, pursuant to the
Agreement.
London Banking Day - any date on which commercial banks are
------------------
open for business in London, England.
Majority Lenders - Majority Revolving Credit Lenders and
----------------
Majority Term Loan Lenders.
Majority Revolving Credit Lenders - Revolving Credit
---------------------------------
Lenders holding 51% or more of the outstanding Revolving Loan Commitments
determined on a combined basis; and following the termination of the
Revolving Loan Commitments, Revolving Credit Lenders holding 51% or more of
the outstanding Revolving Credit Loans, LC Amounts and LC Obligations not
yet reimbursed by Borrowers or funded with a Revolving Credit Loan;
provided, that prior to termination of the Revolving Loan Commitments, if
--------
any Revolving Credit Lender breaches its obligation to fund any requested
Revolving Credit Loan, for so long as such breach exists, its voting rights
hereunder shall be calculated with reference to its outstanding Revolving
Loans, LC Amounts and unfunded and unreimbursed LC Obligations, rather than
its Revolving Loan Commitment.
Majority Term Loan Lenders - Term Loan Lenders holding 65%
--------------------------
or more of the outstanding Term Loan.
Make Whole Amount - an amount equal to the positive
-----------------
difference, if any, between (i) the present value (computed using the
Discount Rate) as of any date of prepayment of all or any portion of the
Term Loans of all remaining scheduled payments of principal and interest
(computed based on the applicable Term Loan Rate and Applicable Margin as in
effect as of the prepayment date) required to be paid in respect of the
portion of the Term Loans to be prepaid, and (ii) the outstanding principal
amount of the portion of the Term Loans to be prepaid as of such prepayment
date plus accrued and unpaid interest in respect of such portion of the Term
Loans through such prepayment date.
Material Adverse Effect - (i) a material adverse effect on
-----------------------
the business, condition (financial or otherwise), operation, performance or
properties of Borrowers and
-17-
their Subsidiaries taken as a whole, (ii) a material adverse effect on the
rights and remedies of Agent or Lenders under the Loan Documents, or (iii)
the material impairment of the ability of Borrowers and the Domestic
Subsidiaries, taken as a whole, to perform their obligations hereunder or
under any Loan Document.
Money Borrowed - means, (i) Indebtedness arising from the
--------------
lending of money by any Person to any Borrower or any Subsidiary; (ii)
Indebtedness, whether or not in any such case arising from the lending by
any Person of money to any Borrower or any Subsidiary, (1) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (2) which constitutes obligations evidenced by bonds, debentures,
notes or similar instruments, or (3) upon which interest charges are
customarily paid (other than accounts payable) or that was issued or assumed
as full or partial payment for Property; (iii) Indebtedness that constitutes
a Capitalized Lease Obligation; (iv) reimbursement obligations with respect
to letters of credit or guaranties of letters of credit and (v) Indebtedness
of any Borrower or any Subsidiary under any guaranty of obligations that
would constitute Indebtedness for Money Borrowed under clauses (i) through
(iii) hereof, if owed directly by a Borrower or any Subsidiary. Money
Borrowed shall not include trade payables or accrued expenses.
Mortgages - (i) the Real Property Deed of Trust,
---------
Assignment of Rents, Security Agreement and Fixture Filing amended by Shelby
on or about the Closing Date in favor of Agent, for the benefit of itself
and Lenders, by which Shelby has granted to Agent, as security for the
Obligations, a Lien upon the real Property of Shelby located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (ii) the Leasehold and Fee Deed
of Trust, Assignment of Rents and Security Agreement amended by Falcon on or
about the Closing Date in favor of Agent, for the benefit of itself and
Lenders, by which Falcon has granted to Agent, as security for the
obligations, a Lien upon the leased and owned real Property of Falcon
located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (iii) the Deed of
Trust, Assignment of Rents and Security Agreement amended by Shelby on or
about the Closing Date in favor of Agent, for the benefit of itself and
Lenders, by which Shelby has granted to Agent, as security for the
obligations, a Lien upon the real Property of Shelby located at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (iv) the Real Property Mortgage and Security
Agreement amended by Falcon on or about the Closing Date in favor of Agent,
for the benefit of itself and Lenders, by which Falcon has granted to Agent,
as security for the Obligations, a Lien upon the real property of Falcon
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and (v) all
other mortgages, deeds of trust and comparable documents now or at any time
hereafter securing the whole or any part of the Obligations, in each case as
the same may be amended or otherwise modified from time to time.
Multiemployer Plan - has the meaning set forth in Section
------------------
4001(a)(3) of ERISA.
Notes - the Revolving Notes and the Term Notes.
-----
-18-
Obligations - all Loans, all LC Obligations and all other
-----------
advances, debts, liabilities, obligations, covenants and duties, together
with all interest, fees and other charges thereon, owing, arising, due or
payable from each Borrower or their Affiliates, or of any other Person for
or on behalf of such Borrower, to Agent, for its own benefit, from each
Borrower to Agent for the benefit of any Lender, from each Borrower to any
Lender and from each Borrower to Bank or any other Affiliate of Agent, of
any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under the Agreement or any of the
other Loan Documents (or any agreements evidencing the Product Obligations),
whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now
existing or hereafter arising and however acquired, and including without
limitation any Product Obligations owing to Agent, Bank or any Affiliate of
Bank or Agent.
Operating Licenses - collectively, all licenses,
------------------
franchises, permits, Consents, approvals, registrations, certificates and
authorizations of all governmental authorities necessary or advisable to the
conduct of the business of any Borrower or any Subsidiary
Original Loan Agreement - as defined in the introductory
-----------------------
language to this Agreement.
Organizational I.D. Number - with respect to any Person,
--------------------------
the organizational identification number assigned to such Person by the
applicable governmental unit or agency of the jurisdiction of organization
of such Person.
Other Agreements - any and all agreements, instruments and
----------------
documents (other than the Agreement and the Security Documents), heretofore,
now or hereafter executed by a Borrower, any Subsidiary, any Guarantor or
any other third party and delivered to Agent or any Lender in respect of the
transactions contemplated by the Agreement.
Other Assets - all Properties of each Borrower and each
------------
Subsidiary, other than Fixed Assets.
Overadvance - as defined in subsection 1.1.2 of the
-----------
Agreement.
Past Due Payables - the trade payables of Falcon and its
-----------------
Subsidiaries existing on the Closing Date that are one or more days past the
due date set forth on the original invoices therefor to the extent not being
contested in good faith by appropriate proceedings being diligently
conducted for which adequate reserves have been provided in accordance with
GAAP, and in any event and without limitation, such term shall include all
trade payables identified as "Past Due Payables" on the Payables Aging
Schedule delivered to Lenders in accordance with Section 7.1.29.
Payables Aging Schedule - as defined in Section 7.1.29.
-----------------------
Permitted Capital Lease Obligations - Capitalized Lease
-----------------------------------
Obligations of Borrowers and the Subsidiaries incurred after the Closing
Date and permitted under
-19-
subsection 8.2.3(vi) of the Agreement. For the purposes of this definition,
the principal amount of any Purchase Money Indebtedness consisting of
capitalized leases (as opposed to operating leases) shall be computed as a
Capitalized Lease Obligation.
Permitted Indebtedness - as defined in the Subordinated
----------------------
Note Indenture as in existence on the Closing Date.
Permitted Liens - any Lien of a kind specified in
---------------
subsection 8.2.5 of the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money
-------------------------------------
Indebtedness of any Borrower or any Subsidiary of any Borrower incurred
after the Closing Date which is secured by a Purchase Money Lien and
permitted under subsection 8.2.3(vi) of the Agreement.
Person - an individual, partnership, corporation, limited
------
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - as defined in subsection 7.1.23.
----
Pledge Agreements - that certain Amended and Restated
-----------------
Pledge Agreement, dated as of the date hereof, by and among each of the
Borrowers and the Guarantors in favor of Agent, for the benefit of itself
and Lenders, pursuant to which Borrowers and Guarantors granted to Agent, as
security for the Obligations, a Lien on 100% of Securities owned by such
Person in each Borrower and each Domestic Subsidiary and 65% of the
Securities of each Foreign Subsidiary owned by such Person, and all other
pledge agreements and comparable documents now or at any time hereafter
securing the whole or any part of the Obligations, in each case as amended
or otherwise modified, supplemented or restated and in effect from time to
time.
Product Obligations - every obligation of Borrowers under
-------------------
and in respect of any one or more of the following types of services or
facilities extended to any Borrower by Bank, Agent or any Affiliate of Bank
or Agent: (i) cash management or related services including the automatic
clearing house transfer of funds for the account of any Borrower pursuant to
agreement or overdraft, and (ii) cash management, including controlled
disbursement services.
Pro Forma Closing Balance Sheet - has the meaning provided
-------------------------------
in subsection 7.1.10 of the Agreement.
Projections - Borrowers' forecasted Consolidated (i)
-----------
balance sheets, (ii) profit and loss statements, and (iii) cash flow
statements, all prepared on a consistent basis with the historical financial
statements of Borrowers and the Subsidiaries, together with appropriate
supporting details and a statement of underlying assumptions.
-20-
Property - any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i)
---------------------------
Indebtedness (other than the Obligations and Capitalized Lease Obligations)
for the payment of all or any part of the purchase price of any Fixed
Assets, (ii) any Indebtedness (other than the Obligations and Capitalized
Lease obligations) incurred at the time of or within ten (10) days prior to
or after the acquisition of any Fixed Assets for the purpose of financing
all or any part of the purchase price thereof, and (iii) any renewals,
extensions, refinancings or replacements thereof, but not any increases in
the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which
-------------------
secures Purchase Money Indebtedness, but only if such Lien shall at all
times be confined solely to the Fixed Assets the purchase price of which was
financed through the incurrence of the Purchase Money Indebtedness secured
by such Lien and the proceeds thereof.
Rebuild Reserve - a reserve created under subsection 1.1.1
---------------
of the Agreement in the amount of (a) all proceeds of insured losses or
destruction to Equipment or real Property being held by Agent pursuant to
subsection 3.3.1(a) pending possible repair or replacement of such Property
subject to the original loss or destruction and (b) all proceeds of
dispositions under subsection 8.2.9(iv) being held by Agent pending possible
replacement of the Property subject to the disposition.
Rentals - as defined in subsection 8.2.19 of the
-------
Agreement.
Reportable Event - any of the events set forth in Section
----------------
4043(c) of ERISA.
Reserve Percentage - the maximum aggregate reserve
------------------
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed on member banks of the Federal Reserve System against
"Euro-currency Liabilities" as defined in Regulation D.
Responsible Officer - the chief executive officer, president
--------------------
or chief financial officer of Falcon.
Restricted Investment - any investment made in cash or by
---------------------
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or capital
contribution, or otherwise, or in any Property except the following;
(i) investments by a Borrower or a Subsidiary of a
Borrower, to the extent existing on the Closing
Date, in one or more Subsidiaries of such Person;
(ii) so long as no Default or Event of Default is then
in existence or is reasonably likely to occur,
investments after the Closing Date by a Borrower
or a Domestic Subsidiary of a Borrower in a
Foreign
-21-
Subsidiary of Borrower (as loans or
equity investments) the Securities of which are
subject to a Pledge Agreement, in an aggregate
amount after the Closing Date for all Foreign
Subsidiaries not in excess of $1,000,000 in any
fiscal year; provided, that any unused portion of
--------
such amount may be carried over to the next
fiscal year;
(iii) Property to be used in the ordinary course of
business the acquisition of which is not
otherwise prohibited by this Agreement or the
other Loan Documents;
(iv) Current Assets arising from the sale of goods and
services in the ordinary course of business of
any Borrower or any Subsidiary;
(v) investments in direct obligations of the United
States of America, or any agency thereof or
obligations guaranteed by the United States of
America, provided that such obligations mature
within one year from the date of acquisition
thereof;
(vi) investments in certificates of deposit maturing
within one year from the date of acquisition and
fully insured by the Federal Deposit Insurance
Corporation;
(vii) investments in commercial paper given the highest
rating by a national credit rating agency and
maturing not more than two hundred seventy (270)
days from the date of creation thereof;
(viii) investments in money market, mutual or similar
funds having assets in excess of $100,000,000 and
the investments of which are limited to
investment grade securities;
(ix) intercompany loans permitted under subsections
8.2.2(v), (vi) and (vii) of the Agreement;
(x) investments existing on the date hereof and
listed on Exhibit 8.2.12 hereto;
--------------
(xi) deposit and other bank accounts maintained by a
Borrower or a Subsidiary in the ordinary course
of business, subject, in the case of deposit
accounts of a Borrower or a Domestic Subsidiary,
to Dominion Account agreements reasonably
acceptable to Agent;
(xiii) intercompany accounting entries made in respect
of sales of Inventory and collections of Accounts
in the ordinary course of business;
(xiv) investments by Foreign Subsidiaries in other
Foreign Subsidiaries whose Securities are subject
to a Pledge Agreement; and
-22-
(xv) investments otherwise expressly permitted
pursuant to the Agreement.
Restricted Subsidiary - as defined in the Subordinated
---------------------
Note Indenture, as in existence on the Closing Date.
Revolving Credit Fee Letter - as defined in Section 2.3(a).
---------------------------
Revolving Credit Lenders - any Lender with a Revolving
------------------------
Loan Commitment or that holds any portion of the Revolving Credit Loans.
Revolving Credit Obligations - all interest and principal
----------------------------
due with respect to the Revolving Credit Loans, the LC Obligations and all
other amounts due Revolving Credit Lenders under the Agreement or any other
Loan Document.
Revolving Credit Loan - a Loan made by any Revolving
---------------------
Credit Lender pursuant to Section 1.1 of the Agreement.
Revolving Credit Maximum Amount - $25,000,000, as such
-------------------------------
amount may be reduced from time to time pursuant to the terms of the
Agreement.
Revolving Loan Commitment - with respect to any Lender,
-------------------------
the amount of such Lender's Revolving Loan Commitment pursuant to subsection
1.1.1 of the Agreement, as set forth opposite such Lender's name on Appendix
B hereto or in any Assignment and Acceptance Agreement executed by such
Lender.
Revolving Loan Percentage - with respect to each Revolving
-------------------------
Credit Lender, the percentage equal to the quotient of such Revolving Credit
Lender's Revolving Loan Commitment divided by the aggregate of all Revolving
Loan Commitments.
Revolving Notes - the Secured Promissory Notes to be
---------------
jointly and severally executed by Borrowers on or about the Closing Date in
favor of each Revolving Credit Lender to evidence the Revolving Credit
Loans, which shall be in the form of Exhibit 1.1 to the Agreement, together
-----------
with any replacement or successor notes therefor.
Second Anniversary Date - October 1, 2006.
-----------------------
Security or Securities - all shares of stock, partnership
----------------------
interests, membership interests, membership units or other ownership
interests in any other Person and all warrants, options or other rights to
acquire the same.
Security Agreements - that certain Amended and Restated
-------------------
Security Agreement, dated as of the date hereof, by and among each of the
Guarantors in favor of the Agent, for the benefit of itself and Lenders,
pursuant to which Guarantors granted to Agent, as security for the
Obligations, a Lien on all of the Collateral (as defined therein) owned by
such Person, and all other security agreements and comparable documents now
or at any time hereafter securing the whole or any part of the Obligations,
in each case as amended or otherwise modified, supplemented or restated and
in effect from time to time.
-23-
Security Documents - the Guaranty Agreements, the
------------------
Mortgages, the Pledge Agreements, the Security Agreements and the
Intellectual Property Security Agreements, and all other instruments and
agreements now or at any time hereafter securing the whole or any part of
the Obligations.
Sellers & ▇▇▇▇▇▇▇▇▇ - as defined in the introductory
-------------------
sentence to the Agreement.
Senior Debt - as defined in the Subordinated Note Indenture,
-----------
as in existence on the Closing Date.
Shelby - as defined in the introductory sentence to the
------
Agreement.
Site - any real Property previously, currently or
----
hereafter owned, leased or operated directly or indirectly by any Borrower
or Domestic Subsidiary.
Solvent - with respect to any Person, on the date of
-------
determination, that: (i) the present fair saleable value of the assets
(i.e., the price a buyer is willing to pay for such asset in an arms-length
transaction) of such Person will exceed the amount that will be required to
pay the probable liability on the existing debts (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent) of
such Person as they become absolute and matured; (ii) the assets of such
Person do not constitute unreasonably small capital for such Person to carry
on its businesses as now conducted or proposed to be conducted; and (iii)
such Person is able to pay all of its Indebtedness as such Indebtedness
matures. For purposes of the preceding sentence, the amount of contingent
obligations outstanding at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time,
represents the amount that are reasonably expected to become an actual or
mature liability.
Special Reserve - a permanent reserve, in each case
---------------
created in Agent's discretion, as approved by Majority Lenders, under
subsection 1.1.1 of the Agreement in an aggregate amount equal to the amount
of mandatory prepayments applied against the Revolving Credit Loans pursuant
to the second sentence of subsection 3.3.1 of the Agreement.
Subordinated Debt - the Subordinated Notes, the
-----------------
Convertible Subordinated Debentures and any other Indebtedness of any
Borrower or any Subsidiary that is subordinated to the obligations in a
manner reasonably satisfactory to Majority Lenders, and contains terms,
including without limitation, payment terms, reasonably satisfactory to
Majority Lenders.
Subordinated Note Debt - Falcon's Indebtedness for Money
----------------------
Borrowed in the aggregate outstanding amount of $100,000,000 incurred
pursuant to the Subordinated Note Documents.
-24-
Subordinated Note Documents - the Subordinated Note
---------------------------
Indenture, the Subordinated Notes and each other agreement, instrument or
document now or hereafter evidencing or relating to the Subordinated Note
Debt.
Subordinated Note Guarantors - the "Guarantors" as defined
----------------------------
in the Subordinated Note Indenture, as in existence on the Closing Date.
Subordinated Note Indenture - the Indenture dated as of
---------------------------
June 17, 1999 among Falcon, as Issuer, certain Subsidiaries of Falcon, as
Guarantors and the Bank of New York, as Trustee, as amended, modified or
supplemented through the Closing Date, and as it may be hereafter amended,
modified or supplemented from time to time if and to the extent permitted
under this Agreement.
Subordinated Notes - the 11 3/8% Senior Subordinated Notes
------------------
due June 15, 2009, Series B, issued by Falcon pursuant to the Subordinated
Note Indenture and the other Subordinated Note Documents.
Subsidiary - any Person of which another Person owns,
----------
directly or indirectly through one or more intermediaries, more than 50% of
the Voting Stock at the time of determination.
Term - as defined in Section 4.1 of the Agreement.
----
Term Loan - the Loan described in subsection 1.3.1 of the
---------
Agreement.
Term Loan Fee Letter - as defined in Section 2.3(b).
--------------------
Term Loan Commitment - with respect to each Term Loan
--------------------
Lender, the amount of such Term Loan Lender's the Term Loan Commitment, as
set forth opposite such Term Loan Lender's name on Appendix B hereto or in
any Assignment and Acceptance Agreement executed by such Lender, minus all
the Term Loan payments paid to such Term Loan Lender.
Term Loan Lender - any Lender with a Term Loan Commitment
----------------
or that holds any portion of the Term Loan.
Term Loan Prepayment Fee - (a) with respect to any
------------------------
prepayment of the Term Loan that is made after the First Anniversary Date
but on or prior to the Second Anniversary Date, an amount equal to 5.0% of
the amount prepaid, (b) with respect to any prepayment of the Term Loan that
is made after the Second Anniversary Date but on or prior to the Thirty
Month Date, an amount equal to 2.5% of the amount prepaid, and (c) with
respect to any prepayment of the Term Loan that is made after the Thirty
Month Date, zero.
Term Loan Rate - for any month, a rate of interest that is
--------------
determined by Agent on the first Business Day of such month and is equal to
the rate of interest which is published in the "Money Rates" section of
The Wall Street Journal, Central Edition (or, if such
-----------------------
-25-
publication ceases, as published in another national publication reasonably
selected by Agent) as the rate for 30-day LIBOR; provided if there is a time
when the 30-day LIBOR is no longer published in The Wall Street Journal or
-----------------------
any other national publication, then the Term Loan Rate shall become a rate
that most closely approximates 30-day LIBOR as agreed among Borrowers and
Term Loan Lenders.
Term Notes - the Secured Promissory Notes to be executed
----------
by Borrowers on or about the Closing Date in favor of each applicable Term
Loan Lender to evidence its the Term Loan, which shall be in the form of
Exhibit 1.3 to the Agreement, together with any replacement or successor
notes therefor.
Thirty Month Date - April 1, 2007.
-----------------
Total Credit Facility - $95,000,000, as reduced from time
---------------------
to time pursuant to the terms of the Agreement.
Tranche A Keyman Insurance - as defined in subsection
--------------------------
8.1.11 of the Agreement.
Tranche B Collateral Agent - ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital
--------------------------
Partners, Inc., as collateral agent under the Tranche B Loan Agreement and
any successor in that capacity.
Tranche B Loan Agreement - means the Loan and Securities
------------------------
Purchase Agreement dated on or about the Closing Date by and among
Borrowers, the Tranche B Collateral Agent and the Tranche B Lenders, as the
same may be amended, restated, modified or supplemented and in effect from
time to time.
Tranche B Loans - means the loans made by the Term Loan B
---------------
Lenders to the Borrowers on or about the Closing Date pursuant to the
Tranche B Loan Documents.
Tranche B Loan Documents - means the "Loan Documents" as
------------------------
defined in the Tranche B Loan Agreement, as such Loan Documents may be
amended, restated, modified or supplemented and in effect from time to time.
Tranche B Lenders - means the lenders under the Tranche B
-----------------
Loan Agreement, together with their successors and assignees.
Tranche B Lender Shares - means the Securities issued to
-----------------------
the Term Loan B Lenders on or after the Closing Date pursuant to the Tranche
B Loan Documents.
Type of Organization - with respect to any Person, the
--------------------
kind or type of entity by which such Person is organized, such as a
corporation or limited liability company.
UCC - the Uniform Commercial Code as in effect in the
---
State of Illinois on the date of this Agreement, as it may be amended or
otherwise modified.
-26-
Unrestricted Subsidiary - as defined in the Subordinated
-----------------------
Note Indenture, as in existence on the Closing Date.
Unused Line Fee - as defined in Section 2.5 of the
---------------
Agreement.
Voting Stock - Securities of any class or classes of a
------------
corporation, limited partnership or limited liability company or any other
entity the holders of which are ordinarily, in the absence of contingencies,
entitled to vote with respect to the election of corporate directors (or
Persons performing similar functions).
Warrant - the Stock Purchase Warrant in the form attached
-------
to that certain Waiver and Amendment No. 3 to Amended and Restated Loan and
Security Agreement, dated as of June 15, 2004, among Borrowers, the Agent
and certain other parties thereto.
OTHER TERMS. All other terms contained in the Agreement
-----------
shall have, when the context so indicates, the meanings provided for by the
UCC to the extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein",
-------------------------------
"hereof" and "hereunder" and other words of similar import refer to the
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement.
All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. All
references to any of the Loan Documents shall include any and all
modifications thereto and any and all extensions or renewals thereof.
-27-
Exhibit 8.3
FINANCIAL COVENANTS
DEFINITIONS
"Consolidated Total Funded Debt" shall mean, at any time
------------------------------
of determination, the sum, without duplication, of (a) the outstanding
nominal principal amount of (i) Tranche B Loans and (ii) other Obligations
to the extent such other Obligations are due and payable, plus (b) the
----
outstanding principal amount of any other Indebtedness for Money Borrowed by
the Borrowers or any of their Subsidiaries on a consolidated basis
(including, without limitation, Subordinated Debt and Indebtedness evidenced
by the Agreement), plus (c) to the extent not otherwise included, the amount
----
by which the aggregate maximum drawing amount in respect of all outstanding
letters of credit issued for the account of Borrowers and/or its
Subsidiaries exceeds $5,000,000, plus (d) to the extent not otherwise
----
included, all liabilities in respect of synthetic leases or Capitalized
Leases of the Borrowers and its Subsidiaries, on a consolidated basis, plus
----
(e) the deferred purchase price of assets (other than trade payables
incurred in the ordinary course of business), plus (f) to the extent not
----
otherwise included, all Purchase Money Indebtedness.
"EBITDA" shall mean, with respect to any period, without
------
duplication, the total of the following for the Borrowers and their
Subsidiaries on a Consolidated basis, each calculated for such period: (a)
net income determined in accordance with GAAP; plus, to the extent included
----
in the calculation of net income (without duplication), (b) the sum of (i)
income taxes paid or accrued during such period, (ii) interest expense paid
or accrued during such period, (iii) amortization and depreciation during
such period, (iv) non-operating or non-recurring non-cash losses including,
without limitation, inventory write-downs, (v) Specified Refinancing Fees
and Expenses, (vi) for the fiscal quarters ending on or about October 31,
2004, January 31, 2005 and April 30, 2005, cash restructuring costs related
to the closing of Borrowers' Belmont, Mississippi plant in an aggregate
amount not to exceed $1,500,000, and (vii) for the fiscal quarters ending on
or about January 31, 2005 and April 30, 2005, 50% of the actual compensation
paid by Borrowers to the financial consultant retained pursuant to Section
9.10, up to a maximum amount of $200,000; minus, to the extent included in
-----
the calculation of net income, (c) the sum of (i) gains from sales or other
dispositions of assets (other than sales of Inventory in the normal course
of business); and (ii) non-operating or nonrecurring gains, but not net of
non-operating or non-recurring cash losses.
"Consolidated Fixed Charges shall mean, with respect to
--------------------------
any period, for the Borrowers and their Subsidiaries on a Consolidated
basis, the sum of (a) Interest Expense paid or required to be paid in cash
during such period, plus (b) the sum of principal scheduled to be paid
----
during such period in respect of Consolidated Funded Debt (including the
principal portion of Capitalized Lease Obligations, but excluding for the
avoidance of doubt, principal payments made in respect of revolving credit
facilities, whether domestic or foreign, principal payments made with the
proceeds of equity issuances, asset sales, and/or
-1-
insurance recoveries and the repayment of Indebtedness under the Existing
Loan Agreement), plus (c) Distributions made during such period, plus (d)
---- ----
cash contributions to pension plans in excess of pension expense during such
period.
"Fixed Charge Coverage Ratio" shall mean, at any date of
---------------------------
determination, the ratio of (a) the result of (i) EBITDA for the Reference
Period most recently ended minus (ii) all Capital Expenditures made during
-----
such Reference Period (other than Capital Expenditures financed by the
issuance of equity or the incurrence of Indebtedness) minus (iii) the
-----
aggregate amount of cash taxes paid in respect of such Reference Period to
(b) Consolidated Fixed Charges for the Reference Period most recently ended.
"Interest Expenses" shall mean, with respect to any
-----------------
period, the sum of (a) cash interest expense paid or accrued for such
period, including without limitation the interest portion of Capitalized
Lease Obligations plus without limitation the interest portion of letter of
credit and letter of credit guaranty fees owing for such period, plus (b)
----
other financing costs during such period, including, without limitation and
without duplication, commitment fees, termination fees, amendment fees,
unused line fees, all as determined for Borrowers and their Subsidiaries on
a Consolidated basis and in accordance with GAAP, but excluding Specified
Refinancing Fees and Expenses.
"Reference Period" shall mean, as of any date of
----------------
determination, the period of four (4) consecutive fiscal quarters of the
Borrowers and their Subsidiaries ending on such date, or if such date is not
a fiscal quarter end date, the period of four (4) consecutive fiscal
quarters most recently ended (in each case treated as a single accounting
period).
"Senior Funded Debt" shall mean, at any time of
------------------
determination, Consolidated Total Funded Debt minus Subordinated Debt.
-----
"Senior Leverage Ratio" shall mean, at any time of
---------------------
determination, the ratio of (a) Senior Funded Debt as at such date to (b)
EBITDA for the Reference Period ending on such date.
"Total Leverage Ratio" shall mean, as at any date of
--------------------
determination, the ratio of (a) Consolidated Total Funded Debt outstanding
on such date to (b) EBITDA for the Reference Period ending on such date.
"Specified Refinancing Fees and Expenses" shall mean all
---------------------------------------
of the following up to an aggregate amount not exceeding $16,000,000: (a)
the prepayment fee paid in connection with the prepayment of certain
Indebtedness under the Existing Loan Agreement; (b) pay-in-kind interest
paid in connection with the prepayment of certain Indebtedness under the
Existing Loan Agreement; and (c) closing fees and out-of-pocket professional
fees and expenses paid or reimbursed by Borrowers in connection with the
closing of this Agreement and the Bank Credit Agreement.
-2-
FINANCIAL COVENANTS
I. FIXED CHARGE COVERAGE
Borrowers will not permit the Fixed Charge Coverage Ratio as of the
last day of each fiscal quarter of the Borrowers ending on or about any date
set forth in the table below to be less than the ratio set forth opposite
date in such table:
--------------------------------------------------------
Fiscal Quarter Ending Ratio
--------------------- -----
--------------------------------------------------------
January 31, 2006 0.90 : 1.00
--------------------------------------------------------
April 30, 2006 0.95 : 1.00
--------------------------------------------------------
July 31, 2006 1.05 : 1.00
--------------------------------------------------------
October 31, 2006 1.10 : 1.00
--------------------------------------------------------
January 31, 2007 1.15 : 1.00
--------------------------------------------------------
April 30, 2007 1.18 : 1.00
--------------------------------------------------------
July 31, 2007 1.22 : 1.00
--------------------------------------------------------
October 31, 2007 1.25 : 1.00
--------------------------------------------------------
II. MINIMUM EBITDA
Borrowers shall not permit Consolidated EBITDA for any period set
forth in the table below, tested as at the last day of such period, to be
less than the amount set forth opposite such period in such table:
----------------------------------------------------------------------
Test Period EBITDA
----------- ------
----------------------------------------------------------------------
Three fiscal quarters ending on or about
July 31, 2005 $12,000,000
----------------------------------------------------------------------
Four fiscal quarters ending on or about
October 31, 2005 $25,000,000
----------------------------------------------------------------------
Four fiscal quarters ending on or about
October 31, 2006 $35,000,000
----------------------------------------------------------------------
Four fiscal quarters ending on or about
October 31, 2007 $38,800,000
----------------------------------------------------------------------
-3-
III. SENIOR LEVERAGE RATIO
Borrowers will not permit the Senior Leverage Ratio as of the last
day of each fiscal quarter of the Borrowers ending on or about any date set
forth in the table below to exceed the ratio set forth opposite such period
in such table:
-------------------------------------------------------------
Fiscal Quarter Ending Ratio
--------------------- -----
-------------------------------------------------------------
January 31, 2006 5.20 : 1.00
-------------------------------------------------------------
April 30, 2006 4.80 : 1.00
-------------------------------------------------------------
July 31, 2006 4.30 : 1.00
-------------------------------------------------------------
October 31, 2006 3.80 : 1.00
-------------------------------------------------------------
January 31, 2007 3.60 : 1.00
-------------------------------------------------------------
April 30, 2007 3.50 : 1.00
-------------------------------------------------------------
July 31, 2007 3.40 : 1.00
-------------------------------------------------------------
October 31, 2007 3.30 : 1.00
-------------------------------------------------------------
IV. TOTAL LEVERAGE RATIO
Borrowers will not permit the Total Leverage Ratio as of the last
day of each fiscal quarter of the Borrowers ending on or about any date set
forth in the table below to exceed the ratio set forth opposite such period
in such table:
-------------------------------------------------------------
Fiscal Quarter Ending Ratio
--------------------- -----
-------------------------------------------------------------
January 31, 2006 9.50 : 1.00
-------------------------------------------------------------
April 30, 2006 8.70 : 1.00
-------------------------------------------------------------
July 31, 2006 7.75 : 1.00
-------------------------------------------------------------
October 31, 2006 6.85 : 1.00
-------------------------------------------------------------
January 31, 2007 6.50 : 1.00
-------------------------------------------------------------
April 30, 2007 6.25 : 1.00
-------------------------------------------------------------
July 31, 2007 6.05 : 1.00
-------------------------------------------------------------
October 31, 2007 5.90 : 1.00
-------------------------------------------------------------
-4-